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Finmid raises $24.7 million to help small and medium-sized enterprises obtain loans through platforms such as Wolt

Berlin-based finmid is one of a number of startups building embedded fintech solutions targeting markets that want to offer their own payment and financing options. The company has raised €23 million ($24.7 million) in Series A funding to further build out its product and enter new markets. After this round of financing, the company is valued at 100 million euros ($107 million).

Marketplaces—usually two-sided businesses that bring retailers or other third-party providers with customers to purchase their products or services—are a very classic target for embedded finance companies, especially because they already host a large volume of transactions activity, so it gives them a reason to build more features around this to increase their own profits.

Companies like Airwallex, Rapyd, Kriya and others are working towards this opportunity. But finmid believes it has the potential to lock in more business, especially in its home region. Small and medium-sized enterprises in Europe often borrow money from banks. The rise of fintech has opened the door for SMEs to more and more diverse sources of financing than ever before, and more and more SMEs are doing so.

The startup believes that it makes more sense for SMEs to access funding through business partners rather than through banks or neobanks, which they will do. “In an ideal world, you don’t have to break away from this environment,” finmid co-founder Max Schertel told TechCrunch.

It also makes sense for the marketplaces themselves to offer these services: a loyal audience of customers and their customers’ customers means they have a wealth of data that can help generate, for example, more personalized financing offers.

As an example of how it works, food delivery brand Wolt uses finmid’s technology to offer cash advances directly within its app to some of its restaurant partners, Schertel said. Unlike banks, Wolt has access to a restaurant’s sales history, and finmid can help it use that data to decide who will see pre-approved financing options.

finmid financing solutions - Wolt

Image Source: Funmead

Working capital does not come from Wolt, but from finmid’s financing partners. Both finmid and the platform earn a percentage of each transaction. “We have banking relationships with a lot of the big banks,” Shettle said.

For platforms like Wolt, embedding finmid is a way to make a restaurant’s life easier while generating additional revenue without much extra effort. As long as partners are willing to try the startup’s API, it’s a fairly simple value proposition.

In its early days, Finmid’s pitch wasn’t easily embraced by venture capitalists, Schertel said. Embedded finance may get a lot of hype, but it’s still an approach that requires signing up with a partner to get results. This requires patience, which not all venture capital investors have.

However, Finmid has managed to find investors who have stuck around since the start of the pandemic, helping the company raise €35 million in equity financing so far. Alexander Talkanitsa, another co-founder of finmid, told TechCrunch that the company raised €2 million in pre-seed funding and €10 million in seed funding before raising its new Series A round.

That support appears to be paying off. According to Schertel, once you’re running on a platform like Wolt, “success really becomes more complicated.”

“I like [my] Work is much better today than it was a year ago. ” he joked.

Schertel and Talkanitsa met at challenger bank N26, whose founder Max Tayenthal is now one of their investors, along with venture capital firms Blossom Capital and Earlybird VC.

The co-founders learned an important lesson at N26: financial infrastructure does not allow for mistakes. “You have to invest a lot in reliability,” Shettle said.

Finmid has an API that connects multiple data points on the platform and can also plug in other sources of information about potential borrowers, just like a bank.

To make the user experience smoother, finmid enables its clients to display pre-approved capital quotes, which the end user can decide whether to accept.

The company also offers a product called B2B Payments that allows partners to finance transactions between its users. Markets such as Frupro (fruits and vegetables), VonWood (timber) and Vanilla Steel (metals) use the product.

The new funding will be used for hiring, with Schertel saying the startup is looking for people with experience in specific areas, particularly finance.

The company is also looking to expand into other countries. First on the list is Italy, Shettel said, but there are no plans to open an office there. Talkanitsa spends half its time in Vienna, while finmid has an office in Berlin.

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