First Bank

Thursday, January 18, 2024

How Kuda missed projection despite raising $20m valuation in 2023

Babs Ogundeyi, Kuda’s co-founder and CEO announced that the bank had reached almost N56 trillion in transaction value and seven million retail and business customers since its launch in 2019. Despite this success, the figure falls short of the fintech’s projections for the year, according to a TechCrunch report.

Early last year, Kuda pitched for a new cash injection. While it had five million users, it predicted a doubling of the figure by the end of 2023. Eventually, the bank raised an estimated $20 million in the middle of 2023, however, the bridge round closed at the same $500 million valuation it achieved in 2021 when it raised a $55 million Series B round.

The financial institution, having spread to the UK in 2022, has grown its user base 5 folds since 2021 by servicing Nigerians both at home and abroad. However, it is yet to gain ground in other African countries as it is still awaiting license approvals to operate in Ghana, Uganda and Tanzania.

Kuda’s losses rose from $2 million in 2020 to $14 million in 2021, a trend seen in neobanks globally. Although most of Kuda’s spending in 2021 was on operational expenses, the bank also lost money through a product whose non-performing loan (NPL) ratio of 69% significantly exceeded the industry average of less than 5% for the same year.

As an adjustment, the fintech reduced its marketing in June 2022 and added 1.5 million users in the following nine months through the addition of new products which as Ogundeyi put it, “lined up new credit features including loans for salary earners and an improved version of Kuda Overdraft.” The bank also introduced a POS terminal to business customers to tap into the competitive agency banking market.

The emphasis on startups, especially those in growth stages, growing into their valuations has become more pronounced, particularly amid the current venture capital slowdown. Meeting revenue targets becomes vital for these startups as they seek additional capital in follow-on funding rounds.

Also, since many African VC-backed startups raise funds in dollars, and earn revenue in local currencies like naira, they are easily at a loss because of the depreciations that happen over time. The naira, for instance, has witnessed a 40 percent depreciation in over 15 months. This devaluation impacts financial reporting, and companies will need to double up their income in local currencies to record the same figures in dollars.


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