How to Web Live Focus Edition – FintechOS Story

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This Focus episode that aired on October 15, 2020, find out the story of FintechOS and its two years of unstoppable growth, with co-founder Sergiu Negut and one of its first investors – Dan Lupu (Partner at Earlybird Venture Capital), in a discussion moderated by Andrew MacDowall.

FintechOS allows banks and insurance companies to act and react faster than the new upstarts on the scene with plug and play products, just like startups do. Is has been recently recognized as the hottest FinTech Startup in Europe by Europas Awards. Last year, FintechOS secured $14 million (£10.7 million) in a Series A investment led by the Digital East Fund of Earlybird Venture Capital and OTB Ventures, with participation from existing investors Gapminder VC and Launchub.

Sergiu and Dan went behind the scenes and shared invaluable insights into FintechOS’ two years of unstoppable growth. Here is a sneak peek into their discussion:

Watch the full discussion on our YouTube channel here.
Listen to the full discussion on Spotify and Apple Podcasts too.
3 takeaways from Sergiu and Dan’s discussion:

►”You can’t get from local to global in one step. And the global has many, many points where you need to go, we have not made a full decision, as to, which is exactly the sequence of geographies that we need to approach for our geographic expansion. But it’s pretty clear that we have very, very large markets out there that have thousands of players in the financial industry, that all need to fully transform their businesses in a way that is very digestible and very customer friendly for their pool of customers”, Sergiu revealed.

►”The thing about the Microsoft accelerator was, if you want an early validation about the product itself, that there is a product, that was important for us. But it was also an indirect validation, because we could think of reaching out to their VC arm as a potential coinvestor. With this kind of larger organizations, there is a multifaceted way in which you can work together if you align and if you can take advantage of their various capabilities”, Dan said on how being a part of the Microsoft for Startups accelerator helped Earlybird VC make up their minds about FintechOS too.

►”we landed our first client in Asia, through the partnership with Microsoft, because they were there, and some of the guys that we’ve met before in Europe, were there to actually preach our technology to the final client” – Sergiu on one of the ways Microsoft and Microsoft for Startups helped FintechOS.

Watch and Listen to the full episode to get your own takeaways!

Are you more into Reading? The Full Transcript is below!

Andrew: Could you tell me a little bit about that original seed of the idea that led to FintechOS?

Sergiu: Well, I’ve known Teodor my co-founder, and, you know, truly the brain and muscle behind the idea I’ve been at for a long time. We’ve been partners for like seven years now, in his previous company, which was a normal software outsourcing firm that grew to maybe, you know, 150-200 people, then million in revenue, and so on. And by that time, it was very clear for us because we were doing services for banks and insurance companies, it was very clear that if we wanted them to accelerate even further, compared to where they were, the only way forward would have been to provide the technology that would allow them to do everything that they did in terms of digital transformation much faster. And hence the idea was there. And the attempt if you want to think of some accelerators and stuff, but then in the services company, you always look at the customer as the priority. So you’re taking away the resources from whatever incipient product you have, all the time. So I think about a bit more than three years ago, there was one day discussion, we were looking at, you know, what other companies are doing in terms of product development. And we said, Look, if we want to do this professionally, and if we want to scale this as fast as possible for as many clients as possible, providing better services to as many customers final customers as possible, then we should privatize it, and we should make a different company three, we should literally abandon the old company in favor of a new one. where, you know, this would be our only focus, creating the technology. And, well, it wasn’t a very long discussion. I mean, he came with the idea and convinced me in like 10 seconds, and the rest was about, you know, dreaming of what would be there. And we are not far from what we thought would be.

Andrew: Excellent. Thank you. Um, can you tell me a little bit about the involvement with Microsoft startup accelerator, because you’re the first Romanian company accepted into it, which is, is quite a feat. Romania has this great startup scene, but but you were the first ones there. How was that relationship developed?

Sergiu: It’s very interesting, because in many ways, Microsoft came above our expectations and so many different ways. We were experienced before with implementation of CRM solutions based on Microsoft technology. So we basically knew some people. And we realized that if we were to accelerate, technology, most very important resource would be development in the cloud. And whatever Asia as a platform is offering for our clients. What we have not realized is that the moment we really had our first release serious release of the product, and it really allowed final clients to Take out some of the processes that they traditionally kept in their core systems into an automation layer that lied in the cloud and took advantage of Asia. Microsoft truly embraced this. And not only embraced the idea, but embraced us as technology included us in their global FinTech accelerator, and made us if you want in contact, put us in contact with a number of potential clients, and they still still do that today. Because I, it’s mutual interest. And although we are really, really small, and Microsoft is really, really big, we see that cooperation working to our advantage and to their advantage that all instances.

