In August of last year, months after securing a $210 million Series D round, Koho CEO Daniel Eberhard told BetaKit that the FinTech startup was in a good position to navigate the downturn’s economic headwinds. At the close of this year, having secured new funding and key milestones, the company is targeting growth and profitability in 2024.
Koho says it has surpassed one million users and a $100-million run rate, with “hundreds of millions” on its loan book.
The funding comes via an all-primary, all-equity $86 million CAD extension to that Series D round, featuring a mix of both new and existing investors: BDC, Drive Capital, Eldridge Industries, HOOPP, Portage, Round13, and TTV. Notably, Koho says it has maintained the $800 million near-unicorn valuation it established in 2021, bucking the trend of markdowns that have plagued both FinTech and venture capital more broadly over the past two years.
“There are very few consumer-facing FinTechs that have protected valuation since 2021,” Eberhard said, noting that similar companies have faced markdowns between 50 to 70 percent.
Eberhard credits the traction of Koho’s core product offering, which includes credit building, high-interest savings accounts, and subscription plans. The company says it has surpassed one million users and a $100-million run rate (revenue has doubled year over year), with “hundreds of millions” on its loan book and individual products like Koho’s credit builder that feature over 100,000 users. It also has a strong B2B business (look at a Wealthsimple Cash card and you will find it is powered by Koho), but wouldn’t share more details.
“We are helping a lot of Canadians at a time when there’s real financial pressure for the majority of Canadians,” Eberhard said. “We’ve kind of played in the space of ‘how do we help you do more with the money you have?’ and in 2024 we’re really asking ourselves ‘how do we get you more money, more progress?'”
To achieve these milestones, Eberhard explained that Koho’s experiments over the last several years have proven out.
“The big thing that’s changed structurally in the business is that the economics are scaleable,” he said. “Last time we talked, the economics were positive and growing, but now they’re in the right place.”
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Going forward, the new financing will be used as growth capital and to fuel new product development. Koho has its eyes on several new additions, including increased credit offerings, in-app bill splitting, and access to government benefits—some of which might be seen in Q1. Eberhard also noted a focus on the “New to Canada” market.
It hasn’t been entirely smooth sailing for Koho through the downturn: the company made a 14 percent reduction in workforce in February and another, previously unreported, 15 percent reduction at the end of September. Eberhard attributed the most recent layoffs to the process of reshaping the company “from product development into products that are working,” noting that all startups in the current market must be focused on capital efficiency.
To that end, a significant portion of Koho’s new financing will be used to ensure the company remains “default alive”—an important proposition for any challenger bank that scales on consumer trust. The company is not currently profitable, but Eberhard said “that’s certainly the intention” in the New Year.
Feature image courtesy Koho.