Why Balderton invested in Cleo

I am delighted to announce Balderton’s investment into Cleo, alongside follow-on investors including Local Globe, EF and an impressive array of angels such as Errol Damelin and Taavet Hinrikus. This was a highly competitive fundraise and we are delighted that Barney chose us as his partner for Series A.

Cleo is your AI assistant for taking control of your finances. Linking to your bank accounts she feeds you insights in Messenger, helps you set and keep to a budget, and helps you save automatically.

So why did Balderton choose to invest in Cleo alongside our prior fintech success stories such as Revolut, Nutmeg and Gocardless?

As is always the case for us, our primary reason to invest in Cleo was the team. We have been following Barney since his days at Entrepreneur First. He is exceptionally ambitious and driven, even by the elevated standard of our entrepreneurs. He even lived in the office for Cleo’s first year. He is also super smart and obsessed with product and metrics. Around him are an exceptional team of developers, data scientists and growth hackers coming from companies such as Google, Wonga, Amazon and IBM. Thish the COO adds financial and regulatory experience from Bain’s FS practice, and — unusually for a series A company — Cleo has a full time head of Voice and Comms Harriet, who brings much of Cleo’s personality

The second reason to invest in Cleo was the mission to help normal people get control of their finances. The typical Cleo client has an average bank balance of £50 and is incurring expensive overdraft fees and credit card interest. This is a market that has been largely neglected by fintech companies focussed on the richest 10%.

We believe that Messenger is the perfect channel to become someone’s trusted financial adviser, to help them get control of their finances once and for all. Cleo have managed to strike the perfect balance between education and entertainment, bringing a unique personality that keeps their users coming back. Underneath this is a huge amount of work on NLP and spend categorisation to ensure Cleo provides accurate insights.

Account aggregation and Personal Financial Management (PFM) tools have been around for many years: Mint was founded in 2006, and mobile PFMs such as Qapital and Bankin have been around since the start of the decade. However these tools have tended to be quite dry, used by the sort of person who keeps their bank statements in a neat binder and does their accounts in excel. Messenger allows Cleo to have a much more natural conversation with a user on their finances. The appeal of this is shown by Cleo’s exponential growth and industry-leading retention and engagement. As I write this post Cleo are the most popular chatbot on Messenger. Cleo can also take advantage of initiatives such as open banking and PSD2 to do much more for users than previous PFM tools have been able to.

A question investors ask on Cleo and anyone in this area is whether they are “deep” enough and in particular how they compare to neobanks such as Revolut, N26 and Monzo. This underestimates the massive amount of work Cleo has put into understanding user spend, providing genuinely useful budgeting, and working out how to communicate to users to maximise engagement. It also doesn’t take into account the fact that most people have several bank accounts, savings accounts and credit cards, and need to keep track of these all in one place. By using Open Banking and tools such as Plaid, Cleo is able to iterate rapidly to optimise user experience, rather than spending time on financial plumbing, while still providing frictionless access to financial services. These platforms have also allowed Cleo to launch quickly and grow fast in the US and Canada.

The coming years will see a battle to become a user’s trusted primary interface for their financial services, which will no longer need to be a traditional current account. Many millions of users are moving their allegiance to neobanks and aggregators such as Cleo. With payments and banking functionality becoming increasingly a commodity, the battle will be to win users’ trust. We believe that Cleo have the team and product to become the leading global player in the coming years.