Zero to Xero: The Growth Story of a Leading SaaS Provider

September 4, 2019

MONTHLY ANALYSIS

Section 1: Zero to Xero

The developments in the online accounting industry had started with the introduction of NetSuite in 1998. Previously, accounting software was installed on desktops. These were used by big organizations to maintain their accounting needs since the software were very costly and were designed to suit the requirements of the organizations. NetSuite was the first company that offered a completely web-hosted accounting software solution. In the late 2000s, many players entered the cloud-based accounting software industry. This phase in time also saw a considerable rise in mobile technology and people’s trust in technological developments and their acceptance world over. Smartphones and tablets kept evolving – this paved the way for the numerous traditional industries to migrate into the online mode of operation using cloud-based systems. Businesses could easily access information within seconds remotely through the internet anytime, anywhere without being reliant on private databases. Existing big players in accounting software like Sage and Coda ventured into developing cloud accounting software.

After NetSuite’s revolutionary introduction of web-hosted accounting systems, it took eight years to bring the next phase of revolution in the accounting industry. A small, cloud-accounting startup based in New Zealand called Xero started taking shape. Xero was originated with the vision of providing a true cloud-based accounting solution.

Growth Story of Xero

Xero is a public software company based out of New Zealand. It offers cloud-based accounting software platform for SMEs. Its products are based on the SaaS model. It sells its products in more than 180 countries. It is one of the fastest-growing accounting software companies in the world.

Xero was the creation of famous entrepreneur Rod Drury, who founded the company at Wellington, New Zealand in 2006. They spearheaded the idea of creating the world’s first SaaS platform for cloud-accounting into reality. The new cloud-software company got significant attention from small local businesses and started gaining traction in initial days from the domestic market, but that growth was not sufficient. Drury and his team believed in Xero’s implicit potential and wanted it to explode globally. They estimated a need of NZD 17 million to grow and sustain the business and launch a commercially viable product at scale. Drury decided to list the company for its first IPO in 2007, within one year of its launch. He rejected the idea of raising funds from venture capitalists in Silicon Valley as it would have handed over the controlling stakes to those investors. Through the first IPO, Xero raised NZD 15 million (~ USD 9.83 million) from retail investors. It helped the firm to get a higher market valuation than private equity.

Today, the company has grown from 50-employees in 2007 to over 2500 employees in 2019. Currently, Xero’s market capitalization stands at $5.815 billion (May 2019). The company has grown leaps and bounds through its strategic acquisitions; a large pool of integrations; quick adaptations; a strong community of innovators including users; business analysts; accountants & others; and a vision to grow bigger and bigger. Xero was listed on the New Zealand Stock Exchange on June 5, 2007, and then listed on the Australian Securities Exchange on November 8, 2012. It further delisted from the New Zealand Stock Exchange on February 2, 2018. In total, Xero has raised nine rounds of funding. After its first IPO, Xero got the next funding of $13.6 million in 2009 from MYOB’s Founder Craig Winkler. The subsequent funding was in 2010 of $3 million followed by $16.6 million in February 2012 from Valar Ventures and another $49 million by the end of 2012 from Valar Ventures and Matrix Capital. By 2013, it has raised more than $100 million in funding. In 2013, it received $150 million followed by a funding of $110.8 million in 2015. The trends in funding reflect the aspirational growth of Xero over the years and investor confidence in the business model.

Here is the market capitalization chart of Xero in ASX since its listing in November 2012:

Source: Y-Charts

Xero started to earn its first positive cashflow in early 2017 after 10 years of its existence, and it’s estimated to rise gradually as per ASX: XRO analysts. According to the estimates by ASX, the company will first breakeven in late 2019, after which it will see steady growth in its overall earnings. The following chart illustrated ASX analysts’ growth expectations of Xero alongside the actual growth achieved until May 2019.

Source: Simply Wall Street

Xero’s earnings have grown by 45.7% in the past year. The software industry in Australia grew by an average of 29.3% in the past financial year, whereas the Australian market’s average growth is 7%.

