GoHenry, the neobank for kids six and older, has tapped existing investors Edison Partners and Revaia for $55 million in a Series B funding round, after its losses soared nearly 2,000% in 2021. Italian payments giant Nexi also took a stake. in the neobank, joining as an investor the last round.
GoHenry has benefited somewhat from the cashless pandemic boom, growing its revenue by 55% in 2021 to £30.5m, from £19.7m in 2020. But in an interview with Sifted, CEO Alex Zivoder warns that 2022 revenue numbers will be “much lower than that” as the company has since slowed revenue growth to focus on profitability.
This is a goal that seems far away. As with all neobanks, customer acquisition has been an expensive pursuit for GoHenry – which, coupled with a 73% growth in headcount since its Series A, has so far kept it away from profitability. In 2021, the neobank’s losses increased 20-fold to £30.5m, up from £1.5m in 2020.
“It came from reinvesting in the business as we looked for revenue growth rather than profitability,” says Zivoder, attributing the losses to the launch of new products like the bank’s Junior ISA; hire new employees; and expanding its customer base in the United States and the United Kingdom.
Despite these huge losses and talk of distant profitability, there is no indication that GoHenry is slowing down its expansion plans.
Four years after its launch in the United States, London-based GoHenry aims to conquer Europe. It first entered the market in July, after acquiring French rival PixPay to expand into France and Spain. It kept PixPay as its European brand name and now plans to draw on the expertise of new Italian investor Nexi to launch it in Italy before the end of the year.
Nexi has its own payments app aimed at Gen Z and Millennials, YAP, which currently has around 1 million users. Edoardo Giorgetti, head of YAP at Nexi Group, joins GoHenry’s board after the raise.
“We both believe in transitioning to a cashless society and understand that the way to achieve this is to reach the next generation with digital financial products,” Zivoder told Sifted.
“We will decide what exactly the YAP-GoHenry partnership will look like next year.”
Customer Acquisition Challenges
GoHenry raised a Series A round of $40m in December 2020 to expand into the US and UK. Zivoder won’t share any region-specific customer numbers, but says the majority of the 2 million customers the bank has amassed since its launch in 2012 are UK-based.
Its main competitor – Revolut
But Zidover thinks the company’s biggest competitor is cash.
“We learned a lot from the very competitive and demanding market that is the United States,” says Zivoder. “And now we are bringing that knowledge back with us to grow faster in Europe.
“I’m not saying we won’t spend money in the UK or the US, but right now it makes more sense for us to double Europe as the third pillar of growth.”
Beyond Italy, Germany and the Nordics are potentially on the cards further down the line.
“Germany has always been the most difficult market for one of these B2C [business to consumer] brands to get into,” says Zivoder. “So it’s all about timing with that one.”
Amy O’Brien is Sifted’s fintech reporter. She is the author of Sifted’s fintech newsletter and tweets of @Amy_EOBrien.