Jiko raises $40 million to become a most unusual challenger bank

Jiko, a Berkeley-based financial technology firm, has raised $40 million in venture capital funding in a bid to take on Wall Street's retail arm. The cash injection, led by Upfront Ventures and investment firm Wafra, follows an initial $7 million debt financing round, putting the company's total raise at $47 million to date.

Most existing fintech challengers spent years acquiring customers with slick apps and no-hidden-fee promises, only later worrying about offsetting mounting costs of customer acquisition, partly by bringing deposit-taking in-house. Lending Club, an early fintech pioneer, bought Radius Bank for $185 million in February. Startup Varo received a national banking charterthis year. Square and, more recently, SoFi got approvals to become banks too.

Jiko took the reverse approach. Founded four years ago by Stephane Lintner, a former Goldman Sachs trader, Jiko set out first to acquire an existing bank before debuting a product. Investors' funds were held in escrow for two years while Jiko pursued purchasing 63-year-old Mid Central National Bank based in Minn., a deal it consummated in September.

"A fintech buying a bank isn't standard, and we spent most of the last few years of our effort on that—the whole round was designed around it," Lintner said. "We needed very patient investors."