Qonto is not one of many entrepreneurs currently facing the harsh reality of a lack of VC funding. The Paris-based business banking startup still has hundreds of millions of dollars in cash on hand. And the company is using an undisclosed portion of its cash reserves to acquire Regate, an accounting and financial automation platform.
Qonto originally started as an online business account with a debit card tailored specifically for small businesses. Over time, the company has expanded its product offerings to include invoicing tools, the ability to manage expenses, and rich integrations with the fintech ecosystem that facilitate bookkeeping, payment reconciliation, and more.
And this modern business banking is working incredibly well, with over 450,000 companies now having Qonto accounts. Qonto's main market remains France, but the company also acquired German competitor Penta, moving Penta's customers to its own platform and making it available in Italy and Spain.
In 2022, near the peak of the 2021 and 2022 funding frenzy, the company raised a whopping 486 million euros ($529 million at today's exchange rates) in a Series D funding round. Now, Qonto wants to realize its original vision of building an all-in-one financial solution for small and medium-sized businesses.
As part of this vision, Qonto will acquire Regate, a French startup we covered, after raising a Series A round of €20 million ($22 million at today's exchange rates). Regate is an accounting automation Software-as-a-Service startup.
Regate integrates directly with your existing accounting software platforms, such as Sage, Cegid, and ACD, so you can focus on automating your finances. Regate customers can also easily track deposits, schedule supplier payments, organize invoices and receipts, and access bank accounts from Regate's interface.
Since 2020, Regate has been able to acquire 10,000 customers. 6,000 of them are already Qonto customers. The company also sells products directly to accounting firms, with 500 companies using his Regate.
It's a different go-to-market strategy and product philosophy than Penny Lane, the French startup unicorn that hopes to completely replace traditional accounting software. Pennylane itself now offers business bank accounts, entering Qonto's core product area.
“We tripled our revenue in 2023,” Regate co-founder Laura Pallier told TechCrunch. However, when Qonto approached his Regate, they decided to sell the company to reach the next level. “We have had quite a heated discussion on this subject. . . . We believe that a cockpit approach with tools that serve both small businesses and accountants makes much more sense than using multiple products. I am convinced.”
With today's acquisition, Regate's entire team of 100 employees will join Qonto's current staff of 1,400 under a new business unit focused on financial tools for accountants. First, there will be new integration between both platforms.
Over time, Regate will be integrated directly into Qonto, improving several of Qonto's accounting automation features, including invoicing, accounts payable, and accounts receivable. When it comes to accounting firms, it also serves as a new sales channel for Qonto.
“The idea is that these two platforms will gradually become one. But it will be a gradual process and we will always be very careful to maintain the customer experience for both our corporate clients and accounting firms. We will pay,” Palier said.
More acquisitions to come in the future
The Regate acquisition is only the second acquisition in Qonto's history, but it likely won't be the last. This is partly because Penta's management is satisfied with the progress of its integration with Penta, but also because of the current window of opportunity.
“We just happen to have a planetary alignment. It would be a professional mistake not to look.” [at potential acquisitions]. We are not the best at everything. Therefore, we too need to remain humble and collaborate with experts in their respective fields,” Steve Anavi, co-founder and president of Qonto, told TechCrunch at Mobile World Congress in Barcelona last week. Ta.
“We have an in-house team that looks at opportunities. Best case scenario, we sign a contract. But even in the worst case scenario, we were able to get to know each other a little bit in a very short process.” So we can be partners,” he added.
Qonto is in a different position than Payfit, another French unicorn (or former unicorn) that offers software-as-a-service tools focused on payroll. Yesterday, Les Échos reported that Payfit plans to lay off 14% of the company, or 110 employees.
Why are things turning around for Qonto? “We have a sound business model. This means that when we acquire a customer, it becomes a profitable customer within a few months. This is mainly because we are paid; no service is free. Therefore, compared to many fintech companies and startups in general that try to upsell their customers by offering free services, we We haven't made that choice,” Qonto co-founder and CEO Alexandre Prot told TechCrunch.
“The second factor is that we raised a very large amount of money two years ago. We were a little bit lucky because the timing was right,” he added. Finally, rising interest rates have also created new revenue streams for the company. And given Qonto's size, the company handles a very large amount of money on behalf of its customers.
For these reasons, Qonto has plenty of cash available for acquisitions. With many fintech startups struggling to raise new funding, Qonto could be a consolidator in this space. And we may be at the beginning of this consolidation phase.