Andrew: Excellent, thank you. a, can you tell me a little bit as an investor, how important was the involvement of Microsoft startup accelerator within the fintech in your view, and building it into the sort of company that you really wanted to get behind.

Dan: So the thing about the Microsoft accelerator was, if you want an early validation about the product itself, that there is a product, that was important for us. But it was also an indirect validation, because we could think of reaching out to their VC arm as a potential coinvestor. With this kind of larger organizations, there is a multifaceted way in which you can work together if you align and if you can take advantage of their various capabilities.

Andrew: Thank you both. How do you bounce and get both? In turn, how you see that relationship developing with Microsoft? I mean, over the short medium term, I’m done. How do you see that evolving for FintechOS? Now, as someone who’s who’s investing behind the company.

Dan: I mean, if the company is able to, to maintain the relationship and keep the interest of the people in Microsoft alive, and there is definitely a great opportunity for distribution and the client introductions, maybe medium term has the company raises other other rounds of capital growth becomes a more relevant company globally. Maybe we can think about tracking their investment arm as a shareholder in the company. So there’s many different ways in which we can, we can do that. Technically, there’s also a case to be made for their cloud service to become relevant within the context of additional deployments that FintechOS is making, especially given the fact that large financial institutions are fairly particular about the technology partners they are working with, especially around the security.

Andrew: Is there anything you’d like to add, Sergiu? Is there anything specific that you’re, you’re working with Microsoft on that you can reveal or anything broadly about that relationship and how it’s evolving?

Sergiu: I think it’s coming with positive surprises, every time, we frankly, we landed our first client in Asia, through the partnership with Microsoft, because they were there, and some of the guys that we’ve met before in Europe, were there to actually preach our technology to the final client. And otherwise, you know, having the endorsement of giants such as Microsoft, it would be very difficult for us, you know, one continent away during a pandemic, to really be able to have some sort of commercial traction with a bank on the other side of the globe. So I think from that point of view, this is something that will obviously grow because you see, the thing when you create a good technology, a technology that clients would adopt, that they would want to use to develop, you know, their digital assets inside their companies, it’s important to get to someone with the right introduction. And the more we grow, the better the technology is, the more known it is and more such introductions will be made. And the more such introductions are being made. It’s more that banks and insurance companies are shifting their processes and products from being managed on prem into being managed in the cloud being managed in Asia and increasing Asia consumption for Microsoft benefit as well. So I think it’s a it’s a very nice partnership. I’m looking forward to see how it evolves, but I can only see it evolving. astonishingly good.

Andrew: Excellent. And that’s really interesting about the international expansion on and so draws out something that maybe a bit earlier on, I’m interested to hear, which is, if you managed to get managed portfolio of 5 billion euros within 12 months are being established and some really big European clients like asked Vienna Insurance Group, TBI bank data bank, how did you manage that sort of initial explosive expansion? What’s the what’s the secret there?

Sergiu: Well, I think at the end of the day, if you’re in the kind of tech, not technology that ends up being acquired by big clients, you end up working with large amounts of money, because this is what the financial institutions are about. They’re about, you know, handling big chunks of money. And this, this is where we are. And this is where we provide more value. But this doesn’t mean very interestingly, that it’s there necessarily that we have our most complex and most impactful solutions being built. Sometimes you have mid size banks and midsize insurance companies that are acquiring very complex end to end solutions that are building perhaps a bank from scratch, or they’re they’re they’re building very thorough engagement layers and automation layers to interface with very complex pre existing systems. And we’re very innovative FinTech players that are coming into the market. And it’s the whole benefit, if you want is into building that complexity, and facilitating that amazing final customer experience, much more than you know, the sheer numbers of you know, how much is being transacted? Or what is the value of the portfolio of the clients that we facilitate interacting with their, with our clients.

Andrew: I think that emphasis on service to the end customer is something crucial and something that you’re bringing up on. I mean, is there something about the culture of the company specifically about that, that delivery or an understanding that you think your team has particularly that allows you to have that extra bit of delivery? Or is it the way you work with clients?

