This interview is part of Scaling Enterprise FinTech | The Handbook, which includes proprietary research on ca. 65 Enterprise FinTech scaleups in Europe, Q&As with 16 founders on their journey to scale, as well as insights from 10 leading investors and financial institutions. Whether you are a founder with an idea, an early stage startup looking for inspiration and learnings, or an investor or financial institution looking to understand the difficult but rewarding journey to building a world-class Enterprise FinTech firm – download the Handbook here http://www.fintechforum.de/sef/
Samarth: Hi Eugene, good to see you – about a half a year since we last met I think, although we do keep in touch often via email or LinkedIn. Great to be here at your office in Amsterdam today and a pleasure to meet you. And of course great to have you on this interview series. For the audience and for the readers, let’s start with a bit about yourself, both at work as well as at leisure. What’s keeping you busy?
Eugene: I am originally from Vancouver, Canada. I studied Computer Science and worked as a software engineer in the earlier part of my career. After doing my Masters I got into financial services by exploring technology opportunities that traditional vendors could have in terms of reinventing how financial services are provided, especially in emerging markets. We were doing a lot of research before the whole fintech era came around. It was around 2009 or so when we started to look into the space. Through that engagement, looking both through the lens of technology, and of customers experiencing financial products, that we saw a new way of using digital, mobile and internet. It’s not just changing how you distribute financial products, but changing the whole experience with financial products from how the products behave, how you reach customers and how you interact with money. We thought that the whole space may have a chance to be completely revitalized. So we set about building a platform to enable institutions to do that. Rather than actually creating a customer-focused product and focus on a particular market, we thought of the opportunity for that revitalization of financial services – which kind of became the fintech movement, which then became the fintech era which is happening globally. The opportunity that we saw was leveraging on our personal strength and my background in technology was not to design the financial products and the services for the end-customers but to build a platform that would allow others to create those products and services in a much more modern way than banking was traditionally done.
Samarth: And somewhere in between, you were also in Portugal, if I recall?
Eugene: Yeah, so that was quite an amazing personal experience. Part of my master’s actually was in the US in Pittsburgh. At the time, we also had an opportunity to spend one year of that program on the beautiful island of Madeira, in Portugal. That was a terrific experience. It was not only just the time in Portugal, but the coincidence about this little tiny island off the coast of Africa was actually where one of the providers of core banking software to the Portuguese market was headquartered. They were providing core banking software to the banks in Portugal, but also the Portuguese-speaking markets like Angola and Mozambique. Because of the relationship with that network, we got to spend six to eight weeks in Mozambique meeting with banks, advisors, consultants, customers. Everything from being out in the field of a market of a mobile bank branch to the boardroom of a bank to understand really what was happening in financial services, and specifically in emerging markets at that time.
Samarth: So out of the research project came this idea, then the first product – that was already in which year?
Eugene: So multiple ideas came out of the project of how technology could have a role in financial services, and that was 2009. The idea of building Mambu came about at the end of that year and we started to execute in 2010. We thought that the opportunity was relatively global and we looked at what was happening in other spaces – from a technology and business perspective. Around this time in 2009, Salesforce was quite mature, NetSuite was making really strong traction, and you saw the Software-as-a-Service model start to have massive impact in traditional industries like CRM and ERP. Legacy technology and relatively traditional business models were being completely upended. Salesforce was obviously not as big as it is now, but where you could see it was not just a disrupter but the future of how even enterprise technology would be delivered. For us, we saw a similar opportunity in the banking space. 2010 is when we moved to Germany from Madeira, where my co-founder Frederick was from. We spent that first year developing the concept a bit more, starting to develop the first version prototype of the application, while also taking on additional projects to pay the bills and live our lives. The end of that first year is when we really formed Mambu, the company. In 2011, is when we launched our first product. Mambu is a business that started to exist at the cusp of 2011. Our first customers started to use the platform live in production around mid-2011.
