“Digital transformation” and AI remain very buzzy terms in the world of enterprise software, and today a startup operating in Romania that’s built a platform that taps into both concepts, and is seeing user traction in the financial sector, has raised a decent round of funding.
FlowX.ai — which lets enterprises port legacy and newer software into a single place to build and run applications and services based around them — has raised $35 million, a Series A that it will be using to continue developing its product and growing its business internationally.
The company’s HQ is in New York, engineering team is in Romania, and all current investors are also European. Dawn Capital led the round with PortfoLion, SeedBlink, and DayOne Capital — which previously backed the company in a $9 million seed round — also participating.
FlowX.ai today primarily works with enterprises in the financial sector — customers include BNP Paribas, OTP, Banca Transilvania, and Alpha Bank — and leans heavily on third parties like systems integrators (IBM, KPMG, etc.) to connect with would-be users. The plan is to keep focusing on financial customers for now but to widen the funnel over time.
Its sweet spot is helping these big legacy players launch new services faster that can be used internally, or alternatively externally to compete with the new products that so-called neobanks and other new players are putting out into the market. FlowX.ai claims that since launching four years ago, some 30 million users have interacted with products and services built using its platform.
FlowX.ai isn’t disclosing its valuation but PitchBook lists some of the startup’s recent financials. According to those, its revenues for the year that ended December 2022 were a mere $1.55 million but grew by over 735% compared to the year before. Ioan Iacob — the CEO who co-founded the company with Radu Cautis and Serban Chiricescu — declined to comment on valuation and those revenue figures but confirmed the growth number was accurate.
The problem that FlowX.ai is tackling is not one that is new. Companies like MuleSoft, Boomi, Sapho, Tray.io and Snaplogic, and many others, have for years been working on solutions to make it easier for enterprises to corral and make use of legacy and newer applications and to build services around them faster and easier.
The fact that the first three in that list were respectively acquired by Salesforce, Dell and Citrix is a strong sign of how big the business potential is in this space, and the value of that to the bigger tech players in the industry.
This startup’s particular approach to the space is its application of AI, specifically using it to automate some of the integration, application and service creation that businesses are spending lots of time and money on doing manually.
This is particularly an interesting problem, and solution, given FlowX.ai’s target market, the finance sector.
Many banks and other financial services organizations have been on long “digital transformation” roads for years — some new software has been added to meet more regulatory demands, some to improve or launch specific new products, and some in answer to the fact that newer startups are stealing customers with better services.
But the reality is that many of these companies are still working with a combination of tools, including a lot of very old, legacy systems. The forever challenge at these organizations is how to get old software and old data to work with new applications and new data, or to simply get older software to work in a more modern and less siloed way.
This is not just endemic to finance, but it’s often seen as one of the more painful industries when it comes to modernization and what Iacob believes have been empty promises, not least because a lot of digital transformation platforms required too much input from time-poor engineers, or underdelivered on what non-technical staff could actually achieve without those engineers being involved.
“Whatever good things were promised [in previous integration and digital transformation projects], no code doesn’t work in the enterprise. The cake is a lie,” he said in an interview (the latter bit is a reference to this). “We believe the future belongs in bringing together business development teams and engineers, augmenting that with AI, and giving them the power to build fast and use any language to do that.”
The crux of the platform is an open architecture, which can be extended with any programming language, he said. This “connector technology,” he said, allows users to “integrate any system.”
“It’s a completely new paradigm for building,” he added, using AI and specifically generative AI to let users ask for new services in natural language to produce results that can in turn be fine tuned by engineers.
Romania’s been an interesting country when it comes to enterprise startups.
It has been known for strong technical talent for years but it was only relatively recently that it marked out its place on the map of European startup ecosystems. Several years ago, a number of investors struck gold when another startup out of the region, UiPath, turned out to be one of the fastest-growing and successful enterprise startups to emerge in years, essentially leading the charge in the emerging category of robotic process automation (it’s now publicly traded).
That led many to look deeper at startups out of the country. For the record, UiPath’s Series A, in 2017, was just over $29 million. And also for the record: FlowX.ai has all European investors, all of its R&D in Romania, and three Romanian founders but does not consider itself Romanian, or did not believe this was how I should describe them.
Still, I will point out that the $35 million getting announced today by FlowX.ai is sizable not just for a startup with roots in Romania but for the market as a whole, where average round sizes are down significantly in what has been a bigger squeeze on technology finance in the last year.
The argument here in some part is that this startup is valuable because it is helping to spur more business in another valuable sector, finance.
FlowX.ai cites research that estimates that some $2 trillion was spent on digital transformation projects last year, and that equally $2 trillion was lost from software errors in the same period — the idea being that its tools can both nab some of that investment, but also reduce some of that loss.
And that potential to serve both financial businesses and beyond is what Dawn sees as the big opportunity.
“We have seen a similar pattern before, where the company starts with financial services, which is a very demanding sector, and then move on to other categories,” said Evgenia Plotnikova, a general partner at Dawn, in an interview.