SMB-focused Finom closes €115M as European fintech heats up

In a landscape where funding can be elusive, Europe's most dynamic startups are still attracting significant investment. Among them is Finom, a Dutch challenger bank headquartered in Amsterdam, designed specifically for small and medium-sized enterprises (SMBs) across Europe. The five-year-old company has recently completed a €115 million Series C equity round (approximately $133 million), as reported by TechCrunch. This milestone follows a $105 million growth funding round from General Catalyst, its investor since 2021, just weeks prior. Finom's innovative business model is geared towards offering European SMBs a comprehensive financial platform that integrates banking services, invoicing, and an expanding suite of features, including AI-driven accounting tools. CEO Andrey Petrov stated, "Theoretically, entrepreneurs don’t need to have an accountant at all," highlighting the startup's vision of simplifying financial management for business owners. This fresh capital will help Finom pursue its ambitious goal of reaching one million business customers by the close of 2026, a target Petrov considers motivational rather than fixed. The startup's potential to cater to a significant portion of Europe's 26 million SMBs is underscored by the participation of various investors in its Series C round, including AVP (formerly AXA Venture Partners) and new investor Headline, along with existing backers such as Cogito Capital, General Catalyst, and Northzone. Despite its recent funding success, Finom faces stiff competition from legacy banks in attracting clients, rather than from other fintech companies. With total funding now reaching around $346 million, Finom's financial backing still lags behind industry giants like Monzo, N26, Revolut, and Wise, each of which has raised over $1 billion. In comparison, Finom's funding is more aligned with French unicorn Qonto, which has raised about $700 million. A unique aspect of Finom's funding is its unconventional structure. General Catalyst, which contributed to the latest round, opted not to take equity but instead provided capital through its Customer Value Fund (CVF), designated solely for growth initiatives. Chairman and co-founder Kos Stiskin noted that this funding model could potentially lead the company to profitability, though Finom also aims to secure equity funding by year-end for a favorable valuation. The timing of these funding rounds has proven advantageous for Finom. While the company has not disclosed its unit economics, its user base has reached 125,000. General Catalyst's interest in reviewing Finom's operations likely accelerated investor confidence and funding commitments. Additionally, the Series C funding will enable Finom to explore strategic acquisitions aimed at expanding its customer base and product offerings, marking a departure from its previous strategy of minimal acquisitions. The company has only acquired one entity to date, Kapaga, a British cross-border payment service, as it previously considered a U.K. expansion. Currently focusing on larger European markets, Finom believes these regions present greater opportunities due to less competitive pressure from challenger banks and a perceived inadequacy of traditional banks in serving SMBs. Like many neobanks, Finom operates primarily under an electronic money institution (EMI) license across its key markets, including the Netherlands, France, Italy, and Spain. Despite these licensing hurdles, Finom has successfully introduced lending options in the Netherlands, viewing it as a testing ground for its credit offerings. Petrov emphasizes that lending capabilities are essential for any fintech, particularly for business customers. The company is also enhancing its product lineup, aiming to provide a full spectrum of financial services. Internally, Finom is leveraging AI not only in its product development but also in streamlining operations. Petrov mentioned that although the company is hiring, it is increasingly integrating AI agents to automate routine tasks, which allows for efficient scaling. The leadership structure at Finom has evolved, with Petrov now serving as the sole CEO, a role he once shared with Yakov Novikov, who has transitioned to an advisory position. The founding team, which previously launched the Russian digital bank Modulbank, is now fully committed to driving Finom’s growth and supporting Europe’s entrepreneurial spirit, which Stiskin describes as "the backbone of the European Union economy."