Mobile banking startup Jiko Group announced Thursday it has raised $40 million in a Series A round of funding.
Upfront Ventures and Wafra Inc. co-led the financing, which also included participation from Radicle Impact, NYCA Partners, Anthem Ventures and all existing investors. The round brings Jiko’s total equity raised to $47.7 million – in addition to $7 million in debt – since inception, according to the company.
This is the second time Jiko has made headlines in recent months. In early September, FinLedger reported on the startup’s purchase of Mid-Central National Bank in Wadena, Minn.
Both the Federal Reserve and Office of the Comptroller of the Currency and the Federal Reserve Bank of San Francisco approved the transaction. But it was a process. The deal came after three years of “rigorous” R&D, testing and auditing, according to Jiko.
A first in fintech
The purchase marked the first time a fintech company completed the acquisition of a nationally-regulated U.S. bank. At the time, Jiko said its plan was to roll out its platform at scale to the general public.
And this new funding will help it do just that, according to CEO and co-founder Stephane Lintner. It already in part helped Jiko purchase the bank as well as build the engine that powers Jiko’s full technology stack and financial infrastructure.
“A fair amount [of the Series A] went into the proceeds for the bank, but there is some money left to grow the business, launch our consumer product and hopefully turn into a profitable enterprise soon,” Lintner told FinLedger. “There was a lot of regulatory scrutiny and so the money was in escrow for a while as regulators examined our acquisition. Everyone had enough patience to stick it out.”
The business model
Founded in 2016, Bay Area-based Jiko is a decentralized full-stack bank with 24 employees – more than half of which are software engineers. What’s different about Jiko’s model is that it doesn’t hold customer deposits. Rather, it uses funds to buy short-term Treasury bills (T-bills).
Instead of investing or lending customer deposits, the money in a Jiko account is automatically invested in liquid US government-backed securities, and users receive 100% of the yield, according to the company. Jiko’s distributed core technology powers the “transparent” model and allows for what it describes as “cutting-edge banking features” in the mobile app, which the company says allow for added safety with tokenized accounts and card numbers, the ability to maximize earnings with an all-in-one account, and the ability to offer cashback rewards on all purchases.
Jiko claims that because of its proprietary technology, which includes “elements” of blockchain technology, “an investment can act as a liquid and spendable alternative to cash.” Since 2017, Jiko says it has invested “heavily” in its core infrastructure, which links payment rails with real-time, 24/7 principal trading capabilities on T-bills.
“We’ve rebuilt it all, including the ledger, or database,” Lintner told FinLedger. “It stores and allows transfers as fluidly as possible, while being designed for privacy and scale. And it’s all cloud-based. We try to keep everyone as private and safe as possible.”
Jiko also is a card processor, so as Lintner puts it, a customer can swipe their card while paying for a meal or drinks on a Saturday night and liquidate their T-bills at the same time.
The company’s next step is to launch a fluid mobile app that will be available to the general public. Building upon the recent bank acquisition, Jiko has secured over 50,000 people on its waitlist and recently started onboarding handfuls of customers after beta testing with about 1,500 people. It plans to charge $9.99 per month or $99 a year for its product.
“We’re now ready to onboard customers,” Lintner said. “Our product is designed to keep your money safe and fully invested at all times.”
Jiko will start with an initial focus on the United States with plans to eventually expand to Europe and possibly Asia. But it first wants to focus on making the product work as well as it can, Lintner said.
“We raised what we needed to build this from the bottom up,” Lintner told FinLedger. “We’ll need more capital over time for sure. But we’ve been lean and mean up to this point and this raise is a reflection of our focus on efficiency.”
For Upfront Ventures, doubling down on its investment in Jiko was a no-brainer.
Yves Sisteron, the firm’s managing partner, said that what attracted it to the company in the first place is what keeps it so supportive now: “an extraordinary founder with an ambitious plan.”
“From day one, Stephane knew that true innovation in banking would only come by rebuilding banking technology from the ground up,” Sisteron told FinLedger. “Because he spent almost a decade at Goldman Sachs but also has a PhD from CalTech, he has the rare blend of industry expertise and technical skills to achieve his vision. From building full-stack banking technology to acquiring a national banking license, Stephane and Jiko have achieved every goal they set for the company.”
In general, he added, Upfront Ventures believes that the fundamentally disruptive businesses are the ones that reduce friction and inefficiency in their markets at lower costs.
“While of course there are many successful businesses being built in fintech, the other neobanks are using someone else’s technology or banking license,” Sisteron said. “Because they don’t control their own destinies, so to speak, it’s harder for them to offer a truly differentiated proposition or lower costs. Jiko owns both the technology and the banking license and are creating fundamentally new rails for efficiency and cost savings in money storage and payments.”
Long term, he added, Upfront sees “a huge opportunity” not only for Jiko to offer a unique proposition directly to consumers, but also for partner companies “to leverage these rails in delivering their own new banking experiences.”