By: Cyril Bertrand
Lydia, the payment app your friends and family love to use, is raising a sensational €40 million Series B round with China tech leader Tencent. After convincing 3 million users in France, the app is now ready to become to Europe’s leading finance super-app. As seed investors, we couldn’t be more excited about this unique trajectory. Bravo!
Too good to let go
Lydia is my first and only deal that was ever rejected by an investment committee. I know the industry, and I can tell you that this team stands no chance, said the senior finance member. And the committee voted accordingly: #no. False start!
To be fair, the case wasn’t easy. In 2014, Lydia was:
- one of 25+ mobile payment apps in our dealflow
- 100% B2C, which tends to cool down investors
- at Seed stage, when XAnge was more of a Series A fund
To say Lydia was leading us “out of our comfort zone” is an understatement. Still, I wasn’t going to let the story end like that. The founders are just too good. We pushed for the deal to happen, and it did.
“See you when they fail”, said the investment committee*.
There’s something magic about Lydia
It’s a payment app. Which means its sole purpose on your smartphone is to pay for products and services, online purchases, as well as sending instant payments to your friends. Splitting the bill after pizza night? Enter your friend’s phone number in Lydia and send him the cash. A group present for a friend’s birthday? Lydia. Pay for rent, gas, pocket money, this vintage chair on Ebay? You get it.
The app is used by 3 million people on a daily basis. 25% of 18 to 30 years-old in France have a Lydia account, and even more use the brand as a verb for mobile P2P payments. “I’ll take the bill, just send me a Lydia.”
They love it because:
- It’s free
- It’s so easy and practical
- All you need are people’s phone numbers, rather than having to manually insert their bank account details
- And people in their network use it
A killer acquisition machine
Just like Tinder and Facebook, Lydia first grew via schools and university campuses. If your group of friends is using an app to sort out payments, you’re going to want / have to use it too. We call it the network effect. And when a network effect is present, the value of the service increases with the number of others using it. It’s theoretic most of the time. Here it’s real. And it’s just starting.
Lydia is a killer acquisition machine. It almost doesn’t have to spend on marketing to grow (customer acquisition costs are close to 80x inferior to those of neo-banks!). The app quickly expanded to new circles: families, larger group of friends, and eventually businesses. In 2018, Franprix started accepting Lydia payments in over 400 stores across France. What a leap!
The 40 million Series B they deserve
This new financing round is sensational news. For the reasons stated above, raising proper money was never straightforward for Lydia. Today — and for the first time — we feel they finally raise the cash that matches their unique product, talent and ambition. Not to mention how excited we are about Tencent joining the adventure. The mother company of WeChat is itself one of the world’s largest and most advanced fintechs.
The message is clear: it’s time for expansion. Students from Oxford and Cambridge already use the app, and many more will follow. In the meantime, Lydia will boost its revenue model, from short-term loans to insurance and all the services its users may need. And it is now in a position to challenge the traditional retail banking distribution model with a mobile platform model similar to what we see in sectors like retail, music or travel.
Teamwork at its best
A quick word to thank everyone involved since early days, in chronological Groupe Duval, New Alpha, Oddo BHF and CNP Assurances (also one of XAnge’s LPs). The support and expertise provided along the way has been precious and made a whole difference.
And a huge thank you to Antoine & Cyril, of course. As an investor, a business partner or anyone looking for a job at a startup, they are exactly the kind of founders you’re looking to work with. When you meet them, don’t let them go.
*Since then, we freed ourselves from the investment committee, an organ that was rich in insights, but most of the time slowed down the decision process.
