Fintech firm Mercury hits $5.2 billion valuation after funding round

Mercury, a fintech firm that provides banking services to startups, has raised $200 million in funding at a $5.2 billion valuation, CNBC has learned exclusively.

That valuation is 49% higher than the San Francisco-based company’s previous funding round just 14 months ago, bucking the downturn facing much of the fintech sector.

The Series D round was led by venture firm TCV — backer of other well-known fintech firms, including Revolut and Nubank — and included existing investors Sequoia Capital, Andreessen Horowitz and Coatue, Mercury CEO Immad Akhund told CNBC.

Mercury has emerged in recent years as one of a select group of fintech firms, like the larger payments startups Ramp and Stripe, that have continued to thrive after the collapse of the inflated valuations of the pandemic era.

Mercury, with more than 300,000 customers, including a third of early-stage startups, has been profitable for the past four years and hit $650 million in annualized revenue in the third quarter, Akhund said.

While generative AI has hurt many startups created before the arrival of OpenAI’s ChatGPT in late 2022, it has also fueled the formation of new companies — a trend that Mercury, which opens accounts for businesses at their earliest stage, has directly benefited from, according to Akhund.

“We’ve seen a lot of growth, especially recently, and a lot of that comes down to AI being a big enabler for entrepreneurship,” he said. “We’re seeing a lot of people doing AI startups, but also non-AI companies where they’re using AI to build an app really easily or build products and websites really quickly.”

The fundraising comes weeks after Mercury disclosed it received conditional approval from the Office of the Comptroller of the Currency to become a federally regulated bank, part of a wave of fintech and crypto firms seeking entry to the traditional banking system dominated by established lenders.

The charter, which Akhund says may be ready for final approval in 2027 as Mercury builds its products and internal controls, will enable the firm to keep more revenue for itself.

Once it is a regulated bank, Mercury will also be able to expand its loan offerings, join the Zelle network for instant payments and reduce its reliance on partner banks Column and Choice Financial.

“At the scale Mercury is at, it just makes sense to be directly regulated,” Akhund said. “We tend to be much bigger than our sponsor banks. When a bank regulator goes in there, they really want to be regulating us directly.”

The move also reflects a broader shift underway in fintech after the collapse of fintech middleman Synapse exposed weaknesses in the partnership model that powered much of the industry’s growth over the past decade.

Still, Akhund said Mercury plans to continue working with its partner banks even after obtaining its own charter because some banking services will remain shared across institutions.

Mercury originally gained traction among startups as a more tech-friendly alternative to traditional banks. It later benefited from the fallout of Silicon Valley Bank’s collapse in 2023. Now, it aims to use AI to maintain its lead in digital features for founders of startups and small businesses.

Mercury recently launched tools allowing businesses to interact with their accounts through AI agents. It also plans to unveil a broader AI interface later this year that will let customers approve payments, send invoices and manage finances with conversational language.

Akhund said he has no plans to sell the company to a bank, as Brex did in January. He said he eventually wants Mercury to go public.

“I really want to build a strong independent brand,” he said. “I would like it to be a public company.”