Lunar, a neobank out of Denmark, last year raised money at a $2.2 billion valuation from a splashy set of investors that included Heartland, Kinnevik, Tencent, IDC Ventures and comedian Will Ferrell, to fill out its ambition to build a financial “super app.” Times being tough for startups right now, Lunar has raised yet again, but with a more modest goal: to “shorten the path to profitability.”
The startup announced today that it has closed a round of €35 million (around $38 million at today’s rates), money that it will be using to sharpen its product and its profile in the Nordics. Lunar says it has around 500,000 users in Denmark, Norway and Sweden. But notably, that is the same number of users that it disclosed when it announced funding in March 2022, which implies that not only is the startup operating at a loss that’s eroded its runway, but growth has stalled for the company in the last year.
“The capital markets that we and other similar companies raise money in have changed completely, with earnings now becoming the key focus,” said Ken Villum Klausen, the CEO, in a statement. “Last year we improved our product, attracted more customers, and increased our revenue streams significantly. We will continue to do so in 2023 and the years to come because the market needs a serious challenger in the industry.”
The €35 million Lunar is announcing today is exactly half the amount it raised 11 months ago — that was a €70 million extension that brought the total of its Series D to €280 million.
There is no word on who the exact investors are in this latest injection, except that it comes from “the vast majority of existing shareholders.” Klausen says the company is “humbled” by the trust investors have in it. Indeed, the company has raised $460 million to date, and there is likely a bigger story between the lines here about the choices investors make when companies they’ve backed with significant funding already need more to shore up their activities.
That’s a fine balance, since some of the problems are not specific to a startup but the market climate, so there is an argument to be made that it makes sense to back a company you like to see them through the current state of things, something that Klausen seems to acknowledge, too.
“They want to help us build a new financial ecosystem and deliver banking services in a whole new way, Klausen said in the statement. “This proves the strength of the concept we offer to bank customers throughout the Nordic region and we remain committed to this approach despite this period of turmoil in the financial markets.”
Lunar is one of a wave of so-called neobanks that have hit the market with great fanfare in the last several years. In its case, it is building a platform of banking and other financial services, aiming to win over customers from incumbent banks by providing a mobile-based, more snappy user experience, better rates for basics and new services that leverage personalization and analytics to give users more insights into their financial standing, planning and futures.
In years past, Lunar has also positioned itself as kind of a hipster alternative. Will Ferrell — who has a big audience of fans in the Nordics in part because of his particular brand of humor, and in part because of his starring role in the Nordic-adorable spoof film about Eurovision — is on its cap table as part of an endorsement deal it struck with the startup.
Image Credits: Lunar (opens in a new window) under a license.
Last year, Lunar used the funding to make its first forays into cryptocurrency trading and B2B payments for small and medium business customers. Other services include checking and savings accounts, a metal Visa card, an investing platform and loans. Some of those services will have been hit hard lately: the stock market is down, crypto has lost its speculative get-rick-quick shine and interest rates are not great — making loans a tougher prospect. Other big neobanks out of Europe like Revolut and N26 have been somewhat quiet of late, which speaks to the general state of the market at the moment.
The short announcement from Lunar is light on a number of details: We’ve reached out to the company to ask for more specifics on its plans for the funding, and for more details on how its existing business is performing, as well as whether its valuation is staying the same, or going up or down. We’ll update as we learn more.