Over the past 12 years since its inception, Xero has become a giant player in the online accounting software industry, leaving behind many of its competitors that started before Xero. It moved miles ahead in competition with MYOB in its domestic markets and has been rivaling strongly against major global players such as Sage and Intuit. This was possible for Xero because of its streak of ambitious acquisitions. Being a small company initially, it acquired companies that were more mainstream in the business world and had a higher market valuation than Xero itself. Gradually, Xero’s valuation went off the charts.

Xero's Product Portfolio

Source: Xero Investor Presentation (August 2019)

In the core of its product offerings are accounting, invoicing, and bookkeeping based on single ledger system of records. There are also multiple support services under Xero’s solutions. It has 700+ in-app integrations through partnerships and acquisitions that provide an all-round ecosystem to its clients:

  • Core product offerings include accounting, invoicing, and bookkeeping based on single ledger system of records.
  • Xero’s products comprise of customized variants and combinations of its core products.
  • Xero’s solutions include multiple support services through Xero Central, which is its help center.
  • App partners/Xero’s ecosystem has 700+ in-app integrations through partnerships and acquisitions that provide an all-round ecosystem to its clients.

Xero’s Financial Performance

Xero’s revenues have grown from $100.4 million in FY15 to $376.6 million in FY19, recording a CARG of 39.2% during FY15 – FY19. Net loss has continued to decline in the last five years. Net loss in FY15 stood at -$56.3 million, which reduced to -$18.5 million in FY19.

 

Source: Xero Investor Presentation (August 2019)

Australia and the UK remain two key geographies for Xero’s financial performance. In FY19, Xero generated $178.1 million from Australia and $81.4 million from UK markets. Australia and New Zealand together generate more than two-third of Xero’s revenues.

With an impressive track record and strong statistics, Xero is still leading its way with further increase in revenue on a YoY basis. The operating revenue has jumped 22% YoY. The major contribution is from the core accounting segment, which shares a massive chunk of 91%, consolidating the fact that Xero is on the mark to become a global market leader as a SaaS-based financial accounting software. The driver of revenue growth can be attributed to the crucial international acquisitions of WorkflowMax and Hubdoc. Integration of these acquisitions in its platform has boosted the value proposition of the platform in terms of being a one-stop of solution package for financial accounting and management, payroll and expenses module, online workflow, and job management along with other non-subscription platform services.

Source: Xero Investor Presentation (August 2019)

Geographical Outreach and International Market Share

Since its initial IPO, Xero has been aggressively looking forward to expanding into new geographies. Xero believes that having a small domestic market has propelled it to venture into world markets and become more competitive. B2B companies providing accounting software and support systems weren’t new, but Xero was one of the first to provide a SaaS-based accounting platform and was poised to gain traction from first-mover advantage.

At present, Xero products are being used by SMEs in more than 180 countries, and its subscriber base has increased to over 1.82 million. The number of subscribers grew exponentially in its domestic markets of New Zealand and Australia in the past 12 years. This fuelled its future growth plans to venture into foreign markets. As of 2018, Xero is the market leader in New Zealand, Australia, and the UK. Its secondary markets are the USA, Canada, and the rest of the world.

Xero launched its platform in different countries with different versions specifically for that country. It launched its SaaS platform in the UK in December 2007, named ‘Xero UK.’ Xero launched in Australia in September 2008; by the end of the year, it also launched its global version, which was not country-specific. In August 2011, Xero’s US version was launched. It mostly concentrated on these four English-speaking countries and maintained steady growth in terms of new subscribers and average revenue per user (ARPU) till 2015 through multiple integrations with banks and other financial & technology service and application providers. In 2016, it registered with the Inland Revenue Authority of Singapore (IRAS) to venture into Asia. It established its first Asia office in Singapore in March 2016. After two years, it had set up its second Asia office in Hong Kong in March 2018. Later in May, it launched its platform in Canada.

