based in Berlin meager — one of several startups building integrated fintech solutions, in this case targeting markets that want to provide their own payment and financing options — has raised 23 million euros ($24.7 million) in a Series A round to further develop its product and enter new markets. The round values the company at 100 million euros ($107 million), cash.
Marketplaces — typically two-sided businesses that bring together retailers or other third-party providers with customers to buy their products or services — are very classic targets for embedded finance companies, mainly because they already host a lot of trading activities. it makes sense for them to build more functionality around it to improve their own margins.
Players like Airwallex, Rapyd, Kriya and many others are among those creating this opportunity. But finmid believes it has the potential to lock in more business, especially in its home region. SMEs in Europe usually look to banks to borrow money. The rise of fintech has opened the door for SMEs to access more, diverse sources of funding than ever before, and a growing number do.
The startup believes that it makes more sense for SMEs to access capital through business partners than through a bank or neobank, and they will. “In an ideal scenario, you don’t need to break out of that box,” finmid co-founder Max Schertel told TechCrunch in an interview.
It also makes sense for marketplaces to offer these services themselves: A captive audience of customers and their customers’ customers means they’re sitting on a trove of data that can help produce, for example, more personalized financing offers.
As an example of how this works, Schertel said the food delivery brand Wolt uses finmid’s technology to offer cash advances to some of its restaurant partners directly within its app. Unlike a bank, Wolt has access to the restaurants’ sales history, and finmid helps it leverage that data to decide who will see a pre-approved financing offer.
Image Credits: meager
The working capital does not come from Wolt, but from finmid’s financing partners. Both finmid and the platform earn a percentage from each transaction. “We have banking relationships with many of the major banks,” Schertel said.
For a platform like Wolt, finmid integration is a way to make restaurants’ lives easier while generating additional revenue without much effort. This is a fairly straightforward value proposition as long as partners are willing to give away the startup’s API.
In its early days, finmid’s pitch was not an easy sell to VCs, Schertel said. Embedded financing may get a lot of hype, but it’s still an approach that requires signing on partners to get results. This requires patience that not all VCs will have.
However, finmid has managed to find investors who have stuck around since it launched during the pandemic and have helped the company raise €35 million in equity funding to date. Before this new Series A, the company raised €2 million in pre-seed and €10 million in seed funding, finmid’s other co-founder Alexander Talkanitsa told TechCrunch.
That support seems to be paying off. According to Schertel, once you’re running on a platform like Wolt, “success is really compounded.”
“I like [my] the work today is much better than what I did a year ago,” he joked.
Schertel and Talkanitsa met at the controversial bank N26, whose founder, Max Tayenthal, is now one of their investors along with VC firms Blossom Capital and Earlybird VC.
The co-founders learned a critical lesson at N26: Financial infrastructure leaves no room for error. “You have to invest a lot in reliability,” Schertel said.
Finmid has an API that connects multiple data points from the platform and can also connect other sources of information about the prospective borrower, just like a bank would.
To make the user experience more fluid, finmid may allow its clients to display pre-approved capital offers that end users can decide to take or not.
The company also offers a product called B2B Payments that allows partners to fund transactions between their users. Markets such as FruPro (for fruits and vegetables), VonWood (for lumber), and Vanilla Steel (for metal) use this product.
The new money will go toward hiring, and Schertel said the startup is looking for people with deep experience in specific areas, especially finance.
The company is also trying to expand to other countries. First on the list is Italy, but there are no plans to open an office there, Schertel said. Talkanitsa spends half of his time in Vienna and finmid has an office in Berlin.
