SumUp, a fintech that offers payments and associated services to around 4 million small companies in Europe, the Americas, and Australia, has raised expansion capital to help it traverse the stormy seas of the present fintech industry, waters that have tilted and swayed SumUp itself.
The business, which is located in London but has origins in Germany, has raised €285 million (just under $307 million). It intends to utilize the funds to continue organically developing its company by offering new financial services. In addition to card readers and other point-of-sale technologies, it provides invoicing, loyalty, business accounts, and other services. It is also looking to expand beyond the 36 countries where it is now operational.
It will also focus on inorganic growth, or mergers and acquisitions. The latter is worth noting: we are presently in a buyer’s market, with fintech firms facing a substantially tighter financing situation, with S&P reporting a 36% drop worldwide in the latest quarter.
(Sometimes, an M&A transaction will check two strategic boxes: when SumUp purchased the loyalty firm Fivestars in 2021, it gained a competitive advantage in the United States while also introducing additional services to the platform.)
This current round is led by Sixth Street Growth, with existing investors Bain Capital Tech Opportunities, Fin Capital, and Liquidity Group also participating. According to PitchBook, SumUp has already raised around $1.5 billion.
Hermione McKee, SumUp’s new CFO, characterized the transaction as “mostly equity” but refused to provide more specific details. She also refused to provide a particular value for SumUp, other than to remark that it is more than the $8.5 billion SumUp attained in 2022 when it received €590 million (half of stock and half in debt).
According to the corporation, it has been “positive on an EBITDA basis since Q4 2022” (this is not the same as profitable). And that it has had “top line growth” of more than 30% year over year.
However, there are other signs that business is difficult right now. SumUp claims that its client base today stands at roughly 4 million, the same level it stated two years ago.
And today’s fundraising announcement follows some other difficult data points for the firm. Only a few months ago, Groupon reported that it had sold a portion of its ownership in the firm for $4.1 billion as part of a wider set of secondary transactions involving existing shareholders. In other words, it sold the firm for less than half of what it was worth in 2022.
Meanwhile, the $8.5 billion value from 2022 was a significant discount to the €20 billion ($21.5 billion) SumUp had hoped to obtain, highlighting how difficult it has been to fund large equity rounds. (In keeping with this, SumUp’s most recent funding round, in August, was for a $100 million credit facility.)
Payment technology companies in Europe and the United States have also experienced more scrutiny and slower growth.
Since 2022, the share prices and market capitalizations of PayPal and Square, two publicly traded US firms that compete directly with SumUp, have plummeted. PayPal’s share price is presently less than $60 a share, down from a high of over $300 per share. Square and its parent firm Block are trading at around a quarter of their high. Stripe’s value virtually halved to $50 billion this year.
Closer to home, Adyen, a publicly traded company, has been in financial trouble after reporting slow growth. However, Adyen’s simple announcement of a turnaround plan (plan, not outcomes) pushed the company’s price up 30%, demonstrating how unpredictable the market is right now and how hungry investors are for any signals of positive news.
So far, Klarna and Checkout have had less luck. Klarna’s value decreased by 85% the last time it received funds; Checkout had a $40 billion valuation when it raised $1 billion in January 2022, but that number has apparently been reduced to $10 billion internally since then.
SumUp, now 11 years old and one of the largest privately owned payment firms, is counting on its history as proof of its stability.
“For over a decade, SumUp has consistently delivered sustained growth and boldly entered and led entirely new product categories and markets,” said Nari Ansari, MD of Sixth Street Growth. “This track record and culture of innovation, combined with SumUp’s thoughtful approach to growth and efficiency, are well-aligned with Sixth Street Growth’s investing strategy.”
