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Neobank Judo Bank raises $400 million in biggest-ever Aussie funding round

Stephanie Palmer-Derrien /

Judo Capital

Judo Capital management team. Source: Supplied.

Aussie challenger Judo Bank has raised $400 million in what is being touted as the biggest single funding round in Aussie history.

Previously, the title was held by Campaign Monitor, which raised $266 million in 2014.

Judo’s latest funding comes from new institutional investors, including Bain Capital Credit and Tikehau Capital, as well as existing investors including OPTrust, the Abu Dhabi Capital Group, Ironbridge and SPF Investment Management.

At $400 million, the round is double Judo’s initial $200 million funding target for this round.

Judo launched in 2018, before raising $140 million in equity funding in August. The following November, it secured a $350 million debt facility from Credit Suisse.

The startup also secured its full authorised deposit-taking institution (ADI) licence in April, when it re-branded from Judo Capital to Judo Bank.

Now, Judo co-founder and chief David Hornery tells StartupSmart the startup will only continue on its high-growth trajectory, hiring more bankers and further building its presence in the market.

It’s on track to lend more than $1 billion to Aussie small businesses by the end of the calendar year, he says.

The things that matter

But Judo is playing in a slightly different sandpit to the other up-and-coming neobanks, specifically targeting small business customers, as opposed to consumer banking.

In fact, Hornery doesn’t necessarily view the business as a neobank, or even as a fintech.

“There’s a degree to which those labels are associated with a very digital offering,” he explains.

Judo’s “backbone”, however, is being relationship-focused, “and taking banking for small business back to what it was a decade ago”, Hornery says.

The founders set out to create a bank that understands a business in terms of cashflow, capital and the character of management, as opposed to only looking at collateral.

“Those are the things that really matter,” he explains.

“We have cutting-edge technology, but we see that as an enabler.”

It was this focus on the relationships aspect of small business banking that really resonated with the global institutional investor market, he explains.

“That resonance has come through in tremendous support.”

In this round, there’s about a 50-50 split between new and repeat investors, Hornery says. And, some 90% of investors in Judo’s first round have invested for a second time.

Many of the new investors have been following the bank’s progress for the past 12 months, and have seen it secure its ADI licence, enter the deposits market, expand its presence to cover Melbourne, Sydney and Brisbane, and grow its team to 135 people.

“They’re certainly happy with the progress,” Hornery says.

The Aussie neobank race

Judo’s raise is the latest in a string of wins for Aussie challenger banks.

Consumer neobank Volt secured its ADI licence in January this year, although it doesn’t have any products out in the market just yet. The only other fully independent challenger, Xinja, is still waiting on its own ADI licence.

While Up became the first Aussie neobank to launch back in October 2018, it is fully backed by Bendigo Bank, and so didn’t have to go through the ADI approval process. While 86 400 is also backed by an existing payments provider, Cuscal, it secured its own full ADI licence earlier this month.

At that time, Xinja chief Eric Wilson suggested the banks that have backing from existing entities have less potential to disrupt the status quo and take on the Aussie big four.

“Obviously congratulations to the team at 86400,” he said in a statement.

“However, whilst this is a new ADI, 86400 is effectively owned by an existing bank, so we don’t necessarily expect as much disruption of the industry from 86400 as we would from a truly independent neobank.”

While Volt waited until it secured the ADI, and is now working on perfecting its product before launching any products into the market, Xinja has launched a pre-paid credit card product, and plans to launch additional products as soon as its ADI is granted.

Judo, however, took a slightly different approach, launching as a small business lender, and then pivoting to provide a full banking service once its ADI was approved.

Although it started out as a small business lender, Hornery explains the co-founders were always building Judo to become a bank.

They opened their doors early so they could “pressure test all the dimensions”, he says.

So, when Judo was granted its banking licence in April, “that really allowed us to accelerate that growth from what has been a well-established foundation”.

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Stephanie Palmer-Derrien

Stephanie Palmer-Derrien is the editor at StartupSmart. You can contact her at [email protected].

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