FinTech Collective Places Its Bet on European Fintech
Published:
Oct 02, 2023
Author:
Sarah Parsons Wolter
Share:
As New York-based fintech venture firm FinTech Collective continues our expansion, we recently opened a London office and added Toby Triebel as a Partner to anchor the European operation.
Danny Lopez, CEO Glasswall, board member of Innovate Finance and former British Consul General to NY, sat down with Toby to learn more about his outlook for entrepreneurship, why he’s betting on fintech in Europe, and why he views FinTech Collective – whose roots in the European start-up ecosystem go back 25 years – as the ideal platform to join.
You were born in Germany, built your career in the UK, and ten years ago, you left the comfortable trappings of the City to become an entrepreneur and operator. Tell us a bit more about your background.
I was born and raised in Düsseldorf, Germany and I have an identical twin brother who is himself an entrepreneur and continues to be a key influence in my life. What excites me the most is the opportunity to contribute to shaping the future of the financial services industry, a space I have been active in over the last two decades, as an operator and investor. I began my career in corporate finance at Goldman Sachs, followed by several years at a London-based hedge fund where I invested in single names across the capital structure with a focus on emerging markets. However, I always had an entrepreneurial calling, so I left the hedge fund world to co-found a Berlin-based SME lending platform.
In scaling this platform across five countries in Europe and AustralAsia, I came to absolutely love the operating side more than expected. So, upon exiting my lending platform, I went on to join a scale-up in digital banking to launch and head the European operations. Next, I headed the digital investing business as a member of the Global Executive Board at Vontobel, a Zurich-based global asset and wealth management house. I have lived and worked in London, Berlin, Amsterdam, Toronto and Zurich. I am very excited to bring this experience to FinTech Collective which itself has very strong operator DNA across the investment team.
Why have you come back to an investing seat? Why fintech in Europe?
I have been investing in public and private markets ever since I got my first pocket money from my grandmother. It’s been a decade since I was an investor at a hedge fund, and I fundamentally believe that operator experience - understanding the challenges and opportunities founders and management teams face - makes you a better investor. I look forward to bringing my experience to support the founders we back; more intimately appreciating the nuances of business models and leveraging the deep network I have cultivated throughout my career.
I believe we are still in the early innings of technology shaping the future of how financial services and products are provided and consumed. And this is particularly pronounced in Europe, especially as the past 18 months have driven a return to first principles - replacing “growth at all costs” with a focus on maintaining sound unit economics and clear paths to profitability. The talent driving this transition is vast, as Europe has a much larger population and workforce of tech developers than the US, while tech salaries that are ~40% cheaper.1
Despite this potential, white space persists. In the UK alone, the tech sector has grown 25% over the past decade, now contributing £150b per annum to the economy.2 However, only 2% of $12.5t in annual financial services revenues are derived from fintech companies globally, and the UK and Europe’s contribution still lags behind the US.3 Moreover, green shoots have already firmly taken hold. Cash usage in Europe is 50% less than North America, and regulations are evolving with the need to balance user protection and innovation to make way for further growth and rapid uptake.4 The median time elapsed for companies to achieve unicorn status is only 6 years in the UK and 5.5 years in Germany, compared to 7 years in the US.5
And why now?
Well, just to continue my earlier point, talent recycling is happening faster than ever before. In the first wave we saw more than 150 companies born from operators at the likes of Revolut, Klarna, Monzo, Wise, N26, and Spotify, and the recent downturn has spurred another exodus that is already well underway.6 It is a cycle that feeds itself. Repeat founders are more prevalent than ever before in Europe.
Yet despite a wealth of outstanding operators, valuations remain subdued with both Seed and Series A deals hovering at just over half of US valuations. Coupled with a significant pullback in funding - we are talking ~50% of 2021 levels - the investment opportunity set is interesting.7
But also, importantly, the regulatory environment is rapidly evolving with dozens of proposed legislative acts in financial services, plus reforms like open banking, PSD2 & 3, and GDPR. This year has been a whirlwind with the digital Euro progress report announced in July, the Markets in Crypto Assets Regulation (MiCA) in effect as of June, the publication of the Sustainable Finance Package in June, the latest draft of the European Data Act inclusive of Smart Contract regulation released in May, and anticipated BNPL regulation by the FCA announced in February. Such rampant change has demonstrated regulators’ commitment to trying to create an environment most conducive to rapid innovation.
All these tailwinds contributed to the decision for FTC to open shop in Europe. We aren’t entirely out of the woods after the tumult of the past 18 months…but that’s what makes this opportunity particularly interesting. Market volatility spurs new considerations - resource allocation, cash management, go-to-market motion, sales cycles - and tough times are a way for founders to distinguish themselves much more so than riding the 2020-2021 wave.
What should a fintech start-up look for in a venture investor?
From my experience as an entrepreneur and founder, and of course I will be somewhat biased, I would look at the investor’s experience - both as an investor but also as an operator. Look for someone who has been in your shoes and had to bootstrap, scrap to find talent and capital, deal with investors, all while developing their offering and taking it to market. Ideally, their experience is deep, relevant but also nuanced. They have experience both inside your vertical and outside it; experience as a founder but also in other fintech settings to provide a rich perspective. Look for someone with a deep network they can draw upon to help you. Go with your gut, but also talk to other founders from the firm’s portfolio. Find an investor you want by your side when times get choppy.
