20 Jul 2021 11:41 AM

Revolut has raised $800m at a valuation of $33 billion this week from leading international investors SoftBank and Tiger Global, making it the most valuable privately held UK tech company. The valuation is a significant jump since its last funding round in February 2020 of $5.5 billion.

Valuation is an interesting art and the valuation clearly reflects the investors’ perception of worldwide growth potential and the pace of innovation at Revolut and is a huge vote of confidence in the product that they are continuing to build; but the valuation is comparable to the current market cap of NatWest ($30 billion) and Lloyds ($42 billion). Is this justified?

The comparison to NatWest and Lloyds is particularly interesting as these are clearly established players with very profitable business models but arguably limited significant growth potential, versus a historically unprofitable business (although Revolut has reported that the business was strongly profitable in Q1 2021) that has grown rapidly and now has users in over 30 countries (with plans to launch in large markets such as the US and India) and a growing range of products delivered through a mobile app.

The valuation does look high though when you compare to the current valuation of Wise of $13 billion, which listed on the LSE in recent weeks, a business that has been profitable since 2017 but Wise does have fewer users (8 million vs. 15 million) and a less diversified business model. The valuations of Wise and Revolut do however show that there continues to be significant confidence in the ability of the neobanks to disrupt the status quo of banking and financial services.

It will be interesting to see what impact (if any) this Revolut funding round has on the valuation of the other neobanks, for example, Monzo and Starling, over the next 24 months as these have recently raised money in the past year at significantly lower valuations ($1.7 billion and $1.5 billion, respectively) but have limited international expansion in comparison to Revolut.