Xero, being a dominant player in its core markets of Australia, the UK, and New Zealand, has spread across 16 states in the USA by 2019 since it launched its US version eight years ago; but it faces tough competition from QuickBooks by Intuit, which is the market leader in the USA with a market share of 80–85%. The major reason is the presence of QuickBooks that has been dominating the market since its launch in 1992. Though it took time to migrate into a cloud-based platform, it succeeded in customer retention due to its strong presence in the USA since the early ‘90s. Businesses are accustomed to its software, and Intuit has attained a significant amount of customer loyalty.

The Strategic Direction

Xero is working with a three-pronged strategic approach, which includes focusing on driving the cloud accounting business, growing the small-business platform, and emphasizing on global scale and innovation.

Xero's strategy to grow the small-business platform keeps its single ledger (system of records) capabilities at the center and focuses on synergies of its own and partner’s ecosystem and products. It enables accounting partners to connect client data and work systems to one platform in the cloud. While Xero offers bank feeds, payroll, expense, projects, and other solutions from its subsidiaries, its partners facilitate compliance, work papers, tax solution, reporting, and other solutions to come to a single platform.

Xero’s Partnership and Acquisition Streak

Xero’s platform has over 700 application integrations. A majority of these integrations are country-specific and in-app collaborations with local banks, FinTechs, IT solution providers, etc. Xero’s growth is fuelled by these integrations. However, there have been crucial partnerships and acquisitions that have made Xero what it is today. Here are some of the major integrations in its platform:

Xero made major acquisitions in 2018. The strategic intent of all these acquisitions and business collaborations are for the long term. Apart from Gusto, all other acquisitions and partnerships were primarily focused on creating value for the platform on a global scale in order to maximize the viability, accessibility, and comfort to the users and clients. As a firm, Xero is particular about the implications of its acquisitions. Many firms that bring the same value to the market, but why did Xero only acquire these firms in its portfolio and not the others?

WorkflowMax was based in New Zealand and founded at the same time as Xero. It had enough funds to buy out and integrate with its platform and increase its presence further in the domestic market. During its expansion in the USA, it required to integrate its systems in compliance with US GAAP regulations, which resulted in Mochilla’s acquisition. Recently, as the company is on the verge of global expansion to all continents, it needed an entity in its portfolio to serve the online documentation and records maintenance and act as a support function for providing faster accounting solutions to users, which resulted in the acquisition of Hubdoc. The partnership with Paystand is a natural outcome since Xero has multiple partnerships with banks, and it wants to integrate its platform for invoicing, billing, reporting, and time-tracking for digital payments. Since the launch of the tax-filing feature in the UK version of Xero, it wanted to speed up the process to benefit its ever-growing core market of the UK; Instafile’s acquisition served the purpose. All these acquisitions are now being utilized and implemented in all its markets, irrespective of where the companies are located.

Competitor Analysis

Source: BeanNinjas, Merchant Maverick & TechRadar

The online platform is the core product of all the financial accounting and reporting software/service providers mentioned above. The pros and cons are enlisted in the graph above. The (O) represents either the absence of a specific feature or that it is comparatively very less preferred among other competitors.

Business Value Propositions

Source: Moneycrashers.com & Softwareadvice.com

Online business accounting is one of the fastest-growing FinTech evolutions in recent years. According to a report by Market.us, in 2018, the international accounting software market was valued at $6.2 billion. It is expected to grow at a CAGR of 9% and is projected to be valued at $11.77 billion by 2026. Even after the market grows double its current size by 2026, it is estimated that less than 50% of online accounting market needs will be served due to exploding growth in number of new startups, SMEs, and existing enterprises migrating from conventional accounting systems to cloud-based online accounting, invoicing, billing, payroll, and other financial practices. According to an article by Sage, “Practice of Now,” 90% of accountants worldwide believe the eminent cultural shift in the accountancy practices is inevitable. With scores of integrations with banks, payment modules, CRMs, payroll management, inventory management systems, real-time invoicing, instant billing, and tracking facilities, most of the small businesses will gradually adopt cloud accounting practices as their preferred modus operandi.

