Christian Hecker & Johan Brenner: The Biggest Fundraising Lessons Having Raised $1.3BN | E1116

1. 0:00 – 0:58

   Intro

   1. HSHarry Stebbings0:00

      You sold 75% of the business to an angel investor. What happened, and how did that pan out?

   2. CHChristian Hecker0:05

      So we tried to raise, many times. They were very eager to invest but they said, "Well, think we have leverage and so it's either this or nothing." And so we said, "Well, it's better to have a tiny shareholding of something big than a big shareholding of nothing." And then we raised 600,000 euros back then and sold 75% of the company.

   3. JBJohan Brenner0:20

      And of course, we looked at the cap table and said, "Jesus, how are we going to manage this?" So we had several meetings with the seed investor. Explained that I think what's best for this company is if we have a cap table that's more founder-friendly.

   4. HSHarry Stebbings0:32

      What would be some of your biggest pieces of advice you've found is when thinking about building out your early cap table?

   5. CHChristian Hecker0:37

      I think that it's important to acknowledge that most of the time, you don't have a choice.

   6. HSHarry Stebbings0:42

      Guys, I am so excited for this. I've heard so many wonderful things in doing the referencing for this show. So first, thank you so much for joining me today.

   7. JBJohan Brenner0:50

      Thank you, Harry. It's great to be here. Looking forward to this for a long time.

   8. CHChristian Hecker0:54

      Yeah, same. Thanks. Great to be here, and we're good, uh, listeners, so

2. 0:58 – 3:08

   Background

   1. CHChristian Hecker0:58

      looking forward to be in it.

   2. HSHarry Stebbings0:59

      Well, that is very, very kind of you. So I want to start with just a little one-minute intro from each of you, just so the audience can get familiar with your voices. So, Christian, why don't we start with you? And then, uh, Johan, over to you.

   3. CHChristian Hecker1:09

      Sure. So it's Christian. Uh, I'm one of the co-founders of Trade Republic. Uh, we started that journey, I think, nine years ago. Uh, before that worked in the investment banking, and before that, actually studied philosophy. So no clue how I ended up here, uh, but it's a lot of fun.

   4. JBJohan Brenner1:23

      Johan? Yeah. I'm a venture capitalist. I'm a partner i- at Creandum, which is an early stage, uh, investor in primarily in Europe. Now I started my career in big companies, became an entrepreneur. My first company I started was actually an online trading outfit that I sold to E-Trade 20 years ago. Many moons later, uh, it's, it's Trade Republic. But I've, I've started my career as an operator, became an entrepreneur, and then joined, actually Benchmark, uh, in Europe 20 years ago, actually to the date, and joined Creandom a few years later. I've been with Creandom for 15 years.

   5. HSHarry Stebbings1:57

      You mentioned that, like, E-Trades, Johan, and like, when you know an industry so well, it's so easy to think that, actually, “Oh, I know everything in that site, not a good industry," or you have these preconceived ideas. Did you have preconceived ideas when you first met Christian?

   6. JBJohan Brenner2:12

      Well, actually, I did. Uh, that story is kind of interesting. I didn't have preconceived ideas when I met Christian. When I met Christian, I fell in love with him and his team and what they were doing. But my colleague came to me one evening in, in, in March 9- 2019 and said, "We, we have this opportunity to look at a Robin Hood of Germany. Do you wanna take a look?" "No," I said.

   7. HSHarry Stebbings2:35

      (laughs)

   8. JBJohan Brenner2:35

      And, and, uh, that was a per- that was tw- so I, I said to myself, "This has, this has been around for 25 years. I've done this before. Nothing has happened. Uh, Robin Hood is coming. And Germans, they don't save anything else but in their mattresses." And, um, then I woke up the next day, and I said, "Hey, maybe there is something there. B- Bjarke, why don't we, why don't we take a call with, with the team?" And I did. And the rest is history. And, uh, I, I can come back to that later. But, uh, so I did have a preconceived idea.

   9. HSHarry Stebbings3:05

      I absolutely love that, and, uh, even better that Germans don't

3. 3:08 – 5:28

   Challenges in Fundraising

   1. HSHarry Stebbings3:08

      save anywhere but their mattresses. I wanna take a couple of years step back though, Christian. 'Cause, you know, it started in 2015. So can you just take me to 2015? You decided not to raise. If we start there, in the early years, like why did you decide not to raise in the early years from that 2015 to 2018 period?