Sergiu: Well, I think it’s about understanding that if you’re into the B2B as we are, and this is this is, you know, typical enterprise SaaS B2B, it’s very standard, but you can only be as successful as your clients are successful with their final customers. And if we do not manage to bring the experience provided by our clients, to their customers, at the level of the experience, that is being provided more and more by FintechOS challengers in the market, then it will not have any commercial success, and it will not justify in turn their investment in us. So our only way forward, you know, if you want hand in hand, between us as a technology platform, our clients as financial institutions, and our partners, various FintechOS solutions, is to go together ahead, and this actually creates broder easier to consume, easier to access more complex financial services for everyone, at any given moment. omni channel on the preferred channel at the right time, in the right shape.

Andrew: Thank you. There’s a few things I’d like to draw out maybe a bit later in the conversation, particularly as we talk about the company’s evolution. But I’d like to bring in Dan here as of looking chronologically done your involvement in FinTech, some how did that develop? And how has it evolved? What role do you play? Obviously VCs often pretty active in the way companies develop? Could you tell us a little bit about how things work? And then we’ll hear Sergiu afterwards.

Dan: Actually knew Sergiu from the from the tech scene for a number of years. And then when he joined the FintechOS quests, basically, we he reached out we had a, we had a chat about what they wanted to do. Which was intriguing to me. The thing about service companies transitioning into product companies is not a trivial thing. I was expecting this to happen more often in the region, because there’s a large number of service companies that tried and failed to do this. I’d say I was expecting many more to complete the transition, but it didn’t happen. So one company that was making the transition, interested me quite quite a lot, the space interested me quite a lot. The idea of digitizing business processes, digitizing interactions with the with, with clients, and automating automating interactions and business processes was something that I was somehow familiar with and understood that it’s, it’s gonna become even more important in the in the financial services space. So we had a conversation, I think I gave them my opinion, which was that they were too early for us. But then, a couple of months later, as the product evolved, their traction with clients got better. And our fund our second fund for the region, the digitalist, fund, two became operational, we decided to, to basically make the first investment with the, with the infintech boys. And from there, that’s how he got engaged.

Andrew: Interesting point you make about about the service to product on shift and the fact that not too many companies in the region have done it, what else stood out and stands out for in FintechOS for you as an investor.

Dan: The automation team, the digitizing of processes and client interactions, and the focus on a specific vertical, which is large enough, because, remember, these days, everybody talks about fintechs, which are mainly the technology enabled new financial institutions that are being created. But that’s those are a tiny drop in the very large, traditional financial sector comprising the banks and insurance companies. And this, these players are, are where the market is or where the money is being handled, the big volumes, the profit are there. So this focus was something that led me to believe that they can build up a large enough company that would would make it worthwhile for for our fund for investing.

Andrew: Thank you. Sergiu, could you tell me a little bit from your point of view that relationship with Dan, obviously, and those initial words, maybe you’re a bit small for us? I mean, what impact did that have? And it must have been useful to have an informal conversation with someone you trusted and knew at that stage. And obviously, it’s now developed.

Sergiu: To be frank, there is a saying in the investment space. And in this investment space, it’s actually they say that, you go and ask for money and to get advice, you go and ask for advice, and you end up getting money. I didn’t know the saying when I approached them, it was just that we were at the beginning, we knew that we wanted to do something with investment and VC funds and attract the necessary fuel to speed up our our growth process. After all, we gave up on a traditional company for that. So we wanted to see how how to actually do it. And he was if you want in our network, the closest very successful one, because at the time UiPath was growing, and it was part of their portfolio. And we wanted to understand what were they doing so special? How did they start at the very beginning? How can we do and learn something from that? And aside from that, you know, thing, because, you know, after all these different companies, we wanted to discuss with Dan because he had seen a lot of different companies and probably hundreds of companies are pitching to him every year. And this is only the ones that get to pitch to him, not the ones that will reach out to him. So at the end of the day, we wanted some advice. Are we on the right track? Is this what we should be doing at this stage? Is this the right focus? How good is a good product for this stage? What do investors want to see for a seed for series A? What are we looking for at that particular stage? And there was quite a lot of learning. And we used frankly, that learning to go and pitch to other investors as well, because it was you know, what, what was there? But we did it from the beginning with the understanding that Yeah, you know, it would be great if Dan himself would become interested in at some point and with, you know, convinced his partners With earlybird, and to invest would be the right time, because they would have the right fund. And by the time but but in the meantime, they have also raised a new fund that was focusing on central Eastern Europe, the fund that they eventually invested from. And the discussion at some point became a lot more concrete and more about, you know, yeah, let’s make that assumption. Let’s see, how would that work, if you were to invest, as opposed to, you know, just getting advice on how to get other investors. And of course, we were happy to get that, that kind of advice on a permanent basis.

