There is no escaping the fact that European VC fundraising this year has got that bit tougher. Published in June, the State of European Tech report by pan-European VC firm Atomico revealed that total European investment values were forecast to just about reach $50bn (£39.6m) for the full year. That represents a halving of the levels achieved at the peak of the market in 2021, and a 38% decline on value achieved last year. 

When start-ups and scale-ups have managed to lock in capital, many have had to do so at reduced valuations. According to the Atomico report, one in five venture fundraisings in the first quarter of 2023 were so-called ‘downrounds’, where a company raises money at a lower valuation than that of its previous funding round. A year before, that statistic was one in 20 – so the bad news has almost quadrupled. On the positive side, it means that four out of five are still on the rise.

Bucking the trend

Despite this challenging funding market, however, data analytics and software scale-up Quantexa has closed a £104m Series E funding round, which put a £1.4bn valuation on the business. Five rounds in and still in the ascendancy, it has achieved unicorn status – that is, reaching a valuation of $1bn without being listed on the stock market.

The pioneering company’s fifth funding round was led by Singapore’s sovereign wealth fund GIC, the first round it had invested in. The other investors were Warburg Pincus, Dawn Capital, British Patient Capital, Evolution Equity Partners, HSBC, BNY Mellon and ABN AMRO. 

“Quantexa closed its Series D in July 2021 and this latest round valued the business at roughly double the 2021 valuation,” says AlbionVC partner Ed Lascelles, who has been a non-executive director of Quantexa since that first investment six and a half years ago. “Achieving that result in a market that’s cooled was a validation of everything the business has been doing so well.” 

Founded in March 2016, Quantexa has built a world-leading ‘entity resolution’ technology. The company’s platform effectively uses AI to verify user identities, and process and collate vast pools of data in a single place. This has powerful applications across know-your-client, compliance, customer intelligence, anti-money laundering, risk and security functions. 

The big sell for Albion has been just how powerful the technology is – it delivers operational performance in these areas with over 90% more accuracy and 60 times faster analytical model resolution than traditional approaches. Given the power of this technology, it is perhaps little surprise that some of the backers – including HSBC and BNY Mellon – are also clients. Other customers include Standard Chartered, Danske Bank, Vodafone and the Public Sector Fraud Authority in the UK Cabinet Office.

The company’s technical capability and the fact that it has consistently expanded its user base, sector footprint and geographic reach, as well as growing annual recurring revenue at 140%, all contributed to the momentum behind the latest Series E round.

“What we are seeing currently in the funding markets is that the very best companies are still being funded and actually on quite attractive terms,” says Lascelles. “But if something is still being figured out in the business, then companies find it hard to raise at all. Quantexa is in the fortunate position of performing well on all fronts – strong metrics, product position and execution in a huge total addressable market.”

Vishal Marria, Quantexa CEO, adds: “After closing our Series D investment round, Quantexa has been on quite a transformational journey. In a challenging market, we have doubled our annual recurring revenue, our user base, and continue to penetrate new markets and industries. This infusion of capital will fuel further innovation, diversification and expansion, and opens exciting options for our future.”

Team for global challenge

Quantexa has made huge strides since chief executive Marria, Imam Hoque and Felix Hoddinott co-founded the company in the spring of 2016. Hoque remains a director of the business. Hoddinott stepped down as director at the end of 2016, but remains chief analytics officer.

“We first met the Quantexa team in the summer of 2016 through an introduction from a contact in our network,” says Lascelles. “When we co-invested with HSBC in March 2017 it was a Series A round. It was also the first financing into the business and so in some respects it felt similar to seed financing. There were 30 people in the company and it now employs more than 600. It has been quite a journey.”

Growing the company’s C-suite has been one of the key drivers of the company’s scale-up, adds Lascelles. “As there has been a huge amount of hiring along the way, a key early addition was the recruitment of chief people officer Lorraine Metcalf. She has been instrumental in helping to build a very strong senior team.” 

Paul Aylieff brought extensive senior financial services sector experience with him when he joined as CFO in January 2022. Ray O’Brien was HSBC’s board representative from 2017, and then became full-time COO in December 2021. Chief product officer Dan Higgins is based in New York and joined in April 2022 from EY, where he was global technology consulting leader. Chief marketing officer Matt Hooper joined in August 2019 and is based in London.

More recently, the business has gone on the acquisition path, closing its first deal in February this year with the purchase of Aylien, a Dublin-based start-up that has developed AI and natural language processing tools to process unstructured data and be used for risk and compliance monitoring.

Lascelles says the Aylien deal added specific capabilities to the Quantexa platform, boosting the company’s technical skills and adding a complementary product to its suite. But while Quantexa remains open to M&A in the future, the company is primarily focused on organic growth.

The only way is up

Quantexa pegs the potential addressable market at some $230bn. The main growth focus for the business will be expanding into new end markets and continuing to broaden its geographic reach. Despite being a unicorn, the company is still very much in scale-up phase and focused on investment and growth rather than profitability. Lascelles says that, if required, it could move into profitability “within its resources if it wanted to”.

Cash from funding rounds and sales means the company has a development runway of another two to three years, with revenues on course to cross the $100m threshold in the next 12 months.

“The company is already global, with significant customer bases in North America, Europe and Asia, but still with scope to expand into new geographies,” says Lascelles. “In terms of client base, the original core market was banks, but that is expanding into broader regulated industries and government. It is important to get across the chief executive’s vision for the business. This latest funding round is not about seeing the business through to an exit in two to three years; this is a milestone on the path to building a foundational global business of scale. All stakeholders are proud to have been involved with the business, and excited to see just how far it can go.”