When engaging with a fintech entrepreneur about their business, discussions often lead to the challenges surrounding ledger management.
A ledger functions as a comprehensive record of monetary transactions, acting as the primary reference for financial assets. However, as companies manage multiple bank accounts, payment processors, and various financial services, overseeing these elements can quickly become complex. Consequently, many enterprises allocate engineering resources to develop customised ledgers to address this issue.
The French startup Formance emerged to meet this demand by creating an open-source, programmable financial ledger capable of tracking all asset movements in and out of accounts. This product now serves as the foundation for a more expansive and ambitious infrastructure initiative.
The co-founder and CTO Clément Salaün mentioned that in 2024, the company primarily concentrated on the ledger, but they are now preparing to expand from a single ledger product to the Formance platform, incorporating additional modules such as reconciliation and connectors to payment services.
Currently, Formance features five offerings: along with the ledger, the company provides a connectivity platform to integrate financial providers through a unified API, orchestrating payments across wallets and payment providers, as well as reconciliation services.
Additionally, the startup is developing a mass payout solution for marketplaces and businesses needing to issue payments. Developers can already manage payouts programmatically through platforms like Stripe, Adyen, or Mangopay, but Formance aims to establish middleware facilitating integration across multiple providers.
Recently, the company secured a $21 million Series A funding round, co-led by PayPal Ventures and Portage. Previous investors including Y Combinator, Hoxton Ventures, and Axeleo have also contributed.
A Platform Strategy
The startup believes in the advantages of providing a modular platform akin to Amazon Web Services in the realm of cloud hosting; customers can utilise a single service, yet experience enhanced efficiency by consolidating their cloud infrastructure under one provider.
Salaün noted that the company plans to launch additional modules, particularly tailored for financial operations. Enhancements will include export functions for accounting tools, as well as deeper connectivity developments and advancements in banking functionalities. The vision is to modularise the entire stack further.
Moreover, the team is committed to keeping integration costs minimal for clients who wish to adopt additional modules.
Salaün elaborated on the financial burden of managing multiple SaaS products, suggesting that a client may incur costs around $150,000 for three tools and an equivalent amount for internal efforts to integrate them. He highlighted that the financial infrastructure presents a series of smaller issues, each of which could potentially develop into companies with approximately $10 million in annual recurring revenue. This platform approach is crucial for scaling beyond those limitations.
Although larger fintech enterprises like Stripe provide numerous fintech infrastructure services, Formance seeks to maintain its independence. The company does not engage in payment processing or hold clients’ funds directly.
Formance currently claims around 20 customers, with two based in the U.S. according to Salaün, these two clients represent approximately 40% of the startup’s revenue. Other notable clients include Booksy, Doctolib, Liberis, and Shares.
With the recent influx of $21 million, Formance intends to establish an office in New York and recruit a go-to-market team. Additionally, the company aims to expand its engineering and product teams, aspiring to grow its workforce from 20 to 50 employees by the end of 2025.