Building the operating system of the CFO: SMBs and beyond

The Opportunity Today

The notion that SMBs have been underserved by financial institutions is not a new one – for years, small business owners have complained about opaque pricing, lengthy onboarding processes, overly burdensome compliance, siloed & poorly integrated integrations, and painfully manual customer support. In many ways, SMBs have been a forgotten middle child; harder to serve than retail customers while lacking the deep pockets of large enterprises. It is no surprise then that only 18% of small businesses in the U.S. completely agree that banks are providing them the services they need to run the financial side of their business[1]. The number is likely lower in emerging markets where incumbent FIs are even more underinvested (and often even more profitable). Despite this, traditional FIs have had neither the impetus (owing to limited competitive pressures) nor the ability (owing to enormous tech debt) to change.

In recent years, we have seen this unstable equilibrium rightfully challenged by a number of businesses, several of which we at TCV have been lucky enough to partner with including Qonto, Brex, Revolut, Razorpay, Mollie, Xero, and Toast among others. While many of these vendors have unique landing points into the SMB (e.g. bank accounts / company incorporation, corporate cards, online payments, PoS), their propositions are widening (and increasingly overlapping), and many businesses are vying to become the Financial OS (Operating System) for the SMB.

Why should we care, you may ask? Simply put, the aggregation of these services makes a lot of sense, and the market opportunity ahead is enormous. The financial services stack of the SMB has become increasingly fragmented over time (see below) and dealing with this fragmentation is not trivial. On the other hand, the benefits of consolidation to both the SMB and the vendor are compelling. SMBs benefit from having fewer vendors to manage, improved integrations between applications that reduce human error and save time for already-overstretched finance teams, and the ability to effectively leverage data across their financial flows (e.g. payments processors who are directly in the flow-of-funds are able to both underwrite loans more accurately and collect repayment more seamlessly). On the other hand, vendors benefit from having improved customer retention (notoriously challenging in the SMB space where structural churn is high), increased ARPU, and more strategic customer relationships.

In addition to this, the SMB market is enormous. SMBs typically comprise ~50% of GDP, and comprise ~99% of total business count[2]. B2B payments are ~5x larger than B2C payments with SMBs comprising roughly half of this[3]. That said, we are at an inflection point today driven by a combination of technological & regulatory tailwinds (e.g. PSD2), growing customer acceptance (in part driven by growing B2C penetration), and the mass-migration to online-only services driven by Covid-19.

Furthermore, while SMBs have historically been able to access financial services through traditional FIs albeit in a high-friction manner, access to software has been severely lacking. Most SMBs today use Excel (or potentially even pen & paper) to manage the bulk of their finances. Given finance teams at SMBs are forced to wear multiple hats and notoriously understaffed, the potential ROI from optimising workflows and increasing automation alone is massive, not to mention the value in having greater control & understanding of your financial position. Today, we are still early in the adoption curve, but the direction of travel is clear and the question is when, and not if.

Understanding the landscape

The suite of services falling under the remit of the CFO is broad, encompassing managing cashflow across customers, suppliers, & employees, compiling management and financial accounts, and increasingly producing forward-looking forecasts that help drive strategy. The universe of vendors attacking the Office of the CFO is similarly broad and can be largely segmented along the two axes below:

The software vs. financial services distinction is an important one, with several key differences:

  • Regulation: software products are largely unregulated while financial products require some sort of license (e.g. payment institution license, banking license etc.)
  • Monetisation models: software products are typically fixed monthly subscriptions while financial products are largely volume-driven (e.g. % payment volumes or fixed cost per payment, interest rate on a loan)
  • Incumbent competitors: traditional FIs have largely offered financial products without providing accompanying software tools; next-gen SMB software vendors are primarily replacing excel and other largely manual solutions today
  • Drivers of ROI: software products mostly drive value through automation & workflow efficiencies while financial services is more around enabling a transaction to happen in the first place

While the earliest businesses to emerge typically serviced one function (e.g. accounting software, online acquiring, lending, payroll etc.), businesses are increasingly expanding their offerings across both of the axes above from their initial landing point. While this may seem straightforward, we’ve learned a few things along the way:

