Hero, a new Paris-based fintech startup, has announced an all-equity funding round of €11.3 million ($12.2 million at today's exchange rates) led by Valar Ventures. Over the past few years, the company has been quietly building an ambitious banking product for small and medium-sized businesses that can essentially replace all the functions you'd expect from a traditional bank, from managing your cash to receiving payments to getting lines of credit.
If you are setting up a company in France, it is now very easy to register your company and open a bank account in your company’s name. At the same time, your bank becomes more than just an IBAN and a debit card.
Running a company often means needing to accept payment in some way. And if things are going well, especially if you're selling goods, you might need to fund your next inventory purchase and pay your suppliers up front.
As a result, small business owners often have to deal with a myriad of fintech products. They also need to find revenue-based companies that offer short-term loans to small businesses. In France, these include Silvr, Defacto, Karmen and Unlimitd. Alternatively, they can negotiate with traditional banks to obtain loans.
Hero wants to combine these technologies and financial services into one product that customers can use to send, receive and store money across multiple accounts and IBANs. The startup also offers a payment card.
The company is building its own core banking system, and while many fintech startups partner with Swan for their financial infrastructure, Hero is not reliant on a banking-as-a-service partner.
Merchants can choose Hero as their payment solution using API, e-commerce platform plugins or payment links. In this respect, the startup is relatively attractive compared to Stripe, as transaction fees start at 0.4% + 0.15 euros per transaction.
Hero plans to make money primarily through credit services: Suppliers submit their invoices to Hero, which pays them immediately, and then you have up to 90 days to pay the invoices.
Similarly, you can submit invoices that you have already sent to your customers and receive money up front. You don't have to worry about whether your customers are going to pay you next week or next month. In either case, Hero's customers will have to pay interest on these credit products.
Hero founder and CEO Roland Jayes Nielsen previously founded luxury hand sanitizer and beauty brand Merci Handy, and already understands why cash flow issues can hit a business so hard.
The startup has developed a proprietary risk scoring engine that uses both public and private data to evaluate customers. Hero decides whether to lend to customers, and the startup has set up a debt fund with financial partners. Unfortunately, it has not shared any details on this.
Hero is raising a €7 million funding round in 2022. SquareOne, an investor in that first funding round, is also participating in today's new funding round.
It will be interesting to see if Hero's focus on building everything in-house gives it an edge over other finance companies, and it does present some challenges — for example, the company is still waiting for regulatory approval from the ACPR for its payment services.