Backbase raises its first funding, $128M at a $2.6B valuation, for tools that help banks with engagement

Larger banks and other financial service providers are getting a lot more serious when it comes to competing with upstarts that are disrupting their businesses with fresher approaches and newer technologies. Today, one of the companies helping those larger banks with that task is announcing a big round of funding to double down on that opportunity.

Backbase — an Amsterdam-based startup that provides a platform that banks and others can use to better structure and leverage the data that they have, and to then use that to build more personalization and other new features into those banks’ customer-facing services — has raised €120 million ($128 million at today’s rates), money that it will be using to continue investing in its technology, as well as expanding its teams into more geographies. The funds — coming from a single investor, Motive Partners — values Backbase at €2.5 billion ($2.6 billion).

Backbase has been around for a decade already. It has amassed 150 big banking customers, grown from €20 million in revenue to €200 million, and is profitable, all without raising any money — in fact, it was only a few days ago that they were the subject of a profile about the virtues of being bootstrapped… oops.

It chose to take a turn away from that path for the same reason that many others that have been bootstrapped do: they want to strike while the iron is hot and invest to grow at a time when its services are in demand.

We want to double down on our go-to-market strategy, and to grow market share,” Jouk Pleiter, the founder and CEO of Backbase, said in an interview. It operates in every continent in the world, but has plans specifically to grow teams in the Middle East and Africa, and Latin America, to have a “stronger position in local markets. We want to be closer to companies’ larger digital transformation programs.”

The problem that Basebase is addressing is one that is endemic to the financial services industry: incumbent big banks and others have been building digital services for forty years at this point. But most are working on a patchwork of databases and in many cases have useful assets but no way to tap into them, let alone orchestrate them with each other. Some might attempt to rebuild from the ground up, but in many cases when they have added or taken away services, they build new infrastructure, but in many cases those individual services still work, so institutions are loathe to throw out what is not broken.

Backbase provides a platform that essentially works with that: at the core is middleware that is tooled to bring in data from different sources and then use that information to build out “on the glass” services — those focused on customer engagement — such as customer onboarding, digital banking and other assistants, and other engagement tools.

It was not an easy tool to build, and it’s one reason why it will not be using the funding for acquisitions: integrating is just much more painful than building in an integrated way from the ground up (maybe a lesson its banking customers could have learned forty years ago).

“We had a crazy time in the last 10 years,” Pleiter said of the process of build the platform. “There are a lot of point solutions out there. But we have built our tool on a larger vision. Initially it felt impossible but we knew it would be good, a single platform for any customer journey, loyalty, onboarding, and so on. We now have 10 years and the critical mass, a single end to end customer engagement platform for that whole lifecycle.”

There are a number of other companies that have identified these same problems faced by incumbents in the financial services industry. They include Mambu, Thought Machine, 10x and Bud Financial, which this week announced its own funding and is also working with very big names in the banking industry.

Backbase, in addition to already being profitable and working with 150 customers, stands out for its singular focus on customer engagement challenges, and for how it works with the banks’ own data giving customers the option of potentially also bringing in other data if they want.

“For more than a decade, Backbase has shown leadership and innovation in enhancing digital relationships between financial institutions and its customers,” explained Rob Heyvaert, Founder and Managing Partner of Motive Partners, in a statement. “We’re excited to support Jouk and the Backbase team with this initial fundraise as they continue to expand, grow and build the leading, customer-centric, Engagement Banking Platform globally.”