  1. The initial wedge will heavily influence the target customer base…
    1. While SMBs are often treated as a homogeneous group, the reality is very different. The needs of a freelancer, 10-FTE, 50-FTE, and 250-FTE business vary significantly and there is a standard ‘roadmap’ of evolving requirements as businesses scale. For example, a bank account and basic payments are mission critical from incorporation, credit is relatively rare among freelancers but becomes increasingly relevant & complex (e.g. corporate credit cards, loans) with scale, accounting software is most relevant for small businesses rather than micro business/freelancers, most other software products (e.g. cashflow forecasting, spend management) are most mission critical for larger SMBs
  2. …and natural product adjacencies
    1. Not all product combinations are created equal; this is driven by both the maturity curve outlined above (e.g. an accounting software vendor may find it challenging to cross-sell a banking offering as the target customer likely already has an existing banking provider) as well as the strength of synergies between the products (e.g. the combination of corporate card issuing & spend management is particularly powerful)
  3. Product velocity is a powerful differentiator…
    1. While rate of product innovation is important for any business, this is particularly true for those executing along the ‘Financial OS’ strategy, especially as competitive boundaries between historically siloed products begin to blur. Particularly amongst SMBs, the benefits of bringing more parts of the finance stack under one roof often outweigh the benefits of going best-in-breed with the exception of a few more complex/regulated products (e.g. payroll). Increasingly, we expect to see a turf war with the spoils disproportionately accruing to those able to offer a broader, integrated suite of ‘good enough’ solutions
  4. …but be practical about the buy vs build vs partner decision
    1. That said, not all parts of the stack need to be built in-house especially in instances where there are clear regulatory barriers (e.g. providing on-balance-sheet lending and acquiring a lending/banking license) or where there are potential win-win partnerships at hand (e.g. GTM partnerships) particularly where customer acquisition economics permit
  5. Verticalised solutions have the potential to extend beyond financial services
    1. For vertical vendors, there is an opportunity to bundle together industry-specific workflows with financial services potentially taking control of multiple systems of record. This in turn drives enormous TAM expansion, competitive moats, customer delight, and with it, economic potential. This is a concept that we, at TCV, have long advocated through our ‘full-potential SaaS’ framework
  6. Let your customers lead the way
    1. Size is not static and (much like my waist size over the holidays) an S today might be an M tomorrow. Similarly, many Ms will eventually graduate beyond ‘SMB’ designation and into large enterprises. Nowhere does this happen more quickly than among tech businesses which, often being early adopters themselves, typically comprise a disproportionate share of the customer base of next-gen financial services disruptors, particularly in their early innings. The advantages of this for vendors are twofold – 1) business models with a volumetric pricing model benefit from organic customer expansion, 2) vendors enjoy a constant stream of product feedback from increasingly demanding customers thereby allowing them to efficiently move up-market and, in an archetypal expression of Christensen’s Innovator’s Dilemma, leapfrog incumbents serving larger & deeper-pocketed customers

One important caveat – while the benefits of aggregation are clear for SMBs, this also needs to be balanced against the advantages of working with a specialist vendor particularly in instances where the problem being addressed is technically complex or highly localised (e.g. as a result of regulation). This dynamic has been particularly apparent in the software layer where we have seen the emergence of multiple standalone categories (e.g. accounting, tax, forecasting & scenario modelling etc). For vendors in these categories, the key pressure points will be in ensuring seamless integration into the rest of the finance stack, seeking out win-win partnership opportunities, and deepening functionality to avoid the risk of being aggregated into another system of record.

What are we excited about?

Despite the progress made over recent years, the Office of the CFO for SMBs remains a largely greenfield market with traditional FIs still controlling the lion’s share of the serviced market. The sheer scale of the market opportunity (99% of all businesses are SMBs!) and the heterogeneity within the SMB base (both by size tier and even by geography) mean there is plenty of room for many seminal businesses to emerge. Furthermore, this is a truly global phenomenon and SMBs in emerging markets such as India, LATAM, and SEA are even more underserved than their counterparts in the US & Europe. We, at TCV, are incredibly excited to continue backing and working with visionary founders across the world who are building for tomorrow.

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The views and opinions expressed are those of the writers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the writers and disclaims any responsibility therefor. This blog post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this blog post, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.


[1] Designing Digital Financial Services that work for US SMBs, 11:FS, 2020

[2] 2020 Annual Report on European SMEs, European Commission

[3] “How the Next Payments Frontier will unleash small businesses”, Goldman Sachs Publishing, 2019


Brex Appoints Karandeep Anand as Chief Product Officer; Raises $300 Million in Series D-2 Round

January 11, 2022 04:00 AM Eastern Standard Time

SAN FRANCISCO–(BUSINESS WIRE)–U.S. fintech company Brex, the company reimagining finance for growing businesses, today announced the appointment of Karandeep Anand as the company’s Chief Product Officer. The company also announced it has raised an additional $300 million in a Series D-2 round led by Greenoaks Capital and Technology Crossover Ventures (TCV).

Anand brings extensive product leadership experience to Brex, and most recently led Meta’s business products group, which served more than 200 million businesses globally. Prior to that, Anand spent 15 years at Microsoft, where he led the product management strategy for Microsoft’s Azure cloud and developer platform efforts. Anand will lead Brex’s product portfolio expansion efforts.

The latest funding round will enable Brex to deepen its investment in expanding the company’s product portfolio, serving a wider range of finance needs for fast-growing companies. Since the company’s founding in 2017, Brex has raised a total of $1.2 billion from investors and is currently valued at $12.3 billion.

