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November 10, 2021updated 09 Nov 2021 4:44pm

You heard it here first: Zilch secures $110m Series C at $2bn valuation

By Eric Johansson

We told you this would happen: buy-now-pay-later (BNPL) startup Zilch has become a unicorn after closing a $110m Series C funding round at a $2bn valuation. Now the founder says the Klarna challenger plans to expand to the US – and that it can claim to be Europe’s fastest growing startup.

“We went from Series A to unicorn in 14 months, which is officially the fastest if you’ve seen any company go from series A to unicorn [in Europe],” Zilch CEO Philip Belamant tells Verdict.

Zilch raised a $7.54m Series A round in September 2020 and then topped up its coffers in April 2021 with an $80m Series B round at a $500m valuation.

The news confirms Verdict’s previous reporting that new financing was in the works, information confirmed by sources familiar with the deal. Ventura Capital and Gauss Ventures led the raise.

The news comes as the BNPL market is expected to be worth $166bn by 2023, according to GlobalData’s thematic research.

The freshly minted unicorn will use the cash injection to pay for US expansion plans, following “almost 200,000 registrations in October” in the UK.

“We’re continuing to grow at a phenomenal speed here in the UK, but the major focus, where we’ve been spending a huge deal of time, is setting up the business and the product rollout in the US,” Belamant says.

Zilch’s acquisition of US debt funding platform Neptune Financial, or NepFin, in August was intended to turbocharge the BNPL company’s Stateside expansion plans.

Zilch has also inked partnerships with New Jersey-based Cross River Bank, Checkout.com, Marqeta and Mastercard, which launched its own BNPL service in September.

“So [we have] all of the partners that we need to get going,” Belamant says.

The company has also set up a new office in Miami, which is currently the home office of eight Zilch employees.

“That’ll be growing by about 150 team members over the next 12 to 18 months,” Belamant says. “So we’re hiring aggressively and actually putting our best foot forward on going and making sure that we get into the market beginning of the year.”

Zilch currently has over 200 employees in total.

Following the Zilch Series C round and the inking of those partnerships, the BNPL startup now plans to rollout its services in the first quarter of 2022.

For anyone keeping track, that’s slightly behind schedule – Belamant told Verdict in April that the rollout was planned for the fourth quarter of 2021.

Zilch plans to launch a US waitlist for new customers in “the next few weeks”.

Zilch raises Series C in increasingly competitive market

Zilch’s Series C round and upcoming US rollout comes at a time when the BNPL market is becoming increasingly crowded.

In Europe, Zilch is already competing with the likes of Klarna, which became the continent’s most valuable tech company after securing a $45.6bn valuation on the back of a $639m SoftBank-led investment round in June. Klarna also has a significant presence in the US, counting 20 million American users to its name as of August.

Other European rivals include Italy’s Scalapay, which raised a $155m Series A funding round in September. Big players like PayPal are also muscling into the sector. In short: the BNPL space is getting crowded.

That’s equally true in the States where Zilch will be facing off against American rivals like Affirm, which recently inked a partnership with Apple to roll out instalment services in Canada.

Apple itself is rumoured to be planning to tap into the BNPL market, together with Zilch investor Goldman Sachs.

Square, which is set to finish its acquisition of Australia’s Afterpay at the end of March 2022, is also a major power in US BNPL.

Despite the massive competition facing him, Belamant is bullish about Zilch’s ability to cut into the US ecommerce market, which he expects to be worth “north of $1.7tn by 2024”.

“It really doesn’t bother us that we have incumbents spending a huge amount of money in the market right now, educating customers as to why this is the most responsible and best way to pay over time. We almost see that as an advantage,” he says.

Launching the business in the States also means dealing with the US’s famously complex regulatory landscape.

“It just is a different kettle of fish,” Belamant says.

As several European neobanks have noticed over the years, expanding to the US means cutting through a wealth of red tape. Some of these complexities are due to the government having introduced new legislation following the 2008 crisis. Others are due to the differences between different states’ legislations.

Zilch plans to overcome these obstacles in two ways. Firstly, its partnership with Cross River Bank will help it on a federal level. Secondly, the company recently acquired a Californian lending licence through the NepFin deal,.

“So we can launch our product and offering nationwide from day one, similar to what we did in the UK,” Belamant says.