Thu. Jan 20th, 2022

French startup Qonto has raised a Series D funding round of $552 million (€486 million). Following this investment, the startup has reached a valuation of $5 billion (€4.4 billion). This is one of the biggest turns in the French tech ecosystem.

Qonto is a challenger bank focused on corporate bank accounts. The startup mainly focuses on small and medium-sized companies and freelancers. It is currently active in France, Germany, Italy and Spain.

Tiger Global and TCV lead today’s funding round. With 220,000 customers, Qonto still wants to grow at a rapid pace in the coming years. “Our goal is to reach one million SMEs by 2025,” co-founder and CEO Alexandre Prot told me. “And we know that Tiger and TCV have already supported a lot of companies to achieve that scale.”

Some new investors are also joining the round, such as Alkeon, Eurazeo, KKR, Insight Partners, Exor Seeds, Guillaume Pousaz, Gaingels and Ashley Flucas. Existing investors Valar, Alven, DST Global and Tencent are also putting more money on the table.

That’s quite a long list of investors and Qonto proves once again that private equity firms are actively looking for late-stage growth rounds in Europe.

Image Credits: Qonto

From everyday banking to an all-in-one financial solution

What’s interesting about Qonto is that it’s a truly European startup. In the US, expense management solutions such as Brex and Ramp have been hugely successful. As Kate Clark of The Information reported, they want to replace American Express and distribute corporate cards to millions of employees in the US

Qonto started with corporate bank accounts because they are the main financial component of European companies. Many companies use their bank accounts directly to move money. They initiate transfers, share their bank account number (IBAN) to receive a payment, and set up direct debits to pay bills.

And Qonto does that very well. You can sign up from a computer and get a local IBAN a few minutes later. After that you can also order debit cards to pay with your card.

In the beginning, Qonto relied heavily on an outside banking partner – Treezor. The startup then applied for its own license to become a payment institution. In 2020, Qonto has transferred all its customers to its in-house core banking system. The company now owns this critical part of the tech stack.

Qonto has gone beyond the simple bank account. The CEO of the startup, Alexandre Prot, defines Qonto as three different products brought together in one service. In addition to the daily banking part, it also simplifies accounting and bookkeeping. It can also become your expense management solution.

In terms of accounting, Qonto allows you to export or sync with your existing accounting solution. This is a fragmented market as each country uses different accounting tools. For example, you can export your data to Cegid if you are a French company, you can sync with Datev if you are a German company, etc. Qonto users can also import receipts directly into their Qonto account.

As for expense management, Qonto allows you to hand out physical, virtual or one-time cards to employees. Admins can set different spending limits, an approval workflow, and all the usual stuff you get from an expense management solution. It may not be as complete as a specialty product, such as Spendesk, but it may be enough for small businesses.

For everything else, Qonto partners with other fintech startups. For example, with October, customers can open a line of credit and borrow €15,000 to €30,000. Customers can also open a savings account with Cashbee and its banking partner My Money Bank.

Image Credits: Qonto

A single bank account

Every month 220,000 companies pay for Qonto. Prices range from $9 per month for the most basic freelancer account to $249 per month for business accounts. In addition, some companies pay more to get more cards or when they exceed certain limits.

What makes the business model even more lucrative is that many customers simply sign up themselves. When they set up their company, they use Qonto for the initial capital deposit to register the company. Essentially, Qonto combines inbound marketing with the high margins of a SaaS product.

“About a third of our customers have started their business with us. It’s their first account and the only one they use,” Alexandre Prot said. “Two-thirds of our customers are companies that already existed before they opened an account with us. About half of them close their existing bank account, half use Qonto in parallel with one or more accounts.”

With today’s funding round, the company plans to grow its team from 500 employees to 2,000 people by 2025. Qonto will also invest heavily in its existing markets. “We will be able to invest more than €100 million in each of our markets,” said Prot. While there are still many SMEs in France, Germany, Spain and Italy that do not use Qonto, Qonto also plans to enter a new market in 2023.

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