Andrew: Sounds like an excellent strategic fit that you have together. And sort of, I’m interested in how the relationship is developed. And from the informal, as I’ve said to that sort of investment and being on the board and part of that. That’s good, that’s good. But may I ask you informally where the relationship goes from here, Dan?

Dan: Well, I mean, it all depends on their ability to execute, we will still maintain a personal relationship, but professionally, they they need to grow and they need to outgrow both me and my fun. Fun, find the better investors, larger investors, smarter investors, that will help them. Yeah, and I mean, if you as they grow, they will find the different challenges that we bring in we did not witness before or that they might get better advice from other people.

Sergiu: Okay, well, my honest straight answer to your where does this would be from time to time is on a terrace, together with some very nice casual conversation and some very interesting business conversations as well.

Andrew: Maybe I’ll join you for an informal discussion at some stage. I understand that, obviously, you’ll be looking for the next round of financing is there much that you can reveal on that side?

Sergiu: I think it’s obvious when you’re in our shoes, as always, that you’re you know, having two sources of finance. One source is indeed money from the clients from the bank lines. But the other source, which is at least equally important, is money from the investment funds, which you can’t get if you don’t get the first ones in the first place. So yeah, if if you were looking at the fact that we raised quite impressive series A at the end of 2019, then probably the beginning of 2021 is the right time for a Series B. And if we are to do that, at the beginning of 2021, then probably pretty soon, we are there to raise a two, three initiate the process, and we are looking indeed, to a 30 $40 million, Series B to take us to where this global company FintechOS temporarily not so global needs to be. So we have to invest more in the technology to be more competitive, to be more easy to use by a larger number of professionals and developers in the financial institutions. And at the same time, we have to invest in the go to market and be present in more markets. We are three years old, we have touched a number of markets in Europe, we have barely an accident, almost accidentally landed a couple of clients in North America and then Southeast Asia. But we should build the infrastructure to be there to be a local player in North America, and Southeast Asia, in other places of the globe. And this requires investment much more than what we are currently getting from our customers.

Andrew: Are there any specific markets that you’re you’re looking at or that you’re particularly looking to answer at the moment? I mean, bearing in mind the global financial situation, are there any interesting developments geographically, you could tell us a little about?

Dan: The reason we thought this is a company that can grow to a significant size was the global nature of the opportunity. Look at the traditional financial institutions all over the world. They are facing pretty much the same issues. And those were only exacerbated by the by the by the crisis. So everybody is now rushing to digitize their interactions with clients and automate their internal Internal business processes. Yeah, this is a global opportunity. These are global. This is a global industry, global opportunity. So basically the we need to we need to be rational about how we approach this, these go to market development, depending on the size of the funding that the company has available.

Sergiu: You can’t get from local to global in one step. And the global has many, many points where you need to go, we have not made a full decision, as to, which is exactly the sequence of geographies that we need to approach for our geographic expansion. But it’s pretty clear that we have very, very large markets out there that have thousands of players in the financial industry, that all need to fully transform their businesses in a way that is very digestible and very customer friendly for their pool of customers. And obviously, if we’re looking at the states, if we are looking at Southeast Asia, we’re looking at Germany and the countries, this is these are places that we have not touched at all or barely touched for the time being. And this is where clearly opportunities are. And we can’t take all the opportunities at one stage and we can’t really, you know, be sure that by the end of 2021, we’re going to be in all these places. But we are going to definitely invest in in doing what needs to be done in order to provide this technology, which is in fact a competitive advantage to as many players as possible, in as many markets as possible.

Andrew: What are the particular challenges that that sort of expansion will will create? Beyond that, obviously needing capital to expand? You’re an entrepreneur, you relish challenges, but what what are the what are the things that you see? Is it human resources? Is it regulatory barriers?

