Small and midsize enterprises (“SMEs”) make up almost all businesses in the EU and, indeed, around the world. But while their financial services needs are different from those of individuals and large corporations, they often report that those needs are unmet.
Ageras is on a mission to change that. Co-founders Rico Andersen and Martin Hegelund are trying to simplify financial administration for small business owners. Ageras began in 2012 as an online marketplace matching SMEs with accountants and bookkeepers but now offers products that help with a range of accounting, banking, invoicing, lending, payments, payroll, and tax needs. The accountant marketplace remains part of the offering.
Ageras is pursuing its vision by adding new capabilities via acquisition. In recent years, Ageras has acquired Billy, Kontist, Salary, Tellow, and e-invoice startup Zervant. The firm reports revenue of €31.7 million and a profit of €1.2 million for 2023. It has approximately 250 employees in Europe and the U.S., six offices, and more than 300,000 active customers.
In June, Ageras agreed to acquire Shine from Société Générale. Shine is an online bank offering a suite of services, including bank accounts, payment cards, invoicing, and company formation, to small enterprises and entrepreneurs in France. SocGen reportedly purchased Shine for around €100 million in 2020. (Terms for the current transaction have not yet been disclosed.) Interestingly, Shine has more than 100,000 customers and nearly 300 employees, so by these measures Shine is the larger of the two companies.
Ageras has raised more than $230 million and is backed by Investcorp (which is majority shareholder), Lugard Road Capital, Rabobank, Lazard, Tryghedsfondet, Back in Black, CIBC, and others. The firm most recently raised €82 million specifically for acquisitions.
I recently spoke with Martin Hegelund, who is also Chief Growth Officer.
Q. Martin, not all your services are currently available in all of the countries in which you operate. Do you envision making them all available in every market, so that you offer a single, centralized destination for nearly all their needs?
A. Yes, we want to build a platform that supports all admin needs of running a small business – with strong invoicing, accounting, banking, tax and payroll features all playing very well together. We are working on offering all these features in our core markets, which are Denmark, France, Germany and The Netherlands.
Q. How far along are you in the process of integrating your offerings in a single platform? How long does it take to integrate each new acquisition?
A. We have done extensive work on consolidating the technology and to bring more features to all markets based on the various acquisitions. Rome wasn’t built in a day and everything we do is centered around how we, over the long term, create the most value for our customers. We always start our integration immediately after closing an acquisition, by welcoming the team to the Ageras family, but the technology and brand, for instance, is something that we do gradually to make sure we do a proper integration together with our new colleagues.
Q. The companies you acquire keep their own websites and brand names. Do you think it will at some point be beneficial to consolidate under a single brand? I would image it would make cross-selling easier.
A. We are on a track to consolidate, but we have respect for brand equity of the companies we acquire. Some of the old brands still exists as customer acquisition channels, but what matters is that the customers over time get access to a unified Ageras experience. So, we are working on building “Ageras” as the encompassing “super brand” that small business owners will associate with solving their admin needs.
Q. Kontist, Tellow, and now Shine have similar offerings but serve SMEs and freelancers in different countries. Are you using acquisitions to expand your geographic footprint as much as a way to expand your product offering? Or is it about cost-effectively acquiring clients? Or all three?
A. It depends on the case. Sometimes we have got all three in one acquisition, which is great. Other times, we have acquired a piece of technology that is somewhat similar to something we already have, but then there might be a piece to it that makes us very strong in that market. It could be country-specific tax features, etc., that makes our existing accounting offering more competitive in that particular market. On the other hand, we then also get a bunch of new customers that might benefit from our existing offering.
Q. To what extent is your acquisition strategy a result of fragmented banking regulations across the EU? Would it be different if the EU were truly a single market for banking products?
A. Our acquisition strategy is not really due to different regulations. The core of our banking technology goes across borders. It would of course make a lot of things easier if every country had streamlined payment methods, currencies, etc., however it is the same with accounting; there is also different tax regulations, etc.
Q. What is your approach to identifying acquisitions? Are you opportunistic or do you decide what you need in advance and then go out and find it? Do you have a dedicated acquisition team? Are you utilizing outside investment bankers?
A. We are actively tracking the space and have a bunch of conversations. If we identify a company that is highly complementary to our existing offering, and where we believe an acquisition could make sense, we initiate a dialogue. Other times, founders reach out to us as an integration into Ageras is a great next step for niche products that could mutually benefit from access to our customers and existing product. It is no secret that after 2022 we have also seen an increase in founders reaching out because of some kind of distress where we can give new life to the product and team within Ageras.
Q. Do you have a template for your acquisitions? Do they look roughly the same, in terms of structure, in terms of composition of cash and stock, use of earnouts, etc., or is each unique?
A. We have a very extensive M&A playbook that we refine with each acquisition. The structure is the same: We always acquire 100% of the company to align interests fully with the founders and management team around the integration. We cannot succeed if we have people on the team that are not incentivized only by our shared potential. Sometimes, we allow selling shareholders to receive part of their proceeds in Ageras shares if we see a mutual benefit from it. But we are very cautious as we care deeply about our partners at our cap table and arguably our shares are worth more than cash.
Q. What have you learned about making acquisitions work?
A. We need to be as transparent and upfront as possible with founders and team of the acquired company – and we should allow for a mutual due diligence. If the company cannot see the benefits of joining Ageras, we should not make the acquisition.
