INSIDE THE DEAL
Revolut’s embedded finance partner Modulr bags $108m in Series C
Modulr taps General Atlantic for Series C as competition in embedded finance heats up and fintech funding dries up. Eric Johansson writes
Embedded finance has become a huge thing over the past few years. Innovators in this fintech industry segment enable non-financial companies to add financial services to their businesses. That can include adding a buy-now-pay-later solution like Klarna’s at the checkout, or to give customers the option of setting up an insurance policy for whatever product they’ve just bought.
Modulr is one of the many start-ups to break ground in this new market segment. It has already proven its chops by providing its payment infrastructure to the likes of $33bn UK neobank Revolut and financial resilience start-up Wagestream.
Modulr now plans to build on the momentum after securing a $108m Series C funding round. American growth equity investor General Atlantic led the Modulr funding round. Other backers also helped top up the start-up’s coffers. Blenheim Chalcot, Frog Capital, Highland Europe and PayPal Ventures injected cash into the round.
While the start-up stayed mum on its valuation, Modulr was happy to disclose how it was planning to use the money.
“This latest funding round will help support Modulr to become a pan-European payments champion,” Myles Stephenson, founder and CEO of Modulr, said in canned remarks.
Myles Stephenson, founder
and CEO of Modulr
He added that the start-up’s leadership plans to “cement Modulr’s position as a leader in embedding financial technology into businesses across the UK and Europe”.
Embedded finance start-ups galore
That may be easier said than done. Modulr isn’t alone in the embedded finance space. It is facing growing competition in a sector Juniper Research analysts expect to be worth $138bn by 2026. In other words, the start-up is hardly alone in the raising money in the embedded finance space.
London-based startup Weavr secured $40m in a Series A round in February, 2022. In July 2021, Toqio raised a €8m seed funding round.
Modulr did not return questions about how the company aims to stand out in the increasingly crowded space.
Fintech funding drying up
Modulr closed its new funding round at a perilous time for the industry. Fintech investment exploded over the past two years. In 2019, VCs injected over $32.1bn into the fintech industry across 1,821 deals, according to data from research firm GlobalData. That figure rocketed over the next two years. Fintech ventures raised over $84.5bn across 2,356 deals in 2021. The industry has raised $20.3bn across 614 deals in 2022 so far.
While that is lower than the grand total of the amounts raised in 2021, VC deals are still on track to overtake the amount raised in 2019 and 2020.
The industry certainly had reason to feel bullish as they went into 2022. The beginning of year has certainly dampened that enthusiasm. Market watchers have warned that VC backing is set to contract this year as markets cool down. The Russia's war in Ukraine has exacerbated market uncertainties that were already rocky due to the hangover from the pandemic, Brexit and the resulting cost of living crisis.
This week, the UK’s Office for National Statistics warned that inflation in the country could be hitting a 40-year high.
There's a plethora of other reasons for the fintech industry to be concerned. Both fintech and other tech start-ups have experienced mass-layoffs recently. The implosion of one-click checkout start-up Fast and publicly-traded fintech companies' stocks plummeting are other reasons to be concerned.
For the latest financial deals analysis, visit GlobalData's Consumer Intelligence Centre.