Sergiu: I think it’s, you know, if you want to grow very fast, it’s always a source of experience, as you would try to drink some water from a water hose or something like that, you know, eventually, there will be a lot of spillover, and there will be some things that really will hurt and things that you will not do entirely right from the first instance. But eventually, if you’re if you’re doing it, you know, in the right direction, with the right diligence of allocating resources, and with the right speed, it would work if the technology is good enough, which is, in our cases. So I’m where I expect the challenges to be, I expect that, you know, we will hire a lot of people that sometimes, and we will not have everybody, you know, extremely well trained on our technology before they will be reaching the market, we will have people that we would have hired wrongly, not the right ones, and we will have to part with them. And because this is how, how it’s done, we will be having to adapt to different regulations and different markets and different if you aren’t business seen, but this is where if you want, funnily enough, I’m I’m less worried about. I’m worried only about their preconceptions. Sometimes I do have enough references in our home market. But I’m not worried, truly, because every time when we cross the border, and we’ve crossed the number of borders in Europe, we have more than 15 markets where our technology is being deployed right now. So every time when we are crossing the border, we face the same challenges. And every time we’re solving it with a knowledge of the regulatory system from the clients and from our implementation partners, the system integrators, we are working with a big integrators of the world with the Lloyd with the Y with Capgemini. With a big firms. We also look to work with small firms that have been there working together with this bank or that insurance company for years or for 10s of years. So we rely upon their competence, to learn the things that we don’t know as of yet, and we hire professional expertise when that professional expertise is needed. We are not trying to sell. If you want banking as a service or insurance as a service. We do not substitute the business purpose of our clients. We are just providing them the technology for them to build with our knowledge with their knowledge with the integrators knowledge with a partner’s knowledge with Microsoft’s knowledge when, when that is the case to build the best in class digital experiences for their customers and their other categories of users.

Andrew: Excellent, thank you. I think that’s very interesting, as you say, well working as you both drawn out working with with financial sector in companies who need to become more nimble, they need to be more online, they need to communicate better with their customers in all sorts of ways rather than sort of the we discussed the some broad pool of specific FinTech, you’re really helping banks and financial institutions across the world meet these new challenges. Before we move on, I’d like to bring out to Dan Are there any particular examples from FinTech? Oh s, from case studies with all these major international institutions that the company works with that said he was mentioned, we’ve talked about Eastbrook, we’ve talked about PNR insurance, already particular ones that you as an investor, and someone involved in the company has thought that is a particularly strong selling point. That’show we can really go global with this.

Dan: try to understand how people, how clients, actual clients, are working with a specific product. One thing that I learned a long time ago, is that the market is always right. And my good opinion or a bad opinion on something doesn’t really matter. I’ve seen incredible, I’ve seen ideas that I thought are incredible and an obvious an obvious match the market that never took off. So I spoke with as many clients that the company had as possible. And I was particularly impressed with the conversation I had with the nn group, and then being a large European based Insurance Group that that was outlining the case for making for making FintechOS voice reference architecture for their various subsidiaries. And I would say this is what I own in the case of FintechOS was the reverse kept the distribution model, where companies in Eastern Europe become proficient that filler client, and initially they engage with the local subsidiary, but from that local subsidiary, they get bumped up to the headquarter and from the headquarter they get then pushed down to other subsidiaries within the group. And I think this is a fairly powerful distribution model. And the that’s a go to market advantage. That is difficult to replicate.

Sergiu: Yeah, just to add on that, I think it’s a no, everybody is looking at these anchor clients, the big names that have virtually unlimited budgets to invest in their digital infrastructure. And sometimes we get too used to the situation on where, you know, yeah, but this has been done before. And look, this particular large bank in the States or large bank in the UK, has done it for years. Yeah, it’s true, they may have done it for years, but they have invested 10s of millions to have it done. And the market is full of hundreds and thousands of players who don’t have those 10s of millions in their budget. And they are trying desperately to get to build as fast as possible matching customer experience for their customers, which they worked hard to get in the first place. And for the new customers that who want to get from the market. So this is an amazing opportunity as well, the mid size players, the second tier, the third tier players that needs to do digital transformation, they are perhaps one step behind the market leaders, and they don’t have the resources to put in. And this is where we come where we come in. And we solve problems that we that technology being so versatile and being so easy to use by the developers and the business analysts, they’re actually able to build the missing pieces in their current digital infrastructure as they perceive it in the order that they perceive it. And then once they have done a few of these missing pieces, they see the opportunities to interconnect those by adding more pieces, more journeys in a digital engagement layer and adding more automation among those products. And since Dan brought the example of and this is actually what happened with them, as they are actually actually expanding further down towards the core, the use cases that are handled with FintechOS, and they are expanding in all their business units, the use of interclass as the basis base base technology upon which they are building the digital journeys. And they propel that not only to different markets, but they propel it to different business lines as well. So in the end, it does become the infrastructure of the firm.