“Brex has always moved fast. But as the company has scaled, they’ve managed to get even faster, accelerating their growth since our last investment,” said Neil Mehta, Founder and Managing Partner of Greenoaks. “Brex is building a full financial operating system that keeps getting more comprehensive, all of which will delight existing customers and attract new ones. We are thrilled to continue working with the Brex team, and we look forward to being partners for years to come.”

“Brex is fundamentally transforming financial operations with a growing suite of innovative financial products and a magical user experience,” said David Zhang, Partner at TCV. “We are honored and excited to continue joining founders Henrique Dubugras and Pedro Franceschi on their journey to becoming one of the most important fintech franchises in the world.”

“We are grateful for the ongoing commitment and belief our investors have in Brex, and for the opportunity to continue to invest in how we serve our customers,” said Henrique Dubugras, Co-CEO of Brex. “As we expand our product portfolio, we are incredibly lucky to have Karandeep join the team to lead this important initiative. Karandeep understands our customers and knows how to build and scale business products with consumer-grade ease to meet the needs of fast-growing companies.”

“Brex is a market disruptor and the opportunity to create economic opportunity for millions of people and businesses globally through innovation in financial products is incredibly exciting,” said Karandeep Anand, Chief Product Officer of Brex. “The opportunity ahead for Brex is expansive, and I’m grateful for the opportunity to create products that will help our customers grow their businesses.”

About Brex

Brex is a powerful financial stack designed to serve the next generation of growing businesses. By integrating software, services, and products into one experience, we help customers effortlessly extend the power of every dollar, so they are free to focus on big dreams and fast growth, without worrying about wasted spend. We proudly serve tens of thousands of businesses, from small private companies to many of America’s most beloved public brands.

Contacts

Karen Tillman, CCO at Brex
press@brex.com

Katja Gagen, Marketing at TCV
kgagen@tcv.com


Digitizing One of the Last Unconnected Markets: Built’s Place in the Multi-Trillion-Dollar Global Construction Ecosystem

$1.58T is spent annually in the U.S. construction industry, yet it’s one of the least digitized industries in the world. Paralleling the shift to digital transformation across other industries, this is beginning to change. That’s just one reason we are delighted to announce that TCV is partnering with construction finance cloud leader: Built Technologies.

Construction may be one of the least digitized industries, but that’s not going to last for long. Builders and owners are expecting digital services, just as they do in all other aspects of their lives. When it comes to financing a construction project, customers around the world should expect seamless communication, payments, and procurement through the convenience of their phone. That’s why we are excited to invest in Built, who is seeking to upgrade the functionality and user experience for everyone in the construction value chain. 

Nashville, Tennessee-based Built offers a cloud-based platform solution for construction lenders, owners, developers, and contractors. Its software acts as a digital workspace to allow all parties to collaborate to get projects built and keep capital flowing to the proper destination. The software is used by more than 150 of the leading U.S. and Canadian construction lenders, in addition to thousands of developers and contractors. 

Built is closely following TCV’s thesis for SaaS as a Network – combining software + payments + marketplace, and connecting all key stakeholders on one platform. SaaS as a Network is a strong model for industries lagging in digital adoption, as products are focused on driving solutions, operational enablement, and strong ROI. We’ve seen this at Toast in the restaurant space – where Toast helps businesses operate more efficiently and grow revenue by providing payments, software and services, or with Clio, where law firms are able to manage their employees, and customers, and enable payments.

We believe SaaS as a Network is markedly increasing the possible expected return and economic strength of vertical sector-serving SaaS platforms, given it takes advantage of end-to-end workflows to build “rails” direct to their merchant’s customers, suppliers, and employees. 

When a SaaS provider starts serving a high enough density of merchants, it can leverage that strength to build two-sided marketplaces with the merchant’s customers, suppliers, and employees. That SaaS vendor has now created a marketplace that can enjoy powerful network effects as seen in consumer marketplaces like Airbnb and Amazon. 

Built’s platform started with a Construction Loan Administration offering that improves communication and operations between banks and their borrowers. Built has grown this offering to over 150 lender customers, representing more than $80 billion of unique construction dollars and is the system of record for these lenders’ construction portfolios. In addition, builders use this system to access their capital—the lifeblood of construction.

By following the flow of money from banks into the hands of builders and owners, the Built team realized there was an even bigger opportunity within the construction ecosystem. They started to build more products around payments and value-added services like on-site inspections and other critical support to enable the construction loan process.

Built was able to accomplish all this due to its product-driven team, led by CEO, Chase Gilbert, who has construction industry experience and understands the real-world buyer pain points. In addition, Chase and the Built team have taken a customer-centric approach that informs everything that they do, especially product design. As we spent time with customers, one of the key themes we kept hearing was the operational efficiencies that Built enabled. All stakeholders involved with the Built platform felt that they were able to operate better through their use of Built.

