- Varo Bank laid off 75 employees and is establishing a new business unit as the bank looks to decrease its burn rate and move closer to profitability, CEO Colin Walsh wrote in a blog post Monday.
- The job cuts represent 10% of the bank’s staff, and come as recent regulatory filings show the bank could run out of funds by the end of the year.
- In addition to the job cuts, Varo Bank has limited hiring and pulled back on marketing investments in the near term to shore up capital, Walsh wrote.
“As a business, we are not immune to the impacts of our current environment, and we must make some difficult decisions to ensure that Varo has sufficient capital to execute on our strategy and path to profitability,” Walsh wrote.
Varo Bank in 2020 became the first neobank to be granted a national bank charter by the Office of the Comptroller of the Currency.
The company raised $510 million at a valuation of $2.5 billion last year and had $263 million in equity for the quarter ending March 31, according to an April regulatory filing.
With a burn rate of $84 million per quarter, the filing showed the not-yet-profitable bank could run out of funds by the end of the year without a fusion of capital or enacting cost cuts.
Walsh, however, told Banking Dive in May the company has “sufficient capital to reach profitability, without having to raise additional capital.”
Those impacted by the job cuts will receive severance pay, extended benefits and additional resources to help through the transition, Walsh wrote.
“They also have all of our utmost respect and appreciation for all that they’ve done to help make Varo the leader in digital banking,” he added.
Part of the company’s transition includes the launch of a new business unit called Varo Tech, which will bring technology, design, data and product functions under a single umbrella, Walsh said.
“This new structure will allow us to increase pace, reduce costs, and, as always, ensure our focus remains on technology innovation and continuing to engage and grow our customer base,” Walsh wrote. “It also enables us to reduce silos across the company and drive more cross-functional collaboration.”
Varo had already pared its workforce earlier this year. The bank had 768 employees at the end of March, according to a regulatory filing, down from the 833 it reported at the end of December.
Varo Bank did not respond to a request for comment from Banking Dive by press time.