Currently, there are over 100 companies worldwide that provide online accounting & invoicing platforms and related services. The core value propositions of these companies are mainly categorized into four sections:

a. Payroll & Accounting-Based Software: Provide industry-specific standard accounting, payroll, invoicing, and cashflow management tools. The interfaces have simple and easy-to-use drag-and-drop formats. E.g., Kashoo & Invoicera.

b. Enterprise Resource Management (ERP): Offer industry-specific standard accounting and other financial tools, reporting portals, POS, inventory management, billing & purchasing functions, CRM, etc. E.g., Harvest, Yendo & Free Agent.

c. Full-Service Online Accounting Apps: Full-fledged, all-in-one cloud-based accounting platforms that offer many added benefits like linking with payment portals, banking feeds, analytics & insights, receivables & payables management, budgeting, GST filing, multiple integrations with various other apps, etc. E.g., Xero, FreshBooks, QuickBooks, Sage & MYOB.

d. Freemiums: These applications have limited features: generally, accounting, invoicing, and billing options. More versatile and integrated features are available only on a paid subscription basis. E.g., Wave Accounting & Brightbook.

Xero’s vital acquisitions have ensured a strong footing for the company in the market against other big shot players that have been providing similar software tools, namely QuickBooks by Intuit and Intacct by Sage for years. However, the flawless Xero platform has been the reason for the lackluster growth of its competitors in the same segment. Its acquisition of Hubdoc has notably contributed to higher customer acquisition and retention for its instant management of key financial documents. It has increased productivity in handling large-scale documentation processes and reduced error margins to almost zero. The quick adoption of new international financial standards in its SaaS system has significantly increased the credibility and trust among its users.

With such relative advantages, Xero also maintains a fair price point for its product offerings. It also offers many support services and Xero essentials specifically for its users, which are aimed to render tailor-made financial solutions as per the users’ requirements.

Xero still lags behind QuickBooks a little when it comes to functionality such as ease of use, general features, and mobile functionality. But Xero has a strong lineup of aggressive development schedules which are aimed at providing quick upgrades, new functionalities, and integrated features at a rapid pace. The impact of which can be seen from results in the past few years.

In 2015, QuickBooks had a market share of 80–90% in North America, serving over 29 million businesses. QuickBooks is currently the most preferred accounting software in the US market but is struggling to gain new customers in foreign markets, whereas Xero has 1.6 million customers spread across over 100 countries. Even though it a strong foothold in the USA, Intuit was late in developing cloud-based services. Xero has taken advantage of the vacancy but is yet to replicate the same model of lightning-fast customer acquisition in North America as it did in New Zealand and Australia. Over the last seven years, since the launch of Xero’s US version, it has spread across 16 states among 50 states in the USA and has been serving over 1,30,000 business in North America.

When compared to Sage’s financial accounting software, Xero provides an unlimited number of collaborators on a single account right from its starter package up to its premium offering; it also has business payrolls and books streamlined with accounting mechanisms, which help in better optimization of time and resources which Sage’s software lacks. Sage fares better than Xero in providing an intelligent digital assistant 24/7 starting from its starter plan, which, in a way, helps new customers to get acquainted with the software interface and enhances its accessibility.

Xero’s Move on New Accounting Standards

Xero has adopted three new accounting standards from April 1, 2018. Here are the new standards in place:

1. NZ IFRS 15: Revenue from contracts

            a. The commission costs from contracts will be capitalized and expensed over time.

                b. Adoption of this standard changed the timing and classification of revenue recognition.

2. NZ IFRS 16: Leases

a. Most of the leases are now recognized as financial expenses or are depreciated instead of being recognized as operating expenses.

3. NZ IFRS 9: Financial Instruments

            a. Amendments on measurement and classification of Xero’s financial instruments.

                b. Simplification of its hedge accounting model and aligning towards risk management

                strategies and objectives.

The tactical impact of these new adoptions:

  • The restated net loss in the first half of FY18 decreased by 7.11% from the earlier-reported $21.1 million to $19.6 million.
  • The restated EBITDA for H1 of FY18 increased by 188.88% from the earlier-reported $5.4 million to $15.6 million.