Since its 2015 launch, the platform has been used to manage the financing of over $135 billion in construction, spanning more than 200,000 commercial, homebuilder, land development and consumer residential projects. All these were factors that led to TCV being the lead investor in Built’s $125 million Series D funding round.

TCV first called on Built in 2017, and our team took the time to build a strong relationship with the executive team.  

“We appreciate the great investing experience TCV brings to the relationship. As a result of its deep customer and technical research, TCV understands our vision and can see just how big an opportunity this is for both of our companies. We’re excited for our future together.”

Chase Gilbert, CEO, Built

While the recent funding is a nice milestone for the team, we are even more excited about the tens of thousands of users that access Built on a regular basis to fund their operations, and the opportunity Built has to build more products and do more to help its customers.

We view our investment as a perfect opportunity to add value. We think Built has a superb window of opportunity, as the world moves faster into a recovery being boosted by widespread embracing of digital ways of working. And, finally, we see huge potential in Built’s ability to connect key stakeholders in the construction process, connecting everyone onto a shared system. We’re grateful for this new partnership with Built and Brookfield Technology Partners, 9Yards Capital, XYZ Venture Capital, HighSage Ventures, and existing investors Addition, Index Ventures, Canapi Ventures, GreenPoint Partners, Nine Four Ventures, Fifth Wall, Goldman Sachs, and Nyca Partners among other individual investors. We look forward to supporting Built’s world-class team on their mission to transform a global market. The addressable market is not just the U.S.’s $1.58 trillion, but the world’s annual $10 trillion construction market.

We believe construction finance on a SaaS as a Network footing presents a remarkable future opportunity. Let’s get something great Built here!

If you’re interested in driving change in the construction finance market, Built is hiring!


Hypergrowth, High Value Partnerships, and Hyperlocalization at Mollie, All By Putting the Customer First

Growth Hacks – Moving the Metric

Mission statements, company values, guiding principles — every company has them. Yet even at the most mission-driven companies, it can be easy to focus more attention on activities such as unlocking growth and winning market share, than it is to make sure the company values are being consistently conveyed.

On this episode of Growth Hacks, Kunal and Katja speak with Ken Serdons, chief commercial officer at online payments processor Mollie, about how being loved by customers is more than just words on a mission statement. Ken takes us deep into the strategy of how Mollie restructured its hiring process, reengineered its partnerships with external service providers, and strategically chose the number of markets it entered, all in pursuit of creating a Mollie experience that its customers loved. In the process, the company gained tremendous market share in each of its local markets.

Key Takeaways:

  • Why Mollie adopted a customer-first mentality. After seventeen years of growth, the Mollie team realized they’d outgrown their initial mission statement that cited values such as passion, courage, and impact. When they coined “Be Loved” as the first of three new company values, they found that applying it to every part of the customer experience helped them offer a vastly different consumer experience from their competitors. Whether it was figuring out how to “Be Loved” by customers based on how they price their product, or on the breadth and functionality of partnerships with other apps and services, that hyper-focus on the soup to nuts customer experience has helped Mollie gain market share year over year.
  • How to drive partnerships that unlock their full potential. Because of Mollie’s global footprint, the team has inked countless partnerships with companies of all sizes that also provide services to online merchants. But signing a partnership and building an integration is just the start of a successful partnership. Ken’s team also innovates on ways to create value for partners outside of monetary incentives, whether that’s joint marketing activities, or providing trend analysis for partners using Mollie’s transaction data. To successfully maintain such robust partnerships, Mollie split the traditional partner manager role into two jobs — the first for “hunters” who love finding and structuring creative new partnerships, and the second for partner success managers, who continually think about ways to create joint growth with Mollie’s partners.
  • How a localization strategy that prioritizes fewer markets can unlock hypergrowth. When Ken first joined the Mollie team in 2019, like most companies, Mollie had ambitions to scale to as many markets as possible. Yet they made a conscious decision to focus on markets where they knew they could see demonstrable success. One example was when Mollie pulled back on expanding into Italy, in order to focus its efforts and resources on growing in Germany, France, and the UK. Though the number of countries Mollie was available in was lower, the company’s market share has soared in each market, seeing successes in Belgium in 2020, and growing more than 1000% in Germany year over year.
  • Why they don’t do any bespoke development at Mollie. A hyper-focused localization strategy doesn’t mean the company doesn’t want to be able to hit the ground running when expanding into additional markets. That’s one reason why Mollie decided early on never to create bespoke development. “Bespoke development creates legacy technology, and that’s expensive to maintain and it’s also not scalable,” says Ken.
  • How to hire candidates for their future roles. Because of the pace that Mollie is growing, effectively doubling its headcount year over year, Ken has learned that hiring the right candidate for right now is short-sighted. Instead, they aim to hire people slightly overqualified for the initial role, knowing that Mollie is going to continue expanding, and the job with it. “That only works if you hire low ego people. People who put the customer first and the company first,” cautions Ken.

