French Fintech Unicorn Qonto, Rolling in Cash, Makes Exciting Acquisition of Regate!

Despite ‍the current ⁤venture ⁢capital funding⁢ crunch affecting many ⁢entrepreneurs, Qonto, a business banking startup based in Paris, ⁤is not among⁣ them. The company has ⁢a substantial cash reserve, a portion⁣ of which it is using to acquire Regate, ⁤a ⁢platform ​specializing in⁢ accounting and financial automation.

Qonto’s ⁢Evolution and Expansion

Initially, Qonto offered online business accounts⁣ with debit cards designed​ specifically⁤ for small‍ and medium-sized businesses. Over time, the company‌ broadened its services to‌ include tools for invoicing, expense management,⁣ and numerous integrations with the⁤ fintech ​ecosystem to simplify bookkeeping and⁤ payment reconciliation.

This innovative approach⁤ to business banking has proven successful, with over 450,000⁢ companies now holding a Qonto account. While France ​is​ Qonto’s primary​ market, the company has also expanded its ⁤reach by acquiring its German competitor, Penta, and transferring Penta’s customers ⁢to its platform. Qonto’s services ‌are ‍also available in Italy and ⁤Spain.

Qonto’s Funding and Vision

In 2022, during the funding boom of ⁢2021‍ and 2022, Qonto ⁤secured a substantial⁢ €486 million Series ‍D funding⁢ round (equivalent to $529 million at the current exchange rate). Now, ​Qonto aims to realize its initial vision of creating ​a comprehensive financial ⁢solution for small ⁤and‌ medium-sized businesses.

As⁣ part of this vision, Qonto‍ is acquiring Regate, a French startup that‍ raised a €20 million Series A‌ round ($22 million at the current exchange rate). Regate is a ⁢software-as-a-service startup specializing in​ accounting automation.

Regate’s ⁤Role and Integration

Regate integrates seamlessly with existing accounting software platforms like Sage,⁢ Cegid, and ACD, allowing it to focus on financial automation. Regate’s customers can easily monitor incoming payments, schedule ⁣payments to suppliers, sort invoices and receipts, and even access ⁤their bank ​accounts from⁤ Regate’s interface.

Since 2020, ⁣Regate has attracted 10,000 clients and sells its⁣ product directly to 500⁢ accounting firms. Interestingly, 6,000 accounting firms are also Qonto customers.

Regate’s market strategy⁤ and product philosophy differ‍ from Pennylane, a recently established French unicorn ​that aims to replace traditional‌ accounting software⁤ entirely. Pennylane now also offers business bank accounts, encroaching on Qonto’s primary product territory.

Regate’s revenue tripled ‍in 2023, according to ‍co-founder Laura Pallier. However, when Qonto approached Regate, they decided to‌ sell the company to scale up. “We had a rather intense⁣ discussion on the subject… We’re convinced that the⁤ cockpit approach —⁤ with a tool that works for both SMEs and their accountants — makes ‌a lot more sense ⁣than multiple products,” Pallier said.

With the acquisition,‌ Regate’s 100 employees will join Qonto’s existing⁤ 1,400-person team under ⁤a new⁤ business unit focused on⁣ financial tools for‌ accountants. Initially, there will be new integrations between both platforms.

Eventually, Regate⁤ will be directly integrated with Qonto to enhance ⁢several of Qonto’s accounting automation features, such‍ as⁢ invoicing, accounts payable, accounts receivable, etc. Accounting firms⁢ will also serve as a new sales channel for Qonto.

Future Acquisitions and Opportunities

While Regate’s acquisition is only Qonto’s second, it is unlikely to be the last. This is partly due to the successful integration of Penta, but also‍ because of the current opportunity window.

Qonto co-founder and president ​Steve Anavi said, “We happen to have a planetary alignment. It ⁣would be a professional mistake not to look ⁤ [at potential acquisitions]. We’re not the best at everything. So ​we should also stay humble and work⁢ with experts in their respective fields.”

Qonto is in a⁤ different position from PayFit, another French unicorn⁤ that provides a software-as-a-service tool focused on payroll. ⁤Recently, Les⁤ Échos ​reported​ that PayFit plans ⁤to lay off 14% of ⁣the company, or 110​ employees.

Why is Qonto faring better? “We have a healthy business model. It means⁢ that when we acquire a customer, after a few months it’s a profitable customer. This‍ is mainly because they‌ pay — we don’t have any free offering. So, compared to⁣ a lot of fintech‌ companies or startups in general that have a free⁣ offering and then try to upsell customers, ⁤we ⁤haven’t ‌made that choice,” Qonto co-founder and CEO Alexandre Prot told TechCrunch.

Prot added, “The⁣ second element ⁤is that we raised a very⁢ large amount of money ‍two ‌years ago. And ⁣we ‍were ‍a bit ⁢lucky because the timing was right.” Rising interest⁤ rates have also created⁤ a new revenue stream⁤ for ‌the company. Given ⁤Qonto’s ‍scale, the company ‍is ‍handling very large sums of money on behalf‌ of its customers.

For these ‍reasons, Qonto has ample cash to spend on acquisitions. As many fintech startups struggle to raise new ​funding ‌rounds, Qonto could become a consolidator in​ the space. This could be the beginning of a consolidation phase.