Samarth: Awesome. So, I think you are the few people I’ll be interviewing where I can actually ask, you know, what was it like to build something which was at that time, it wasn’t even called fintech, but you started off and then you didn’t have too many other startups to compare with or look to for a model- at least not in Europe at that time, I don’t think there were too many. So how was this first two to three year journey? Just getting a hang of where are you? What are you doing? Are you on the right track? How did you go about that? So it’s like I’m talking about 2011 to maybe 2013, how were those early days?
Eugene: I said, my background is in technology, so both my co-founder and I spent a lot of our time and energy building the product and building the platform in the beginning. For better, for worse, that’s where most of our mental energy was because we knew that there were a lot of challenges in this – but part of this is we weren’t really sure if it was possible. Conceptually, it was nice to apply the principles of something like Salesforce where you build a platform and one code base is used across various markets. But in practice that hasn’t been done anywhere. It’s usually a case of every single core banking system or any system that provides similar functionality is either a local platform or it’s usually localized or customized sensibly. So we did this to kind of both prove to ourselves and to our investors that it’s possible to build it and it can be based on the principles of configuration. Otherwise, the fundamentals of a software as a service business model, support model, distribution model would be very difficult to support. So that was the kind of big challenge that we were overcoming in the early years. We were lucky enough to always have early customers working with us. In the very first year, we had a customer in Mexico, we had one in the Philippines and we had a few in Africa. It was always the smaller organization in emerging markets. But even though they were not really providing us with the kind of commercial traction that we needed to scale the business, they were beneficial, helping to prove, validate and co-develop the technology, because it was being used in so many different markets for different use cases. All of them were around lending, so we kept it relatively contained, mostly around personal or micro/ small business lending, but still around lending. The diversity of the markets they were in, the way they designed their products and fees, everything else behaved differently. We were able to build the platform and had to re-engineer quite a few things due to the lessons learned with the first few customers. There are a few major iterations of the platform over the first few years, but at that point we were quite confident that you know what…it’s very possible to build a platform that is one codebase that we can support as a software-as-a -service model, and that can reach customers anywhere around the world.
Samarth: Got it. And then by this time, you already raised your seed funding in 2011 to 2013?
Eugene: Yeah, we had our seed funding from which we formed the company- just the beginning of 2011 – and around 2013 was when we had our Series A funding when the technology was becoming more mature and coming out of its initial prototype stage. We had our first few customers but the commercial traction was relatively low because they were smaller organizations. But you could see that there was definitely interest and appetite in that. And it was also around 2013 that the earlier days of the whole fintech movement started to come around. You could see what was coming on the horizon. And that was going to be, you know, the really big opportunity for us to play in as well. That was also a key moment in our history.
Samarth: And the first set of investors who came in – I think I remember a couple of them – but who were they and what was the main aim of bringing them on board at that time? Was it mainly, you know, focused on the product and the SaaS piece of it or was it also trying to get connections into the financial services?
Eugene: Runa Capital and Point Nine capital were our first VC investors after our seed investment, and a lot of it went into product development then. But it was also about starting to help us build out some sort of marketing and commercial footprint for the company to be able to raise awareness in the market and try to figure out. Because you are a platform, we were trying to figure out which areas,which type of organizations will be best suited for it at the time. That’s what started to open us up to larger non-bank lenders. We started to work with our first credit union, we started to talk to telcos who were interested in lending, started to really expand beyond just the micro financial services community into a broader ecosystem. We were investing in building up our market awareness about the fact that we existed and how we position ourselves in our market, but also still continued to deeply invest in the product and platform. We were expanding and it was leading to more use cases, more geographies. We were very quickly in 10 to 30 countries, we had customers really popping up from all over the world. We had to keep investing in the product and technology to support that.
Samarth: Would you say then by the time you finished raising your Series A, the expectation or the plan with that was already to go to real enterprise customers as well? Because I remember, there was a transition from the smaller, prove the product works type of customer base, and then you started to really go pretty much head-on with some of the incumbent players. Maybe not head on in absolutely the same customer base, but there would have been a planned way to go head to head with some of the incumbent core banking providers. When was that approximately?