Xero adopted the new accounting standards in compliance with the latest inclusion of three new International Financial Reporting Standards (IFRS) by the International Accounting Standards Board (IASB). It was one of the early adopters of these new standards and integrated its cloud-based software (SaaS) to incorporate IRFS 9, IRFS 15 & IRFS 16 quickly for the benefit of its clients and customers. As a result, the net loss of the company significantly came down. The expeditious approach has been appreciated by many of its clients.

Source: www.xero.com

The Emerging Accounting Ecosystem

The importance of cloud accounting has never been felt before worldwide until a few years ago. The shift in preference among small businesses towards cloud accounting from the conventional desktop-based accounting software has been rapidly increasing. The main reasons for such a transition are:

a. Security & Reliability: In the past five years, with the emergence of blockchain technologies and digital payment systems, the confidence of the business community on security and reliability of cloud accounting systems have increased significantly.

b. Cost-Effective Solution: Through cloud-based accounting software, low cost of installation, maintenance, and quick integration to customer’s own business platform is possible.

c. Flexibility & Ease of Use: Businesses get lots of alternatives to choose from the range of accounting solutions and related services tailor-made to the user’s needs that capture the minutest of details owing to the business. The subscription-based model of software solution provides flexibility to upgrade or terminate services, add-ons, accounting solutions, etc., to the businesses. It indirectly helps the firm so that they can utilize their funds more efficiently.

d. Compliance: The recent developments and modifications in IFRS, GST implementation, new GAAP rules, and regulations by international financial organizations and government bodies make it difficult for businesses to account for these changes and integrate their systems accordingly. Here, cloud-based software provides the value for money with quicker integrations of all new rules and regulations in the systems compliant with the standards.

e. Accessibility and Automation: The cloud accounting software is accessible at any time and anywhere through any devices, smartphones, tablets, PDAs, etc. It ensures systems are automated and effortless for a seamless experience to businesses and their customers in accounting, billing, invoicing, etc. It also provides valuable insights and analytics to businesses, along with digital tax filing, payroll, inventory management, and other solutions.

f. Tons of Add-Ons for Special Needs: It provides an ecosystem of services as per the need of the businesses. A wide range of add-ons is available from which users can customize the platform dashboard as per requirements.

All these reasons make it evident for businesses to switch to cloud accounting solutions in today’s time. According to reports from Forbes, around 78% of American SMBs will move to cloud accounting by 2020. The governments are putting efforts to digitalize financial systems to curb piracy, illegal transactions, tax evasions, and other hindrances in implementing regulatory measures. Financial institutions and international regulatory bodies are devising plans to adapt to the emerging ecosystem of accounting through technological innovation that makes it easy for probing, auditing, inspection, and investigation of frauds in international transactions.

All these developments provide much scope for cloud-based accounting software solution providers to explore and grab this opportunity to come up with practical solutions to challenging financial problems. Xero, with its promising strategy, has been able to capitalize on the international market through its accounting software ecosystem with over 62 million customer connections accounting for transactions valued at $2.4 trillion per year. According to Reuters, at present, the USA alone accounts for 35.6% of the global market, the largest segment in the world, followed by EU with a market share of 23.4%. The global accounting software market has a current valuation of $2.63 billion, which is going to rise to $4.32 billion by 2024, with a CAGR of 8.6%.

How the Future Looks Like for Xero

Xero has evolved into a giant corporation with many units within its organizational portfolio. It is well-equipped to maintain sustainable growth. Three key factors are in favor of Xero. Firstly, it’s already the leading player in cloud accounting industry worldwide. Since it is a young firm, it has the potential to diversify itself at its will. It is in the stage of creating a name for itself as a conglomerate at a global scale. Secondly, the market size is growing, and it’s going to double in size in the next 10 years with the majority of new businesses rising from emerging markets. Thirdly, its numerous integrations with other organizations make its growth inevitable since it is in common interest of parties within a strategic partnership to grow and become profitable. Hence, Xero will attain more traction in the future. Moreover, the continuous engagement with other allied services and businesses provide relevant insights to incorporate business needs of customers and upgrade the platform from time to time.