To learn more, tune in to Growth Hacks: How Mollie’s Mission to Be Loved by Its Customers Has Fueled Hypergrowth.

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The views and opinions expressed are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the speakers and disclaims any responsibility therefor. This interview and blog post are not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this interview and blog post, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.


Be Loved, Be Bold, Be Authentic – Core Values to Fuel Mollie’s Hypergrowth!

When online payment processor Mollie redefined its key values to put “being loved by customers” at the top of the list, the Amsterdam-based fintech company found that they began to approach every business decision they made quite differently — from hiring, to partnerships, to adopting a unique localization strategy that focused on fewer markets while still unlocking global growth.

In this episode of Growth Hacks, Katja and Kunal are joined by Ken Serdons, the chief commercial officer at Mollie. Ken explains how Mollie’s key value of being loved by customers has influenced every part of the company’s DNA, from how they assign responsibilities, to who they hire, and how the company structures and manages its relationships with external partners. Ken also explains to us how Mollie has reworked its partnership model in a way that helps them extract full value, something he credits to — you guessed it — Mollie’s hyper-consumer-centric mindset.

Here’s what you will learn:                

  • Why Mollie adopted a customer-first mentality
  • How to drive partnerships that unlock their full potential
  • How a localization strategy that prioritizes fewer markets can unlock hypergrowth
  • Why they don’t do any bespoke development at Mollie
  • How to hire candidates for their future roles

To hear more on this, settle in and press play.

Please find the transcript below, which has been edited for brevity and clarity.

Katja Gagen: Today we’re thrilled to speak with Ken Serdons, Chief Commercial Officer at Mollie, one of the largest and fastest growing FinTech companies in Europe.

A little bit about Ken – he likes to grow things which was clear from an early age. As a child, he used to grow all sorts of vegetables and pumpkins, and his passion for growth is now focused on helping customers grow their e-commerce business through the financial services that Mollie offers. Welcome to Growth Hacks, Ken.

Ken Serdons: Thanks for having me, Katja.

Kunal Mehta: Ken, it’s such a pleasure to have you here. Where does this podcast find you today?

Ken Serdons: I’m working today out of our headquarters here in Amsterdam.

Katja Gagen: Nice. And Ken you are Chief Commercial Officer at Mollie. Tell us about Mollie and what your role is.

Ken Serdons: So at Mollie we provide online payments to now over 125,000 active customers across Europe.

We differentiate by offering not just great products, but we also really care about design and making sure that the checkout is optimized for conversions and in some cases we can improve conversion by up to 7% versus more traditional players.

We are hyper localized in every market that we operate in. And we absolutely love the customer, which is definitely a unique selling point in the payments industry. So I look after commerce, which includes partnerships, sales, and marketing.

Kunal Mehta: Awesome. You know Ken, I’m a huge fan of partnerships because it just creates this multiplier effect. And what we observe is partnerships rarely see their full potential because they’re not activated well. And Mollie’s philosophy on activating partnerships drives a win-win for everyone. Maybe you can talk a little bit about how you get that.

Ken Serdons: Yeah, you’re right, Kunal. Partners are absolutely critical to the success of our business. They provide a super scalable growth channel. Our customers work a lot with different types of software and tools to run their business. So at Mollie, it’s important to work with as many of them as possible.

I’ll give you a couple of examples, how we get to a proper win-win situation. I think the first thing is, we don’t just care about the partners, but we actually also care about their customers, who of course, are also our customers.

We try to do our utmost best to provide the best possible experience to these merchants. If something goes wrong, we not just try to solve it with the customer, but we also inform our partners. And that creates a lot of transparency and a lot of trust. Again, happy merchants create happy partners.

That’s the core part, being extremely customer centric, both on the partner side and on the customer side.

Second is we look at creating value for our partners and value that goes beyond the traditional money incentives. For example, one of our partners did not have a very good view on their own customers. At Mollie we process payment transactions, so we see a lot of data about our customers, and we could help that partner with understanding which of their customers are growing, which industries they’re playing in, etc. All that information we could provide to them so they could actually identify for themselves which segments to focus on.

And finally, we spend a lot of effort in building amazing integrations with our partners. And that’s really helpful for developers that actually drive a lot of the decision-making on which PSP to select.

Katja Gagen: That sounds great, Ken. It looks like you have a really good playbook in place. It also sounds like there’s a lot of resources involved to activate a partnership. What types of resources and skills come in handy here?

Ken Serdons: That’s right, Katja. So first of all, we have split the job of partner managers in two. We have hunters who go after new deals, who get the thrill of signing up a new deal. And there you of course looking for the traditional sales skills, but also the creativity of how to structure deals.

