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Opinion Alternative Lending
Zopa’s close cash call is a cautionary tale all too common
With one of the company’s largest investors embroiled in an Indian financial scandal, the lender was forced to take drastic action.
Originally published in The AltFi Weekly Newsletter, for more like this sign-up now.
Last year’s emergency cash call by pioneering alternative lender Zopa struck many in the industry as odd, especially given the firm’s prudent growth over the years.
In December Zopa was forced to slash its valuation in order to complete a £140m fundraise, hitting the bottom lines of existing investors Augmentum Fintech and Pollen Street Capital.
The move was in order to save the firm’s banking licence application before the Bank of England’s 3 December regulatory deadline—a deadline well-known to the company.
News this week of the departure of Zopa board member Kapil Wadhawan shines a little more light on what unconfirmed speculation indicated was going on behind the scenes.
Wadhawan, chairman of Wadhawan Global Capital, co-led Zopa’s £32m Series F in 2017 and joined the board quickly after.
Last month, however, the Indian finance tycoon was arrested as part of a growing financial scandal in India with Wadhawan arrested over money laundering allegations.
According to unconfirmed reports in the Indian press last year, Wadhawan had been lining up an extensive funding line to support the upcoming capital requirements of Zopa’s bank. These claims were never confirmed by Zopa.
As the scandal around Wadhawan’s empire grew last year, it’s clear that at some point any future funding plans for Zopa would have been scrapped.
The cautionary tale has a certain similarity with the UK fintechs who last year floated rumours of imminent Vision Fund unicorn rounds, notably Revolut, only for these rumours to vanish as SoftBank’s WeWork woes removed the Vision Fund’s steam.
It also holds similarities with many startup founders who, all-to-often, will run their businesses entirely out of cash and leave employees unpaid in the desperate hope of a last-minute cash injection.
Luckily for Zopa, IAG Capital was willing to step in at the 11th hour to save its banking licence application.
For many fintechs delayed funding rounds do eventually come to pass. Monzo,Monese and Revolut are all reportedly gearing up to make announcements in the coming weeks and months.
For other startups, those hoped funding rounds never transpired.
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