French neobank Qonto has continued the nation’s fintech hot streak today with a €486m funding round it will use to expand its small business and freelancer banking services.
According to France FinTech, an industry association, French financial startups raised €2.27bn in 2021, up from €830m in 2020. That momentum has carried into 2022 with PayFit becoming the nation’s 23rd unicorn last week with a $289m round.
And now Qonto has officially joined those unicorn ranks with a valuation of €4.4bn thanks to a fundraise that also set a new record for France’s largest fintech round. The round was led by two familiar private equity faces, Tiger Global and TCV, who have been rewriting the rules of the startup fundraising game in recent years.
We will be following up on what we've done, but with much more firepower
CEO and cofounder Alexandre Prot says the megaround is necessary for Qonto to accelerate its hiring, product development and customer support to seize the opportunity he sees. While the company counts 220,000 customers, its goal is to serve 1m in Europe by 2025.
“This new round is really to double down on our European expansion,” Prot says. “We will be following up on what we've done, but with much more firepower.”
Founded in 2017 by Prot and Steve Anavi, Qonto now operates in four countries: France, Spain, Germany and Italy. Its platform aims to digitise and simplify the banking chores such as bookkeeping and spending management for clients who are often too small to appeal to larger, incumbent banks.
The seeds of the company were planted when the cofounders were working on a connected hardware startup several years ago and suffered the financial frustrations felt by so many small business owners and freelancers. “We created Qonto to build what we would have dreamed of having eight, nine years ago,” Prot says.
Prot explains that about 80% of Qonto’s platform is similar across all four markets, while 20% is customised for local financial and accounting quirks. For instance, French clients are more likely to have to manage cheques from customers while Italy has its own very specific financial accounting rules.
Rather than expand into new territories, Qonto intends to enlarge its presence in those same countries by rapidly increasing hiring from its current headcount of 500 to 2,000 over the next few years, and by ramping up marketing efforts. Prot expects the money to be spent evenly across its four markets. That will include opening a customer support centre in Barcelona this year.
“Talent is key,” Prot says. “This new round will enable us to probably attract even better profiles, but also just more of them.”
The latest round comes two years after Qonto raised €104m and brings its total raised to €622m. While Qonto never confirmed its valuation at the time, many observers, including Sifted, had placed the startup’s valuation north of €1bn following the 2020 funding. Today’s announcement is the first time Qonto has publicly confirmed its unicorn status.
It's important to look at relative values and to see that a unicorn 10 years ago was a huge valuation. Today, unicorn is kind of a starting point
The new round also included money from previous investors, including Valar, Alven, the European Investment Bank, Tencent, DST Global, Alkeon, Eurazeo, KKR, Insight Partners, Exor and Gaingels.
“They've seen that we did what we said we would be doing in terms of growth, more than doubling every year our revenue, including last year,” Prot says. “That's also what we're planning for this year.”
In this round, Prot says the company is also looking for international partners who could help realise its ambition to become not just a European champion, but eventually a global one. That includes looking down the road to an eventual IPO.
In the meantime, he’s keeping Qonto’s growth and valuation in perspective. Such numbers would have been unimaginable in France just a few years ago. At the same time, those benchmarks are even bigger in Silicon Valley.
“It's important to look at relative values and to see that a unicorn 10 years ago was a huge valuation, a huge success,” Prot says. “Today, unicorn is kind of a starting point.”