We then we split that role from managing those relationships for success in the future. So we have what we call partner success managers. They really think about how we can create joint growth with the partner.

We also have technical people. Solution engineers who help design the integrations, technical partner managers who help them solve problems, etc. And overall, we have people that think about creating programs for partners, standardized programs, including joint marketing activities, etc.

Kunal Mehta: Katja and I have had a chance to work with you on round tables, and Mollie and you are deeply introspective. I’m just curious. What are some of the lessons you’ve learned along the way?

Ken Serdons: We try to do many bold things and sometimes things work – sometimes they don’t, and if they don’t work we course correct quite quickly. Looking at partnerships I think one of the mistakes that we made was that we were too focused on creating new deals, on the hunting part.

We did not spend enough effort into nurturing those relationships going forward. When we identified that some of these partnerships were not reaching the ambitions that we had when we created the deals, we started investing a lot more in those partner success management capabilities. And it really has created more trust with partners. And obviously more businesses flowing through right now.

Katja Gagen: That’s right, and Mollie has been on an expansion path, which Kunal and I have seen firsthand. We see your competitors carpet bomb their way into markets, but Mollie takes a different approach.

I remember reading all your German materials when you went into that market. And I know localization is really important to you. Tell us a bit about your strategy for expansion and going into new markets.

Ken Serdons: Yes. As you said, Katja, we believe that a very localized approach is required to create a truly unique experience for our customers and their shoppers.

They’re probably about three components in our international strategy. First one is focus. The second one hyper localization, and the third one is creating and standardizing the playbook that we talked about.

In the beginning we did not have this international expansion playbook in place and then it’s actually very difficult to roll out new markets at speed. And when I joined, we were active in about six markets, and we wanted to be present in as many markets as soon as possible. But I quickly identified that that was probably not the right way to differentiate ourselves.

We took the decision to focus. Drop Italy, for example, where we had a very small sales team in place, to really focus our efforts and resources on the markets where we saw a lot of traction. Mainly Germany and France, and later on the U.K. as well.

Hyper-focused on what really works, we’ve managed to achieve really fast growth. So Germany, for example, last year we were growing at a thousand percent year over year.

The second point about hyper localization. And this is really how we differentiate from, for example, the global PSPs, that process transactions across the world. Every market in Europe is different. They have their own nuances, their own local payment methods.

We localize our offering to not just include all the local payment methods, but also to make sure that the integration of those payment methods is optimized for conversion. So there’s never a redirect. You always stay as a shopper within the branded experience of the website that you shop at.

We also have localized the onboarding experience, tapping into local databases, using the right language. So we make sure our customers understand the documentation that they need to provide to us. Obviously, we also provide localized customer service in the local language. A German person likes to talk to a German support agent and it’s the same thing in every single market.

Finally, on creating that playbook. So when you go to a lot of markets at the same time, you really need to know about what you need to do at which sequence. We have created a playbook that includes how you set up partnerships upfront, how you start hiring the right sales teams, how you structure the team at different stages of the journey. That playbook really helps now to speed up the expansion to different markets.

Kunal Mehta: Ken, talking about focus. How is this reflected in the choice of the customer segments that Mollie serves?

Ken Serdons: One of the guiding principles from the get-go was that we never wanted to do any bespoke development. Bespoke development creates legacy technology and that’s expensive to maintain, but it’s also not scalable.

When we started, we focused on the small customers first, with a simple and easy to integrate product. We started off with a focus on one payment method back in the day, which was iDEAL, which is the preferred payment method in Netherlands. We really optimized that user experience and over time we really created an amazing journey for our customers.

Kunal Mehta: I love hearing two growth hacks in one answer. No bespoke development. It’s just too expensive to maintain and start with SMB because you just learn at scale in that segment. That’s really great.

Ken Serdons: Indeed yeah, I think it’s an easier way to disrupt the market if you start from the smaller end, add more features then as they go up market. The other way around is a lot more painful when you have to really simplify a complex product that you are using for larger customers to simplify it down, to go off smaller customers. That’s a really tricky job.

Katja Gagen: And what we’ve seen is that Mollie has grown up a lot in the last 17 years and learned a lot. But we also at TCV really focus on value and mission driven companies. So, how have your values evolved over time at Mollie?

Ken Serdons: Yes, they have evolved quite a bit, actually. So, we started off with five rather generic values. It’s a typical thing that you see at pretty much every corporate companies. We had passion, impact, courage, honesty, and friendship, and those values were good values, but they didn’t really resonate. So, we decided to upgrade those values and we selected three values that fully reflect what we do and who we are.

The first one is “Be Loved”. We aim to be the most loved partners for our customers, for our partners, but also be the most loved employer for our “Mollies”. And that’s important because for our customers, we always try to do the right thing. Every person you speak to at Mollie is absolutely passionate about our customer. We take care of them. We provide them an honest service. There’s never hidden fees at Mollie. And we’re super transparent on pricing, which is quite unique in our industry.

