Just like clockwork, Pennylane is raising another €40 million ($43 million at today’s exchange rate). This new funding round comes after the accounting startup raised €4 million in 2020, €15 million in 2021, another €15 million in 2021 again, €50 million in 2022 and €30 million in 2023.
You might think that it’s quite a lot of money for a company working on . . . accounting software? That’s because the startup is growing nicely with more than 2,000 accounting firms now using Pennylane as their main software tool.
Some companies with in-house accountants also use Pennylane directly, but the vast majority of the company’s clients come from these accounting firms. Overall, it means that 120,000 small and medium companies rely on Pennylane for their accounting needs in France.
Over the last two years, Pennylane’s user base of SMEs has increased by 40x. You don’t see that kind of growth rate that often — even for a startup.
“We have a glass ceiling, which is ERP software. We’re not going to replace SAP. However, under SAP, we are a very good alternative as an accounting and finance tool for SMEs. Today, we work with companies with a bit more than a thousand employees,” Pennylane co-founder and CEO Arthur Waller told me.
With today’s funding round, existing investors Sequoia Capital and DST Global are increasing their stake in the startup. And Pennylane has now reached unicorn status, meaning that it has reached a valuation of $1 billion or more.
In Pennylane’s case, this is a valuation of “just over a billion euros,” Waller said. “It roughly doubles the valuation of the last fundraising,” he added.
One app to run your business finances
In addition to Pennylane’s unique distribution strategy, the company has been adding new features at a rapid pace. As a modern SaaS product, it connects directly with third-party services that hold valuable information. For instance, you can get banking statements in the Pennylane interface, import receipts from Dropbox and get billing information from Stripe.
Combined with in-house OCR technology, Pennylane can save time when it comes to entering data into the accounting platform. Pennylane has also added fintech products with professional banking and payment cards integrated directly in the platform.
You don’t need to use Pennylane as your bank account, but you can — 20% of Pennylane’s customers have a bank account with the company. And because other fintech companies like Qonto are ramping up their financial and accounting management features, it’s important to provide an all-in-one accounting and finance product.
Arguably, Pennylane wants to become Qonto before Qonto becomes Pennylane. Of course, Pennylane and Qonto both have integrations with the other service so that users can sign up to both services and seamlessly use both. “But when you run a restaurant, you prefer to have everything in one place. You prefer to have one software subscription,” Waller said.
And because both business owners and accounting firms have access to the same platform, everything stays in sync. Pennylane also handles billing, purchase orders, paying suppliers, accounts payable, etc.
Finally, Pennylane is also playing around with artificial intelligence in two different ways: finding relevant information in accounting data and helping accountants when it comes to following accounting rules for the most complex edge cases — a sort of accounting copilot.
While Pennylane doesn’t have any money issue, it still hopes it can become profitable within the next 12 to 18 months. And if there’s one thing that Pennylane must be good at, it’s tracking the startup’s financial situation.