Solaris is feeling the chill from the fintech downturn.
The upstart German fintech player secured a major credit card contract last year with Allgemeiner Deutscher Automobil-Club, Europe’s biggest motorists association and roadside assistance giant. But now, Solaris is sweating to raise 100 million euros to actually fund the project, according to a report last weekend from the Financial Times.
e-Bank On It
The deal with ADAC was something of a legitimizer for Solaris, handing it a decade-long deal to issue ADAC-branded credit cards to 21 million club members — with sales projected to reach more than 100 million euros a year, a massive step for a firm that generated 130 million in sales in 2022. But it’s been a bumpy road ever since, with Solaris losing 56 million euros last year. One of its biggest clients, blockchain-based banking startup Nuri, filed for insolvency in August 2022. And ADAC announced this summer that it would delay migrating its credit card clients to Solaris by at least six months (though one source insisted to the FT this was due to tech issues, not lack of funding).
Either way, the firm apparently needs a lot more money to deliver on the project — and both sides are getting creative to try to pull it off:
- A portion of the 100 million euros fundraise is for an upfront payment to ADAC, according to the FT, though most of it will be used to simply meet the minimum capital requirements needed to take on ADAC’s 500-million-euro loan book.
- ADAC has reached out to Hanseatic Bank, DKB, and Deutsche Bank to see if any of them could take on the loan book, according to the FT, which would mark something of a U-turn, given that the club picked Solaris over each of them last year.
Fund Grazing: Venture capital money has all but dried up in fintech. Earlier this summer, Solaris raised a 38 million euro Series F, though it came at the exact same valuation — $1.6 billion — of its most previous funding round back in 2021. Still, that beats buy-now, pay-later firm Klarna seeing its valuation drop by over 70% in its most recent raise. Meanwhile, global fintech funding fell off a cliff in 2022, relatively speaking, plummeting 46% to $75 billion, according to CB Insights. In other words, fintech may not quite be finito just yet, but it’s time for the industry to prove its worth.