German fintechs are increasingly attracting the interest of venture capitalists again. Now, Berlin-based Solaris is on the verge of a new financial injection with a financing round soon, raising a mid-double-digit million amount – about €50 to 60 million from existing investors.
The fintech’s valuation is to remain stable in the process. This was reported to Handelsblatt from financial circles. Solaris is currently in talks with investors and wants to close another financing round “promptly,” a spokesperson said. “In doing so, we remain true to our principle of not raising more capital than we need. We aim to make Solaris more comfortable about regulatory requirements and further growth.”
Most recently, Solaris raised €40 million from existing investors last summer, bringing its valuation to 1.6 billion euros. Previous venture capitalists include the likes of BBVA, HV Capital, Lakestar, and Finleap. Solaris enables other startups to use the institution’s banking license to do initial business. The fintech also offers banking services to established companies, such as credit card issuing.
With the financing round, Solaris is on trend. German fintechs have again attracted increased interest from venture capitalists this year. For example, venture capital investors (VC investors) put 235 million euros into local financial startups in 21 financing rounds from January to March, figures from analysis firm Barkow Consulting show. In the fourth quarter of 2022, there were only six financing rounds with a combined volume of 80 million euros. However, the small financing rounds of Solaris and other fintechs also show that the wind has changed. While startups were showered with money in 2021, they now have to fight for every euro and make significant concessions in terms and conditions.
For Solaris, the financing round is essential because the company secured a considerable deal in 2022 that it needs equity capital to liquidate. For example, starting in the second half of this year, the Berlin-based company will take care of around 1.3 million credit cards issued by ADAC. To continue to meet regulatory requirements and take on even more partners in the future, Solaris now needs the money, according to financial circles.
In 2021, the annual loss before tax for the Solaris group was 41.3 million euros. Figures for the previous fiscal year have yet to be discovered. Solaris plans to get into the black this year. “We want to demonstrate profitable growth this year and be in the black for the first time on an annual basis,” Solaris CEO Carsten Höltkemeyer said in a Handelsblatt interview in January.
According to some industry experts, Solaris needs help with the consequences of earlier business decisions. In the early days, Solaris offered its services at very favorable conditions and concluded long-term contracts, which put pressure on margins.
However, the spokesperson says the company is “on a perfect path to becoming consistently profitable.” The first quarter went according to plan, he said. “We are also planning on a positive net margin this year,” the spokesman said.
At the same time, Solaris continues to have trouble with Bafin. The financial regulator had found deficiencies at Solaris, some of them serious, during an audit in 2020. It then sent a special auditor to the bank and increased capital requirements.
Bafin then tightened its control of the prominent Berlin fintech at the beginning of January. Since then, the company has had to get the green light from Bafin before it can take on new customers.