Q&A- Startups

7 Questions with Jamal El Mallouki, CrowdDesk

1. Please tell us a bit about yourself, both at work and leisure.

Together with my co-founder Johannes Laub we are the managing directors of CrowdDesk. We’re a team of 15, creating the infrastructure for the future of capital markets with the vision to digitize how financial products are issued and brokered. Our HQ is in Frankfurt, Germany, which is a great place to be for us due to its high density of financial intermediaries, strong SMEs and – perhaps surprisingly – the proximity to financial regulators. In fact, financial regulation is not our enemy but our friend (more on that later). Originally, both Johannes and I are from the region of Rheinhessen, close to Mainz, where we went to school and attended the European Business School together.


2. Which services do you sell and who are your competitors?

CrowdDesk has developed the Funding-as-a-Service technology platform that enables financial intermediaries and capital-seeking companies to raise or broker capital through their own online investing platforms. We translate the complexity of selling financial products into simple and compliant digital investing processes. Companies can raise capital online and issue securities, (investment fund) shares or do private placements — whether its equity, mezzanine or debt — with the simplicity of an “Invest Now” button. This creates a new access to capital markets and allows the creation of entirely new asset classes (i.e., take real estate online investing).

Today, CrowdDesk serves 35+ customers with the software-as-a-service to run their own investing platforms including a major German direct bank (yet to be disclosed), the sustainability bank GLS Bank and SMEs such as MoschMosch (well-known in Frankfurt). We’ve already processed over EUR 65 million through the raised funds of our customers. Recently, we have also signed a cooperation with German development bank KfW to launch the crowdlending platform LeihDeinerStadtGeld for municipal infrastructure projects.

Direct competitors are software companies in Germany (and beyond) that allow customers to build their own investing platforms or processes to raise / broker capital online. Nonetheless, we feature greater flexibility, technological depth and regulatory expertise. Thus, we’re able to provide digital investing processes for a wider range of financial instruments, a USP over our competitors that is in demand.


3. How did you get your startup idea and how did you go about lauching it?

Back in 2011 we set off launching our own investing platform for municipal projects but failed to convince municipalities to do crowdlending with their citizens. But while we didn’t get the B2B sales part right we recognized that our technology, translating the analogue and complex sale of financial products into simple and secure digital processes plus an automated investor management, sparked interest. Thus, we started white-labelling our technology and incorporated CrowdDesk in 2015 with our first customer being Zinsland.de, today Germany’s second largest real estate investing platform. It has been quite a journey since then but today we stand at a seven-digit revenue per year and have successfully shifted to a software-as-a-service business model last year.


4. How did you finance your startup, and what learnings would you like to share from the fundraising journey?

We were able to finance CrowdDesk mostly through its cashflow thanks to steady but also organic growth. Recently, we proactively started building relationships with the investor community to discuss options investing into our growth. One takeaway: talking to the people in person is key. Venture capitalists invest in teams at an early stage. Take the chance and go to events such as FinTech Forum, Pirate Summit or IdeaLab where investors are present. Also: get an understanding of the venture capital economics and its jargon through reading blogs and books (e.g., Venture Deals by Brad Feld or DealTerms.vc by Nikolas Samios / Anja Arnold).


5. What areas within FinTech do you personally find most interesting and why?

The intersection of capital markets, financial regulation and crypto is really interesting — in particular, B2B business models that they can make a dent into how companies have access to capital beyond traditional debt. This is where it gets exciting because this is exactly the kind of capital you need for investments in growth. The European Commission is really pushing financial regulation in this regard, as seen with the progress on the “Capital Market Union”. Since July 2018 it is a lot easier and economically viable to raise capital at European public markets up to volumes of EUR 8 million! Eventually, financial regulation is integral to the FinTech landscape and offers great potential to create innovations on top. Add the potential of developments in the crypto space such as the tokenization of securities — for more professional uses than the ICOs we have recently seen — and there is a lot to be excited about.


6. What opportunities do you see for FinTech startups in Continental Europe, and how can we help?

The unbundling of banks and their value chains moves forward, and legislators as well as regulators seem up to support that (take PSD2 or the Capital Market Union). This is a great chance in addition to the ongoing harmonisation of markets for financial services in Europe. The still widely experienced market fragmentation begins to dissolve slowly which offers the opportunity to really catch up with the United States in terms of market size. This might also alleviate another general problem in Continental Europe: access to venture or growth capital, in particular to larger ticket sizes. Here is where FinTech Forum can indeed help: providing a platform for startups and investors to build relationships, fostering the exchange of ideas and capital — in person.


7. What tip would you like to give FinTech entrepreneurs?

Three things, not necessarily in order of importance: First, be sure to know the financial regulation for your business inside out. This is can be your edge. Second, if you opt to work with venture capital investors, make sure that the partners you’re about to work with have solid (ideally first-hand) experience in the financial industry. Third, that regard, also make sure that the ownership structure and incentives for both founders and team are sorted out beforehand and can be aligned with the reasonable interests of an investor.