French startup Qonto raised a Series D (€ 486 million) round of funding of $ 552 million. Following this investment, the startup reached a valuation of 5 billion dollars (4.4 billion euros). It is one of the biggest towers of the French tech ecosystem.
Qonto is a challenger bank focused on professional bank accounts. The startup is mainly aimed at small and medium-sized businesses as well as the self-employed. It currently operates in France, Germany, Italy and Spain.
Global Tiger and TCV are leading today’s fundraising round. With 220,000 customers, Qonto still expects rapid growth in the years to come. “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 helped many companies reach that scale.”
New investors are also participating 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.
That’s a pretty long list of investors and Qonto proves once again that private equity firms are actively seeking late stage growth cycles in Europe.
From everyday banking to an all-in-one financing solution
What’s interesting about Qonto is that it’s a truly European startup. In the United States, expense management solutions, such as Brex and Ramp, have been a huge success. As Kate Clark of The Information reported, they want replace American Express and distribute corporate cards to millions of employees in the United States
Qonto started with professional bank accounts as it is the key financial component of European businesses. Many businesses use their bank accounts directly to move money. They initiate transfers, share their bank account number (IBAN) to receive payment and set up direct debits to settle invoices.
And Qonto does it very well. You can register 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.
At first, Qonto relied heavily on a third-party banking partner – Treezor. The startup then applied to obtain its own license to become a payment institution. In 2020, Qonto moved all of its customers to its internal banking system. The company now owns this critical part of the technical stack.
Qonto has expanded beyond the simple bank account. The startup’s CEO, Alexandre Prot, defines Qonto as three different products brought together in one service. In addition to the day-to-day banking part, it also simplifies bookkeeping and accounting. It can also become your expense management solution.
On the accounting side, Qonto allows you to export or synchronize with your existing accounting solution. It is a fragmented market because each country uses different accounting tools. For example, you can export your data to Cegid if you are a French company, you can synchronize 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 distribute physical, virtual or one-off cards to employees. Admins can set up different spending limits, an approval workflow, and all the usual things you get from an expense management solution. It may not be as comprehensive as a dedicated product, such as Expenses office, but it might be enough for small businesses.
For everything else, Qonto partners with other fintech startups. For example, customers can open a line of credit with October and borrow € 15,000 to € 30,000. Customers can also open a savings account with Cashbee and its banking partner My Money Bank.
One bank account
There are 220,000 companies paying Qonto every month. Prices range from € 9 per month for the most basic independent account to € 249 per month for corporate accounts. On top of that, some companies pay more to get more cards or when they go over certain limits.
What makes the business model even more lucrative is that many customers 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 clients have started their businesses with us. This is their first account and the only one they use, ”explains Alexandre Prot. “Two-thirds of our clients are businesses that existed before opening an account with us. About half of them close their existing bank account, half of them use Qonto in parallel with one or more accounts.
With today’s funding round, the company plans to grow its team from 500 to 2,000 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,” said Prot. While there are still many SMEs not using Qonto in France, Germany, Spain and Italy, Qonto also plans to enter a new market in 2023.