Cologne-based NaroIQ, a FinTech Startup developing a platform that enables companies to launch and manage ETFs and funds with lower cost and effort, has raised more than €5.85 million in a Seed financing round in order to expand its digital fund infrastructure.
The round is led by VC investor Magnetic and FinTech VC Redstone. Existing venture investors, including US-based VC General Catalyst, have increased their stakes.
“We are witnessing a once-in-a-generation shift: ETFs will replace mutual funds in the retail market over the next decade, which means that margins will shrink significantly,” explains Chris Püllen, Co-founder and CEO of NaroIQ. “Without a technological solution, only large fund providers with scale advantages will survive, creating an alarming concentration of power and wealth in the market.
“Our digital fund infrastructure levels the playing field, allowing smaller fund providers and management companies to offer their own ETF and fund products profitably, while ensuring investors continue benefiting from diverse investment options and innovative ideas.”
Founded in 2022 by Chris Püllen and Nils Krauthausen, NaroIQ uses a digital infrastructure to enable companies to launch and manage their own ETFs and funds with enhanced digital capabilities and greater cost-efficiency. With its modular technology platform, NaroIQ claims to democratise access to the ETF and fund market for fund providers and management companies and reduces costs, which the end goal of benefiting investors.
The FinTech is building an independent European alternative to the US-dominated ETF landscape and enables smaller fund providers to enter the ETF market.
While the European ETF and fund market sees record inflows, NaroIQ says that outdated manual processes create barriers to innovation and broader market access, which concentrates assets among a handful of providers.
NaroIQ’s solution for funds and ETFs aims to address this challenge directly: The digital infrastructure platform reduces the costs of launching new and managing existing ETF and fund products. This ensures a faster time-to-market, more flexible product development and lower initial investments.
According to EFAMA, the European UCITS and AIF market represents a total volume of €22.9 trillion in assets, but is based largely on outdated infrastructure. In a recent study by Ernst & Young, the degree of digitalisation of the asset servicing market for funds is rated at just 1.6 out of 5 points. This leads to considerable pressure on margins.
The disconnect is stark: While asset managers’ assets under management (AuM) have grown by 8.8% over the last five years, profits have only increased by 0.7%, a recent study by strategy consultancy zeb shows.
As a result, NaroIQ believes that the market is demanding flexible, digital solutions that reduce operational costs, which NaroIQ looks to deliver with its modular technology.
David Rosskamp, Founding Partner at venture capital firm Magnetic, adds: “With foundational financial services still reliant on manual, fragmented back-end processes, NaroIQ’s digital infrastructure is critical to unlocking efficiency, real-time transparency and cost savings. The team’s API-first, cloud-native platform addresses the sector’s most painful workflows and positions NaroIQ to drive the next wave of innovation in fund servicing across Europe and beyond.”
NaroIQ also claims to solve a “critical paradox and a structural weakness” of the European ETF market: It is one of the largest ETF markets in the world, yet a few players dominate it, and it lacks a powerful European ETF administrator.
According to the company, the five largest ETF issuers account for 75% of the market share, while US-based issuers manage two out of three and administrate four out of five of all European ETFs. NaroIQ aims to close this gap by building a more resilient and high-performance fund infrastructure, “Made in Europe”, also enabling smaller fund providers and management companies to enter the ETF market.
The fresh capital will be invested specifically in technical development and regulatory licensing. NaroIQ plans to launch its first partner integrations as a key milestone this year.
