Finom Raises €115M to Fuel SMB Fintech Growth in Europe

European Startup Finom Secures €115 Million in Series C Funding

Despite potential challenges in securing capital for some ventures, Europe’s rapidly expanding startups continue to attract significant investment.

Finom, a 5-year-old Amsterdam-based challenger bank focused on small and medium-sized businesses (SMBs) throughout Europe, is the latest recipient of this investor confidence. The company, reporting a doubling of revenue in 2024, has recently finalized a €115 million Series C equity round, equivalent to approximately $133 million, as exclusively reported by TechCrunch.

A Comprehensive Financial Platform for European SMBs

Finom’s core business model revolves around delivering a unified financial platform to European SMBs. This platform integrates banking services, invoicing capabilities, and an expanding suite of features, notably including AI-powered accounting tools.

CEO Andrew Petrov suggests this approach could ultimately reduce the need for external accountants for entrepreneurs.

Ambitious Growth and Funding Details

The startup has set ambitious growth objectives, aiming for 1 million business customers by the end of 2026, though this target is viewed as aspirational. The recent funding injection significantly enhances the feasibility of achieving this goal.

This confidence in Finom’s potential to capture a substantial portion of Europe’s 26 million SMBs is reflected in the Series C round. AVP (formerly AXA Venture Partners) spearheaded the investment, with participation from Headline (formerly e.ventures) as a new investor through Headline Growth.

Existing investors, including Cogito Capital, General Catalyst, and Northzone, also contributed to the round.

Competitive Landscape and Funding Comparison

While gaining traction, Finom may encounter less resistance when attracting customers from established banks than from competing fintech companies.

Despite the successful Series C, bringing its total funding to around $346 million, Finom’s external capital remains lower than that of major players like Monzo, N26, Revolut, and Wise, all of which have raised over $1 billion.

Its funding level is more aligned with that of French unicorn Qonto, which has raised approximately $700 million, although a direct comparison isn’t entirely accurate.

A Unique Funding Structure with General Catalyst

Finom’s funding structure is noteworthy due to an unconventional element. General Catalyst’s investment was made through its Customer Value Fund (CVF) and did not involve taking equity.

The capital from the CVF is specifically designated for growth initiatives, representing the fund’s strategy for realizing a return on its investment.

Path to Profitability and Valuation

Chairman and co-founder Kos Stiskin indicates that the combined Series B and nontraditional funding round would have been sufficient for the Dutch company to achieve profitability.

Finom was also actively seeking equity funding to secure a favorable valuation. The company unexpectedly closed both deals in close succession.

“One process took longer than anticipated, while the other progressed much more rapidly,” Stiskin explained to TechCrunch. He refrained from disclosing the updated valuation, stating only that it is double the valuation associated with its 2024 $54 million Series B round.

Positive Market Signals and Investor Confidence

The timing of the funding may have been advantageous for Finom. The company’s reluctance to publicly disclose its unit economics – beyond its user base of 125,000 – suggests that General Catalyst’s thorough due diligence played a role in attracting investor interest and accelerating the funding process.

This demonstration of confidence, coupled with General Catalyst’s direct stake in recouping its investment, likely encouraged investors to expedite their commitments.

Strategic Use of Funds: Acquisitions and Product Expansion

The Series C funding will support initiatives beyond customer acquisition through marketing efforts.

CEO Petrov suggests that a portion of the funds could be allocated to strategic, opportunistic acquisitions aimed at expanding either the customer base or the product portfolio. This represents a shift in strategy, as Finom has only completed one acquisition to date – the 2022 purchase of Kapaga, a British cross-border payment service, when the company was exploring expansion into the U.K.

Focus on Key European Markets

Since then, Finom has redirected its focus to larger European markets, identifying greater opportunities due to fewer competing challenger banks and perceived shortcomings in the service provided to small businesses by traditional banks.

Like many neobanks, Finom currently operates with an electronic money institution (EMI) license in its primary markets: the Netherlands, France, Germany, Italy, and Spain. Its partnership with Solaris, which holds a full banking license in Germany, concluded earlier this year.

Expanding Financial Services with AI Integration

Despite these licensing limitations, Finom has introduced lending services in the Netherlands, utilizing it as a testing ground for its credit offerings – a feature Petrov considers essential for any fintech and its business customers.

This lending initiative aligns with Finom’s broader strategy of expanding its product line both horizontally – with deposits and loans – and vertically, “ranging from a banking account to tax payments, reporting, and all related services.” Artificial intelligence is also being integrated into various aspects of the business.

Internal AI Implementation and Team Growth

The company is also leveraging AI internally to enhance operational efficiency. With a team of 500, Finom anticipates hiring additional personnel in both business and technology roles, but not necessarily to drastically scale operations.

“We are adding staff, but primarily focusing on integrating new types of AI agents to support internal processes,” Petrov stated. “This allows us to achieve significant output with a leaner hiring approach, leveraging AI to automate routine tasks.”

Leadership Evolution and European Focus

Finom’s leadership structure has undergone changes, with Andrew Petrov now serving as the sole CEO – a role previously shared with Yakov Novikov, who now acts as an advisor alongside Oleg Laguta.

These three co-founders previously established Russian digital bank Modulbank. However, Finom’s current focus is firmly on Europe and its entrepreneurs, who, according to Stiskin, are “the cornerstone of the European Union economy.”

Note: This story has been updated to reflect Finom’s current licensing status.