How did you start your career in fintech?
I started straight from school. I had a group project and I asked the teacher if I could do something else outside the scope of the project and alone. I chose to work on a location-based social network which became my first company. So it all came very naturally.
What message would you send to your 20 years younger self?
When I was 10 I didn’t know what I wanted to do, when I was 16, I wanted to be a DJ, when I was 18 I wanted to be a rapper and at 20–22 I started my first company. The lessons I learned as an entrepreneur regarding my current company would probably lead me to advise: “Be careful to start a fintech company” . There are so many regulations, so much redtape and regulatory complications and no bank wants to work with you. So I would actually have picked an easier area. Nevertheless we are working with many institutions, like Skatteverket, Financial Inspection and top four bank in Sweden and Barclays, so we have our fair share in working with banks. They are not unwilling, but they are also bound by regulations.
What would you recommend to young founders?
Go as far as you can without taking in investment money and until you you have some product market fit, because once the investment money comes in, the expectations rise.
“Don’t necessarily go for the highest valuation, which is something you naturally wanna do, but I know from experience that you can inflate your valuation where you will need to defend what you have first and then build on top of that to raise your next round. This can lead to higher expectations and pressure that you probably don’t need in the beginning.”
Picking the right team is very important too, in the beginning.
Who are the co-founders? How do you hire them in a later stage?
That’s the most important. So you typically have 4 years vesting and you do a 1 year cliff, so those who leave earlier, before the 4 years pass, return all or part of their equity. That’s a healthy way to filter out those who end up not being motivated. It happens in many companies that some founders leave.
With your founders you have to have a good vesting scheme. If somebody has to leave early, the equity should flow back to the company.
Then you have to put up a stock option pool that incentivises employees. This happens to be quite hard in Sweden due to tax reasons. So that might lead to a bit of a complication. In certain countries it works better than in others, but you want to motivate them by doing the same kind of vesting scheme for employees so they are part of the company. Otherwise you just have to pay which means that you are burning cash.
Nevertheless, in Sweden more and more people are getting familiar with the startup world and more people are incentivised by it. In a startup it’s better to set it up early and have those incentives in place, because if your valuation goes up, or if you are overvalued it even becomes a burden for the employee in some cases to pay for the initial options.
Has it happened, that your investors wanted to switch one of the founders?
No it hasn’t happened to me. There has mostly been frictions between the founders and I think that in general this is the case. It is rare that the investors have frictions with the founders to the point where they replace them — it can happen mostly in the growth phase, when different expertise is needed. This is what happened at Google for example when Eric Schmidt became the Chairman and Larry Page, the COO. So you might switch around a little bit and change roles. Founder driven companies are statistically the best performing companies, so when you have a change from the Board of Directors, it is probably not a good sign.
Why do you think there is so much buzz around fintech?
In Europe particularly there is the Payment Service Directive which requires banks to open up their data for the fintech market, a huge opportunity. Also, there are already many fintech companies that try to disrupt the existing incumbents. And then there is the blockchain technology which can change the entire underlying financial infrastructure. So you have a perfect storm of financial institutions that — for the first time — need to worry about their future. If they are be around as banks in the presence of these new fintech companies, who are eager to fight the big dogs.
How would you pitch fintech to a 6 years old kid?
I would just tell, that bitcoin is on the phone, go and play around with it. So it’s like having your own bank. Generally young people work with money in a very different way as I did when I was a teenager. And most of the people in cryptocurrency space come from the gaming communities, so they already see money as a virtual token to play around with. And fintech technology might tap into that and make it easier. But this is probably not the way to tell this to a 6 year-old, right? My kids are two years old, so now for them it’s just like “gagagagaguuu moneey”.
Who is the Elon Musk of fintech on your opinion?
There is none in fintech. There are people who built Neo-banks and stuff like that, but I really have a hard time coming up with anyone even remotely like Elon Musk in the fintech space.
Do you think that there will be banks on Mars?
This will most likely be done by Elon Musk… He would be the first one colonizing Mars and I’m sure that he is a fan of cryptocurrencies, so everything that will be connected will pay for itself, based on whatever you are doing. So I don’t think there is a need for classical banking in that sense, but to have money of course. But what is that you want to buy on Mars..? A rock… or beer maybe?
What should banks do?
We have spoken to a lot of banks and we work with them and typically we find that at the bank there are people who have a lot of ideas and want to embrace innovation.
“Banks are already doing the things they need to be doing: they try to accelerate themselves, they try to work with startups, they have internal teams exploring bitcoin and find ways to implement it.”
Some of them are more ahead than others. BBVA is way ahead for example as they are already creating an Open API platform. So it is “evolve or die” right now for banks.
Do you think cryptocurrencies will take over traditional currencies?
Bitcoin particularly was designed to be a replacement for traditional banking and to potentially become a global reserve currency. I personally invested heavily in the idea that it is a good store of value with the hope that it will have some broader kind utility as a currency in the future. It is still too early to tell, but it grows in a healthy way. As of today, its market cap is around 15 billion and it has been going through hype cycles in the past few years since its invention in 2009. Things might take off with the geopolitical situation with Trump and Brexit in combination with a financial collapse, but we can’t really yet .
Also, Peter Thiel is one of the key advisors for Trump, being one of the lead investors in Bitpay, one of the biggest bitcoin companies and he is looking at other people for his administration who are probitcoin, so I am positive. By the way, he was also the only one from Silicon Valley who put some investment in the Trump campaign as he invested 1 million dollars. Once Trump won and they had this awkward meeting with all stakeholders from Silicon Valley, he sat next to Trump, so he was definitely the “belle of the ball”.
Are you using bitcoin from time to time?
Sometimes, yes. I have paid for occasional dinners with bitcoin here in Södermalm and I have paid for some drinks in London in a bar — but it is very sporadic now and there aren’t many shops who accept it.
Bitcoin today is for speculative purposes mostly and it will continue to be that way in the developed world. But there is an exponential growth in the developing world, among those people who want to protect their purchasing power and they want to send or receive money to and from other countries.
There is also a possibility to connect your bitcoin wallet with your credit card (Martercard or Visa) and then you can use it anywhere. In the early days of Bitcoin someone made an experiment, how long they can survive with only bitcoins, but after this solution had appeared, it became just too easy and the experiment was sort of done. Now you can get your salary in bitcoin, pay your expenses in bitcoin… paying your taxes is a bit more difficult, but pretty much everything else can be paid with it.
I am passionate about all innovations, but blockchain technology can lead to complete financial inclusion and can give the opportunity to those who can’t have banking services to be banked. This is really a bank in everyone’s pocket.
We are very excited about Startup Weekend Fintech on the 27–29 January in SUP46! Will you be there with Frank?
More information about the event and registration here: http://www.up.co/communities/sweden/stockholm/startup-weekend/10233