While many entrepreneurs are currently struggling with the harsh reality of the financial crisis venture capital, Qonto is not one of them. The Paris-based business banking startup still has hundreds of millions in cash within reach. And it is using a portion of its undisclosed cash reserves to acquire Regate, an automated accounting platform and financial automation.
Qonto originally started with online business accounts with tailor-made debit cards designed for small and medium businesses. Over time, the company expanded its product offerings to include invoicing tools, expense management features, and a plethora of integrations with the fintech ecosystem to facilitate accounting management, payment reconciliation, and more.
This modern perception of business banking worked surprisingly well as Qonto now has over 450,000 companies holding a Qonto account. While France remains Qonto's primary market, the company also acquired German competitor Penta – transferring Penta's customers to its platform – and is now available in Italy and Spain.
In 2022, amidst the funding frenzy of 2021 and 2022, the company raised a massive €486 million in Series D funding (which is $529 million at today's exchange rate). Now, Qonto aims to fulfill its original vision of building an all-in-one financial solution for small and medium businesses.
As part of this vision, Qonto acquires Regate, a French startup that caught the eye after raising a €20 million Series A round. Regate is a software service startup for accounting automation.
This integrates directly with existing accounting software platforms like Sage, Cegid, and ACD so that Regate can focus on financial automation. Regate's customers can easily track incoming payments, schedule payments to suppliers, sort invoices and receipts, and even access their bank accounts from the Regate interface.
Since 2020, Regate has managed to attract 10,000 customers – 6,000 of whom are already Qonto customers. The company also sells its product to accounting firms directly with 500 companies using Regate.
This is an exit strategy to the market and a different product philosophy compared to Pennylane, a French unicorn startup that aims to completely replace traditional accounting software. Pennylane itself now provides business bank accounts and transitions to Qonto's main product territory.
"We tripled our revenue in 2023," said Regate's founder, Laura Plaier, to TechCrunch. But when Qonto approached Regate, they decided to sell the company to reach the next stage. "We had quite an intensive discussion on the topic. . . We believe that the T-shaped approach – with tools that work for both small and medium businesses and their accountants – is much more logical than many products," she added.
With today's acquisition, Regate's team of 100 employees will all join Qonto's current team of 1,400 under a new business unit focusing on financial tools for accountants. Initially, there will be new integrations between the two platforms.
After some time, Regate will be integrated into Qonto directly to enhance several features of Qonto's accounting automation, such as invoicing, accounts receivable, accounts payable, and more. As for accounting firms, they will also serve as a new sales channel for Qonto.
"The idea is that these two platforms will gradually become one. But it will be a gradual process, and we will always be very careful to maintain the customer experience for both organizational customers and their accounting firms," said Plaier.
Future Acquisitions
While the Regate acquisition is only Qonto's second in history, it is reasonable to assume that it will not be the last. Among other reasons because its managers are happy with how the integration of Penta went, but also because of its current opportunity window.
"In our case, we have a planetary alignment. It would be a professional mistake not to look at potential acquisitions. We are not the best at everything. So we also need to remain humble and work with experts in their field," said Qonto co-founder and CEO Steve Anavoie to TechCrunch at the Mobile World Congress in Barcelona last week.
"We have an internal team examining opportunities. In the best case, we sign a deal. But even in the worst-case scenario, we could become partners because we have learned to get to know each other a bit better in a very short process," he added.
Qonto finds itself in a different position than Payfit, another French unicorn startup (or ex-unicorn) that provides HR-focused software and services. Yesterday, Les Echos reported that Payfit plans to lay off 14% of the company, or 110 employees.
Why do things look better for Qonto? "We have a healthy business model. It means that when we acquire a customer, a few months later, it is a profitable customer. This is mainly because they pay – we don't offer anything for free. So, compared to many fintech companies or startups in general that offer something for free and then try to sell to customers, we did not make that choice," said Qonto co-founder and CEO Alexandre Prot to TechCrunch.
"The second component is that we raised a very large sum of money two years ago. And we were a bit lucky because the timing was right," he added. Ultimately, the rise in interest rates also generated new revenue streams for the company. And considering Qonto's scale, the company handles very large sums of money on behalf of its customers.
For these reasons, Qonto has a lot of cash to spend on acquisitions. Since many fintech startups are struggling to raise new funding rounds, Qonto may become a consolidator in the field. And we may be at the beginning of this consolidation phase.
