Speedinvest

On August 31st in 2013 I received the following task by Marcel in my Inbox:

We were using Socialcast at that time and Marcel had first met Stefan and Christopher in Silicon Valley about 3 months before. A team from Klagenfurt doing Adaptive Streaming, having co-authored the MPEG-DASH standard? That caught our attention.

Stefan, Christopher and Christian were a founding team right out of university, with a company that would hardly have been investable by a conventional VC at that time. Fast forward, that has dramatically changed. We are happy to celebrate this moment with the team, as Atomico leads the Series A of 10m $ in Bitmovin. A couple of existing shareholders, including Dawn Capital and Speedinvest, have participated in this latest funding round, which is designed to continue the growth of the company during the next years.

So what can be learned out of this tremendous journey over the past 3 years? Some takeaways from our perspective.

Even a world-class product is not fundable, unless you make it fundable.

Looking at the old slidedecks and the material we prepared for the initial investment, it becomes evident how much work went into adapting the company structure and the collateral material on the way (The first claim of Bitmovin was “We move your ideas”, I spare you the logo ;-). Marcel and the team in the US spent countless hours refining and reworking the material around the product and many months engaging potential customers and partners to understand their requirements and forge the initial deals.

Go early, go fast!

In early 2015, we encouraged Bitmovin to apply to YCombinator, after Flaviar (another portfolio company of Speedinvest) had a positive experience with massive business impact the batch before. The application was late, but we managed to get the necessary attention and eventually only 2 weeks after sending the video in, the team would relocate to the US for an intense 3 months program and continued setup of their offices there. This transformed the client base and also the investor base, as international investors joined after YC, and set the company up for accelerated growth .

Even though this might seem like a natural result, we see with many other companies out of YC, that even the best Accelerator in the world can’t spare you the grind: raising from Top VCs is still going to be very hard for European companies.

It’s the team, stupid

Regardless of all the support an investor can bring to the table, and seemlingly random circumstances that can provide favourable tailwinds to the company it is the founding team in the end that is the largest factor determining the succes of the company. How they deal with set backs, but also how they make the most out of opportunities that appear. When they slow down and not jump on what might feel like too-good-to-be-true opportunities, and doggedly pursue a chosen direction, swinging for the fences.

We once again would like to congratulate Stefan, Christopher, Christian and the team for this achievement. A big thanks goes to Constantia New Business, with Sabine Fleischmann and Philipp Thurn und Taxis, who proved to be co-investors that share our values. Helping founders achieve their goals is and was always the reason we founded Speedinvest. Seeing them thrive and grow, is what motivates us to ride the rollercoaster with them. Thanks for sharing this ride. We are curious to see where this will take you and us next.

 

I’ve recently been asked to be at a Panel that covers the questions:

– Is there a difference when investing in FinTech startups and startups in other industries?
– Do investors consider different aspects?
– Is the risk bigger?

So my answers are yes, yes and not really. Blog post done. But in all seriousness, if it is appropriate, of course there is a difference when investing in FinTech startups compared to startups from other sectors. But there is also a difference between investing in E-Commerce and investing in AdTech. Or B2B vs B2C plays. Every business, every vertical has its characteristics and nobody knows them all. I briefly want to explain based on three sections why (and how) I think FinTech is different.

Legal, legal, legal and compliance

Licensing requirements, compliance, regulation — catchwords that every banker gets nightmares  from— are topics every FinTech company has to deal with. Securities law, laws protecting borrowers, privacy laws and many more are part of the day to day business. And those laws are different from country to country. You have to know your country specific regulatory laws and licensing requirements. Know your issuer, your customer, your banking provider, etc. If you compare for example FCA and BAFIN — KYC processes and requirements are completely different. Things that are not necessary in the United Kingdom are obligatory in Germany. Also when it comes to licensing. There are businesses that need licensing and BAFIN approval in Germany and that are unregulated in the UK; the latter is anyways completely different from the rest of Europe (and also one of the reasons why London as a FinTech hub is so successful). And there is more or less a basic rule: if it is allowed in Germany, it is probably allowed everywhere else ;). So scalability is not that easy (it is never easy actually) due to the reasons mentioned. In reality it is pretty hard. As a result there are e.g. a lot of regional champions in payments and mobile banking but not that many Pan-European FinTech players. Because of these challenges experience in the Financial Services industry is crucial. Knowing local rules, habits, players and having contacts within the industry is definitely for the good if you want to be successful.

