French startup Qonto has raised a $552 million Series D funding round (€486 million). After this investment, the value of the startup has reached $5 billion (€4.4 billion). This is one of the biggest tours of the French tech ecosystem.
Qonto is a competitor bank focused on commercial bank accounts. The startup mainly focuses on small and medium businesses as well as the self-employed. She currently operates in France, Germany, Italy and Spain.
Tiger Global and TCV are leading the funding round today. With 220,000 customers, Qonto continues to plan to grow at a rapid pace in the coming years. “Our goal is to reach 1 million SMEs by 2025,” co-founder and CEO Alexander Prout told me. “And we know Tiger and TCV have supported quite a few companies to reach this scale.”
Some new investors are also taking part in 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.
This is a long list of investors and Qonto proves once again that private equity firms are actively looking for late-stage growth rounds in Europe.
From everyday banking to a comprehensive financing solution
What’s interesting about Qonto is that it is a truly European startup. In the United States, spending management solutions, such as Brex and Ramp, have been a huge success. As Kate Clark of The Information reports, they want to replace American Express and distribute the company’s cards to millions of employees in the United States.
Qonto started with commercial bank accounts because this is the main financial component of European companies. Many companies use their bank accounts directly to transfer funds. They initiate transfers, share their bank account number (IBAN) to receive a payment and set up direct debits to pay bills.
And Qonto does it really well. You can register from a computer and get a local IBAN after a few minutes. After that, you can also order debit cards to pay with your card.
Initially, Qonto relied heavily on an external banking partner – Treezor. The startup then applied for its own license to become a payment organization. In 2020, Qonto moved all of its customers to its in-house core banking system. The company now owns this important part of the art collection.
Qonto has expanded beyond a simple bank account. Alexandre Prout, CEO of the startup, defines Qonto as three different products combined into one service. In addition to the daily banking part, it also simplifies bookkeeping and accounting. It can also become your spending management solution.
On the bookkeeping front, Qonto allows you to export or sync with your existing accounting solution. This is a segmented 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.
For spending management, Qonto allows you to hand over physical, virtual, or one-time cards to employees. Administrators can set up different spending limits, approval workflows, and all the usual things you get from a spending management solution. It might not be as full a feature as a dedicated product, like Spendesk, but it might be enough for small businesses.
For everything else, Qonto partners with other fintech startups. For example, customers can open a credit line with October and borrow 15,000 euros to 30 thousand euros. Customers can also open a savings account with Cashbee and its banking partner, My Money Bank.
one bank account
There are 220,000 companies that pay for Qonto per month. The price ranges from €9 per month for the simplest freelance account to €249 per month for enterprise accounts. Moreover, some companies pay more for more cards or when you go over certain limits.
What makes the business model more lucrative is that a lot of clients sign up on their own. When they set up their company, they use Qonto for the initial capital deposit in order to register the company. Qonto combines inbound marketing with high margins for a SaaS product.
“About a third of our clients have established their companies with us. It is their first and only account they use,” Alexander Prout said. “Two thirds of our clients are companies that existed before they opened an account with us. Nearly half of them close their existing bank accounts, and half use Qonto in parallel with one or more accounts.”
With today’s funding round, the company plans to increase 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 euros in each of our markets,” Pruitt said. While there are still a lot of small and medium businesses that do not use Qonto in France, Germany, Spain and Italy, Qonto plans to enter a new market in 2023.