Flush with cash, French fintech unicorn Qonto acquires Regate

While many entrepreneurs are currently facing the harsh reality of a VC funding crunch, Qonto isn’t one of them. The Paris-based business banking startup still has hundreds of millions of cash on hand. And it is using an undisclosed portion of its cash reserve to acquire Regate, an accounting and financial automation platform. Qonto originally […]
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While many entrepreneurs are currently facing the harsh reality of a VC funding crunch, Qonto isn’t one of them. The Paris-based business banking startup still has hundreds of millions of cash on hand. And it is using an undisclosed portion of its cash reserve to acquire Regate, an accounting and financial automation platform.

Qonto originally started with online business accounts with debit cards specifically tailored for small and medium businesses. Over time, the company expanded its product offering to include invoicing tools, features to manage expenses and plenty of integrations with the fintech ecosystem to facilitate bookkeeping, payment reconciliation, etc.

And that modern take on business banking has worked surprisingly well as more than 450,000 companies now have a Qonto account. While France remains Qonto’s main market, the company also acquired its German competitor Penta — and moved Penta’s customers to its own platform — and is also available in Italy and Spain.

In 2022, near the peak of the funding frenzy of 2021 and 2022, the company raised a massive €486 million Series D funding round (that’s $529 million at today’s exchange rate). Now, Qonto wants to deliver on its original vision of building an all-in-one finance solution for small and medium businesses.

As part of this vision, Qonto is acquiring Regate, a French startup we covered after it raised a €20 million Series A round ($22 million at today’s exchange rate). Regate is an accounting automation software-as-a-service startup.

It integrates directly with existing accounting software platforms like Sage, Cegid and ACD so that Regate can focus on financial automation. Regate customers can easily track incoming payments, schedule payments to suppliers, sort through invoices and receipts, and even access their bank accounts from Regate’s interface.

Since 2020, Regate managed to attract 10,000 clients. The company also sells its product to accounting firms directly with 500 firms using Regate — 6,000 accounting firms are also Qonto customers.

It’s a different go-to-market strategy and product philosophy compared to Pennylane, a newly minted French unicorn that wants to replace legacy accounting software entirely. Pennylane itself now also provides business bank accounts and moving into Qonto’s main product territory.

“We have grown our revenue by 3x in 2023,” Regate co-founder Laura Pallier told TechCrunch. But when Qonto approached Regate, they decided to sell the company to reach the next level. “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.”

With today’s acquisition, Regate’s team of 100 employees will all join Qonto’s current 1,400-people staff under a new business unit focused on financial tools for accountants. At first, there will be new integrations between both platforms.

After a while, Regate will be integrated in Qonto directly to improve several accounting automation features of Qonto, such as invoicing, accounts payables, accounts receivables, etc. As for accounting firms, they’ll also act as a new sales channel for Qonto.

“The idea is that these two platforms will gradually become one. But it’s going to be a gradual process, and we’ll always be very careful to maintain the customer experience for both corporate clients and accounting firms,” Pallier said.

While Regate’s acquisition is only the second acquisition in Qonto’s history, it’s most likely not the last one. In part because its executives are happy with how Penta’s integration went, but also because of its current opportunity window.

“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 co-founder and president Steve Anavi told TechCrunch at Mobile World Congress in Barcelona last week.

“We have an in-house team that looks at opportunities. In the best-case scenario, we sign a deal. But even in the worst-case scenario, we can become partners because we’ve learned to know each other a little bit better over a very short process,” he added.

Qonto finds itself in a different position from Payfit, another French unicorn (or former unicorn) that provides a software-as-a-service tool focused on payroll. Yesterday, Les Échos reported that Payfit plans to lay off 14% of the company, or 110 employees.

Why are things looking better for Qonto? “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.

“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,” he added. Finally, rising interest rates have also created a new revenue stream for the company. And given Qonto’s scale, the company is handling very large sums of money on behalf of its customers.

For these reasons, Qonto has plenty of cash to spend on acquisitions. As many fintech startups are struggling to raise a new funding round, Qonto could become a consolidator in the space. And we might be at the beginning of this consolidation phase.

 


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