One Zero to raise $100m led by Deutsche Bank

Israel digital bank One Zero, controlled by Amnon Shashua, and led by CEO Gal Bar Dea, is seeking to raise $75-100 million abroad in a private placement, source inform “Globes,” as the country’s financial sector is expected to be hit hard by the fighting in the south.

As far as is known, the bank is seeking a higher valuation than the $320 million in its most recent financing round. One Zero had sought to raise $100-200 million at the start of the year but was forced to lower the amount. “Globes” has learned that the bank is currently making presentations to investors overseas, and Deutsche Bank is expected to lead the financing round.

Digital bank One Zero is still a loss making venture. According to the forecast presented by the bank to investors in the fundraising, it has set itself the target of achieving profitability in the fourth quarter of 2024. In the presentation to investors, the bank estimates that 75% of the funds from the current financing round will be used for investment in operations in Israel, and the rest for its planned operations in Europe. The first country to which it intends to expand is Italy, with the launch of operations there expected in the second half of 2025. In June 2023, the bank began the process of obtaining regulatory approvals in Italy.. Potential in Italy

One Zero aims to establish itself in 4-5 European countries in the coming years. It is believed that, apart from Italy, One Zero will try to establish operations in Spain and possibly also Switzerland, France and Germany, and later to expand to the US. In Italy, the bank writes in its presentation to investors, there is a potential of about 2.7 million customers whom the bank is targeting, with “high growth in digital.” A market source told “Globes” that after receiving approval in Italy, it will be easier for the bank to “obtain regulatory approval very quickly in other countries as well.” Meanwhile, One Zero has already appointed a manager for operations in Italy.

As of today, One Zero has, according to the source, over 80,000 customers in Israel. The bank estimated earlier this year that when it reaches 250,000 customers it will become profitable. At the beginning of 2023, One Zero predicted annual income of $48 million in 2023, and according to a presentation to investors, the bank estimates that it will reach annual income of $200 million from 360,000 customers in 2026, with about 50% of income from “subscribers” who are the bank’s customers, and the rest mainly from income from interest and foreign exchange activity.

Slowdown in acquiring customers

As expected, after the outbreak of the Israel-Hamas war, there has been a slowdown in customer acquisition numbers and the source who spoke to Globes estimates that there may be up to three months of damage to the bank’s development plans. About half of the bank’s customers today are paid subscribers – 35% on the cheaper track of NIS 50 subscription fees per month and the rest on the more expensive track of NIS 120 per month.

At the start of the year One Zero completed a financing round of $62 million from existing investors, at a valuation of $320 million, the same as in previous round at the end of 2021, when the bank raised $120 million.

One Zero is still a startup that does not pose a threat to the traditional banking system. The volume of its customers is negligible, and the question is whether the bank will be able to expand and take a significant market share further into the future. One Zero will also have to compete with Nir Zuk’s Esh digital bank also received regulatory approval this year to start its operations.

Published by Globes, Israel business news – en.globes.co.il – on October 26, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.