Thought Machine Reaches $ 1 Billion Valuation With Funding Backed By JPMorgan

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JPMorgan Chase & Co. signage is illuminated at night at a bank branch in Chicago, Illinois.

Christophe Dilts | Bloomberg | Getty Images

LONDON – British fintech start-up Thought Machine has raised $ 200 million in a new round of funding that takes its valuation above the coveted $ 1 billion mark.

The cash injection was led by Nyca Partners, a US-based venture capital firm that has previously bet on companies like Affirm and Revolut, with additional backing from big lenders like JPMorgan Chase, Standard Chartered and ING.

Existing investors Lloyds Banking Group, Eurazeo and SEB also increased their holdings.

Founded in 2014 by former Google engineer Paul Taylor, Thought Machine says its software is helping big banks move from a legacy IT infrastructure to a modern cloud-based platform.

The company counts many of its major bank lenders among its clients. In the United States, for example, it struck a deal with JPMorgan to replace the company’s core retail banking system. In Great Britain, Thought Machine has a similar agreement with Lloyds.

Taylor said his company’s mission “is not small” and requires substantial investment to achieve its goals. Although Thought Machine now generates “tens of millions” in revenue, it is not yet profitable, he added. The company derives its revenues from multi-year software subscription agreements.

“It’s a fantastic time to be an entrepreneur,” Taylor told CNBC in an interview. “There is more funding available than ever. “

“This means that here in the UK we can actually build a world-class company, rather than always looking over our shoulder at Silicon Valley. “

Thought Machine plans to use the new money to expand internationally. The company opened an office in New York earlier this year, with around 20 employees leading its expansion into the United States.

Thought Machine is also expanding into new Asian markets such as Malaysia and Japan. About half of Thought Machine’s business now comes from Asia, the company’s CEO said. It employs around 500 people around the world.

The company competes with Mambu, which was valued at over $ 2 billion in its last funding round, as well as 10x Future Technologies, the fintech business of former Barclays CEO Antony Jenkins. 10x is also supported by JPMorgan.

Thought Machine is one of many new business-driven fintechs looking to partner with, rather than disrupt, the banking behemoths of the world. Banks face increasing competition from a host of new digital entrants like Chime, Revolut and N26.

So far, these challengers have not yet significantly reduced the market share of the incumbents. But they are gaining popularity with consumers and plenty of funding from venture capitalists willing to subsidize substantial losses in favor of rapid growth.

The banks are not standing still. Many have attempted to deploy their own stand-alone digital banking products, with varying degrees of success.

JPMorgan recently launched a digital-only version of its Chase brand in the UK, while Credit Suisse rolled out a new banking app called CSX in Switzerland.

However, several lenders have stumbled on their digital transformation journey. RBS, for example, shut down its online banking brand Bo last year.

“Our goal is not to pick the winners in space,” Taylor said. “Our goal is that if anyone wants to start a cloud-based bank, we are available and they can use our platform.”

When asked if an initial public offering was on the horizon, the founder of Thought Machine said it was likely to be released in about three years.

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