Startup bank Tandem says that last year’s Brexit vote made it “significantly” more difficult to raise money.
Last year’s vote to withdraw from the European Union “significantly impacted management’s ability to raise funding when planned,” says Tandem in its 2016 accounts, which were registered with Companies House this week.
Founded in 2015 by Ricky Knox, a serial tech entrepreneur and Matt Cooper, the Capital One co-founder, Tandem is attempting to build an app-only bank pitched at millennials. The company has yet to introduce the app to the public and has spent two years developing its technology.
Accounts reveal that last year, Tandem raised £28.2 million in equity funding, including £1 million via crowdfunding, and £1.2 million in subordinated debt.
However, a large investment in tech and product development forced it to a £20.4 million loss in 2016, up from a loss of £6.4 million in 2015. Tandem recorded no income in 2016 and was left with £7.3 million in the bank.
Tandem assumed that it had secured £35 million in December 2016 in a deal with House of Fraser that was supposed to have funded the launch of its app-only bank account. However, that deal fell through in March after the app-only bank had only received £6 million.
The funding impediment led the startup to lose its banking licence and urged it to delay and scale back launch plans, seek additional funding, and lay off staff. As Business Insider reported previously, Tandem sold shares at a discount and raised £3.6 million in April.
‘No further money is needed for the time being.’
The future of Tandem appears to have been secured by a share-for-share takeover of the loss-making Harrods Bank that was announced in August. Tandem got a £10 million cash injection from “existing and new investors” as part of the deal and will receive an additional £70 million once the deal is approved by regulators.
However, auditors PwC put an “emphasis of matter” on the going concern basis of Tandem in the accounts, suggesting that it is concerned about the ability of the company to survive. PwC says that the startup’s need to raise additional funding “may cast significant doubt on about the company’s ability to continue as a going concern.”
Ricky Knox, Tandem’s CEO said: “The Harrods Bank acquisition brings £80m of new capital into the combined Tandem and Harrods Bank business, which means no further money is needed for the time being.
“PwC is highlighting a risk only in the case that the acquisition doesn’t close given that it is still subject to regulatory approval. Tandem remains fully confident that the deal will go ahead.”
Knox added: “Tandem would like to add an investor or two that they think can bring strategic value to the business, but if they can’t find anyone appropriate then existing investors will fully fund the round.”
Tandem has raised close to £40 million from various investors including Route66 Ventures, eBay founder Pierre Omidyar, and crowdfunding investors on Seedrs.
Despite its setback in licensing, Tandem declares in its accounts that its “intention is to regain a deposit-taking licence and achieve its original strategic aims.”