Google-backed neobank Open becomes unicorn with new funding

There are 100 unicorns in India. The neobank Open entered the coveted club on Monday with a new funding round.

A source familiar with the matter said it was $50 million. IIFL led the new round that valued Open at $1 billion. Tiger Global and 3one4 Capital were also involved in the round, which came just seven months after Open announced its Series C funding. Open has raised about $187 million.

Open operates a neobank that offers small and medium-sized businesses as well as enterprises nearly all the features of the bank with additional tools to better serve the customers. Millions of small and medium sized businesses in India struggle with maintaining multiple bank accounts, bookkeeping, and bandying out payments to employees.

More than 2.3 million businesses use the startup, which has partnerships with over a dozen top banks in India. Each year, it said, open processes over $30 billion worth of transactions.

In recent years, the startup has expanded its offerings to provide itsneobanking technology stack to banks in a white-label licensing arrangement, who then sell it to their own customers.

In the coming months, the startup plans to launch three new products; revenue-based financing Flo, early settlement card offering Settl and working capital lending Capital. Within the next year, it wants to disburse $1 billion in lending through its new products.

We are excited to partner with IIFL, Tiger Global, and 3one4 Capital for the series D round. Anish Achuthan said that they are getting ready to launch innovative products like revenue-based financing, early settlement, working capital loan and business credit cards to SMEs on their platform.

There are key offerings of neobanks. The data is from the Reserve Bank of India and the investment bank Jeffries. The image is from Jeffries.

The growth of Open in recent years has led to several other startups expanding to and innovate in this category, which has changed the relationship between banks and fintechs. Most banks in India were skeptical of neobanks a few years ago, and it was difficult to convince them for a partnership.

Neobanks are gaining prominence as platforms to digitise banking or bank-like services for young people. According to a report last year, the top-4 global neobanks are worth $100 billion and Indian fintechs have made a start through Open, RazorpayX, Fi, and Jupiter.

Many Indian fintechs plan to expand from 1-2 platforms to neobank over the next few years. NBFCs are partnering with incumbent banks. They said that Monetisation is some time away.

Today's announcement marks a major milestone for the Indian ecosystem, home to a tenth of the world's unicorns. It was more than a decade ago when India found its first unicorn, a startup with $1 billion or higher valuation, in adtech startup InMobi. Things have changed dramatically in the past decade with more and more entrepreneurs finding the conviction to build something of their own. Since last year, more than 60 Indian startups have joined the unicorn club.