European regulation is turning ESG (environmental, social, and governance) reporting from a nice-to-have to a must. This creates new tailwinds for startups such as Paris-based Apiday, whose platform targets private equity funds and blue-chip companies needing to track and pilot sustainability practices.

Asset management firms have been a key target for Apiday, especially European ones. Because of the Sustainable Finance Disclosure Regulation (SFDR), it is not just impact funds that keep close tabs on sustainability metrics: All sorts of firms are now paying attention to ESG reporting.

This creates a different environment from when Apiday was founded in 2021, but also one in which ESG backlash has appeared. CEO Édouard Audi engaged with Elon Musk's criticism of ESG ratings and agrees that these have limits. But his focus with Apiday is on using ESG for value creation and not merely compliance.

The company just raised €10 million in a Series A funding round, which will help Apiday accelerate its growth in a space that includes well-funded competitors such as AlphaSense, Dataminr and Sesamm, as well as FactSet-owned Truvalue Labs.

Like these players, Apiday leverages AI to save time for its customers. But like legacy consultants, it also offers human expertise. It's the combination of both that gives it an edge over competitors old and new, Audi told TechCrunch in an interview.

Another differentiator is its expansion plan. With clients in 23 countries and 60% of its sales generated outside of France, it plans to double down on Europe and open offices in Germany and the U.K. Since it also aims to improve its offer overall, it expects its team to grow from 40 to 70 employees over the next 12 months.

Audi also hopes that Apiday's latest funding round will boost the company's standing among asset management firms.

Before co-founding Apiday with former investor Charles Moury, Audi co-founded ride-hailing company LeCab, and this journey inspired him to go into the ESG space. Compared to competitors, LeCab was doing better in some ESG-related respects, Audi said, but that wasn't properly taken into account in its sale due to a lack of metrics on these topics.

Again, the way that investors engage with ESG now is not the same as it was back then; and on the corporate side, ESG reporting is about to get another boost from the Corporate Sustainability Reporting Directive (CSRD). "The importance of ESG data will increase dramatically over the next few years," said Stanislas Lot, the partner who led the round at Daphni.

Data is only the basis, though. What's more important is what can be done with it. Apiday, for instance, assists its customers with developing roadmaps including some 350 actions they can take to improve their ESG practices after becoming compliant. Funds have already reached that phase, but Apiday expects corporates to follow, and it will be interesting to see how quickly they do.

Its Series A backers include AENU, Daphni, Galion.exe and SWEN Capital, as well as existing investors Speedinvest and Revent.

This article originally appeared on TechCrunch at https://techcrunch.com/2024/07/02/helped-by-regulatory-tailwinds-apiday-eyes-the-european-esg-reporting-market/