There are many upcoming activities in the pipeline for Xero. The firm is currently working on a number of projects and developing prototypes. Here are the major developments taking shape within the company:

  1. Advanced Machine Learning: Xero is using AML apps to process and interpret stored information in its database to automate decision making to provide a flawless experience to its clients, reducing the chances of human error. It will help in timely suggestion to accountants and bookkeepers to take actions on pending or upcoming activities such as bank reconciliation, tax filing, etc., and also provide probable solutions as per past trends from its records.
  2. Product for Large Firms: Xero is prototyping models for providing solutions to large firms with employee strength of more than 100 employees. These companies will have added business needs for which Xero is working on up-market solutions to attract large firms.
  3. Streamlining Third-Party Software Firms: Xero is working on extracting the maximum from its partner channels and enhancing its network effect. In order to achieve that, it’s aligning the third-party software services in line with the service value provided by Xero itself. It’s achieving the close coordination of third-party applications and integrating the same with client platforms for better customer experience.
  4. Increasing Transparency: Xero, with its comprehensive bank feeds API, is working on integrating with other applications such as Sasfin and Absa to enhance visibility and transparency into transactions, cashflow, reporting, and reconciling accounts. Modern-day businesses are eager to have a deep-dive analysis of cashflows. It also will help businesses to forecast growth opportunities or hurdles in the future.
  5. Updated Xero Central: Xero’s platform has a dedicated help center called Xero Central. With the increasing customer acquisition, Xero now requires to render a prompt response and resolution to a large number of clients on their queries. Xero is implementing AI & ML technologies to render faster service and resolutions to its clients.
  6. E-commerce Integration: Xero is integrating its platform with other applications for digital payment services. Xero has plans to increase its foothold in e-commerce solutions. With the integration of new applications, Xero is looking forward to providing accounting solutions for e-commerce platforms and digital payment service providers.

New Horizons and Roadways

Currently, Xero is reigning as the market leader in the cloud-based SaaS financial accounting software industry for small and medium-sized businesses. It is one of the fastest-growing FinTech companies in the world and has achieved plenty of milestones in the past 12 years. This is because Xero’s platform offers the values that help the small businesses in maintaining their financial records customized to their requirements. Its innumerable support features and complementary add-ons in the platform ensures delivery of flawless accounting systems to its clients. It also boasts a dynamic community of developers, business advisors, accountants, bookkeepers, and users. They provide valuable inputs and insights in developing the platform to serve the challenging and emerging needs in the industry. But is it enough for the future growth of Xero? The way Xero started the journey in its domestic markets couldn’t be replicated in the US. What are the avenues that Xero has not yet focused on? What should Xero do to remove the roadblocks in the way of its growth?

There are new horizons and roadways that Xero should look forward to. These areas can ascertain sustainable revenue growth as well as customer acquisition and retention:

  1. Distribution Models: Businesses depended on technology are always in a continuous need of evolving their distribution models. Xero is capable of fast-paced evolution and quick integration of applications and support services in its platform. Its main value proposition being accounting, the support services ecosystem also needs to work in tandem with the evolving financial technologies. Xero has to focus on the upgradation of the existing applications along with new integrations and collaborations.
  2. Multiple Linguistic features: Xero has the opportunity to venture into untapped markets in non-English speaking countries. Currently, Xero’s platform supports only one language, i.e., English. This is acting as a barrier in terms of attracting the potential SMB customers in matured and emerging economies that are not comfortable with English as a linguistic medium of operation. It has been one of the reasons for slow growth outside its core markets. Xero currently has a penetration rate of less than 2% in the USA and the rest of the world. In the future, the market is poised to grow further with an influx of additional 50% SMEs within the next 7–10 years. Other major language options may include Spanish, Mandarin, Arabic, Portuguese, German, and Hindi. These major business languages cover over 100 million population worldwide and are spoken in over 20 countries.
  3. Larger Firms: Xero’s platform is ideally suited for small businesses having a low number of employees. As soon as businesses grow in size and have over 100–150 employees, they tend to switch to other accounting and payroll software such as NetSuite. There is an imminent need for Xero to expand its product lines. Xero should focus on tapping bigger firms that are initially using its platform and develop some upgradable premium subscription plans that support businesses with over 100 employees.
  4. Universal Product: Xero provides a separate version of its platform for different countries. Many SMBs today are having small SBUs in different parts of the world. Having a uniform, universal platform can be easy for businesses to organize finances. Its viability and accessibility to SMBs will increase significantly. Since Xero’s functional footprints are not limited to accounting alone, it’s important for Xero to have a universal product alongside its existing ‘version’ products. The global version also lacks uniformity; hence, Xero has not been able to do well in the market since its launch.

