Phenom, a European challenger bank targeting SMEs and freelancers, has raised €50 million ($54 million) in a Series B equity round of funding.
Founded in the Netherlands in 2019, Phenom allows businesses to open an online bank account in minutes and receive an IBAN (International Bank Account Number) to support cross-border transactions. On top of that, customers also receive integration support for physical or virtual bank cards, expense management tools and accounting software.
Indeed, the Dutch startup is one of several players that includes the likes of Wise, Kwonto and Revolut, but Finom's fundraising further highlights the demand for SME financial services in a market still dominated by large banks. While challenger banks such as Atom Bank and Monument have attracted significant investment in recent months, SME lenders such as Ivoca have also closed significant new funding channels.
“The first problem (that we solve for SMEs) is always unsustainable banking – traditional banks consider it 'uninteresting' to serve SMEs, compliance risks are high, but lending opportunities are very limited, which means the product for SMEs is very low. With the digital banks we use every day In comparison, Yakov Novikov, co-founder and co-CEO of Phenom, told TechCrunch via email. “But at the same time, the needs and complexity level of SMEs are much higher.”
Phenom touts its core selling point as a “fully integrated” product that spans tangential services such as banking, payments, invoicing, expense management, accounting and business registration.
“The integration of these services not only saves our clients hours each week, but also significantly lowers their costs by eliminating the need for separate services,” Novikov said.
Show me the money
Phenom previously raised about €50 million, including two seed tranches in 2020, and a so-far undisclosed €33 million ($35 million) Series A round that closed in early 2022.
Although Phenom is typically joined by other startups that challenge established banking mandates, it's not technically a bank — it holds what's known as an Electronic Money Institution (EMI) license, which allows it to offer services that a bank does, but not, such as lending. Phenom holds an EMI license in its domestic market of the Netherlands, but this allows it to operate throughout the entire European Union (EU).
With another €50 million in the bank, the startup will be well-financed to prepare its expansion efforts to target the entire Eurozone by next year. At the time of writing, Phenome claims around 85,000 customers in Germany, Spain, France, Italy and the Netherlands, and while it is technically available across the entire EU, it will begin localization efforts for additional markets in the coming months.
The Series B round was co-led by new investor NorthZone and existing investor General Catalyst, which has previously backed the likes of AirBnb, Stripe and Snap. Other participants in the round included Target Global, Cogito Capital, Entry Capital, FJLabs and S16vc.