   2. CHChristian Hecker3:27

      Well, of course. So, I think first of all, it was never a really decision from us, right. Uh, so we tried to raise, uh, many times. So, uh, between I think 2015 and '19, I met over 200 VCs. Um, I was, um, rarely invited, and every time we were invited, we, uh, almost never saw the partner, right. So they... The usual story goes, they just cancel the meeting five minutes before, and then you may meet an intern, you may meet an analyst. And then you're pitching, uh, to them a very simple idea, right, that, um, you believe that there's a pension gap, people are going to invest, um, starting in Germany. You're 25 years of age. You gonna found a bank. And then everybody calls it bullshit, right, and says, "This is not gonna work." As Johan said, "Nobody wants to invest." And it's, uh, uh, heavily regulated, and, and, and, and the potential is not there. And so, um, nobody really gets anywhere close to writing a term sheet, um, uh, to this. Um, and so during that time, we looked into alternative ways of kicking things off. And, um, my co-founder, Thomas, he's a gifted engineer. And, um, at the beginning, he would participate in hackathons, you know, those programming, uh, competitions, and he mastered the skill, and he won every one he participated in. Um, and so we won one, um, of Commerzbank, like the German, uh, uh, bank with the yellow sign, and they then invited us to join their so-called startup garage, so their internal accelerator, so to say. And so we moved to Hamburg, um, and we spent, uh, one year with them to develop that idea and stuff. And they would give us some money, and then, uh, one day, in, uh, I guess, early 2017, they would say, "Well, um, we will not back this. Um, we decided against it. So we're done." Right? And so then we bootstrapped the rest, uh, between 2017 and '19. And once we had our banking license, and the first 10,000 paying customers, the VCs were all very excited all of a sudden and wanted to invest.

   3. HSHarry Stebbings5:27

      I have so many questions.

4. 5:28 – 8:00

   Lessons from Early Days

   1. HSHarry Stebbings5:28

   2. CHChristian Hecker5:28

      Sure.

   3. HSHarry Stebbings5:28

      One, when you look back at those early days when, bluntly, you were getting rejected by every VC and the analysts and the interns and you name it-Was that your mistake in terms of how you packaged it? I think a lot of things are product marketing challenges. Should you have packaged it differently, or was it a VC class that just didn't like the product?

   4. CHChristian Hecker5:46

      Well, I think if you, if you fail it's always your mistake, right? Um, um, so you, you're not here to blame any other person. So I think in hindsight, obviously, we, um, improved a lot about how we present the company, the mission, and how we, uh, understand our business. But I guess back then, um, let's travel back in time, right? 2015, uh, Entry 6 just started, Revolut just started, right? So the entire idea of doing banking on your phone was quite novel and not really proven. Um, second, you're entering a market, Germany, where there's historically a very low quota of people investing in the first place, right? So only, um, 10% of German invest. And then third, um, you have, uh, the idea to do commission-free investing in a heavily regulated market, and you get this huge entry barrier of getting a license in the first place. And I think these, um, three points altogether were a bit too high, right? Um, but we've been so motivated because we really believe that there is a pension gap. So meaning that the statuary pension system we have in continental Europe is inherently broken, and that thesis suggests that basically in the next 20, 30 years, millions of people are going to start investing. And so that idea kept us going, um, over the first four, four and a half years to really, uh, come to the point where we have a working prototype.

   5. HSHarry Stebbings7:01

      What did you tell yourself when you got continuous nos? A lot of f- you know, we have over 700,000 founders that listen, and I'm sure many of them get many nos. What would you say to them, and what did you tell yourself?

   6. CHChristian Hecker7:12

      Well, we never tried to think about the, the, the, the, the big thing, right? So, um, if you would ask me back then, was it my aspiration to build a unicorn? No. We always told ourselves that, um, as a brokerage business, you can be very profitable, meaning with 80,000, 100,000 clients, you can be a small, profitable salary-paying company, right? And that idea sounded much more feasible than just founding this, uh, behemoth with like multi-million clients. We started very small, so we built a trading competition for students. So, uh, we took our money, we bought a few iPads, and we went to s- to universities and we would make these trading competitions where they could simulate the stock market, right? And all of a sudden, we had 15,000 people, uh, using the product overnight, right? This trading competition. Uh, maybe because of the iPads, but maybe because the app was just so,

5. 8:00 – 10:50

   Pitching the Vision

   1. CHChristian Hecker8:00

      um, uh, intriguing and, and, and, and cool, and obviously these things motivate you and keep you going.

   2. HSHarry Stebbings8:05

      Johan, I want to ask you, you know, it's a really hard thing for founders, 'cause like Christian said there, we didn't think about like building a billion-dollar business in that way so aggressively, and it was kind of the next thing, the next thing. But then investors want to hear the billion dollar, the pitch that makes it, you know, a huge outcome for everyone involved. How do you advise founders pitching between this is how we accumulate value sustainably, versus pitching the big vision, and what do you prefer?

