Many entrepreneurs are currently facing the harsh reality of a lack of VC funding, but Qonto is not one of them. The Paris-based business banking startup still has hundreds of millions of dollars in cash. And it’s using an undisclosed portion of its cash reserves to acquire accounting and financial automation platform Regate.
Qonto originally started as an online business account with a debit card tailored specifically for small and medium-sized businesses. Over time, the company has expanded its product offering to include various integrations with the fintech ecosystem to facilitate invoicing tools, expense management capabilities, bookkeeping, payment reconciliation, and more.
And its modern approach to business banking is working incredibly well, with more than 450,000 companies now having Qonto accounts. France remains Qonto’s main market, but the company has also acquired German rival Penta, moving Penta’s customers to its own platform, which is also available in Italy and Spain.
Near the peak of the 2021 and 2022 fundraising craze, in 2022, the company raised a massive Series D funding round worth €486 million ($529 million at current exchange rates). 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 is acquiring Regate, a French startup we covered, after raising a Series A round of 20 million euros ($22 million at current exchange rates). Regate is an accounting automation software service startup.
Integrates directly with existing accounting software platforms such as Sage, Cegid, and ACD, allowing Regate to focus on financial automation. Regate customers can easily track 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 customers. The company also uses Regate to sell its products directly to 500-firm accounting firms. 6,000 accounting firms are also Qonto customers.
It’s a different go-to-market strategy and product philosophy than Pennylane, a newly minted French unicorn that aims to completely replace legacy accounting software. Pennylane itself now offers business bank accounts, moving into Qonto’s main product area.
“We tripled our revenue in 2023,” Regate co-founder Laura Pallier told TechCrunch. However, when Qonto approached Regate, they decided to sell the company to get to the next level. “We had a rather heated discussion on the subject. . . We are convinced that a cockpit approach using tools that suit both small and medium-sized businesses and accountants makes much more sense than using multiple products.”
With today’s acquisition, Regate’s team of 100 employees will all join Qonto’s current 1,400 employees under a new business unit focused on financial tools for accountants. Initially, there will be new integrations between the two platforms.
In the near future, Regate will be integrated directly into Qonto, improving many of Qonto’s accounting automation features, such as invoicing, accounts payable, accounts receivable, and more. For accounting firms, it will also serve as a new sales channel for Qonto.
“The idea is that these two platforms will gradually become one. However, this will be a gradual process and we will always be very careful to maintain the customer experience for both corporate clients and accounting firms,” Pallier said.
More acquisitions to come
Regate’s acquisition is only the second acquisition in Qonto’s history, but it likely won’t be the last. This is partly because management is satisfied with Penta’s integration process, but also because of the current window of opportunity.
“A planetary alignment happened by chance. It would be a professional mistake not to look. [at potential acquisitions]. We are not the best at everything. So we need to remain humble and collaborate with experts in the field,” 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, you get a contract. But even in the worst case, we can become partners because we have gotten to know each other a little better in this very short process,” he added.
Qonto is in a different position from Payfit, another French unicorn (or former unicorn) that offers software-as-a-service (SaaS) tools focused on payroll. Yesterday, Les Échos reported that Payfit plans to lay off 14% of the company, or 110 employees.
Why do things look better for Qonto? “We have a sound business model. This means that once we acquire a customer, after a few months they become a profitable customer. This is mainly because they pay for it. We do not provide free services. So compared to many typical fintech companies or startups that offer free services and try to upsell customers, we didn’t make 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. And I was a little lucky that the timing was right,” he added. Finally, rising interest rates have created new revenue streams for the company. And considering Qonto’s size, the company handles a very large amount of money on behalf of its customers.
For this reason, Qonto has ample cash available for acquisitions. With many fintech startups struggling to raise new funding, Qonto could become a consolidator in the space. And we may be at the beginning of a consolidation phase.