Neobanks are still hot. Novo, a Miami-based neobank targeting the SME market, has announced a $90 million Series B funding round at a pre-money valuation of $700 million. The new funding brings Novo’s total funding to about $135 million. Novo raised its seed round in 2019.
Stripes, a VC that invests in software and consumer brands, led the funding round. Participating in the round include existing investors Valar Ventures, Crosslink Capital, Rainfall Ventures, and BoxGroup.
Michael Rangel, CEO and co-founder of Novo, said that after speaking with thousands of their customers one theme keeps coming up – remove the red tape and friction around cash flow:
“With this additional funding, Novo will take a huge leap forward in improving cash flow for small businesses. In the coming months and years, our small business customers will be able to access their funds faster than they ever thought possible.”
Novo said it plans to build out its lending capabilities and integrations adding to new features announced last year.
These new features include:
- The Novo App Marketplace: Novo customers can use the Novo App Marketplace to customize their accounts. The Novo App Marketplace allows small businesses to take advantage of dozens of native integrations, and connect to over 1,000 applications and tools that they already use. (The marketplace is something that has been successfully pioneered by UK challenger bank Starling).
- Invoicing: Customers can create and manage an unlimited number of invoices on the Novo platform.
Cash flow Insights: Customers can quickly review their top income and spending categories, compare income from different time periods, and review cash flow and inbound transactions. This functionality reduces the need for some businesses to leverage complex account systems.
Reserves: Customers can add up to five Reserves to their account, and allocate those funds for different expenses they want to save for, from estimated taxes to large capital expenditures.
The funding is said to arrive at a key period of growth as Novo has surpassed $5 billion in lifetime transactions — processing more than $4 billion in transactions in 2021 alone, and entering 2022 with a run-rate transaction volume of more than $7 billion.
Saagar Kulkarni, Partner at Stripes, said that despite being the heart of the economy 30 million small businesses have always struggled to access even basic financial services and are typically overlooked by big banks.
“What sets Novo apart is a fundamentally different approach to helping small businesses succeed. Instead of opting for incremental change, Novo built its banking platform from the ground up so that it could not just deliver a great digital banking experience, but actually deliver de novo financial products to a customer base that is yearning for them. At Stripes, we only invest in companies building amazing products, and Novo’s rave reviews, strong retention, and incredible growth make it clear it has built something that small businesses love.”
Kulkarni will be joining Novo’s board of directors.