Thoughts on the €3.1bn N26 valuation

Since N26 raised additional funding valuing the company at €3.1bn (source) my Linkedin feed has been full of discussions, mostly around the company being "massively overvalued" and the founder's comment that "profitability is not a metric" for them right now displaying short-term think and "bubble traits".

I don't want to get into a discussion here around their business model and the sustainability of it. For the better or worse, at Lendico we decided against going in first with a digital banking product instead of loans.. and that was in the early days of German fintech in 2013.

What I want to add to the discussion is this: Insight Partners investing into the company happened a couple of months after N26 launched their Metal cards - think AmEx Centurion for €16.99 / month. The latest round values a user of N26 at c. €1.000 (which to many seems a lot. But consider a Metal user to have a LTV (10y) of €2.039 - before any other up- / cross-sells N26 might be able to do. 

• Of my 14 friends I asked who bank with N26, 9 use Metal (64%).
• Of those 14, 9 joined recently (i.e. Metal has been introduced already) and thereof 7 use Metal (78%).
• Meaning of the 5 long-time users, 2 converted to Metal (40%). 

Of course this is not a representative sample but I do believe that more people use Metal (or the entry premium product "You") than everyone thinks. If they are able to convert enough users of both new and old cohorts the €1000 / user valuation seems on point. Insight must have seen a strong trend with those cohorts having significantly higher LTVs as older ones when investing in the first place. With them being a prolific investor in consumer apps they will value this "lifestyle aspect" of the offering a lot and see the potential to build upon.

In short: What does this mean for traditional banks? Digitizing existing products is just not enough! It's about offering new products that have been thought through digitally end-to-end. Even in finance every successful product will be a lifestyle product, too.

PS: All of this does not automatically mean that I'm bullish on N26 as a company or that I believe the valuation is justified. This would be a separate discussion. I just want to add another perspective on their recent valuation which I haven't seen in the various discussions thus far.