But also regulation for FinTech companies changes in the US and in Europe. This has to be considered. These two papers are just an outline of two recent changes that are affecting a lot of FinTech companies. But regulation definitely is worth an own blog post (for the nerds then).

Branding and user acquisition

Also, user acquisition is different. “Hey, that’s easy. I’m just paying for some Facebook and Instagram Ads for customer acquisition.” Said no one ever in Financial Services (and probably nobody else except bloggers). Customer acquisition costs are typically pretty high compared to other industries and it takes a lot of effort to acquire a customer (especially SMEs). Why? Because people are much more cautious when dealing with banking, payment or other financial services and it takes time to convince them to use your product. Everybody cares about his money and in the end it comes down a lot to trust, brand and reliability. Or as amazon puts it: “payment is a trust business”. And you have to earn that trust. This definitely is a long process. Therefore competing on cost or betting on an aggressive growth strategy does not really work (and somebody can backfire). As it is simply not possible to have a fail whale in financial services. The product has to work 24/7.

To dig deeper into the topics it is definitely worth reading these excellent Holvi blogposts:

· How to build a FinTech brand from scratch
· Marketing assumptions that don’t apply to FinTech
· From branding to customer acquisition in FinTech

Strategic Partnerships and cooperation

A third point I want to highlight are strategic relationships and industry focused investors. At most FinTech cases strategic relationships are key. So often it is more about cooperation than competition because 1.) banks do not sleep and 2.) you probably need a bank and other infrastructure providers for your service to work even better.

Banks used to be in deep sleep mode (not even mentioning insurance here) but now it seems they woke up and are well rested and ready to go. There a couple of banks which made an impressive shift towards a real digital focused bank. Especially when I think about the presentation of Carlos Torres Vila, CEO of BBVA, at Money 20/20 in Copenhagen this year. When he was talking about its bank digital strategy, I think a lot of FinTech companies in the room got scared for a second. Or as Matt Harris from Bain Capital Ventures put it: „The empire strikes back!“ But to be honest some banks are still sleeping (no names). Pretty well. They can only hope that there won’t be a rude awakening soon.

The second support beside strategic investors you will need are VCs with deep experience in the financial sector. If you want to build up a scaling VC case this can be crucial. Experience, having contacts to banks, card issuers, payment companies and others are very important. This goes hand in hand with what I mentioned in the first section: know your business inside out. And sharing is carrying. It is always a good idea to bring FinTech founders together. Our founders love that. Because there are people that have the same issues with regulation, processing, whatsoever and that understand each others’ problems. But you only benefit from this experiences and knowledge sharing with an investor that already did FinTech deals. So in the end it’s like a marriage: finding the right partner(s) is key.

To read more on that, the Deutsche Bank wrote a paper about different ways of cooperation between banks and FinTechs.

Is the risk bigger?

IMHO I don’t think that they downside risk of FinTech investments is bigger than in other businesses. I think the risk is far less. Most E-Commerce and Consumer plays are really binary cases. It is either one or zero. You either go big or you go home. In Financial Services there are many potential exit cases. If you take banks and insurance companies as an example. There are hundreds of regional banks and insurances in Europe. Most of them don’t have a clear digital strategy or even an own digital team. For them it is a clear make or buy decision, most of the times it is cheaper to acquire than to build up on their own. This point also goes hand in hand with the strategic partnerships mentioned above. And there are also a lot of other financial service or non-financial service companies that could be potential exit cases. But that is a whole different story I want to talk about soon.

So that’s it. Just a brief summary of my opinion. Always open for comments and an interesting discussion.

