UK buy now, pay later start-up quadruples valuation to $2 billion, plans U.S. expansion

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  • London-based start-up Zilch has raised $110 million in a round of funding, valued at $2 billion, which is four times the $500 million it raised eight months ago.
  • Zilch plans to use the fresh cash to launch in the United States. It has set up an office in Miami with about 10 employees working on its US expansion.
  • The firm has experienced huge growth amid growing demand for Buy Now, Pay Later services such as Klarna, Afterpay and Affirm.

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LONDON – British start-up Zilch is riding the “buy now, pay later” wave for America.

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The London-based company said on Wednesday it has raised $110 million in a new round of funding, valued at $2 billion – four times the $500 million Zilch was valued in its previous private investment round eight months ago.

The investment was led by Ventura Capital, a pre-IPO investor that previously backed Alibaba and Spotify, and Gauss Ventures, an investor in London fintech firm Curve.

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Zilch plans to use the fresh cash to launch in the United States. It has set up an office in Miami with about 10 employees working on its US expansion.

Buy now, pay later, or BNPL, services have attracted swell demand amid the acceleration of e-commerce during the coronavirus pandemic. Such products let buyers split the cost of a purchase over a period of months, often interest-free.

According to data from Worldpay, BNPL accounted for 2.1% of all global e-commerce transactions in 2020 – around $97 billion.

Zilch hopes that his approach to the BNPL will help him stand out from the crowd. Rivals like Klarna, Afterpay and Affirm include their checkout options on select retailers’ websites. Zilch, on the other hand, lets users pay at any merchant that accepts MasterCard.

Zilch CEO and founder Philippe Belmont said the start-up chose that path because all BNPL companies “look exactly the same.”

“I’m not saying they’re bad business, but they’re just copycats,” he said. “Our idea was, you can’t be late to the party and just do something like that.”

“We’re really using the infiltration of executives against them. We’re going straight to consumers and saying you can buy now, pay later anywhere.”

However, the company is similar to rivals in how it makes money. Zilch takes a small cut from merchants on every transaction processed through its platform.

The idea is that retailers are willing to pay these charges because it increases their sales in the long run.

wild growth

Belmont said his firm has experienced massive growth since it secured the last round of funding in March.

“The company is about eight times the size,” he said. “It’s been 30-35% implied sales growth month-over-month for the full year.”

Zilch says it now has 1.2 million subscribers and is adding 200,000 new users each month. The firm has more than 210 employees — up from just 20 in March — and is aiming to hire another 100 employees over the next 12 months.

That growth could be tested in the coming years, though, as regulators take a closer look at the space. In the UK, the government is introducing new legislation to bring the BNPL under regulatory oversight.

“It should be regulated,” Belmont said. Zilch received a consumer credit license from the UK’s Financial Conduct Authority in 2019. It also offers a “pay now” option that lets users pay in full for items. Klarna recently launched a similar feature in the UK

“After all, BNPL is a debt instrument. And so we went and got a consumer loan license,” said the Zilch founder.

The start-up is also backed by Goldman Sachs and the venture capital arm of the Daily Mail and General Trust, which owns the Daily Mail newspaper. It has raised a total of $340 million in both equity and debt financing so far.

This battle of funds will be key to helping Zilch gain a foothold in the US market, which is dominated by the likes of Affirm, Afterpay and Klarna.

“We need to thank these other people for spending millions on educating customers,” Belmant said. “Karna tried to move to America six years ago and it didn’t work out so well. And I think the timing was probably wrong.”

“A lot of investors or shareholders have asked us if we’re doing product-market fit testing for the US and in fact, the answer is Afterpay is doing it for us.”

The BNPL market is already showing signs of strength. American fintech giant Square earlier this year agreed to buy Afterpay for $29 billion, while PayPal is buying Japanese firm Pedi for $2.7 billion.

Zilch is not the only start-up to benefit from the increase in demand for BNPL. Elsewhere in Europe, German fintech firm Billy raised $100 million at a valuation of $640 million, while Italian company Scalpay raised a valuation of $700 million at $155 million.


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