Q. What do you think distinguishes successful acquirers from those that are unsuccessful?
A. Being critical if you are the right home for the acquired business. Lot of acquirers don’t have this self-reflection and makes acquisitions very opportunistically where nobody benefits. That might work if you don’t integrate and solely do acquisitions as a financial asset. But a “forced” integration by a strategic buyer where it does not make true strategic sense for the customers and everyone involved is likely wasted money, time and effort.
Q. What advice do you have for founders on the other side of the transaction, the folks at the companies being acquired?
A. Engage with potential acquirers early. Even if you are not ready to exit, it is always good to stay visible and active in the ecosystem. Perhaps you can even partner up with companies that might be your acquirer at some point to see the strategic value-add and make a “cultural” due diligence by getting to know the team.
Q. Few fintech startups set out to grow as you have, by acquisition. Are there things about the space you operate in, characteristics that make growth by acquisition a more viable strategy than it might be in other market segments, or outside of fintech?
A. When we acquire companies, we really buy time-to-market. Each market has its own characteristics (tax rules, payment methods, SaaS ecosystem etc.), so acquisitions enable us to move faster than if we did everything organically. When doing acquisitions, we always consider all factors, where cost of integration, purchase price, etc., is on the “negative” side, and the value of the customers, team, technology and reduced time to market is on the “positive” side. And here I believe that fintech often comes out favorably in that equation.
Q. How are you thinking about a potential IPO?
A. We have been transparent that an IPO could be a future avenue for Ageras. But timing needs to be right and it needs to be for the right purpose and be a benefit for the business.
Q. You’ve said you are planning at least one additional acquisition prior to an IPO. Can you share anything about what you’ll be looking for? Is there a product that you feel you’re missing right now?
A. We would like to complete our offering in our core markets and expand in adjacent features as well. We have some feature gaps in payments, payroll and local tax that we would likely cover with an acquisition.
Q. How do you decide to add new capabilities by acquisition rather than through partnership, as you did with Froda, or by building them yourselves?
A. When we believe we can provide more value by being in full control of the feature and deliver it inhouse, we prefer to own the technology, either built organically or via acquisition. In other cases – e.g., if it is only a small subset of customers needing the feature (e.g., industry-specific admin features) or if it requires a license to operate (e.g., lending) or market-tailored manual work (e.g., tax support), we rather want to partner up with best-in-class providers in that space.
Q. You are the first Danish fintech founder I’ve met. What would you like people to know about the Copenhagen fintech scene?
A. We have a bunch of cool fintech companies with roots in Denmark. The country is tiny, resulting in founders often needing to think global from the get-go. However, the drawback is that companies often to establish themselves partly or fully in other markets to get access to talent and capital.
Q. Why is your sole U.S. office in Philadelphia?
A. We do not need a physical presence to operate. However, we saw a great pool of talent on the American East Coast that speak multiple languages. And since our customer support is available from 8-23 every day, we could help facilitate that during normal work hours in the US.
Q. How is Ageras regulated?
A. Ageras is generally not a regulated business – at least not prior to the acquisition of Shine. However, we do have an AISP registration to be able to offer a smooth open banking feature where our customers bank transactions from other banks are automatically synched to the accounting software.
Q. I’m curious about your logo. Can you explain what the logo means and the strategy behind the different colors and when you knock-out the color of the two short but gently-curving design elements?
A. The logomark has a lot of meaning to it. First, the left shape symbolizes the windy journey of entrepreneurs. Second, it also symbolizes optimism by being an upwards trending graph. The two shapes together that form the logomark then in turn symbolizes both a rocket about to take off – but also an umbrella shielding entrepreneurs from the administrative burden of running a business. It takes a bit of creativity when looking at it, but I am really happy with the symbolism that was the basis of designing this logomark.
Q. How are you acquiring clients (outside of acquisitions)? Does it vary by product? By country? Is there a gateway product that gets people in the door?
A. We are privileged that we have a broad product offering that supports the lifecycle of small businesses. Therefore, we have multiples ‘doors‘ that customers can use to start using Ageras. All our customers come inbound via our self-service signup. Customers can always sign up for free to test the product, and only if they need certain features or grows above certain thresholds, they need to start paying for the product.
Q. On average, how many of your services does a typical client use?
A. It depends a lot from market to market, but the majority of customers use invoicing, accounting and banking.
Q Will Shine make France your most important market?
A. I don’t like to use the word “important”. We have four core markets currently – Denmark, Germany, France and The Netherlands. France was already our largest market measured in number of active customers, so adding Shine will of course put France in top.
Q. After four years inside Société Générale, does Shine still have its entrepreneurial DNA?
A. Shine operated quite independently from Société Générale. The team is very capable, innovative and indeed entrepreneurial, so we are very excited to welcoming the entire Shine team to Ageras.
Q. You offer invoice financing as well as lines of credit. How does the data you have on your customers help you make better underwriting decisions? Are you lending your own capital or are third parties providing these loans?
A. We don’t do the credit scoring or provide the financing ourselves as we don’t want to take balance sheet risk. But as you say, we have a lot of real-time data on our customers and can see the trading between our customers and their customers. We can use this data to enable our financing partners to make better credit assessments. By letting our customers use their own data to obtain a credit line with our lending partners, they can get cheap and flexible funding with quite high acceptance rates.
Q. Do you help your clients manage currency risk?
A. No this is not a focus at this point.
Q. Are you hiring?
A. Yes, we always look for great talent across our office hubs in Copenhagen, Amsterdam, Berlin, Paris, Helsinki, Gdansk and Philadelphia. We have a career site where new openings are posted: https://www.ageras.com/us/careers
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