   3. JBJohan Brenner8:33

      I think you gotta have some kind of vision in there, um, but I, I, I, I, I like better realistic founders than, than, than ex- exuberating founders. So, um, uh, so I... but it needs, it needs to be a part of the vision there. And I think one of the conversations I... you know, Christian will ban me on this, but he says, "You asked me so many times with how I can become a billion-dollar company." And, um, and, uh, a- a- actually, I think I did. But it, it was, it was... that was the most challenging thing, right? How, how do you make the equation? Germans don't save too much in equity instruments, uh, payment reward of flow, how's that going to be sustained? Uh, et cetera, et cetera. So that was, that was one of the biggest questions.

   4. HSHarry Stebbings9:15

      So if we fast-forward a little bit, uh, unbelievable stat here, Christian, that you sold 75% of the business to an angel investor. Can you just take me to this? What happened, and how did that pan out?

   5. CHChristian Hecker9:29

      Right. So, um, a- again going back in time a tiny bit, so we started with like Commerzbank, and they would give us some money, we had employees and stuff, and then they basically pulled the plug. One Sunday we would lay off eight people, unfortunately, and we moved to Berlin, and we bootstrapped from that onwards, um, and during that time, as I said, nobody would give us really money. Um, but we got this trading competition going, the first traction, and, and people would use the app. We looked for alternative ways of funding the business, and then, um, we met many people who again rejected it, and then somebody said, "Well, you should meet this, um, company in, in Dusseldorf in Germany. It's like a small high-frequency brokerage company called C note, and they are entrepreneurial, they understand the thesis, and they have the guts to do it." And we met them, and I think they saw, uh, uh, the potential, um, and they were very eager to invest, but they said, "Well, I think we have leverage, and so it's either this or nothing." And with that, okay, well, we're three years in, um, we have the confidence we can build it. We've seen at Commerzbank what is required, and we, we can do it, um, and if we get to the point where we have maybe the first, uh, 100,000 customers, it will go somewhere. And so we said, "Well, it's better to have, uh, a tiny shareholding of something bi- big than a big shareholding of, uh, nothing," right? And so we did it, and then we raised, uh, 600,000 euros back then and sold 75%

6. 10:50 – 13:42

   Selling Majority Stake

   1. CHChristian Hecker10:50

      of the company.

   2. HSHarry Stebbings10:50

      Okay. 600,000 euros and then 75% of the company. What happens then? Because that seems like quite a broken cap table that's almost insurmount-... I mean, Johan, obviously, as both venture masters are like, "Oh, oh."

   3. JBJohan Brenner11:04

      Yeah, but you know, this was... So what happened was the following. I, I took that call with Christian and Thomas that morning afterwards, and I was just im-... Then, then they had refined their pitch to world-class, I must say. It was one of the best pitches I ever saw. But more importantly, they had built a full stack, and they've thought about every single banking detail to be able to scale this business, and have keep- to have low transaction costs, et cetera, all the things that you want if this... to, to, for this to scale. S- and then we flew down and met them in Berlin and said, "Hey, there might be a situ-" First of all, they built a great product. They have some, you know, 1,000, a couple of customers, so very early, but they're engaging a lot in the app, so they show all the right trends and engagement metrics, and more importantly, I think...... we realized that, hey, maybe there is a shift in time now. Maybe there's a transition with the new generation of savers. They are going to have to mind to save the pensions. So we realized that, and then we fell in love with everything that we saw, the team, the product, et cetera. And, of course, we looked at the cap table and said, "Jesus, how are we going to, to, to, to, to manage this?" And of course, I mean, in the end of the day, you, you, you wanna make sure that you invest in a, in every- everything as m- good as possible cap table. And of course, going from, from 25% ownership of the founders to something else is extremely difficult. And most VC will probably, you know, not take that challenge. But we tried. And so we had several meetings with, um, the, the seed investor and, uh, explained that I think it's best for this company, uh, for you and us as pos- possible investors, and for the founders and everybody coming afterwards that we have a cap table that's more founder-friendly. That's what we tried to do. And eventually, it's, it's tough, right? And the, and, and I'm gonna say hand it all to the angel investor that they accepted to make that transfer and mechanism work. And, and, but we did make it work in the end, but this was actually a, a deal-breaker for us in the end because we really wanted to see, uh, Christian and the team own enough to be able to have, you know, sufficient as a founder to stay with la- the company long term.

