Nubank is now worth $30 billion after $750 million investment led by Berkshire

With huge stakes in banks like American Express, Bank of America and US Bancorp, billionaire investor Warren Buffett is the main lender to banks worldwide. Now Buffetts conglomerate Berkshire Hathaway is betting on a digital lender trying to shake up the global banking market.

On Tuesday, Berkshire Hathaway announced a $500 million investment in Brazil-based digital bank Nubank, one of the most valuable privately held startups in the world. The investment was part of a broader financing round that raised a total of $750 million and subsequently raised Nubanks’ valuation from $25 billion to $30 billion, according to a source familiar with the matter. This new valuation puts the digital bank slightly behind Banco Bradesco, one of Brazil’s top banks, with a market value of $40.9 billion.

The funding round completes a busy 12-month period for Nubank, as the company boomed during the pandemic, raising more than $1 billion in private financing. In April, Nubank co-founder David Vlez also graced the cover of Forbes in an article detailing how he went from a rising star in the world of venture capital to one of the most successful entrepreneurs in Latin America by defying Brazil’s major incumbent backers.

With just $1 million in seed money raised eight years ago from Vlez’s former employer Sequoia Capital, Nubank has grown into a powerhouse. Nubanks’ turnover almost doubled in 2020 $963 million, and customers recently crossed 40 million. Like other fintechs that serve consumers digitally, it benefited from the pandemic-ravaged 2020, as consumers shifted their banking to mobile phones and the Internet, even older banking customers.

In Latam alone, about 50% of the population still does not have a bank account and credit card penetration averages 21%, compared to 70% in the US, David Vlez, co-founder of Nubanks, said in a statement. [W]We are at a real turning point for Nubank and we are honored to welcome such a world class investor to support us on our journey.

Nubank’s addition of Berkshire Hathaway adds to its blue chip roster of US investors, including Tiger Global, TCV, Whale Rock, DST and Singaporean sovereign wealth fund GIC.

Vlez once aspired to become a venture capitalist who bets big on the growth of economies like Brazil and his native Colombia. After graduating from Stanford University and its business school, and working at major companies such as Morgan Stanley and General Atlantic, Vlez was recruited by Sequoia Capitals billionaire Doug Leone to build his presence in Brazil. However, when they arrived in So Paulo to scour the market for opportunities, Leone pulled the plug on Sequoia’s pursuit due to doubts about the local entrepreneurial culture. So, after a few months of studying the market, Vlez got down to building Nubank and turned it into a startup that boosts venture investment in Latin America.

With Warren Buffett’s Berkshire Hathaway on board, the rise of Nubanks has captured the interest of some of the world’s most sought-after investors, and is a standout among startups trying to disrupt large established banks with large-scale and branch networks. Series G’s fundraising now totals $1.15 billion, which is the largest private capital raise ever by a technology company in Latin America.

As Nubank takes on more capital, it must prove that it can be profitable outside of its no-fee business model and maintain its stellar growth rates.

Last year, Nubank acquired a pioneering digital investment platform and introduced a life insurance product, selling 100,000 policies in the first two months. In a statement, the company said it plans to use the capital raised to continue launching new products and services.

With the additional financing, Nubank will continue to invest in acquisitions and international expansion. Currently, the company is pushing hard on the Mexican banking market, where it launched its first credit card more than a year ago and has already received 1.5 million applications. Nubank plans to invest $135 million in the country.