The second value is “Be Bold”. We’re not afraid to fail. We try lots of different things, make bold moves, and then if things don’t work out, we quickly iterate at a fast pace.

A good example of being bold is that we never locked our customers into a long-term contract. Our customers can leave at any point in time. And while that sounds a little bit scary sometimes, it actually is the best sign of confidence that we believe in our own product.

Finally, the third value is to “Be Authentic”. We want people, our colleagues to bring their best self to work. They can truly be who they are. We have lots of different nationalities, people from different backgrounds, et cetera. And it creates not just a fun environment, but also an environment where we encourage diversity of thought.

Kunal Mehta: You often don’t see “be loved” as a value. And that’s so refreshing to see, how does that show up at Mollie?

Ken Serdons: Yeah, I think in many different ways. So first of all, in all the interactions with our customers. In the way we think about pricing, in the way we optimize our products, et cetera. But we also look at our values in our performance appraisal process.

So every half year, every “Mollie” is being evaluated and we evaluate also our colleagues on which values they represent the most. And also the hiring process. We look at our values when a person is in front of us, we really check is this person reflecting the three values that we have? And one of the key things I like at Mollie is that we always hire people with low egos.

You have to absolutely put the customer first. You have to put the company first, we’re growing so fast.

Katja Gagen: That’s so refreshing, Ken, and such good insight. We also talked about hiring people and that’s really important to Mollie. You’ve said that you’re not just hiring people to do the job now, but the job in the future. Why is that important to you?

Ken Serdons: We’re growing at a very fast pace, effectively doubling every single year. And we also do a lot of things that have never been done before at Mollie. Opening new markets, expanding into different products, and we don’t have the big supporting structures in place that you’d typically find in large corporates.

We need people who not just know what good looks like but who also know how to implement it and how to get the job done. So when we hire people or when we promote people from internally for a job, we often get people who are too big for the initial role, knowing that the company will continue to grow and the job will expand.

If you hire a person that’s just about right for the job right now, the chances are very high that they might struggle the next year when the company is twice the size. And if you think one year ahead, they might be underperforming as the company keeps expanding. So we really want to hire people who can do the job still two years down the line.

And I think that only works if you hire low ego people. People who put the customer and the company first.

Kunal Mehta: Katja and I cover a lot of different companies. And one of the common questions we get asked are, “Hey, what’s the cool facts?” And I’m curious, what are the cool facts about Mollie?

Ken Serdons: Yes, we have about 125,000 customers and we have about 400 customers signing up on a daily basis. I think our biggest onboarding day was around 800 to 900 customers a day. Out of our top 30 best onboarding days 25 of them so far we’re in March 2020 when Corona hit and lots of merchants were scrambling to move their businesses online. So we helped a lot of these companies go online.

We have about 44 nationalities at Mollie, so a really diverse group of people. Last month was the best month ever in terms of hiring, we hired 62 people which is more than 10% of our total population.

Katja Gagen: All right, that’s pretty cool. We also have a few more questions. We always end with a rapid fire. So let’s go ahead. What’s the company you admire the most?

Ken Serdons: I love Apple because I think they’ve set the standard on providing delightful experiences on pretty much every single touch point with the customer.

Katja Gagen: What’s your go- to book, what’s on your nightstand?

Ken Serdons: So I regularly check in on a book called What Got You Here, Won’t Get You There. to really get some reflections on how to get better as a leader.

Kunal Mehta: Cool. Ken, just curious what’s the social media influencer who you follow the most?

Ken Serdons: Yeah. So I like to read stuff from Robin Sharma. He is a leadership coach. He’s a bit over the top, but his advice is always a great reminder on how to do things differently.

Katja Gagen: I totally agree. I like his 5:00 AM club as well Ken, and that gets me up in the morning.

Kunal Mehta: Well, it should make the next question super easy, morning person or night person?

Ken Serdons: Morning person. So I do try to get up early and enjoy the quietness of the mornings to work on myself and to get stuff done.

Kunal Mehta: Fantastic. And what’s your proudest achievement at Mollie?

Ken Serdons: It’s been a really fun journey the past two years, but I think what’s most memorable is I think all the efforts we did to help customers move online when the pandemic hit. And during the time we also expanded our market share substantially in all markets.

Katja Gagen: Well, thanks so much, Ken. We covered a lot today. Partnerships, expansion, culture, hiring, you name it. And I think we could have talked for a few more hours, but thanks for joining us on Growth Hacks today, and for all the insights you shared.

Ken Serdons: Thanks so much. It was my pleasure.

***

The views and opinions expressed are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the speakers and disclaims any responsibility therefor. This interview and blog post are not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this interview and blog post, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.