   4. HSHarry Stebbings13:17

      How did they respond? That's a difficult conversation to have.

   5. JBJohan Brenner13:20

      Yeah, of course, they didn't like it at all. Um, and the first call was rather tough, and the second, maybe a little bit easier. And in the end of the day, I think they understood it. I think if you ask them today, I think they are happy with what, what, how we, how we did and restructure it because Trade Republic has been a fantastic, uh, story and development for, for all of us that took part of, of, of

7. 13:42 – 17:08

   Lessons on Fundraising

   1. JBJohan Brenner13:42

      the company since then.

   2. HSHarry Stebbings13:42

      Can I ask you, Christian, on the flip side, on the founder side, having gone through that process, what would be some of your biggest piece of advice to founders when thinking about building out your IT cap table, the dangers, what to do, what not to do, and how it changed your mindset?

   3. CHChristian Hecker13:56

      I, I think we're gonna talk about maybe the further fundraising i- in, in a minute, right? But it's very, uh, important to acknowledge that, um, most of the time, you don't have a choice, right? So I think you all see there's obvious advice, you wanna w- work with great individuals and superstars and broad cap table, blah, blah, blah. But to be honest, nine out of ten founders don't have a choice at all, right? So basically, take what you can. Um, and I think the second one is, I'd say in hindsight back then, we were in for really the entrepreneurial journey, meaning building that product, right? The rest we really didn't care about, so we've been never motivated by money, we're never motivated by big numbers, right? We really wanted to build this product and to make it work and to have something which is actually there, right? And that fairytale kind of kept you going through all the ups and downs of that journey, right? So, um, I'd say in hindsight, raise as little as you can, right? Uh, at a reasonable valuation, um, and just really try to build something which has defensible moats, um, which is unique, uh, which has a true value proposition. Because to be honest, the moment we had the banking license, the moment we had the first 10,000 customers, nobody, no investor I met, uh, the ones who invested and the ones who didn't invest, nobody ever questioned product market fit after that, right? So it was incredibly obvious to everybody if you make f- trading for free in a great-looking app, people will use it. It's gonna be successful. But to come to that point where you have all those moats and it's defensible, that took the initial conviction and the initial entrepreneurial journey. Um, and for that, we just wanted to have people who understood the product and to help us on the journey.

   4. HSHarry Stebbings15:24

      Johan, what risks were you underwriting when you did the deal? When you were analyzing this, what were you like, "These are the question marks we have which we are not sure about yet"?

   5. JBJohan Brenner15:33

      Market looked great, but is it really there? Uh, do you have to steal customers from somebody else or can you get into new generation of savers that will join the platform at scale? Can you build an international product that goes across b- and can work in other countries than Germany? Which is, this is, uh, difficult is- 'cause it's regulated, it's tax-driven in many countries, et cetera. Will, uh, payment for order flow be sustainable in Europe over the long term? If it's, if it, if it's in the medium term, it will be okay for the company 'cause we will always find revenue sources. How can we get, uh, satisfied BaFin which is one of the toughest, um, you know, uh, FSAs, um, bank authorities in Europe? And they just had Wirecard which wasn't a great, uh, incident, and, and how can, how can, how can you build, uh, suf- you know, sufficient structure and team in order to, to make sure that you operate under the regulation? 'Cause it's financial services, it's savings, it's about trust. So those were the things that we thought about the, the, the most. We saw very little r- I mean, we s- we, we loved the team and, uh, the people that hired and, and came around and we love the product, uh, but those were the things we thought about. And of course, I would say also, how do you efficiently acquire customers? The CAC/LTV was of, is of course a, a very important subject, but then we can come to that later, uh, 'cause everything went better than we planned.

   6. HSHarry Stebbings16:58

      I always wonder with like CAC/LTV, does it get cheaper over time to acquire customers as brand increases, as word of mouth increases? Or does it get more expensive

8. 17:08 – 18:23

   Customer Acquisition & Retention

   1. HSHarry Stebbings17:08

      as you saturate core market and you expand into ancillary markets which are maybe less obvious customers? Open to everyone. I'm just always thinking about this question.

   2. CHChristian Hecker17:18

      Well, I think-

   3. HSHarry Stebbings17:18

      Christian.