Eugene: I think it was pretty much kind of around that time, around, 2013 to 2015 or so we transitioned from a place where our customers were using us because we were the best, most cost effective alternative to local and desktop systems – and the economics and the complexity of traditional core banking systems simply never made it a part of their equation at all. That wasn’t something that mattered, that was never something that we were competing with, because those were just unrealistic options for most of them. From 2013 to 2015 the dynamic changed very quickly, because now organizations were comparing us to them, but looking at very different attributes. They’re saying, well, I need most of the functionality that the traditional core banking systems have or lending systems – which core banking systems also support- but I want them to be much more agile, to be much more flexible, to be more modern, to be more closely connected to my cloud architecture, principles, etc. They start to look for similar functionalities, but different attributes and we were much better positioned to support those attributes for those types of organizations.
Samarth: And both of you, I think at that time, it was still mainly you and Frederick driving the company and your CTO, probably. But would you say either of you three had any like, sales, business development, focus or background? Or how did that part play out after you decided to go after enterprise customers?
Eugene: Well, so, our CTO, actually, we’ve only had one CTO, Ben Goldin, who’s still our CTO. He joined us quite a bit later, in 2017. So Freddie and I were managing the technology part of it. We’ve had various people in different roles supporting us in either marketing or sales and so forth. But we took on the strategic roles in those conversations ourselves, navigate both closely with our customers which was really beneficial. It wasn’t scalable, but it was really beneficial to understand what was happening in the market, what customers really valued, what they cared about. That affected both how you do sales and marketing, but also how we think about what the product should be, what the scope of it should be, and also helped inform us when we moved into other use cases of the platform. The vision for the platform was always supporting a very broad range of banking – or even broader – financial services products. We had to start somewhere. We started with very simple personal loans for various reasons. Then we expanded that out often in collaboration with our customers into additional use cases including N26, Oak North and many others. But as we moved into more use cases from small business types of lending to revolving credit products and related cards, we did that in collaboration with our early customers. They were like our launch customers for that particular capability.
Samarth: Then the next phase started around…like that would be roughly Series B?
Eugene: I would say the next phase was probably around that 2015 or so mark, and that’s when we were starting to really see – not so much yet within the traditional bank space – but there was definitely a lot of interest from established institutions in financial services. And of course, the neobanks were looking at technology through a very different lens than banks traditionally work. At this point, there were a lot fewer question marks around the ability of our platform to scale, and service enterprise customers with various financial products. The question at this point was still about what the role of traditional banks was – especially the larger banks – and how would they adopt a platform like ours. They started to look into the cloud, especially because they saw a lot of fintechs and the new banks were on the cloud but you didn’t see too much movement from a lot of them at that time. That was becoming the next wave to conquer. But at that point, there was already a clear and relatively proven need and market for us in non-banks, or let’s say non-Tier-1 banks, needing a platform that had the attributes that we did.
Samarth: Wasn’t by that time a kind of transition phase for you as well on the sales side? Did you continue to get involved or did you start putting together the sales and business development team? How was that going with Series B?
Eugene: Yeah. We’ve always been a very geographically distributed company, with customers in Mexico, and the Philippines, then several in Africa. The countries and timezones just kept growing because of the nature of our platform and the nature of the industry. But I think around that time, we were starting to hit critical mass. That’s when we realized we had to restructure our commercial operations – and our company in a way – where we made different leaders responsible for various regions. This would give them more alignment and autonomy, to service their markets and support the whole customer lifecycle from marketing to sales, to onboarding, and then of course, account growth and retention. And to make that as local in the various regions as possible because we were becoming a limiting factor of both what we knew about the various markets, but also our ability to support them and service the market. So we expanded out from being a centralized European team, and we spun up operations in Miami to support Latin America. Miami was the headquarters but we had people in Mexico, Colombia, Puerto Rico, throughout Latin America as well. We did the same thing for Asia Pacific, we’re doing that in Singapore/ Sydney to cover that region too. Then in Europe, we have a more clear distinction between our global and EMEA operations, which is a separate team, even though we’re about running around in the same offices. So I think that was the biggest structural change where we realized that the needs, and that as the market opportunity was global, we were becoming bottlenecks. It was impossible to have a global VP Sales sitting here and driving decisions in each of the markets – which they know very little about. It had to change.