Dan: I always create my own mental models about how to talk about companies I invest in, and I try to, to use these mental models to create stories around them. So with the in the case of interquest, I use this reverse capillarity distribution model. And in terms of product approach and the sales approach, I use the reverse salami tactic. It’s quite powerful to approach core core strategic issue like digitizing processes and digitizing improper interactions with customers in in a very discreet way, that gives the customer the ability to make discrete decisions, instead of making big transformational process projects, they have to take only small decisions like digitize the onboarding of for a particular product. Because these are easy to decide, do not cost a lot of money are not disruptive to the existing infrastructure. In fact, they integrate well with a with existing infrastructure. And once once delivered, you have a basis from which to start and continue to add slices. And once you add enough slices, all of a sudden you realize that you have the full salami, so that’s why I call it the reverse salami tactic.

Andrew: I’d very much like that, and we’ll make a note to use it in future. Thank you. Gentlemen, we we’ve covered quite a lot of your bullishness about the future, we’ve covered future plans quite well. I think. One thing that I don’t think we’ve mentioned is the word COVID, once in about 35 minutes. So I’m interested on how it impacted this crisis particularly. And I’m wondering what the challenges have been getting through this difficult period and whether it’s had an impact on business at all. I mean, my conclusion from your bullishness is, is that really, you know, this sector is going places. You’re going as international as possible. But have there been been challenges whether they’re operational, or financial?

Sergiu: I think whoever says that we have not been affected by the COVID. situation is either because they are providing something to treat the COVID whether it’s video conferencing or medication, I don’t know. Or they are delusional, I think, you know, the the world has been changing. And the world has been changing, changing suddenly, in a disruptive way in in a way that we have not anticipated. So I remember that back in February and March, we were sweating thinking of where will this take us? You know, will we have enough business from our customers? Or will they be so affected? That they would have to cancel? Will we have enough support from our investors? Or will they you know, fear that this is no longer going to you know, work be financeable and they will just back away. So we had our times of anxiousness and our plans B and C and looked for rationalizing the business and looked for what would be our best way out of it. If the situation was worse, if the economies would have collapsed if the pandemic as such would have proven to be a much stronger threat to the public health and that this way of living. Now, maybe we were a bit lucky because it wasn’t that bad may and because the government interventions and central banks interventions were strong enough to keep as much as possible of the business infrastructure there. But what happened in reality is that many of the clients have accelerated their digitalization process. Is because social distance, you know, comes with the side effect, that you can’t go to the branch of the insurer or of the of the bank. And you can’t do go to the branch, even though you’re, you’re perhaps a senior citizen that has always used the branch and now has just used the phone and internet to connect and access services. So this created the pressure on the financial sector to reform and to bring digitalization forward. And this came very aggressively. But at the same time, a big part of the financial sector continues to be cautious on allocating investments for the coming months, because they are not sure yet, what will happen, and how things will evolve over the next months. So there are different trends, some of them that are pushing, if you want our business forward, some of them that are actually creating a level of cautiousness on on us. But overall, as I said before, I think it’s if you have a strong enough technology, and if there are very strong reasons for the clients to use it, and deploy it for the benefit of their final customers, and they are able to monetize the investment in our technology fast enough. Now, this actually places us in a competitive scenario that is favorable to the growth of the company, even though the overall economic environment is less favorable.

Andrew: Thank you. Dan, what’s your feeling? Now? Are you are you among the on the cautious side or the less cautious side as an investor?

