UK-based business payments startup Sequence has announced one of the biggest seed rounds in European fintech this year.
US VC giant Andreessen Horowitz (a16z) led the $19m seed round — its 11th European investment this year — which gives Sequence a post-money valuation of $75m.
London-based Sequence is the brainchild of two second-time founders: CEO Riya Grover, who was previously cofounder and CEO at food delivery platform Feedr, and chairperson Eamon Jubbawy, ex-cofounder of digital ID startup Onfido.
It’s tackling the clunky world of business billing and payments — something that both founders say they wasted precious time and resources on at their previous ventures, and that some of the world’s biggest startups (like Deliveroo, Hopin and Pipe) have already enlisted Sequence to fix.
Most startups that take payments — whether consumer companies in food delivery or retail, or SaaS companies that charge other businesses for their services — build their billing engine from scratch, Grover tells Sifted. This uses up a lot of their engineers’ time — which founders would prefer to be spent on core product work.
But payments are often not just a case of one identical repetitive transaction between two parties. Instead, they vary widely depending on a company’s pricing model.
Sequence’s founders say that as finance teams grapple with variable payments across spreadsheets, they miss countless data insight opportunities that can be critical for company growth.
The first complication simply surrounds the number of stakeholders in each transaction. Companies like Deliveroo, for instance, need to divide each end-consumer’s payment between their drivers, the restaurants and the Deliveroo platform itself.
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The second crops up mostly with SaaS companies, which tend to charge more the more people use their software. With a usage-based component, a billing system needs to be able to pull real-time data. But at the moment, this is almost entirely done manually.
Other companies struggle when sales teams sell contracts that can vary wildly and are difficult to track and analyse.
This is what both Feedr and Onfido struggled with, Grover tells Sifted.
Feedr’s orders varied by headcount and the particular meals that were being ordered. Onfido charged customers per background check that was carried out.
“This made the billing and finance operations challenge really acute,” Grover explains, “because it was hard to know what you’re supposed to be collecting, and then all this data was locked in a spreadsheet.
“That meant it was difficult to then draw trends and insights from what different customers were being charged, and which product lines were driving revenue.”
What does Sequence actually do?
Sequence has built a “low-code” modular software product so that companies can pick and choose what elements of billing, payments and revenue data they need help tracking.
It’s targeting companies that typically collect payments from their business customers via bank transfers or direct debit.
Its pitch to customers is that once a company has its end-to-end billing and payments process automated with Sequence, it can start doing much more exciting things on top — like offering customers access to certain features, or giving them financial incentives based on their usage.
“Imagine an energy company being able to get customers discounts or awards based on certain patterns of behaviour,” Grover says. “You can use this kind of data to understand how to optimise your pricing or understand how to calculate sales commissions.
“There’s a lot that having usage and payments data streamlined can give companies to fuel their growth.”
Sequence charges a software fee for its core platform but Grover says it's mostly free for businesses to start with. They can then pick and choose whether they use Sequence’s billing product and/or its payments product, and it charges per payment once they’ve signed up to those.
What’s next for Sequence?
Sequence is already working with unicorns on both sides of the Atlantic — including Pipe, Deliveroo, Omnipresent, Snyk and Reachdesk — on designing the desired “stack” for their payments.
Being well-connected in the European startup world has paid off for Grover and Jubbawy. A16z investors say part of what attracted them to the company was the fact that they were already talking to the founders of unicorns Plaid, Intercom, Jeeves, GoCardless, Marshmallow, Lendable, Hopin, UiPath, Monzo, and Comply Advantage — who have all now invested as angels in Sequence.
So far, Sequence has hired a team of 30 people from companies like Wise, Hopin and Revolut — and Grover tells Sifted that although it’s planning a surge of hiring at some point next year, it’s doing so cautiously.
“Having built a business before, I'm a very strong believer that the optics of team size is a really flawed metric because team size growth doesn't actually mean company growth,” she says.
“We're at this really amazing point where we're well resourced as a team, but we are lean enough and agile enough to move really quickly — and we want to really capitalise on that now.”
Who’s investing in Sequence?
- US VC firm a16z led the round, which is its sixth European fintech investment — after Stoik and Payrails earlier this year
- Salesforce Ventures
- Firstminute Capital
- Crew Capital
- Passion Capital
- Dig Ventures
- Fin Capital
- Founders from Plaid, Intercom, Jeeves, GoCardless, Marshmallow, Lendable, Hopin, UiPath, Monzo and Comply Advantage.
What’s the market like?
As the economy dampens and the consumer-facing fintech market loses its allure, investors are shifting their attention to slightly less sexy business-facing fintechs that are making life easier for other startups.
CFO tools have long been ripe for innovation — many finance teams still rely on spreadsheets and siloed data streams.
But European startups building tools for CFOs have raised $66.5m so far this year — a record amount. Meanwhile, the global accounting market was valued at $12bn in 2020 and is expected to reach over $20bn by 2026.
Sequence is certainly not alone in tackling this clunky operational problem — but it does seem to be addressing a corner of a CFO’s job that other startups aren’t. Most are focusing on cashflow management (like Tidely or Sibill), business planning (like Pigment and Growblocks) or consolidating bank accounts and financial data (like Airbank and Aurelia).
So far, we’ve not seen a specific focus on billing and payments for companies with variable usage business models. Legacy billing platforms like Chargebee have got some of this covered, but they’re designed for fixed recurring subscriptions — rather than the varied usage-based billing that Sequence is targeting. On the programmatic bank payments side of the business (ie, initiating payments with no manual intervention) GoCardless is already tackling direct debit, but they’re mainly focused on consumer-facing businesses.
Sequence’s main challenge will be proving that companies should swap the custom in-house billing and payments engines they’ve got their own engineers to work on for Sequence’s shiny new APIs.
There’s also a danger that other, slightly older, CFO tools startups will capitalise on the access to company payflows and financial data that they already have and launch products similar to Sequence’s as an add-on for their existing customers.
But CFO tools are definitely taking off right now and in the current economic climate, anything that makes it easier for company builders to devote resources to growth is likely to be a very attractive proposition.