Samarth: This was like, you have to arrive at the decision mostly based on how things were working in those markets and the way you wanted or the way you saw customers buying and using your products, because this is not the normal route for many companies to take, they do start off with a sort of head of or VP of Sales or BD?
Eugene: We had the same sort of thing. But we just realized that the structure wasn’t scalable, because you don’t have enough insights about the various markets, you’re also too far removed from your customers. It’s great for me to build a relationship with all of our customers, but our customers speak different languages and they need to talk to people who speak those languages too. And they need to have that relationship with the local teams and people who are in their market, and know their markets better. It’d be naive for us to sit here and think that we know how everything operates in those markets. We need to be creating great products and a platform and company operations to support the regions. But they need to fundamentally be able to drive the relationships and the customers in the specific markets in which they operate.
Samarth: Got it. That’s kind of worked out for you and you continue to plan expanding it that way regionally, for each of these regions.
Eugene: Exactly. We’ve done that at the regional level. This year, we’ve spun up well, two months ago we spun out North America as a separate region. So right now we’re operating with four regions and of course, we’re always taking a look to see how should that continue to grow and scale out in the future, both from a high level region perspective, but also specific countries where we want to dive in deeper. This is because saying that you cover all of Latin America is one thing, but there’s very different dynamics and customers and languages in specific countries where we might want to dive even deeper. We want to make sure we don’t cover just regionally but get much more local in terms of coverage and also the planning becomes more bottom up rather than top down.
Samarth: By this time I think you had a better grip on where you are, what you need to do and advice from investors. I think you had another roster of great Investors in Series B coming in. How did that all pan out? And kind of what has worked out from there in terms of the fit to the way you wanted to grow, the investors you brought in – how’s that helped?
Eugene: Yeah, I think for us, we were always in a very fortunate position. At this point we had CommerzVentures and Acton join us. Then Bessemer Venture Partners joined us a couple of years after that. One of the nice things is we’ve always had is investors, who were supportive of our approach. It always felt like an advisory board where they challenged a lot of things that you’re doing, but it was up to us to lead the conversations and propose things. If they see better examples of somebody else who has been working on something similar, that’s great. If they see it’s been done differently, they’ll challenge us. But it’s always been up to us to take the lead. It was really good to have that sounding board, because some of the initiatives were relatively new and uncommon. International expansion, of course, is common to a lot of companies but usually they do that by dominating the local market first, and expanding from there. We were global from the very beginning. So we had to try to see what analogies could we learn from companies that might have done something similar? Obviously, there is no individual company we can really look to for a playbook. We try to look within their portfolios, within their experience of individual pieces that seem like they could be relevant for our journey and look at how we can adapt it to what we want to do. SAP for instance, in the early days, they did a great job of how they built up their company by doing it country by country and putting in general managers in each specific country. They own a P&L and run that particular country and market. Even though they don’t have as many parallels with us, there is still a lot to learn about the operating model that we could apply to how we were thinking of scaling out our business.
Samarth: So we fast forward to the last couple of years or the last two-three years. But before that, so far, if we are around in 2017, or 18, by this time, in this journey, was there a time when you were like, really struggling to figure things out? Or was it always, relatively, you had things in control and you figured everything out right in time.
Eugene: I think at this point, we were really about trying to scale things up. Of course, there’s a million things to try to figure out. But I think the bigger decisive point in the journey was probably closer to the 2013 sort of era when we were really trying to transition from Mambu as a platform for microfinance organizations. And asking whether the rest of the market is ready and willing to adopt our banking technology, or is it not quite there yet. That’s a relatively large leap, and probably the bigger challenge. I think those were the more difficult waters to navigate. It’s really just a question of timing. If we started the business a couple of years later, we’d be a few years behind where we are in terms of product development, but that would have been a lot easier and more obvious. If we started the business a couple of years earlier, the market probably just wouldn’t have accepted it, I don’t know, maybe we would have managed to survive for a little while, but it would have been a very different dynamic. We wouldn’t have been able to catch that next wave of the fintech movement – not just the new banks and the fintechs, but how traditional enterprises, corporates and banks responded to fintech as well. I think that was probably the more critical moment, in the company’s history. In 2017/2018, we were going through different challenges and trying to restructure the company, hiring more skills and investing in your product. But it was more a matter of what areas should we invest in? Who’s the right leadership and so forth rather than, what sort of company will we be?