Dan: let’s say that we like to think of ourselves as disciplined investors. And this means that we need to be aware of the risks. And risks are coming in various flavors with the this kind of this kind of investment focus, both in terms of technology and the region, the region clearly lacks enough capital for follow on investments. So any any kind of volatility in the in the global markets, gets immediately reflected here. That’s why, as a strategy, we like to create the consortiums of investors that invest together with us all my investments in the region, we’re done together with coinvestors. And the what concerns me are, I mean, the concerns me the fact that the capital that is nominally interested in making investments here is difficult. They come and go, if things become volatile, I’m, I’m concerned that they will be they will be gone when the company needs cash. Luckily, we keep a lot of cash in reserves, so we can continue to invest in the companies that that are performing well. Definitely, the level of uncertainties is creating potentially additional volatility in the markets, you will look at the global, the global macro environment where interest rates are zero or negative, pushing public market equities, to fairly high levels and the quite unexpected valuations. This does create an incentive for both the larger players to step in earlier, but also creates an opportunity for companies to raise larger amounts of money. And this is great, but volatility has the downside of moving quickly on the other side and the these spokes investors, which are trying to retreat from, from the screens of their geographic in Oh, it’s a I mean, we need to need to be aware of it. The obviously neither us nor the company nor their clients can fight it. But we need to be to keep nimble, be prepared, keep reserves and be quick about decision making.

Sergiu: If I may add something, you know, the good thing about getting investments from people like them and funds like early bird is the fact that we were able to consult so we had access to this kind of reasoning in board meetings that were at at the heat of the peak of the The other crisis where not not more than 10 days, two weeks apart, one meeting from from the next, to reassess the situation to understand where we are to understand what are the options, what is happening in the world? What is happening with us what is happening with the investment, what is happening to the customers, and how we should better react. And I think this is, this is, you know, playing it rational and being prepared for the worst while shooting for the best, I think, is what kept us going. And they, you know, gave us the possibility to continue and aggressive growth during complicated times.

Andrew: Dan touched on the rather shallow capital markets that exist when you get to a certain stage in Central and Eastern Europe. Obviously, we’re talking about a global company here, and one that’s expanding internationally. But is there anything that you particularly like to draw out for the viewers about the strength of of the region in tech, and particularly fin tech, and maybe particularly with with Romania? I’ve written quite a lot about companies that talk about Romanian DNA, even if they’re based in Silicon Valley, is that something you you identify with? And what’s the future for this very interesting sector in the region?

Sergiu: Well, there are two aspects here. One is, we want to be a global company. And being a global company comes with paying a price that you have to, you know, focus on markets that are far more developed than Eastern Europe. So you have to understand those markets deeply. And whatever solutions you’re providing and other experiences you’re providing, can no longer be at the level that may be enough for Europe, but may not be enough for the big financial centers of the world. So for us, we have to move on. And we have to create very strong footprint in the markets in the developed markets, where if you want the trends are being made, where the trends in digitalization are being created, because we are competitive in those markets. So we should be able to be to be there. Now, that being said, we have also been, I think, quite lucky that having started a business, a technology business in Eastern Europe, in Romania, we were able to take advantage of I would say a number of trends. The first trend, there is a very strong technology, educated pool of talent in the region. And in particular, in Romania, we were able to get on board, a large number of engineers, of developers have analysts that have had the right experience is working, some of them with, you know, regional centers, original outsource centers of large multinationals, some of them working with other companies in Western Europe that we’ve learned, and we brought them initially back to Romania. And we were able to take advantage of that talent in technology. At the same time. When it comes to developing the business, to developing world class products to developing if you want delivery, engagement of opportunities with with larger clients, obviously, we need a level of expertise that is simply not available in countries like Romania. So we have to seek for it. We have to find it in the UK, in the Netherlands, perhaps in the states in the future in other places. And this is something that we always need to manage. But we’re also lucky with the fact that the timing was right. The availability of early stage venture capital to be invested in companies originated from Romania have just, you know, grown tremendously over the last few years. The first two funds or should I say two funds and a half that are originated from from Romania, and they’re providing early stage VC investment there in the market. So, and with it, there is also a big increase in angel investment and a big increase in the done by angel investment groups that are syndicating together. And this facilitated that transformation. If you want to buy A number of technology professionals into early stage entrepreneurs. So the entire stage of early stage businesses that are now being born in Romania is of a different complexity and of a larger number compared to what was there, like five years ago. So this is, I think, a very strong trend, that we are just a part of, perhaps one of the first ones, but I’m pretty sure there will be more companies, you know, being born today, or having been born a year ago that we’re gonna see in a in the next years in the international markets.