   4. CHChristian Hecker17:18

      ... i- initially the idea obviously is that it gets more expensive down the road, right? As you penetrate a niche audience and from that, it gets expensive and I think this is where maybe the question mark is coming from and we had the same obviously. I think in hindsight what we underestimated is that if your next best competitor is 10 bucks per trade, right? And you offer something for free in an app with a German banking license, right? The word-to-mouth growth is something you can just not predict and imagine, right? So still today we get 65% of customers for free through organic growth and word-to-mouth, right?... it's like a virus that spreads, positively. I think we saw the same, so basically as Johan said, to think we overly, um, um, underestimated, uh, how cheap we can acquire customers and how big the LTV is. Because another fact which is, um, a great, uh, uh, pro and a contra in the European banking market is, it's hard to acquire customers but once you have them, they're incredibly loyal. Like, they don't really churn. So this is why your LTV is always higher than you initially expect.

   5. HSHarry Stebbings18:13

      What do you think is your core metric for success? Like, how do you define a successful user? The number of trades? The amount of times they log into the app? What is that metric which determines

9. 18:23 – 19:23

   Defining a Successful User

   1. HSHarry Stebbings18:23

      a successful user?

   2. CHChristian Hecker18:24

      Yes. And I- and I think that's a very, very important question, fundamental question for Trade Republic because many people confuse us to Robinhood, right? And they think we're just a trading company. And if you follow that thought, I would- I would should look into trades per customer per month, maybe, right? And actually we're not looking at it, to it at all. So when any product manager comes to me and suggests that we should have an engagement campaign helping people to invest more, more often, more frequently, we don't do it. We- we don't. Because we believe we want to help people to accumulate wealth. Now, how do you predict this is by monthly recurring deposits. So basically, we try to optimize with as many young people putting in money monthly into the product, right? And so this is a core metric. So eventually if we go to the board, the first number we talk about is assets, total assets. The second number is, um, recurring deposits over time because we believe that's the biggest predictor for sustainable activity. Because I'd rather have millions of people doing little business over the next 30 years recurringly than a lot of business doing GameStop and then they're gone when

10. 19:23 – 25:08

    Addressing the Pension Gap

    1. CHChristian Hecker19:23

       the market flex.

    2. HSHarry Stebbings19:24

       Can I ask, and this is a naive outsider but I, you know, specialize in asking dumb questions, when you look at bluntly the- the audience that we have with Trade Republic, it would be on the younger end, I imagine, and like the lower wealth end. How does one ever think about getting the 50 to 65 where they're depositing millions and millions and taking them from very high-touch prestige services to Trade Republic?

    3. CHChristian Hecker19:50

       So basically, I think we want to have an incredible focus which is basically having, um, the most customers we can beneath, let's say, 30, 35 years of age, depositing recurring money, right? Uh, why do we do this? Look at Trade Republic today. We have four million clients. The average Trade Republic client is, let's say, 28, 30 years of age, right? This person already holds an average 8,000 euros with the account. These people are gonna, uh, uh, uh, double or triple their wealth in the next five to 10 years to come, right? Because as everybody knows from themselves, during the 30s you accumulate the vast majority of your personal wealth. So if we can just grow with these people, you're gonna be the, uh, Charles Schwab, the UBS, uh, of Europe in 20, 30 years, right? And so basically we have this really incredible focus of young people, recurring deposits and obviously during the, during the journey you get a lot of 40 and 50-year-old people, uh, down the line. Maybe that's what we're seeing today, but the core focus is still the young people.

    4. HSHarry Stebbings20:44

       This is really just going macro now, so forgive me for it. But like y- y- you said there about accumulating wealth in your 30s. Certainly in the UK, people used to own homes and buy homes in their 30s. Now, bluntly, homes are so unaffordable, people just spend money on designer goods. It's why Bernard Arnault is one of the wealthiest men-

    5. CHChristian Hecker21:02

       Right.

    6. HSHarry Stebbings21:03

       ... in the world. Um, and so actually we are nowhere near as wealthy as our parents. We squander our whole wealth.

    7. CHChristian Hecker21:08

       Yes.

    8. HSHarry Stebbings21:09

       Do you worry about actually a very different time today, meaning we're less wealthy than ever and we accumulate wealth less effectively?

    9. CHChristian Hecker21:17

       Yes, and I guess this is a conviction piece you must have in this play, right? So basically, the underlying thesis of Trade Republic and I guess coming from the US, coming from the UK, you don't understand the problem we have in Continental Europe. So Continental Europe doesn't have any incentivized, government-incentivized way to do capital markets pension savings. So you just depend on the generational pension system, meaning you depend on the young people paying m- money into the system and old people getting money out of the system, meaning the guaranteed pension from the state is falling apart. And many, many people realize this right now, right? And I think this is a transformation we're believing in and the transformation we currently see in the market that, um, a whole generation of young people recognizes, "Oh my gosh, I have a problem in 20, 30 years, I need to save some money now." And this is why you see so many people paying in monies, right? So Trade Republic today has 35 billion euros of assets because of that fact, because all these young people deposit money on a monthly basis. And so yes, we believe that over time this will happen and maybe think about it differently. Um, today, a typical 30, 35-year-old is likely not married, likely has not a house, likely has not a car, so the disposable income is pretty high, and then to get a fraction of that as savings is not as unrealistic as it sounds.

