Based in Berlin finmid – one of many startups creating integrated fintech solutions, in its case aimed at markets that want to offer their own payment and financing options – has raised €23 million ($24.7 million) in a Series A round for further develop your product and enter new markets. The round values the company at €100 million ($107 million), after cash.
Marketplaces (typically two-sided businesses that bring together retailers or other third-party providers with customers to purchase their products or services) are very classic targets for integrated financial companies, especially since they already host a large amount of transactional activity, so it does have It makes sense that they incorporate more functions around that to improve their own margins.
Players like Airwallex, Rapyd, Kriya and many more are among those preparing for that opportunity. But finmid believes it has the potential to capture more business specifically in its home region. Small and medium-sized businesses in Europe often turn to banks to borrow money. The rise of fintech has opened the door for SMEs to access more varied sources of financing than ever, and an increasing number are doing so.
The startup believes it makes more sense for SMEs to access capital through business partners than through a bank or neobank, and they will do so. “In an ideal scenario, you don’t need to go outside of that context,” 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 are sitting on a trove of data that can help produce, for example, more personalized financing offers.
As an example of how it works, Schertel said the food delivery brand Wolt uses finmid technology to offer cash advances to some of its partner restaurants directly within its app. Unlike a bank, Wolt has access to restaurants’ sales history, and finmid helps it leverage that data to decide who will see a pre-approved financing offer.
Image credits: finmid
The working capital does not come from Wolt, but from finmid’s financial partners. Both finmid and the platform earn a percentage of each transaction. “We have banking relationships with a lot of the big banks,” Schertel said.
For a platform like Wolt, incorporating finmid is a way to make life easier for restaurants while generating additional revenue without much additional effort. That’s a pretty straightforward value proposition, as long as partners are willing to test the startup’s API.
In its early days, finmid’s proposition was not an easy sell to venture capitalists, Schertel said. Integrated finance may generate a lot of buzz, but it’s still an approach that requires hiring partners to get results. That requires a patience that not all venture capitalists will have.
However, finmid managed to find investors who have stayed since it began during the pandemic and have helped the company raise €35 million in equity financing to date. Prior to this new Series A, the company raised €2 million in seed funding and €10 million in seed funding, finmid’s other co-founder Alexander Talkanitsa told TechCrunch.
That support appears to be paying off. According to Schertel, once you run on a platform like Wolt, “success really increases.”
“I like [my] “My job today is much better than it was a year ago,” he joked.
Schertel and Talkanitsa met at the Challenger bench N26whose founder, Max Tayenthal, is now one of its investors along with venture capital companies. Flourishing capital and early bird VC.
The co-founders learned a crucial 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 various data points on the platform and can also connect other sources of information about the potential borrower, much like a bank would.
To make the user experience more seamless, finmid can allow its clients to display pre-approved equity offers that end users can decide to accept or not.
The company also offers a product called B2B Payments that allows partners to finance commerce between their users. Markets like Frupro (for fruits and vegetables), VonWood (for wood), 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 extensive experience in specific areas, especially finance.
The company is also looking 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 his time in Vienna and finmid has an office in Berlin.