Samarth: Right. And then the last couple of years so Series C was 2018?
Eugene: It was, what a year and a half ago with Bessemer.
Samarth: And what’s the plan, so from the Series B to Series C, where was the…what delta was to be done or what was in your mind as you went to investors with the Series C raise? And how’s it going? What’s the plan?
Eugene: Yeah, so at that point, the commercial operations were looking quite good. We were already starting to work with banks as customers, which is really a critical proof point. We had a lot of other exciting opportunities that we wanted to expand into both in terms of geographies and going deeper because we were spread out geographically. Our operational customer facing teams in our regional offices were relatively small. We didn’t have our technical support capabilities regionalised as well. So while we were in other markets, we were still a relatively Europe-centralized company. And we saw a lot of other product initiatives that we wanted to invest into both in terms of supporting additional functional use cases around our customers, but also technical capabilities. Because of our great commercial traction at that time, and because the fintech era was becoming very clear, it was relatively straightforward to go through a fundraising process. And then to double down on our growth at that point.
Samarth: At all these stages and all these fundraises, did you really – because those were early days for each of these raises- in terms of comparable companies, there were not too many. So did you find like investors were looking for a very cut size, you know, this much ARR or such and such metrics or so on and so forth? Or was it more you know, guys, we know what’s coming. This is where we need to put in and how did that conversation go? Did you find yourself more setting the agenda or was it always Yeah, talk to us when you have so much ARR type of a thing?
Eugene: Earlier was less structured but our last fundraising was more clear cut. We had growth, growth numbers, ARR numbers and all the fundamentals of business looked really, really good. The key was just finding an investor that was the right match for us, because we’re a very unique company in the sense that we’re an enterprise software-as-a -service company, but in the financial services domain, and there’s very few of those. But we’re also one that has 90% of its business outside the US. So you come to this strange intersection where you have investors that are interested in enterprise software, but they invest primarily in US-based companies. And then for other investors, we were also a little bit of an anomaly by being an enterprise software but software-as-a-service. We didn’t just fit the traditional mould. Basically, all the fundamentals of the numbers are good and the market looks good. But it’s a little bit of ‘this company is a little bit odd in some way’. So finding the right investor who understood us and could support us was the interesting part of it. We had no shortage of offers. We were just trying to understand who was going to be the right fit for us.
Samarth: So plans for the next few months or the next 6 to 18 months?
Eugene: We’re working to really scale out the team. We’ve grown to about 360 people right now and we’ll probably finish the year close to 450 people or so across all areas. There’s a lot of focus on building out the teams and onboarding everyone that’s coming in, and we have a lot of customers and pipeline. A lot is due to the COVID impact and opportunities have accelerated as we’re also seeing increased demand. We’re trying to make sure we can scale up our operations and product capabilities to support that, and make sure we can support the whole entire deal flow. Then at the same time, we have quite a few other, more strategic areas that we want to invest in – both technical capabilities and product. The challenge for us right now is to navigate both at the same time – we have a lot of businesses as usual where we can’t drop the ball and at the same time, we see quite a few exciting areas where we can move into. We’re in a good position for going forward. So it’s a kind of balancing act between business as usual for us, and a lot of the new initiatives. So it’s definitely an exciting time right now.
Samarth: By the way, do you get contacted by startups who are earlier stage also like in Germany or in Holland or in Europe, trying to pick your brain?