    10. HSHarry Stebbings22:33

        Don't you find that fucking depressing? Right, you don't have a wife, you don't have a car, you don't have a house. Oh great.

    11. CHChristian Hecker22:40

        But at least, at least you have a savings account with Trade Republic.

    12. HSHarry Stebbings22:42

        No. (laughs)

    13. CHChristian Hecker22:42

        Yes, but... (laughs) But, uh, but-

    14. JBJohan Brenner22:46

        That's the advert, Christian. That is the advert.

    15. CHChristian Hecker22:48

        (laughs)

    16. JBJohan Brenner22:49

        But, uh, I mean, just, uh, from an investor point of view if you make it, if you get the product ma- mar- market fit right, if you have a great product, if you have a- a product that you deposit regularly and over time it's like NRR is, there's no churn really and you- you just build upon this asset base all the time. If you can deliver great savings products that is, you know, cheap and- and- and- and- uh, and worthy for the consumer, they will- they will join and over time you'll build a fantastic business.

    17. HSHarry Stebbings23:18

        Can I ask how- how much of your, like 4 million, you know, users, members, depositors, how much of that is their primary account? You know, when we think about say like your Revolut or your Monzo who I know very well, their big thing or their kind of core unlock is we want it to be your primary banking account. How much is your primary depositing-... position for you.

    18. CHChristian Hecker23:37

        When we, uh, uh, survey our customers, uh, we see that they have 40% of their private wealth with us. It's a KPI, no challenger bank comes anywhere close, right? So again, like the average account size is 9,000, 10,000 euros, and this is the average. Basically, if you look at your cohorts, which are with the company for two or three years, the average account size is 25,000 euros. So imagine that, right? We have a 30-year-old who has 25,000 euros on his or her Trade Republic account, right? So we own the vast majority of the private wealth of these people. So maybe we're the first bank account for them when it comes to wealth and, um, I think that's a very, very important value proposition for the next, uh, years to come.

    19. HSHarry Stebbings24:16

        What's the biggest hurdle? Is it getting them to make the first deposit? Is that the core thing that then locks them in? Because you've said multiple times, and Johan just said there about the zero churn, I'm just trying to understand why it's zero churn, and is that core hurdle just the first deposit?

    20. CHChristian Hecker24:30

        Well, so the, um, really viral product of Trade Republic is a so-called savings plan, right? So you subscribe to an ETF basket, so to say, and you put in money monthly. And this is something people, um, almost never really quit, right? So you set up 200, 300 euros per month and you just deposit money with this savings plan and it's a bit like a, like a fitness club subscription, right? So you feel so guilty by, by, by quitting it, you don't do it, right? So I think this is what we're trying to do, we're trying to get people this free savings plan and it comes with no strings attached. It's for free, you can cancel it anytime, right? But still people don't do it, and I think that's the underlying current which is driving the business.

11. 25:08 – 26:27

    Raising Funds in Challenging Times

    1. CHChristian Hecker25:08

    2. HSHarry Stebbings25:08

       Yeah, I totally get that. What's the revenue per user today? Am I allowed to ask that?

    3. JBJohan Brenner25:13

       You're allowed to ask, but Christian is very sneaky with numbers, but, uh, we'll see what he says.

    4. CHChristian Hecker25:16

       Yeah, we don't share numbers.

    5. HSHarry Stebbings25:18

       (laughs)

    6. JBJohan Brenner25:19

       (laughs)

    7. HSHarry Stebbings25:19

       Listen, I thought it was worth a go.

    8. CHChristian Hecker25:21

       No, of course.

    9. HSHarry Stebbings25:21

       Um, o- okay, so we have this, uh, we have this theory, we have the banking license then that comes, we have the clear product market fit, and then obviously more VCs see the potential. You've now raised $1.3 billion. Um, can I ask you... and it's a broad one, so you can take it in any ways, but what are one or two of your biggest lessons from raising 1.3 billion from some of the best, including Johan, but then your Keith Rabois, Doug Leone, John at TCV, what are some of those big lessons?

