Andreessen Horowitz and Benchmark have piled into the burgeoning FinOps sector. Now, European startups are racing to become the region's early leader.

In March, the valuation of Californian startup Modern Treasury spiked to $2 billion as it established itself as an early leader in the burgeoning FinOps sector.

FinOps, a portmanteau of finance and devops, has become one of then most sought after areas of fintech with investing giants like Andreessen Horowitz, Altimeter Capital, and Benchmark all piling in.

The term refers to businesses moving their operational expenditure processes to the cloud as companies look to digitize and better manage their payments. Startups in the space offer APIs to finance and engineering teams that can act as payment processor or marketplaces to provide better visibility and accountability over cashflow.

In Europe, FinOps startups have captured the attention of a wealth of venture capital firms hoping to be an early backer in the region's own Modern Treasury.

Andreessen Horowitz for example has backed London-based Sequence and Berlin-based Payrails. Their connection, other than relative youth, is that they both address the same sector, FinOps. The US payments market is notoriously fragmented with some 5,000 banks and no universal real-time settlements platform.

The European payments landscape has had the Single Euro Payments Area (SEPA) for over a decade to help synchronize cross-border transactions but there is still a bevy of other pain points to address for players in the space, according to Akash Bajwa, an investor at EarlyBird Capital in Berlin. 

"Modern Treasury set things ablaze but there are fundamental ingredients in this market that investors like and there is a massive total addressable market," Bajwa said.

Notably, there are a lot of manual processes involved in payments that require companies to hire teams of staff to do often repetitive tasks across finance functions at businesses. These processes can often take time to reconcile and be logged while coming in and out of different bank accounts, in different currencies, and jurisdictions, making the space primed for automation. 

It's a process that's begun in earnest in Europe with Sequence recently raising $19 million, one of the largest seed rounds on the continent in 2022.

"It's a personal story for me because in my previous business I always felt that what was happening in the finance department was challenging because it lacked automation and a proper operating system," Riya Grover, Sequence's CEO said. Notable other examples in Europe include the aforementioned Payrails, France-based Numeral, Sweden's Aventir, and London-based Aurelia.

B2B fintechs have been more in vogue amid a wider collapse in the consumer market through 2022, making the sector more appealing to investors. Indeed, investment into European startups plummeted by 38% in the second quarter of the year to $23.7 billion, according to Crunchbase data.

"The current European cohorts of Fin/PayOps companies are still early stage but will hope that the promise of efficiency savings and performance optimization of payments as a core business function will support demand in a slower growing market," Ellen Logan, an investor at Augmentum, told Insider. The growth of Modern Treasury has unsurprisingly got VCs excited by the prospect of a potential European winner in the space.

"There will be a big company built here, maybe multiple," Bajwa added. "There are clear and specific problems that consumers will have a high propensity to pay for so getting go to market right is key as a result."

Importantly, the wider world of finops, and payops, could yet support a number of different players, Sequence's Grover said.

"There's room for a lot of players to co-exist and tackle different sides of this coin," she added. "Each new entrant will find their own thing and a big enough addressable market."