Qonto got a lot of PR attention in January as the first investment of Valar Ventures (founded by Peter Thiel) in France. This definitely helped us spread the word about Qonto, and contributed to attract our first 2,000+ signups on the Qonto beta waiting list, with literally no marketing cost.

I thought it would be worth sharing the behind-the-scenes story.

Starting

My co-founder Steve and I sold our previous venture (Smokio) to a Fortune 500 company, just after 2 years of existence.

As much as I loved this journey, I never really experienced the pain we aimed at solving — help people quit smoking — myself, as I never really smoked.

I more or less consciously started seeking another pain point to address that I would personally know. I was the one in charge of all admin and financial tasks at Smokio, and I can’t say enough about how our banking services nearly drove me crazy: outdated tools, poor customer service, and this constant feeling of not knowing what we were paying for. I had been looking for banking alternatives for a while, but all the existing ‘modern’ ones appeared to be (i) geared towards B2C users, (ii) not currently available in France: Simple (US), Nubank (Brazil), for instance.

This is how Steve and I, started being more and more intimately convinced something BIG would happen in the small business banking space in Europe.

To be totally honest, there was another idea we really liked: ‘disrupting health insurance’… this is how we met Jean-Charles Samuelian. We were really impressed by his drive, experience and grit, and he had already started working on what would become Alan. We just thought this pain point was in good hands already. 😉

So we started drafting wireframes, interviewing experts, registered a new company and invested a couple of hundreds thousand euros in it to hire a designer and 2 developers to kickstart our online business banking startup. This was the easiest part.

We interviewed our friends, and friends of friends, who all agreed current business banking services were really bad and needed a fix.

Carried by these feedback and by the confidence we got from our previous exit, we decided to start pitching VCs.

Pitching

To be honest, being second-time entrepreneurs really helped securing meetings with investors. When we pitched for Smokio, they assumed we were straight-A students (being INSEAD MBA graduates, McKinsey and Goldman Sachs alumni) but always questioned our ability to be ‘down-to-earth’ and to execute. In one word, that we were ‘street-smart’ entrepreneurs.

This time we had our Smokio experience to prove it.

1. This does not mean we got no resistance; here are the main ones we had to overcome:

Expected ones

• ‘You were IoT/hardware entrepreneurs who are now turning to SaaS/Fintech… interesting.’
• ‘You don’t have any bankers on the team!’
• ‘Small businesses will not use Qonto because the main thing they are interested in is getting loans/overdrafts.’
• ‘Why do you raise so much, so early? Build your product first.’

Unexpected ones

• ‘We don’t believe in it.’ (period)
• ‘Banks are too powerful to let startups disrupt their industry.’
• Most investors were not wary of EU fintech regulatory context and did not get the width of opportunities a partnership with a payment institution would bring on the table. Some would not even let us explain it either.

2. Also, as Fintech ventures are very capital intensive, we were very mindful of dilution, and this might have been a deal breaker for several VCs.

We were lucky enough to have existing ‘comparables’ we could leverage to negotiate with investors: Atom Bank $230 million valuation or Simple $117 million exit, for instance. We then had to prove that (i) valuations would be equivalent or superior in B2B, (ii) we could adapt these B2C successes to B2B. I think there is no ‘magic tip’ or fancy industry analysis here, and at the end of the day, all founders who plan to launch in a new market will have to convince investors to ‘just’ bet on them.

3. On top of this, I believe founders should not underestimate how draining and stressful this process can be

• Answering the same questions, over and over.
• Processing negative feedback from experts/people you respect, when you might have back to back pitch meetings. This literally means you have to gather yourself, be shiny and positive to meet the next VC, when you were just turned down 5 minutes ago.
• Keep building your company: convincing talented people to join the boat (which, by the way, is not currently funded), answering their very same questions, over and over. Not being with the team to guide and onboard them, because you’re pitching.

Steve was really fond of the Miracle Morning routine to help him face this intense period. I just tried to keep my schedule available for (i) running sessions several times a week (I still aim at running my 4th marathon in less than 3 hours!), and, more importantly (ii) quality time with my family.

Again, no ‘magic recipe’ here: I think that being a solid two-founder team really helped coping with tough moments. Having a partner with whom you can laugh during hardships makes life easier.

Doubting

After 4 weeks of pitching, and 18 meetings, we secured a couple of term-sheets, with several VCs, which proposed pretty much the same financial deal.

1. One of them had the most favorable clauses, with a young, bullish, and dynamic spirit;

2. Another pair of VCs (willing to invest jointly) was composed of (i) a US and Fintech focused VC, and (ii) another top French VC we trusted and knew very well.

A lot of people would think, ‘What are you complaining about’, and I would totally get this.

However, this is an overview of what was going through our mind when we got the two term-sheets:

• Do we really want to do this? We’re about to sign for at least 5 years of hard work and stress. I just had an adorable daughter, Steve was about to get married. We could re-invest some of the money from the Smokio acquisition, and/or opt for less capital-intensive projects. I thought SaaS or marketplace ventures had great potential as well, while being less demanding in terms of tech/security/regulation and thus investments, than Fintech.
• Are we really going to succeed? For Steve and I, taking investors’ and business angels’ (all friends and family) money has always been a huge responsibility. Of course we wanted our company to be successful, but above all, disappointing our investors was not really an option.
• Which term sheet should we choose?

Taking the plunge

Well, I guess you already know what we decided.

We could not think of another career option than building another startup, and truly believed we would disrupt B2B banking.

Also, picking Valar Ventures and Alven Capital’s offer (option 2) made most sense because:

• We loved Valar Ventures’ fintech expertise (they invested in TransferWise, N26, and Xero among others), and very pragmatic ‘US’ mindset.
• Alven Capital is one of the top VCs in Europe, we’ve known and enjoyed working together at Smokio. In short, we trusted them and felt we belonged to the Alven family.

Building Qonto

Every fundraising must be celebrated as it brings both financial means and experts’ validation ; therefore the self-confidence required to build something from scratch.

However, raising funds is just a necessary step towards success, and we could not wait to be 100% back with the team to actually focus on Qonto, meaning, in priority order:

• Team: recruit, develop, retain the best talents.
• Product: #1 complaint of users is around the outdated banking tools they have to cope with. Qonto’s ambition is to be the leading business banking product for entrepreneurs and startups.
• Operations: we believe entrepreneurs and startups deserve a best-in-class customer service, especially when it comes to their money. That’s why we ‘obsess’ so much about (i) caring, (ii) executing.

Wrapping up

We did have our set of doubts and insecurities, but since then, we never looked back. By March we had a team of 15+ talented and passionate people, our beta is live, 2,000+ companies signed up to open a Qonto account.

To all founders, I would just say:

• Founding a company is a 5+ years personal commitment. Be sure you want to commit!
• Don’t underestimate mental preparation before/during/after pitching. Being open to feedback without undermining your self-confidence is a fine balance to find.
• Choose the right partners. I might be repeating myself, but having Steve, whom I have known for years and already founded a company with, was an invaluable asset. For important decisions, we always speak in one voice. I cannot imagine how hard and stressful being misaligned with one’s cofounders during fundraising can be.

This article first appeared in the Quonto blog. Quonto has since moved ahead, announcing today the raising of a further €10 million from existing investors Valar Ventures and Alven Capital and opening for business in France