Section 2: Current Affairs

(Aug 1–Aug 30, 2019)

The All-Seeing Regulatory Eye

Indian insurance regulator IRDAI has set up a single point contact for its regulatory sandbox (RS) initiative, where FinTech firms can seek permission to experiment with innovative approaches for the growth of the sector. 

The Bank of Mexico has issued a new FinTech law that is likely to force a break on the accelerated growth of FinTech activity in the country. The new law is expected to result in a crackdown that could force the closure of 201 listed startups. Reports indicate that the new FinTech Law could close almost half of the promising young companies.

Israel’s Capital Market, Insurance & Savings Authority announced that it would rearrange its licensing regime and speed up the process for its 2,000 FinTech and blockchain businesses that are currently seeking licenses from the regulator. The move is part of a greater effort by the Israeli Ministry of Finance’s work promoting financial innovation.

Money Magnets

Numbrs Personal Finance, a Zurich-based FinTech firm, has raised $40 million at a $1 billion valuation. The FinTech aims to expand outside its main market of Germany. Numbrs raised $40 million to bring the total capital invested to almost $200 million.

Recko, a Bengaluru-based provider of AI-powered reconciliation of digital transactions, has raised additional capital from a group of reputed global and Indian FinTech angel investors. Recko plans to enter international markets, including the US, in the next six months. Recko’s investors include Taavet Hinrikus (Co-founder of TransferWise), Ashish Gupta (Managing Director, Helion Ventures), Vaibhav Puranik (Financial Product Head for Carta), Shamir Karkal, (Founder of Sila Money), Eric Kwan (Early Facebook Engineer & Founding Engineer of Operator), and Locus Ventures.

Indian FinTech startup Cred, which is less than a year old, has closed a $120 million funding round which was led by Ribbit Capital, Gemini Investments (a personal investment vehicle of Yuri Milner’s DST Global), and Sequoia Capital. The founder of Cred suggests that the fresh capital is to be used to expand into international markets and strengthen Cred’s merchant ecosystem.

Avanti Finance, a lending solution FinTech that is created and funded by Ratan Tata and Nandan Nilekani, has announced its plans to raising $150 million in a combination of equity and debt to meet its investment needs.

California-based FinTech company Tala has raised $110 million in its Series D funding round which was led by RPS Ventures with GGV Capital and previous investors IVP, Revolution Growth, Lowercase Capital, Data Collective VC, Thomvest Ventures, and PayPal Ventures also participating in the round. Tala aims to use the new capital to enter India. 

New York-based FinTech Morty, which aims to help first-time homebuyers secure their mortgages, has raised $8.5 million series funding.

In August 2019, Softbank’s Vision Fund further expanded its financial-technology portfolio by leading a $200 million funding round for supply chain platform C2FO. The Kansas-based C2FO provides an online marketplace where suppliers offer discounted rates on their invoices in exchange for early payments directly from their customers.

Most-Valued FinTech in Europe

Stockholm-based Klarna has secured a new round of financing amounting to $460 million, which makes the total value of the payment service provider to stand at $5.5 billion, surpassing digital banking platform N26. With this round of funding, Klarna has become biggest FinTech firm in Europe.

Turning the Table: FinTech Acquiring a Bank

Raisin, one of the most successful FinTechs in Europe, announced the rebranding of the previously acquired MHB Bank to ‘Raisin Bank’ as it sharpens the focus on “banking as a service for FinTechs.” Raisin now possesses a full banking license and will use the advantages of this acquisition to further its growth.

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