    10. CHChristian Hecker25:50

        Well, I mean, so first of all, I think we saw the two sides of venture capitalism, right? So the first four or five years where nobody touches you, where you're being rejected all the time, right? And then I'd say yes, to the second half, um, where we could or had the luxury of choosing, uh, with whom to work with, right? And I think any investor which we picked, we've built a relationship for over a year or two years, right? So, um, all of them basically cover the company, we had multiple conversations, we spent a lot of time, um, uh, trying to promise and deliver and then, um, that led to this investment. So we would know the people very well, um, before they entered the cap table.

    11. HSHarry Stebbings26:25

        How did the meeting with Doug Leone go?

12. 26:27 – 31:30

    Meeting with Doug Leone

    1. HSHarry Stebbings26:27

       I mean, the- the guy is special. Uh, how did that go? Just take me to it.

    2. CHChristian Hecker26:32

       So first of all, I think it's the peak of COVID, right? So physical meetings are not happening, right? And then, um, Doug says, "Well," casually, "I'm in Berlin, do you want to meet?" And then we would meet on this hotel terrace, because the peak of COVID, everybody's a bit afraid to meet, right? And so yes, we were set- sitting down, it was freezing cold on a terrace of a hotel and had this, I don't know, uh, one or two hour initial conversation which was 50% Trade Republic, 50% my private life and, and, and how I grew up and, and what I'm about and what motivates me, right? And I think that led then to a very great exchange, um, um, over the coming month and then, um, luckily resulted into the investment and obviously we're very privileged to work with Sequoia, to work with him personally on the board and, um, he's somebody who's make you leave your comfort zone for sure.

    3. HSHarry Stebbings27:16

       How did the rounds change? When you think about the way that you presented, the vision that you presented, how did that change from round to round? And Johan, d- do chime here in terms of advice on what you coach founders in terms of how they need to alter their presentation from round to round.

    4. CHChristian Hecker27:31

       So I think in hindsight if you... and we usually do it once a year, look into the, the, the, the pitch decks over the years, you see that our vision really gets bigger and bigger by every funding round, right? So there's a new layer added to it or a new, like, dimension added to it, right? I think in hindsight that is a red line through all the pitches. Um, and I think then we really found in every funding round the next big thing, right? So obviously Johan was the product market fit and then series B with Founders Fund in Accel was the, um, um, scaling in Germany, going deeper in the market, get really maybe millions and billions of assets. And then in the series C with Sequoia it was, okay, let's take the European successful business into some... sorry, the German successful business to something which works across Europe into different markets that's quadruple the addressable market for the product. So you find these, um, 10X reasons every now and then. And then second, obviously, uh, raise as little as you can. We try to be thoughtful with valuation in all the rounds, right? So I think in every round we could have easily raised something much bigger than we did, um, because we're trying to optimize the really end journey and not, not the step along the way.

    5. JBJohan Brenner28:41

       I think... I mean, um, we did have the benefit of, uh, overachieving the plans. I mean, um, you know, I think... you know, I think you sent me the other day the pitch deck that Christian, uh, and I looked at it and, uh, you know, in 2023 we're 5X the plan that was presented to me on the- on top line. And, and it's very seldom that companies develop that way. We have that momentum so, you know, luck and timing but, you know, series B was raised in 2020 on the back of COVID fueled business but that was sustained as well, and then going into 2021 we raised another round. So we've always had, touch wood, a bit of momentum behind us. And at the same time I think we went step by step and refined the pitch on what we wanted to do, so that was all. And I also want to say that Christian was very level-headed in terms of how much money to raise and what valuation, etc., o- over time.

    6. HSHarry Stebbings29:44

       Can I ask you, you know, there's some US venture investors, in particular, you know, Reid Hoffman, who says, you know, "Raise as much as you can when you can." How do you think about that raise as much as you can versus the more disciplined approach to this is how much we need and this is why we're raising it?

    7. JBJohan Brenner29:58

       Well, that's a difficult conversation, right? Because founders want to ra- want to raise sufficient capital, have minimum dilution, and, and at s- at the same time too, they get the advice that you shouldn't get, you know, too razy on valuation because it's hard to, to grow into it. The, the truth is somewhere in between, but I think at the pace where you have a business model that works, business unit, bus- business unit economics that works, and you have money on the table that you can get some extra cushion and everything else works, why not take that little extra money, uh, to be able to execute on a rainy day? Uh, now, if you can do that on valuations, that's, that's okay. Why not? So I think it's, it's not so easy to just say, uh, "Be careful with valuation. Just raise the amount that you need." I think there is some merit to, to raising when you can.