Why did you choose FinTech Collective as the platform to express your ambition for European fintech?
FTC’s mission is to back founders who reimagine the way that money moves through the world. FTC is headquartered in New York, but they have been investing in Europe since the start. Both co-founders, Gareth and Brooks, were previously fintech operators and entrepreneurs, much like myself, and have networked extensively in Europe for decades. In fact, I originally met Gareth and Brooks ten years ago as they launched FinTech Collective, and we have gotten to know each other well over the last decade.
I have always been very impressed by the firm’s approach, ambition, and competitiveness, but also its warmth and generosity. We love what we do and have built a great team and powerful platform. Sorry for the commercial – but this is important context for why I joined.
In terms of a European footprint, FTC has made some great investments already. Mentioning a few, FTC led the seed round for Berlin-based Mondu in the $125t global B2B payments space in 2021. They co-led the Series A rounds for UK-based IMMO who are unlocking access to the nearly €40t European residential real estate market and Stockholm-based Anyfin, who are busy helping Europeans refinance €413b of annual unsecured consumer credit.
As background for those less familiar, FTC prefers to partner early with high flexibility to invest $2-$12m in a first check as lead, co-lead or supporting investor. We have a rigorous sector focus, deep understanding of fintech business models, strong operator DNA, a global portfolio, and connectivity to US networks, insights, and capital.
Finally, what do you see as the most interesting opportunities in the European financial services space currently?
FTC’s thematic approach has yielded many interesting opportunities and there are many themes I, and the rest of the team, are excited about in Europe - to name a few:
Wealth management software. I have witnessed this first hand having worked in the wealth management industry as an operator and at Exec Board level, from a scrappy start-up to a publicly traded company. Europe lags significantly behind the US, and existing solutions still require hundreds of hours of customization per month, are generally hosted on-prem and are designed for enterprise players. After many unsuccessful attempts of the past, wealth management software will emerge in the near future driven by several factors. The multi-generational wealth transfer will exacerbate current scaling limitations, as will clients’ increasingly digital demands. Further catalyzing this long-overdue change, ESG regulation, a proliferation of alts, market volatility, rates, and climate concerns will all contribute.
The combination of SaaS & embedded finance. We anticipate a proliferation of embedded finance in legacy sectors as financial institutions and fintech companies’ budgets remain constrained and founders look to more attractive TAMs. Winning platforms will build out lending or payments solutions coupled with SaaS product suites. Unlocking payments solutions or capital at the point of need will serve as the initial hook, while core software will ensure long-term stickiness.
AI applications in financial services. Compliance solutions will especially benefit from a proliferation of AI use cases to address complex regulatory and risk requirements, especially on the back of PSDR1. Scale has been difficult to achieve due to an ease of building point solutions rather than coordinated offerings across stakeholders, geographies, and industries. GenAI will bring down the cost of innovation, though, as the value potential for the banking sector alone is $200b+, or more than 3% of total industry revenue.8 Efficiency gains are especially pronounced in the financial services sector as evidenced by AI’s effects on human capital, for example: ~44% of finance jobs are exposed to AI vs 32% across all industries.9
These are just three, of many, themes we are currently pursuing. Our new home base of London positions us in the center of the 3rd largest fintech hub in the world, with most of the UK’s 2,500 fintech companies based within the city. Meanwhile with a team that speaks German, French, Spanish, Portuguese, and Arabic, we remain in close reach of the 65+ start-up ecosystems throughout Europe, as measured by locations with 1+ unicorn.10
As the fintech ecosystem in the UK and Europe gears up for its next decade, I’m honored to have joined FinTech Collective. Our long operator history paired with deep sector expertise has sharpened our edge. I look forward to leading our efforts from London, growing our presence across Europe, and partnering with amazing founders and management teams to grow innovative businesses.
About Danny Lopez
Danny is the CEO of award-winning cyber security firm Glasswall. Between 2011 and 2016 Danny was the British Consul General to New York and Director General for trade and investment across North America. Prior to this, Danny was the inaugural CEO of London & Partners, the UK capital’s official promotional agency. The first ten years of Danny’s career were at Barclays Bank, where he held several senior international positions in corporate and investment banking in London, New York, Miami, and Mumbai. Danny is a non-executive director at both Innovate Finance – the UK industry body championing global FinTech – and Aquis Stock Exchange. He is also a pro bono advisor to the City of London Corporation. Born in England, Danny grew up in Spain and is a fluent Spanish speaker. Danny and his Australian wife Susan live in London with their three children.
Endnotes
1 Atomico. The State of European Tech (2022)
2 City of London and Oliver Wyman. Vision for Economic Growth — a roadmap to prosperity (2023)
3 BCG and QED Investors. Global Fintech 2023: Reimagining the Future of Finance (2023)
4 BCG and QED Investors. Global Fintech 2023: Reimagining the Future of Finance (2023)
7 Atomico. The State of European Tech (2022)
8 McKinsey. The economic potential of generative AI: The next productivity frontier (2023)
9 Evercore. Generative AI: Productivity's Potential, from Macro to Micro (2023)