Trade Republic Announces $900M Investment, Led by Sequoia, to Drive Its Mission to Help Close Europe’s Pension Gap

  • $900M Series C investment led by Sequoia as well as TCV and Thrive Capital
  • With a valuation of over $5B Trade Republic is one of the most valuable private FinTechs in Europe
  • Within 24 months, Trade Republic has reached more than one million customers in Germany, France and Austria
  • Over €6B in client assets make Trade Republic one of the largest savings platforms in the market

May 20, 2021 — BERLIN–(BUSINESS WIRE)– Trade Republic, Europe’s leading NeoBroker, today announces a $900M Series C investment led by Sequoia with participation from new investors TCV and Thrive Capital as well as existing investors Accel, Founders Fund, Creandum and Project A. With a valuation of over $5B, Trade Republic is amongst the highest valued private FinTechs in Europe. With this investment, Trade Republic will continue to drive its mission to set up millions of Europeans for wealth creation with secure, easy, and free access to capital markets. This will ultimately open up financial markets for all Europeans to help close the massive pension gap.

“At Trade Republic, we believe everybody should have the right to participate in economic growth. This requires an easy-to-use, accessible and affordable savings platform that is open to everyone,” says co-founder Christian Hecker“Within just 24 months, we have empowered over one million people to put their money to work. For many Germans, French and Austrians, Trade Republic is the home screen app to manage their wealth.”

Demographic change, negative interest rates and inflation are among the greatest challenges for Europeans. Compared to other industrial nations, European countries face a huge pension gap. Trade Republic aims to help millions of people across Europe to invest money into capital markets with an easy-to-use and commission-free offering. This removes barriers for many people, who have missed out on participating in economic growth in the past.

“Fifty percent of Trade Republic’s customers, over 500k people, have never invested in capital markets before in their life. We empower people to start with wealth creation, who have been neglected by big banks for too long, with high fees and opaque products,” adds Thomas Pischke, co-founder“With over €6B in Assets under Management, we are the core savings account for our customers.”

At the heart of Trade Republic’s offering is an ETF or fractional stock savings plan, which allows people to invest free of charge on a regular basis. Trade Republic is already Germany’s largest provider for these long-term investment strategies. In addition to commission-free investing into equities, Trade Republic also recently added crypto currencies so people can adjust their portfolio to reflect inflation and negative interest rates.

The investment is led by Sequoia, which has backed defining companies such as Apple, Google, Stripe and Klarna. This marks one of Sequoia’s largest initial investments ever in Europe. The round is completed by TCV, who has invested into iconic consumer brands like Netflix, Spotify and Peloton until their IPOs and beyond, as well as by Thrive Capital, investors in Nubank and Oscar Health.

“The democratization of financial markets will be one of the most important consumer trends of the next decade,” says Doug Leone, partner at Sequoia“Trade Republic is on the leading edge of this trend and has attracted an untapped generation of European savers who demand increased financial accessibility. We’re thrilled to partner with Christian, Thomas, Marco and their team as they deliver a product and experience that customers love.”

“We are very excited to partner with Sequoia, TCV and Thrive. The strong continuing interest of leading investors proves Trade Republic’s progress in redefining how people can save their money. We will use this funding to create the most innovative investment products for our customers, expand across Europe and attract the best global talent. We expect this to accelerate our growth so we can reach millions of Europeans and ensure that everyone has access to the simplest, most powerful financial services no matter who they are, where they are in their financial lives and how much they earn,” adds Christian Hecker.

To change the financial system, Trade Republic has built a bank from scratch since 2015 with an easy-to-use product everybody can afford. With an $900M Series C financing round, Trade Republic closes one of the largest venture investments in financial services in Europe. This supports the fast growth of Trade Republic across continental Europe with innovative, secure and commission-free financial products as well as attracting the best global talent on its mission. The Trade Republic team has quickly grown to over 400 employees.

ADDITIONAL INFORMATION AND PRESS MATERIALS:

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ABOUT TRADE REPUBLIC

Trade Republic is on a mission to set millions of Europeans up for wealth creation with secure, easy and free access to capital markets. With over one million customers Trade Republic is already the home screen app for many Europeans to manage their wealth. It offers commission-free investing in equities and crypto as well as free ETF and fractional stock savings plans. Trade Republic is a technology company with a German banking license supervised by Bundesbank and BaFin. As Europe’s largest NeoBroker Trade Republic has received investments by Accel, Creandum, Founders Fund, Project A, Sequoia, TCV, and Thrive Capital. The company based in Berlin was founded in 2015 by Christian Hecker, Thomas Pischke, and Marco Cancellieri and employs more than 400 people.

Contacts

Bettina Fries, Trade Republic
presse@traderepublic.com
+49 30 5490 63121

Katja Gagen, TCV
kgagen@tcv.com
+1 415 690 6689