Novo, the SMB neobank, nabs $90M at a $700M valuation

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Novo, the SMB neobank, nabs $90M at a $700M valuation

Ingrid Lunden

Tue, January 11, 2022, 9:56 PM·6 min read

Novo, the startup building a new kind of banking service from the ground up for small and medium businesses, has closed a significant round of funding to take the next step in growing its platform. It has raised $90 million, a Series B round that values the Miami-based startup at $700 million, funding that it will use to build out its infrastructure (going from 24,000 customers to 150,000 is no small feat); to add in new products, specifically around lending; and to acquire more customers.

There are a number of fintechs, some that describe themselves as challenger banks, in the market today catering to SMBs. (We've covered many of them; they include Brex, Rho, Juni, NorthOne, Lili, Mercury, Hatch, Anna, Tide, Viva Wallet, Open and many more; and you could argue Amazon, offering other money management and spending tools, is also in the space.) But Novo sees incumbents as the real "challenger" here.

"We are competing against big banks. They are the only ones we are concerned with because they own 99% of the market," said Michel Rangel, CEO of Novo, in an interview earlier this month. "We believe our product is better value for businesses, but we're happy to see others also pushing the charge forward."

The round is being led by Stripes, with Valar Ventures, Crosslink Capital, Rainfall Ventures, and BoxGroup -- all of whom backed Novo in its $40 million Series A, just six months ago -- also participating. The startup to date has raised just over $135 million.

A lot of startups are getting into patterns of raising large funding rounds in rapid succession to ride their respective waves of growth, and to capitalize on the huge opportunity right now to tap deep-pocketed investors looking for smart places to put their LPs' money. That is very much the case here with Novo, too. The company has seen truly accelerated growth in the last year, and specifically the last six months, both in terms of customer numbers and in terms of how much its app is getting used.