Target Company Overview

Sonect, a Swiss fintech startup, has successfully secured a funding round of €4.65 million led by Italian Angels for Growth (IAG). This round has also opened up investment opportunities through Doorway, a leading platform for equity investing focused on professional and qualified investors, which alone will contribute nearly €1.3 million. Additional participation from foreign investors and family offices aims to facilitate the company's international expansion. This investment serves as a precursor to a larger capital increase anticipated in 2022, intended to support Sonect's global development.

Sonect provides a cash withdrawal service at partnering retail locations, applying the principles of the sharing economy to the cash management sector. By allowing any store to become a cash withdrawal point, Sonect enhances consumer access to cash, particularly in light of the decreasing number of bank branches and ATMs. The company’s solution addresses three primary needs: easier cash access for consumers, new service offerings for merchants, and cost reduction for banks in cash handling.

Industry Overview in Switzerland

The cash services industry in Switzerland has shown significant shifts, with a notable trend of reduced physical bank branches and ATMs impacting consumer access to cash. With the increase in digital banking, there is a pressing need for innovative solutions like Sonect that cater to these changes. The Swiss cash withdrawal landscape has seen a transformation, where Sonect has quickly risen to be the largest ATM network in the country. The user base consists of a diverse demographic, with 15% being students, 25% seniors, and 45% adults.

As of May, Sonect has begun operations on the TWINT platform, which encompasses nearly all Swiss banks and boasts over 3 million users. This integration has resulted in a remarkable 600% increase in user numbers and a staggering 1000% growth in transactions within just five months. Sonect is currently expanding its network beyond Switzerland, indicating a robust strategy for growth.

With plans to launch in Italy by the end of the year, Sonect has secured a partnership with a major Italian bank to streamline merchant onboarding and promote its service to 1.2 million customers currently using the bank’s mobile app. A further agreement with a commercial network will provide access to an additional 34,000 merchants for customer withdrawals. Such strategic partnerships highlight the high growth potential in Italy, which recorded approximately 900 million withdrawals in 2020 alone.

Rationale Behind the Deal

The investment in Sonect is driven by the company’s innovative approach to cash management, which benefits all stakeholders in the cash supply chain. The anticipated growth in user adoption prompted investors to recognize Sonect as a profitable opportunity. The expected expansion in Europe and South America further underscores the investment’s potential ROI, with evidence suggesting that a mere 2% usage in the European withdrawal market would yield substantial profitability.

According to Amedeo Cristofaro, the Country Manager for Italy, the operational rollout in the Italian market is strategic for Sonect. This venture not only provides valuable technical and commercial knowledge but also paves the way for broader expansion across other countries.

Investor Information

The investment round saw nearly 70 participants, comprising business angels from Italian Angels for Growth (IAG) and the Doorway community. Through this initiative, Doorway has achieved a 100% success rate in closing campaigns, most of which have exceeded their funding targets, now totaling over €12 million raised cumulatively.

Marco Bolgiani and Fabrizio Centrone, the champions of IAG, have expressed the potential growth and scalability of Sonect, highlighting the limited competition within this niche. They have committed to continuing their support and consulting services for Sonect as it progresses in both Italy and abroad.

View of Dealert

Dealert views the investment in Sonect as a lucrative opportunity due to the company's innovative approach that aligns with evolving consumer needs for cash access in a market increasingly driven by digital solutions. The move to combine retail outlets with cash withdrawal capabilities represents a significant disruption in the traditional cash management sector, which is poised for transformative changes.

Additionally, the strategic partnerships Sonect has secured within the Italian banking landscape will likely accelerate its market penetration and user adoption, suggesting a clear pathway to growth. With the rapid increase in users and transaction volumes observed in Switzerland, a similar uptake in Italy can be anticipated.

Furthermore, Sonect's planned expansion into other European countries and South America reflects a forward-thinking strategy that could enhance its market share on a global scale. Given the robust data supporting the demand for cash services and the promising trends in user engagement, the investment into Sonect could yield high returns in both the short and long term.

In conclusion, while there are inherent risks in fintech investments, the unique position Sonect occupies in a vital aspect of daily financial transactions effectively mitigates these risks. Therefore, it is posited that Sonect is likely to emerge as a strong player in the cash management sector moving forward.

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