Varo Money Inc, the fintech startup that is seeking a national bank charter, has raised $45 million in a Series B round led by Warburg Pincus and Rise Fund.
The B round, which closed Jan. 10, featured 30 additional investors including angels, existing investors and management. Varo has collected more than $78 million in two years. It plans to use the funding for growth, including hiring staff, said Co-Founder and CEO Colin Walsh.
Varo employs more than 60 people and will be looking to add staff in engineering, marketing, risk and operations over the next year, he said.
“Now that we have had a large funding round, attracting great talent is high on the priority list,” Walsh said.
Varo, San Francisco, is a mobile app geared for people who want to bank on their smartphones. The company doesn’t have any branches. It cuts out fees typically associated with traditional banks like overdraft charges, minimum-balance fees, and foreign-transaction fees. Varo also doesn’t charge customers for using its more than 55,000 Allpoint ATMs.
“You can do basically anything [with Varo] that you can do with a bank,” Walsh said. “It has all the conveniences, and more, than a traditional bank but without the fees or the waiting in line at a branch.”
Some users may not have access to a personal banker. Varo can help them manage their money, Walsh said. The app can link a user’s banking, savings and lending accounts to help them get “a full financial picture,” he said. Varo will let users know how much they have left over after paying their bills and will make suggestions if they have cash-flow issues, Walsh said. It will also make suggestions if users have any money left over, he said.
Varo launched its app in the middle of June and already has “tens of thousands” of customers, Walsh said. “The business is really taking off,” he said.
The $45 million in funding also comes less than a year since Varo applied to the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp for a national bank charter. (Social Finance Inc, an online lender, also applied for bank charter. SoFi withdrew its application in October.)
Varo has been in talks with regulators since its application in July, Walsh said. He declined to disclose whether a decision is expected soon. Discussions with regulators “have been very collaborative,” he said. The OCC, which will be Varo’s primary regulator, has been very engaged, he said.
“Things seem to be going in the right direction,” Walsh said.
For Warburg, the B round is the second time the firm invested in Varo. Warburg led Varo’s A round in 2016, which collected more than $27 million. Walsh declined to disclose how big a stake Warburg has, but he said the firm has invested about $45 million in Varo. “They are a large investor,” he said.
Varo is also the latest investment of Rise Fund, the $2 billion global impact pool led by TPG Growth. Rise has invested in Acorns, a microinvesting app, as well as EverFi, which provides digital learning to K-12 schools.
Varo was founded with the social mission to improve the financial lives of its customers, Walsh said. “That was very appealing to [Rise Fund],” he said. “They’re looking to make investments in companies that will make a difference in the world.”
Action Item: Contact Colin Walsh at +1 800-827-6526
Photo of customer handing card with Varo logo in bakery courtesy of Varo