Berlin-based finmid (one of many startups building embedded fintech solutions, in its case targeting markets that want to offer unique payment and financing options) is To further strengthen the company, the company has raised a Series A round of 23 million euros ($24.7 million). Develop products and enter new markets. The round values the company at €100 million ($107 million) post-money.
Marketplaces (usually interactive businesses that connect customers with retailers and other third-party providers to purchase products and services) are a very classic target for embedded finance companies. Especially since it already hosts a lot of trading activity, they believe they need to build more features around it to improve their margins.
Players like Airwallex, Rapyd, and Kriya are among those building for that opportunity. But Finmid believes it has the potential to lock in more business, especially in its own region. Small and medium-sized businesses in Europe typically borrow money from banks. The rise of fintech is giving small and medium-sized businesses access to a more diverse range of funding sources than ever before, and more companies are doing so.
The startup believes that it makes more sense for small and medium-sized enterprises to access capital through business partners than through banks or neobanks, and will do so. “In an ideal scenario, you don't have to step out of that context,” finmid co-founder Max Schertel told TechCrunch in an interview.
It also makes sense for the marketplace itself to offer these services. A captured audience of customers and their customers' customers means that there is a trove of data that can help generate more personalized loan offers, for example.
As an example of how that works, food delivery brand Wolt is using finmid's technology to offer cash advances directly within the app to some of its restaurant partners, Shartel said. Unlike banks, Wolt has access to a restaurant's sales history, and finmid leverages that data to help decide who should see pre-approved financing offers.
Image credit: finmid
Working capital does not come from Wolt, but from finmid's financing partners. Both finmid and the platform earn a percentage from every transaction. “We have banking relationships with a number of large banks,” Mr. Schertel said.
For platforms like Wolt, incorporating finmid is a way to make restaurants' lives easier while generating additional revenue with no additional effort. This is a fairly simple value proposition for partners to try out a startup's API.
In its early days, Finmido's pitch was not easy for venture capitalists, Schertel said. Embedded finance may get a lot of hype, but it's still an approach that requires a partner to get results. It takes patience, which not all VCs have.
However, since Finmid started operations during the pandemic, it has managed to find investors who will continue, helping the company raise €35 million in equity funding so far. Before this new Series A, the company raised 2 million euros in pre-seed funding and 10 million euros in seed funding, Alexander Talkanitsa, another co-founder of finmid, told TechCrunch.
That support seems to be working. Running on a platform like Wolt “really complicates success,” according to Schertel.
“like [my] “Work is much better today than it was a year ago,” he joked.
Mr. Schertel and Mr. Tarkanitsa met at challenger bank N26. The bank's founder, Max Tienthal, is now one of its investors, along with venture capital firms Blossom Capital and Earlybird VC.
The co-founders learned an important lesson at N26. That means there is no room for error in financial infrastructure. “You have to invest a lot in reliability,” says Schertel.
Finmid has an API that connects several data points from the platform and, similar to banks, can also connect other sources of information about prospective borrowers.
To make the user experience more fluid, finmid can allow clients to display pre-approved capital offers that the end user can decide whether to accept.
The company also offers a product called B2B Payments that allows partners to fund transactions between users. Markets such as Frupro (for fruits and vegetables), VonWood (for wood), and Vanilla Steel (for metal) use this product.
The new funding will go toward hiring, and the startup is looking for people with deep experience in specific fields, particularly finance, Schertel said.
The company is also considering expanding to other countries. First on the list is Italy, but Schertel said there are no plans to open an office there. Tarkanitsa spends half his time in Vienna, while Finmid has an office in Berlin.