With B2B FinTech a rising star among investors, two trends in particular are surfacing from the industry.
One is the ongoing focus on alternative small business (SMB) lenders, and another is the growing importance of FinTech collaboration with banks. Both play a role in boosting investor confidence in the B2B FinTech space, analysts say.
“We are seeing more investment in B2B FinTechs as there is evidence around the productivity and savings they can provide to banks, particularly as it relates to the payments value chain,” said Julian Skan, Accenture practice senior managing director, in a recent interview with PYMNTS. “B2B FinTechs are creating solutions that they can build once and then offer to thousands of banks around the world who need their solution. There is a path to profitability [that is] also seeing more progress in the number of B2B FinTechs working with banks.”
This week’s B2B Venture Capital Roundup shows investors are certainly on board with the bank-FinTech collaboration model. While challenger and alternative banks are pushing forward to disrupt traditional SMB financial institutions — especially in the U.K., where challenger banks aim to disrupt small business and enterprise banking as the market struggles to secure a clear path forward amid Brexit negotiations — the biggest winners of the week actually secured funding for their banking disruption efforts by one of the world’s major traditional financial institutions: BBVA.
Below, PYMNTS offers the B2B FinTech rundown, with SMB banking the undisputed winner — this week, at least.
Bank FinTech
The U.K.’s Atom Bank landed this week’s largest B2B funding round with $206 million for its digital financial services that target millennials and small businesses. Reports in TechCrunch said the funding was led by Spanish bank BBVA, which now holds a 39 percent stake in the company, and the deal already secured regulatory approval. Toscafund also participated in the investment and is also planning to increase its stake in the challenger bank. The publication estimated the funding boosts Atom Bank’s valuation to about $526 million or higher.
“We are very proud of what we have achieved in the Atom journey to date, and we are excited about our plans for the future,” said Atom Bank CEO Mark Mullen in a statement. “This further significant injection of capital secures the bank’s place as a disruptive force in the mainstream of U.K. banking. We will continue to invest in growth, in our technology and in our products as we continue to push ahead with the support of our investors.”
BBVA said Atom will work to take advantage of PSD2 and Open Banking regulations to enhance its financial services. The company said it will focus on growth, client acquisition and an enhancement of its core capabilities, with plans to roll out new products moving forward.
BBVA’s next move in challenger banks came with Germany’s solarisBank, which announced $69.7 million in Series B funding. In addition to BBVA, Visa, Lakestar and ABN AMRO’s Digital Impact Fund also participated, reports in TechCrunch said. Existing backers Arvato Financial Solutions and SBI Group also increased their stake in solarisBank, though existing investor Finleap remains the company’s largest shareholder.
SolarisBank’s Banking-as-a-Platform solution links banks to technology to enhance their offerings while maintaining regulatory compliance. Reports said the company has nearly 60 corporate customers that deploy solarisBank’s platform, though the company aims to have more than 100 clients by the end of the year.
The company said it will use the funding to focus on growth and development of its platform, as well as enter new geographic markets.
“There is a new wave of innovative digital platforms transforming commerce and banking services across Europe. SolarisBank broadens the definition of banking without sacrificing security and reduces the friction associated with cash,” said Matt Dill, SVP, Digital Partnerships at Visa, in a statement.
Travel & Expense Mnaagement
The $51 million in Series B funding raised by TripActions will boost a company that aims to encourage employees to spend less on business travel. TechCrunch reported this week that Lightspeed Venture Partners and Zeev Ventures led the funding round for TripActions, which offers a solution to identify the cheapest flights and hotels that are in-policy for corporates and their employees. The new funds will go toward expanding its staff, reports said, with a focus on customer service, which the company said sets it apart from industry competitors. The investment follows a $14.6 million funding round announced earlier this year.
Blockchain
Taulia’s own founders started Centrifuge with the aim of streamlining B2B commerce and payments via blockchain technology. Now, Centrifuge has secured its own funding to press ahead. Reports in EU-Startups this week said the company secured $3.8 million for its solution, led by Mosaic Ventures and BlueYard Capital. The company developed an open B2B commerce protocol to interconnect business data on blockchain technology and facilitate transactions throughout a global supply chain.
According to CEO and Co-Founder Maex Ament, the company is targeting the invoicing process in particular.
“We want to fundamentally change how businesses interact by consigning antiquated invoicing processes to the history books,” he said in a statement. “To do this, we are building a world-class team in Berlin, which has some of the most talented blockchain engineers in the market. We are super excited that Mosaic and BlueYard are leading this round — their expertise in the blockchain and decentralized internet space is a tremendous asset for Centrifuge.”
The company said it plans to use the investment to expand its team in Germany, where its engineering and product staff are based. The company also operates out of San Francisco, where its commercial team is based.
Alternative Finance
India’s Finova Capital landed $6 million, reports in DealStreetAsia said this week. Sequoia India provided the Series B investment to add onto last year’s Series A investment, also provided by Sequoia India. The company targets SMBs with its non-bank financing solution.
“There is dearth of organized credit available to a large proportion of MSME [micro, small and medium enterprises] … largely due to lack of formal income, documentation and financial literacy. We have formulated a way to efficiently serve this underbanked population and are working toward facilitating their access to credit,” said Mohit Sahney, founder and CEO, Finova Capital, in a statement.
Cybersecurity
Netsparker, based in the U.K., targets mobile app developers with its security scanning solution. The company said this week it raised $40 million in funding from U.S.-based Turn/River Capital, which will be used to focus on its product roadmap, marketing, sales and geographic expansion. Netsparker’s tool enables developers to automate the identification of security flaws in web apps, websites or web services.
A $26 million Series C funding round will bolster Bugcrowd, which offers a crowdsourced security solution. Triangle Peak Partners led the investment, the company said in an announcement. According to Bugcrowd, its cybersecurity solution addresses the impending problem of a lack of talent in the industry, instead turning toward global researchers and customers to crowdsource threat detection for corporate customers.
Payroll
Combining payroll and other Human Resources (HR) solutions, Justworks announced a $40 million funding round led by FirstMark Capital, while Redpoint Ventures, Index Ventures, Bain Capital and Thrive Capital also participated. The company told TechCrunch that it will use the investment to continue its gradual, calculated growth plans as it targets small businesses. According to Justworks, consolidating HR and payroll solutions can address a key pain point for SMBs, which can be overwhelmed by managing multiple HR apps at once.
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