While many entrepreneurs are currently facing the harsh reality of a VC funding crisis, Short it is not one of them. The Paris-based business banking startup still has hundreds of millions in cash on hand. And it uses an unknown portion of its cash reserve to acquire Regattaan accounting and financial automation platform.
Qonto originally started with online business accounts with debit cards specifically tailored for small and medium-sized businesses. Over time, the company has expanded its product offering to include invoicing tools, expense management capabilities, and multiple integrations with the fintech ecosystem to facilitate bookkeeping, payment reconciliation, and more.
And this modern take on business banking has worked surprisingly well as more than 450,000 companies now have a Qonto account. While France remains Qonto’s main market, the company also acquired German competitor Penta — and moved Penta’s customers to its own platform — and is also available in Italy and Spain.
In 2022, near the peak of the 2021 and 2022 funding frenzy, the company raised a massive €486 million Series D funding round (that’s $529 million at today’s exchange rate). Now, Qonto wants to realize its original vision of creating a complete financial solution for small and medium-sized businesses.
As part of that vision, Qonto is acquiring Regate, a French startup we covered after it raised a €20 million Series A round ($22 million at today’s exchange rate). Regate is an accounting automation software-as-a-service startup.
It integrates directly with existing accounting software platforms such as Sage, Cegid and ACD so that Regate can focus on financial automation. Regate customers can easily track incoming payments, schedule payments to vendors, sort invoices and receipts, and even access their bank accounts from the Regate interface.
As of 2020, Regate managed to attract 10,000 customers. The company also sells its product to accounting firms directly with 500 firms using Regate — 6,000 accounting firms are also Qonto customers.
It’s a different strategy and product philosophy to the market compared to Pennylane, a newly created French unicorn looking to completely replace legacy accounting software. Pennylane itself now also provides business bank accounts and is moving into Qonto’s main product area.
“We’ve tripled our revenue in 2023,” Regate co-founder Laura Pallier told TechCrunch. But when Qonto approached Regate, they decided to sell the company to get to the next level. “We had quite a heated discussion on the matter. . . We are convinced that the cockpit approach – with a tool that works for both SMEs and their accountants – makes much more sense than many products.”
With today’s acquisition, Regate’s team of 100 employees will join Qonto’s current staff of 1,400 under a new business unit focused on financial tools for accountants. First, there will be new integrations between the two platforms.
After a while, Regate will be directly integrated into Qonto to enhance many accounting automation features of Qonto, such as invoicing, accounts payable, accounts receivable, etc. As for accounting firms, they will also act 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 corporate clients and accountancy firms,” said Pallier.
More acquisitions to come
While the Regate acquisition is only the second acquisition in Qonto’s history, it likely won’t be the last. Partly because its executives are happy with how Penta’s integration went, but also because of its current window of opportunity.
“We just happen to 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 should also stay humble and work with experts in their respective fields,” Qonto co-founder and president Steve Anavi told TechCrunch at Mobile World Congress in Barcelona last week.
“We have an internal team looking at opportunities. At best, we sign an agreement. But even in the worst case scenario, we can become partners because we got to know each other a little bit better in a very short process,” he added.
Qonto is in a different position than Payfit, another French unicorn (or ex-unicorn) that provides a software-as-a-service tool focused on payroll. Yesterday, Les Echos mentionted that Payfit plans to lay off 14% of the company or 110 employees.
Why are things looking better for Qonto? “We have a healthy business model. It means that when we get a customer, after a few months they are a profitable customer. That’s mostly because they pay — we don’t have any freebies. So compared to a lot of fintech companies or startups in general that have a free offering and then try to upsell customers, we haven’t made that choice,” Qonto co-founder and CEO Alexandre Prot told TechCrunch.
“The second thing is that we raised a very large amount of money two years ago. And we were a bit lucky because the timing was right,” he added. Finally, rising interest rates also created a new revenue stream for the company. And given Qonto’s scale, the company handles very large sums of money on behalf of its clients.
For these reasons, Qonto has plenty of cash to spend on acquisitions. As many fintech startups struggle to raise a new round of funding, Qonto could become a unifier in the space. And perhaps we are at the beginning of this consolidation phase.
