Formance Raises $21M to Revolutionize Fintech Infrastructure

The Core Challenge of Financial Ledgers for Fintechs

When engaging with a fintech founder, discussions frequently revolve around the complexities of managing financial ledgers.

A ledger functions as the definitive record of all financial transactions, establishing a single source of truth for a company’s assets. However, as businesses accumulate multiple bank accounts, payment gateways, and funds distributed across various platforms, maintaining control can become significantly challenging.

Formance's Evolution from Ledger to Platform

Many companies ultimately allocate engineering resources to construct custom ledgers to address these difficulties.

Formance, a French startup, initially aimed to address this very need by developing an open-source, programmable financial ledger capable of tracking all asset flows. This initial product now forms the foundation for a more extensive and ambitious infrastructure solution.

Expanding Beyond the Ledger

“Our primary focus was the ledger in 2024 and prior. We then began preparations to transition from a standalone ledger product to the Formance platform, incorporating additional modules – such as reconciliation tools and connectors to payment services,” explained Clément Salaün, co-founder and CTO, to TechCrunch.

Formance's Current Product Suite

Currently, Formance provides a suite of five distinct products.

These include the core ledger functionality, a connectivity platform offering a unified API for integrating various financial providers, a payment orchestration service for managing fund transfers, and automated reconciliation processes.

Future Developments: Mass Payouts

The company is also actively developing a mass payout solution designed for marketplaces and businesses requiring large-scale disbursement of funds.

While developers can currently handle payouts via Stripe, Adyen, or Mangopay through programmatic interfaces, Formance intends to create intermediary software that supports a wider range of providers.

Recent Funding and Investment

Formance recently secured $21 million in a Series A funding round, co-led by PayPal Ventures and Portage.

The round also saw participation from existing investors, including Y Combinator, Hoxton Ventures, and Axeleo, demonstrating continued confidence in the company’s vision and progress.

Key Components of the Formance Platform

• Financial Ledger: A programmable record of all financial transactions.
• Connectivity Platform: A single API for integrating with financial providers.
• Payment Orchestration: Tools for managing money movement across different wallets.
• Reconciliation: Automated processes for verifying financial data.
• Mass Payouts: A solution for large-scale fund disbursement.

A Strategic Platform Approach

The company positions itself as offering a versatile, modular platform, echoing the approach taken by Amazon Web Services in the realm of cloud hosting. This allows clients to utilize individual services, but maximizes efficiency when all cloud infrastructure is centralized.

According to Salaün, several additional modules are slated for release, with a particular focus on financial operations. Further development is planned for export functionalities within accounting tools.

Enhancements to connectivity are also a priority, extending deeper into the technology stack to address banking processes at a more fundamental level. The overall strategy centers on continued modularization of the entire system.

Maintaining minimal integration costs for clients adding new modules is a key objective. The team recognizes that integrating disparate SaaS solutions can be expensive.

“Utilizing three separate SaaS products for these functions could easily cost $150,000 for the software itself, and another $150,000 for the internal development needed to connect them,” Salaün explained. “Financial infrastructure is comprised of numerous, smaller challenges.”

Each of these challenges could potentially support a company generating $10 million in annual recurring revenue. However, a platform-based approach is seen as crucial for achieving greater scalability.

While larger fintech firms, such as Stripe, also provide a range of infrastructure services, Formance is committed to maintaining its independence. The company specifically avoids direct payment processing and does not hold client funds.

Currently, Formance reports a customer base of approximately 20, with two located in the United States. These two U.S. clients contribute significantly to the startup’s revenue, accounting for 40% of the total.

Other notable clients include Booksy, Doctolib, Liberis, and Shares. This diverse portfolio demonstrates the platform’s adaptability across various business models.

With the recent $21 million in funding secured, Formance intends to establish a presence in New York by opening a new office and building a dedicated go-to-market team.

Furthermore, the company plans to expand its engineering and product teams, aiming to increase its overall employee count from 20 to 50 by the close of 2025. This expansion will support the ongoing development and refinement of the platform.