Business banking startup Qonto raises $552 million at $5 billion valuation

French startup Qonto has raised a $552 million Series D funding round (€486 million). Following this investment, the startup has reached a valuation of $5 billion (€4.4 billion). This is one of the largest rounds in the French tech ecosystem.

Qonto is a challenger bank focused on business bank accounts. The startup focuses primarily on small and medium companies as well as freelancers. It currently operates in France, Germany, Italy and Spain.

Tiger Global and TCV are leading today’s funding round. With 220,000 clients, Qonto still plans to grow at a rapide pace in the coming years. “Our goal is to reach one million SMEs by 2025,” co-founder and CEO Alexandre Prot told me. “And we know that Tiger and TCV have supported quite a few companies to reach that scale.”

Some new investors are also participating in the round, such as Alkeon, Eurazeo, KKR, Insight Partners, Exor Seeds, Guillaume Pousaz, Gaingels and Ashley Flucas. Existing investors Valar, Alven, DST Global and Tencent are putting more money on the table as well.

That’s quite a long list of investors and Qonto proves once again that private equity firms are actively looking for late-stage growth rounds in Europe.

Image Credits: Qonto

From everyday banking to an all-in-one finance solution

What’s interesting with Qonto is that it’s a truly European startup. In the U.S., spend management solutions, such as Brex and Ramp, have been massively successful. As The Information’s Kate Clark reported, they want to replace American Express and hand out corporate cards to millions of employees in the U.S.

Qonto started out with business bank accounts because that’s the key financial component of European companies. Many companies use their bank accounts directly to move money around. They initiate transfers, share their bank account number (IBAN) to receive a payment and set up direct debits to pay bills.

And Qonto does that really well. You can sign up from a computer and get a local IBAN a few minutes later. After that, you can also order debit cards to pay with your card.

At first, Qonto relied heavily on a third-party banking partner — Treezor. The startup then applied to get its own license to become a payment institution. In 2020, Qonto moved all its clients to its in-house core banking system. The company now owns this critical part of the technical stack.

Qonto has expanded beyond the simple bank account. The startup’s CEO Alexandre Prot defines Qonto as three different products rolled into a single service. In addition to the everyday banking part, it also simplifies bookkeeping and accounting. It can become your spend management solution as well.

On the bookkeeping front, Qonto lets you export or sync with your existing accounting solution. This is a fragmented market as each country uses different accounting tools. For instance, you can export your data to Cegid if you’re a French company, you can synchronize with Datev if you’re a German company, etc. Qonto users can also import receipts directly in their Qonto account.

As for spend management, Qonto lets you hand out physical, virtual or one-time cards to employees. Admins can set up different spending limits, an approval workflow and all the usual stuff that you get from a spend management solution. It might not be as feature complete as a dedicated product, such as Spendesk, but it could be enough for small companies.

For everything else, Qonto partners with other fintech startups. For instance, customers can open a credit line with October and borrow €15,000 to €30,000. Customers can also open a savings account with Cashbee and its banking partner My Money Bank.

Image Credits: Qonto

A single bank account

There are 220,000 companies paying for Qonto every month. Pricing ranges from €9 per month for the most basic freelancer account to €249 per month for enterprise accounts. On top of that, some companies pay more to get more cards or when they go above certain limits.

What makes the business model even more lucrative is that a lot of customers just sign up on their own. When they create their company, they use Qonto for the initial capital deposit in order to register the company. Essentially, Qonto combines inbound marketing with the high margins of a SaaS product.

“Around a third of our customers created their companies with us. It’s their first account and the only one that they use,” Alexandre Prot said. “Two-thirds of our customers are companies that existed before they opened an account with us. Roughly half of them close their existing bank account, half of them use Qonto in parallel with one or several accounts.”

With today’s funding round, the company plans to grow its team from 500 employees to 2,000 people by 2025. Qonto will also invest heavily in its existing markets. “We will be able to invest more than €100 million on each of our markets,” Prot said. While there are still a lot of SMEs that are not using Qonto in France, Germany, Spain and Italy, Qonto also plans to enter new market in 2023.