Eugene: Through introductions to investors, yes- I just had a call this week with a company in the insurance tech space. And they were also talking about their journey about how they’re thinking of scaling up their commercial operations. I talked them through our experience- a bunch of the mistakes we made, what I would probably do a little bit differently. And hopefully, it’s useful as a sounding board to other founders and other CEOs. So yeah, always happy to do that. Whatever usually comes in through introductions from our investors because they’re thinking of investing in somebody or they know somebody in their network and they think we could provide some help. I always make some time for those calls whenever it’s possible.
Samarth: Any last piece of advice you’d like to leave those startups with? In terms of learnings or what to do what not to do? Especially when we’re talking about those difficult first two to five years.
Eugene: I’m a product sort of founder. I always believe that, at the end, you have to really put a lot of energy in it and create a great product. And creating a service experience – so that your very first early customers will be your ambassadors. And that can be due to both the technology, and it could also just be how you service them, how you onboard them. My co-founder and I were involved in helping draw up support tickets or escalations or anything else that was really necessary. You can’t expect things will be all perfect no matter how great your technology is, but if their experience with you in the early days is very positive, then that will carry forward for many years in your company. It doesn’t matter too much whether that customer is paying you 10,000 a year or a million a year in the early days. What matters more is ‘are they a really strong and positive reference’? We had very small customers who were very good ambassadors that brought us very big deals. You wonder how this small customer can ever be a big reference for a bank? Well, because their CEO has a great track record in banking. He has a strong personal network, he is a very trusted individual, even though he’s now running a very small institution – which pays you a very little amount of money – but he’s highly respected. And if you show him that you guys are serious, you’re professional, you value quality and service in everything you do, that will carry forward and that work will keep going forward. So it sometimes feels like a difficult, strange investment, but it pays off. If you have a product, and technology and the markets are moving your way, then those things will definitely pay very large dividends at the right time.
Samarth: I still remember on the topic of you know, how hands on or how much you need to do in the early days, I still remember I think we met in your Alexanderplatz office in Berlin, about five years ago, even then, that was like already three, four years into the startup and I think they were the first two inside sales or business development guys, right, and you and Fredrik would keep hopping over to them – hey, say this to the customer etc. I think it’s exciting. Good stuff.
Eugene: You definitely don’t want to get too far removed from the voice of the customer early on. I think there’s pressure from investors to bring in sales leadership and account executives – and of course you need to do that because you cannot be on all sales calls yourself. But I think it’s also a mistake to assume that you can just delegate- especially in the early days – as founders are the best sales reps because they understand their value proposition, they understand the product, the technology, and they can also learn from those conversations.
Samarth: Absolutely. And why the move from Berlin to Amsterdam?
Eugene: So we spun up the Amsterdam office because our CTO was based here. Around him we had a great network that we brought into both the product organization and commercial side. Our company’s always been very international. Even when we were based in Berlin, I think more than three quarters of our team joined us from all over Europe. And we have people joining us from South Africa, from the UK, from the US, recently we had a new hire from Mongolia. We’ve had a very international footprint and Amsterdam is very similar. It just had a different talent pool that was already based here and sometimes people wanted to move to here instead of Berlin. So it simply expanded our pool of options effectively. As a result, we scaled quicker and – as it worked out – most of my direct leadership team, like Ben our CTO, Elliot, our CCO, and our MD for EMEA, and many of our VP level leaders were based here. I was spending a lot of time here, with customers and partners coming to Amsterdam, I found I had to commute back and forth. I was sitting in Berlin on phone calls all the time, so I was feeling remote – and this was before everyone was remote with the Coronavirus. I wanted to be closer to where a lot of the action was, where my direct team was, and be able to track with them on a more daily basis. That was the reason for the move to Amsterdam.
Samarth: Great to have you as neighbors. Excellent. Thank you so much. In spite of having kept off and on in touch with you, I learned a lot about things which happened in those couple of years when we didn’t interact. So exciting to have the story and the journey to scale here from you. And looking forward to sharing this with a lot of the others who are early in the journey, looking for inspiration, looking for learnings and so on. I just hope your phones don’t start ringing a bit too much from startups looking for you know, tell me more. How do you do that? But yeah, thanks so much for your time.
Eugene: Yeah. Likewise, happy.