Cologne-based fintech startup NaroIQ has successfully raised $6.5 million in seed funding, marking a significant step in its mission to reshape the European fund infrastructure landscape. The funding round was led by Berlin-based venture capital firm Magnetic, known for its focus on critical infrastructure investments, with participation from Redstone and existing backer General Catalyst, which increased its stake in the company.

Founded in 2022 by Chris Püllen and Nils Krauthausen, NaroIQ is developing a digital platform designed to streamline the creation and management of exchange-traded funds (ETFs) and mutual funds. The company’s core proposition is to empower smaller fund providers with the tools to compete against industry giants by reducing the cost and complexity of launching and operating funds.

“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,” said Püllen, co-founder and CEO of NaroIQ.

Addressing Europe’s Infrastructure Gap

The European fund market, which manages approximately €22.9 trillion in assets, is still heavily reliant on outdated systems. According to a recent Ernst & Young report, the digitalization of fund servicing in Europe scores just 1.6 out of 5, highlighting a critical need for modernization. Despite an 8.8% growth in assets under management over the past five years, profits have only increased by 0.7%, underscoring the pressure on margins and the inefficiencies in the current system.

NaroIQ’s platform leverages API-first architecture and cloud-native technology to automate fund operations that are traditionally manual and fragmented. This approach not only reduces operational costs but also accelerates time-to-market for new products, offering a lifeline to smaller players in a market increasingly dominated by a handful of large firms.

Challenging US Market Control

Currently, US-based firms manage two-thirds of European ETFs and handle administrative tasks for four-fifths of them. The top five ETF providers control 75% of the market share, raising concerns about concentration of power and lack of financial sovereignty in Europe.

NaroIQ aims to counter this imbalance by offering a European-built alternative that supports local fund providers. The startup’s infrastructure is designed to lower barriers to entry, enabling a more diverse and competitive ecosystem.

“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,” said David Rosskamp, founding partner at Magnetic.

Strategic Vision and Next Steps

The newly secured funding will be used to expand NaroIQ’s technical capabilities, pursue regulatory licensing, and launch its first partner integrations later this year. The company’s long-term vision is to establish a resilient, sovereign European fund infrastructure that levels the playing field for smaller asset managers and promotes innovation across the industry.

While the road ahead includes navigating complex regulations and entrenched industry relationships, investor confidence suggests that NaroIQ is well-positioned to become a key player in Europe’s evolving financial landscape.

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