Andrew: And so deep down you back some of the biggest upstarts in coming out of the region. What do you see is the evolution of the ecosystem? And how has there been that that growth in early stage financing over the past few years, what’s been behind that it must been exciting to be to be one of the leading participants in it.

Dan: This is a huge region, both geographically population wise, and, and the GDP. So we are talking everything east of Austria and Germany, all the way to Belarus, Ukraine, Turkey, north to south Poland, to Greece. So, huge region. But totally lacking all kinds of venture capital funds. I think now, across the region, the early stage, seed and the very early stage investment, it’s addressed to a certain degree that actually to various degrees in different countries, but I think it’s more or less in place. And this clearly had an effect, drawing route. Hundreds of new companies that are being created, which is very, very encouraging. Still, the level of company creation is, is well below what more developed regions are our recording, which for us, which are investing maybe at a later stage, creates a creates a wavelike activity, in which we see more interesting investment opportunities in Romania one year, the next year, it’s in Slovakia, the next year in Poland, the next year in Turkey, and so on. So the, there is a flow, there is not a constant tide, if you want. And it’s also very broad. That’s why we stay with the if you want to coat with a generalist focus, there is no focus, basically, we take what the market throw it throws at us, we even go against what we thought we will never do. So why do the hardware investment ID the consumer investment from the region, which were things that I felt like we’re gonna do, given our mostly b2b software focus, but this happened and you need to be flexible, I do expect that the as more capital becomes available, and this will come on the back of good performance from the existing funds. And hopefully with the bar. Unfortunately, with time, more institutional capital dedicated to the region, things really improve and will stabilize. And that way we will we welcome more funds might seem, might seem a bit odd, because more more funds, more capital, we mean, means more competition. But I think it’s healthy competition, because it will drive the overall growth of the market.

Sergiu: I share that view. It’s, it’s, it’s the early stage that started to work. It’s the later stage that is completely inexistent for the for the market. So already when we reach now, Series B, we can’t look back at the region, we have to look only at the finite the larger financial centers as sources of capital investment. And this is a in a way, a market inefficiency that needs to be corrected. Because obviously, and this is valid for the entire Eastern Europe, there has not been enough time to build enough private capital for investment and to build the institutions that will have the know how, on how to manage that, that capital. So yes, we will probably see more public funding in the space. But even with all the public funding that I can imagine, I’m pretty sure that the lack of capital will continue to be there, the need for capital will continue to be there and it will be very complimentary to an otherwise well developed labor, labor availability, good quality, sophisticated labor that is available that has the intellectual power to build new things, but doesn’t have the capital to turn it entirely into, you know, fully grown global businesses.

Andrew: Thanks very much, gentlemen, for your time. Do you have a last two or three sentence summary of our discussion and the way ahead? I’ll start with you, Dan.

Dan: Oh, we live in interesting times, which is all we can hope for, we are lucky to to be in the position of investing now from a brand new fund with enough firepower to continue to invest throughout throughout the ups and downs of the of the market. We are open for business we are looking for. For successful entrepreneurs, we are ready to to continue to back our existing portfolio companies. So I’m quite excited about about what lies ahead.

Sergiu: Well, I, you know, I’m, the more the time passes, the more you know, we enter in discussion with new clients in new territories and so on, the more I believe that FintechOS is here, because it grabbed a very specific opportunity at a very specific moment in time, and this is going to grow big, is going to grow big, because luckily is not only asked, you know, doing our work the way we think, but we have the support the financial support and the no house support from our investors, from advisors from everyone. And, you know, this has been a very interesting conversation. It’s always a pleasure to have a discussion with that. No offense, Andrew. But as always a pleasure to have a discussion with Dan, because you always learn something new out of it. Of course, I would have preferred the discussion to be over a beer on a terrorist. But I’m pretty sure we have that those opportunities as well. But for a facilitated discussion, I think it was very good. And I thank you for that. And you and I thank you for that. Microsoft through this initiative with How to Web and the possibility to share a little bit of our internal discussions and brainstorming and thinking ahead and analyzing and making decisions with a wider audience.

Andrew: Thank you very much. It’s been a pleasure speaking to Dan and you today. Again, thank you for joining us. Thank you.


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