Internship (m/f) at Speedinvest (Vienna)

Speedinvest is a leading European venture capital fund for digital startups. With $100M under management, Speedinvest works side-by-side with early-stage entrepreneurs to build great companies. Thanks to our hands-on model, our global partner network and our operations in Silicon Valley, we have managed to become one of the main focal points for the European startup community.

Tasks

• Dealflow evaluation
• Industry analysis
• Assessing business plans and pitch decks
• PR / Marketing / Website and Social Media Support
• Assist portfolio companies with different tasks

Requirements

• You are a startup afficionado. Reading Techcrunch is part of your daily routine and the festival of choice is Pioneers. You understand acronyms like CAC, LTV & LiqPref.
• You take the initiative. What matters to us is your drive, your ability to learn fast and your high level of self-organization.
• You are enrolled in a university program. Technical background is a plus.
• You love numbers, structure and results.
• Excel, Power Point, social media are your daily tools. You’ve already experimented with WordPress.
• Excellent German and English. Additional languages are an advantage.

Your Personal Profile

• Self-driven and independent.
• Curious, adaptive & flexible. You prefer new challenges over routines.
• An entrepreneurial ‘can-do’ attitude facilitated by continuous learning.
• Ability to juggle multiple projects and work on tight deadlines
• Ability to digest complex information, form a distinct point of view, and communicate it in a clear and relevant way

Compensation

Full-time position (40h/week) based in 1010 Vienna.

Rolling Admission: apply today. Duration: 3-6 months.

Salary: EUR 1150 EUR gross/month (full-time), based on 40h/week. Please send your resume and application to jobs@speedinvest.com and we’ll be in touch with you! Links to other websites and resources where we might learn more about you (personal blog, Twitter, etc.) are greatly appreciated.

Startups are built in a garage or late at night on a flickering screen in bed. At least that’s the common myth around entrepreneurship and founders. Sometimes though, ideas are strategically built and not born in the shower. And just because you work in a big corporation doesn’t mean you can never reach this level of spirit and foster innovation within the company.

In recent years, several so-called startup studios have popped up, facilitating and incubating products and ideas. Last.fm founder and Speedinvest partner Michael Breidenbrücker spent years advising companies on how to innovate in a fast-pacing world where the little startup in the garage could become your next big competitor. At the same time, Speedinvest founder Oliver Holle found more and more corporate managers asking for help. So when they two got together, they decided to join forces and create Speedstartstudio.

Described as “company builder of entrepreneurs for entrepreneurs”, Michael and his co-manager Christoph Böckle are offering a platform for developing a product or even a startup as company spin-off. Their motto: “Let’s build a thing!” A lot of corporates want to get involved in the startup community and find solutions for their own challenges, but find it tough to get it started within an existing organisation. “So we help them develop new products and find talents to execute and build a new company”, Michael explains.

Usually, these projects turn into startups that both Speedstartstudio and their corporate partner are invested in. “We basically create the startup they would want to invest in”, says Marie-Helene Ametsreiter who supports several Speedstartstudio projects. “It’s essential that the project is outside the corporate structure. I guess you could call it excubator rather than incubator”, Michael says. The studio itself is an independent company that Speedinvest and other corporations are shareholders of.

A year after its launch, Speedstartstudio runs six projects at the moment. Their biggest one to date is a joint venture with the Austrian Federal Railways ÖBB. Their management approached Speedstartstudio to build an extensive platform for national transport services and route planners that also involve ridesharing services. “They wanted to do it themselves before someone else does”, says Michael about the platform called “iMobility”. Together with the ÖBB, the studio came up with the strategy and business plan and hired a management team. The platform is expected to launch next year.

Speedstartstudio projects don’t always take that long. Following an individual approach, defined milestones determine how long the collaboration between the corporate partner and Speedstartstudio will last. It could be anywhere from six to 24 months, depending on the success factors the company builders are going for.

“We’re bringing two worlds together: Traditional industries share valuable expertise and knowledge while the new economy is known for its agile product development”, Marie-Helene lists the two factors of success for Speedstartstudio. Michael adds: “The important thing is that we create an environment where interests of all partners are aligned and the individuals own their products. It’s not like getting a job done. It’s doing your thing and taking chances to build something big.”