Information on the Target

Nect, founded in 2017, is a pioneering German technology firm specializing in digital identity solutions. The company has quickly garnered recognition for its patented, fully automated, AI-driven technology that revolutionizes digital identity verification by removing the need for human intervention. This innovative approach has enabled the company to amass a user base of 12 million for its Nect Wallet, underpinning Nect's commitment to security and user-friendly solutions.

Through its various offerings, including Nect Ident and Nect Sign, Nect provides secure identity verification and electronic signature services compliant with EU regulations such as eIDAS. Nect has showcased its technology across essential sectors including banking, insurance, telecommunications, and government, earning accolades for its rapid growth, including recognition as one of Germany's fastest-growing companies by Deloitte in 2023 and 2024.

Industry Overview in Germany

The digital identity verification sector in Germany is experiencing significant expansion as both businesses and governmental organizations increasingly demand secure and efficient solutions for online interactions. With the acceleration of digital transformation and an increased reliance on remote services due to recent global events, the need for robust identity verification has never been greater.

Regulatory changes and the evolution of compliance standards further propel the market's growth, compelling organizations to adapt and integrate advanced verification solutions. This shift enhances trust in digital interactions while ensuring compliance with stringent regulatory requirements. Consequently, the market is expected to witness sustained growth, offering ample opportunities for innovative players like Nect.

Additionally, the market dynamics indicate an ongoing surge in demand as enterprises seek to implement scalable identity verification systems. With an emphasis on user experience and data security, organizations are increasingly turning to advanced technology providers, highlighting the competitive landscape where Nect is strategically positioned.

Diverse applications across various sectors confirm the rising relevance of digital identity systems, creating a fertile ground for providers. Nect's commitment to integrating AI and biometric solutions aligns seamlessly with industry needs, establishing the company as a leader in this evolving market.

The Rationale Behind the Deal

The EUR 2.5 million revenue-based financing from Round2 Capital is a strategic move designed to bolster Nect's market expansion efforts and further secure its standing in the digital identity verification industry. This investment not only enhances Nect's operational flexibility by facilitating growth without diluting equity but also aligns with its long-term vision of innovating and diversifying its product offerings.

The non-dilutive nature of this financing allows Nect to navigate new growth opportunities while maintaining control, thereby empowering the company to pursue its objectives unencumbered by the constraints typically associated with traditional equity financing methods.

Information About the Investor

Round2 Capital is a prominent European growth investment firm based in Vienna, managing EUR 170 million in assets. Established in 2017, the firm is recognized for its innovative revenue-based finance model in Europe, backing companies with digital and sustainable business models. They are an active investment partner in several European markets, having invested in 40 software and technology scale-ups across nine jurisdictions to date.

Supported by the European Investment Fund, Round2 Capital focuses on nurturing technology companies in the European Union, further enhancing its reputation as a reliable financial partner. With a unique investment strategy centered on revenue-based finance, Round2 Capital enables growth while allowing companies to maintain ownership control.

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This investment in Nect by Round2 Capital appears promising, reflecting both strategic foresight and a solid understanding of market dynamics. Nect's established technology and rapid user growth position it favourably to capitalize on the escalating demand for digital identity solutions. The partnership is likely to yield substantial benefits as Nect expands its portfolio and market reach.

Furthermore, incorporating revenue-based financing is prudent, offering Nect the necessary financial flexibility while avoiding equity dilution. This funding approach aligns well with Nect's growth strategy, empowering it to enhance product innovation without compromising shareholder interests.

Considering Nect's proven track record, award recognition, and compliance with stringent regulations, this collaboration could lead to further market leadership. The investment, thus, not only supports Nect's operational goals but also contributes positively to the broader tech ecosystem by fostering innovation in digital security solutions.

In conclusion, Round2 Capital's backing of Nect represents a strategic alignment between investor and target, promising to drive exponential growth and transformation in the digital identity space. This deal signals confidence in Nect's potential and positions both parties for future success in a rapidly evolving industry.

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