Newly anointed Dutch unicorn acquires Irish company Capitalflow

8 Jul 2021

Image: Bunq

Digital banking start-up Bunq has taken its first round of outside investment from Capitalflow’s equity owner Pollen Street Capital.

Digital banking start-up Bunq has secured the largest Series A round for a European fintech company, bringing its valuation to unicorn status at €1.6bn.

In a round led by British private equity firm Pollen Street Capital, Bunq raised €193m.

Founded in 2012, Bunq has been self-funded up to now. Founder and CEO Ali Niknam once told Dutch newspaper Het Financieele Dagblad that he would “rather sell a kidney” than take on an external investor.

Niknam previously invested €98.7m into Bunq and, according to TechCrunch, he also participated in the Series A round, investing a further €25m. “Bunq now is mature enough to start scaling up significantly so more capital is welcome,” he said.

The rest of the Series A funding comes from Pollen Street, which has taken a 10pc stake in the company, according to NRC, the Netherlands’ newspaper of record.

As part of the deal, Bunq has agreed to buy Irish company Capitalflow Group from Pollen Street Capital for €141m. Pollen Street acquired the specialist lender through private equity investment in May 2016.

Led by ex-banker Ronan Horgan, Capitalflow offers flexible finance options for SMEs through its tech platform. The company is headquartered in Dublin with 60 employees, and Horgan told RTÉ business editor Will Goodbody that Capitalflow will become a wholly owned subsidiary of Bunq.

Having invested heavily in a digital platform, Capitalflow aims to increase scale through the acquisition and reach more than €1bn in new lending in the next three years.

“Combining the SME lending expertise of Capitalflow, the digital execution capability of Bunq and the ‘customers first’ approach of both Capitalflow and Bunq creates a really exciting, high-growth and self-sustaining platform with a pan-European reach that will mark a new standard in European digital banking,” said Pollen Street partner James Scott.

In an interview with NRC, Niknam described the acquisition as a “sequel” to the fintech start-up’s move into mortgages at the end of last year.

Niknam retains ownership of all other shares at the company, and the latest valuation for the company has made the serial entrepreneur a billionaire.

Profits from his previous tech company TransIP have been used to cover losses at Bunq in its early years. However, Bunq differs from other digital banks with a revenue model based on its users, which is beginning to pay off.

Like rival services from Revolut, N26 and others, Bunq offers bank accounts and debit cards controlled via a mobile app. Bunq users, however, typically pay a monthly subscription fee for this service.

User deposits on Bunq have doubled for the past three years, reaching €1bn in April. This also marked Bunq’s first profitable month in business.

“With the acquisition of Capitalflow, we expect to be consistently profitable by the end of this year,” Niknam told NRC.

In comments to Reuters, Niknam added that structural profitability at a neobank is likely an “industry first”.

The company intends to follow an acquisition strategy to further fuel growth.

Headquartered in Amsterdam, Bunq is currently available in 30 markets across Europe, including Ireland.

In recent months, the company issued updates so that users in France and Germany could receive localised IBANs in order to drive further expansion in these markets. More local IBANs for select European countries are expected soon.

France and Germany were identified as key markets for Bunq, and expansion in these countries is part of the reasoning behind Niknam’s U-turn on outside investment.

“To conquer those markets, you need money,” he told NRC. “The next dream is the United States.”

Elaine Burke is the host of For Tech’s Sake, a co-production from Silicon Republic and The HeadStuff Podcast Network. She was previously the editor of Silicon Republic.