For every success, there are many failures #Varo

We all revel in the buoyance of fintechs succeeding. What about those who fail?

Notable fintech failures include BlockFi: A crypto lending and exchange company that collapsed during the 2022 crypto crisis, partly due to its relationship with FTX (FTX was a fintech failure as was MtGox). Then there are companies like Fast, a one-click checkout company that raised significant capital but failed due to a lack of a viable product and meaningful revenue, becoming a victim of its own hype. Oh, and then there is Wirecard … let’s not go there.

Meanwhile, while much of the fintech world has moved on to the latest shiny objects — agentic AI and stablecoins — there are thousands of fintech startups in the US that struggle on but not succeeding. They are Zombie companies. The Working Dead.

Varo is one such zombie company.

This surprises me as I praised Varo a few years ago and was particularly taken with this quote from its founder Colin Walsh who said, years ago, that getting a banking licence was the key. Colin said that getting a bank licence is “the only long-term sustainable route if you want to be around 50 to 100 years from now”. I agreed with him. But that was five years ago and now, Varo Bank is an American Zombie Bank.

Why?

Launched in 2017, Varo was the first neobank to receive a national bank charter from the Office of the Comptroller of the Currency. But then, as a chartered bank, it has to send out quarterly reports of the banks condition and income, commonly known as call reports.

And there is the rub.

Varo was doing well in 2021, when it raised a $510 million Series E, against the frothy backdrop of massive COVID-era backing but then Varo spent that $510 million. But then it stumbled, raising just $50 million in early 2023 and another $55 million earlier this year. The additional capital could not keep the bank alive.

The company changed CEOs. It did not work and did not deliver on the company’s strategy and execution. Deposit accounts did go up (6.2 million) but the bank just was not getting enough deposits and revenue. Revenue per account in the third quarter was a paltry $5.94. meaning Varo realizes only about $24 in revenue per account per year.

This is why I place Varo in the same bucket as other failed fintechs. I’d love for it to succeed and make a comeback but, if you have a fintech bank that isn’t getting any traction, it’s not a bank or a viable proposition. Makes me wonder about all the other challengers out there.