    8. HSHarry Stebbings30:49

       I, I definitely agree with you. Are you price sensitive, Johan? I just did a show with two seed investors and they're like, "No, the best seed rounds are, uh, you have to be price e- elastic completely." And I was like, "Oh, that's not me. I must be fucked."

    9. JBJohan Brenner31:02

       I think if we look back at all our, all our investments and the ones that have been fantastic, uh, it's, they've all been expensive. Or too cheap, no, no.

    10. CHChristian Hecker31:11

        (laughs)

    11. HSHarry Stebbings31:12

        How expensive was Trade Republic when you did it, Johan?

    12. JBJohan Brenner31:15

        Well, it was five, six years ago. It was, it was, it was cheap in today's world, I'll tell you that. But, uh, on the other hand, uh, it felt expensive at that time, given a thousand customers in an A round of 10 million.

    13. HSHarry Stebbings31:28

        Johan, do you think the best entrepreneurs

13. 31:30 – 33:12

    What Makes a Great Founder

    1. HSHarry Stebbings31:30

       are also the best fundraisers?

    2. JBJohan Brenner31:32

       I think so. 'Cause, eh, within fundraising, there's a lot that comes into that trait. Uh, it's about, um, cr- uh, you know, explaining your vision, be- being a great storyteller, uh, be concise, to the point, listen, uh, et cetera. So there's a lot, though, that encapsulates, you know, great at fundraising. And the... and even though as an investor you're- when you're on the, the opposite side of that discussion, it's really frustrating. And I tell you, Christian is great at this. But you c- have to remember then as an investor that next time, you're partners and you're on the same time, eh, same side. So, so I think greater fundraising is absolutely the number one trait of, of, of great founders.

    3. HSHarry Stebbings32:13

       Okay. Y- you just said that, uh, that you're on the same side w- when the next round comes. Most often you're not if you're also a very reserves heavy model, which is why I don't like reserves heavy models. I think that you have a real purity of your relationship by having a one and done, "We're partnered, I'm gonna get you your best round next time." How do you think about maintaining that purity of relationship when also you're a one to one and you're like, "Well, well, Christian, on the next round, I would like it to still be a little bit lower, 'cause I wanna, I wanna put in my extra"?

    4. JBJohan Brenner32:44

       Honest answer, ah, we never think about that. I mean, if, if, if, if the market tells us, "This is the valuation, this is the round," we try to participate in the winners. I, uh, that's, that's honest there, isn't it? If that ever would, would come through and be, uh, be, uh, be, be true, we would not be in business.

    5. HSHarry Stebbings33:03

       I love it. Very rare that I get an honest answer on the show, so thank you, Johan. (laughs) That's a great thing. Um, can I ask you about Christian? You then decided to raise

14. 33:12 – 37:24

    Competition & Market Positioning

    1. HSHarry Stebbings33:12

       a round in, in 2022. Uh, put in context, Robinhood was down 60% from their IPO price. Um, I don't think there was a huge amount of love towards the market, bluntly. Can you take me to this process and what you decided to raise at seemingly kind of the worst time?

    2. CHChristian Hecker33:28

       So I think we've been privileged in the, in the, in the years 2020, 2021, um, that we raised money when we never needed money, right? So, um, we kind of had a cushion. Um, but we also recognized that our business model has a so-called double, double whammy. So what does it mean? So if interest rates go down, uh, capital markets go up. And so retail people trade more, right? And so your revenue explodes. At the same time, as you know, venture valuations go up and the market is much more interested in, in, in having high valuations, right? So that elevator goes up quite fast. And so when I or we saw first cracks in the interest rates, and okay, there was like this war situation in Ukraine, and, and, and, and it was a very realistic scenario that interest rates would go up quickly. We knew this elevator goes down, um, quite quickly in the other direction, right? Um, and so I think that experience kind of, um, um, made us pretty aware that now it's time to just really brace for another two, three, four years, uh, where you wanna have all the money to press your competitors against the wall if you need to. And, um, so we went out. And, um, Robinhood was out, as you said, and because they've been a public company, you could take the quarterly earnings. And, uh, we could go to investors, a very, um, selected, uh, number of investors, which we s- saw as very, uh, complementary what we have today, um, and show them that this is Robinhood. Everybody thinks we're like Robinhood in Europe, but look at the numbers. So they are churning monthly active users, they're churning assets, they're churning activity. At the same time, Trade Republic has growing active numbers of customers, has growing assets, and has new savings plans. And by the way, nobody is quitting, uh, their savings plan, right? During that already struggling market timing. And then we ended up with OTPP, uh, the Ontario Teachers' Pension Plan, which is one of the largest pension funds on earth. And so they really understood it in a second, right, right? That this is more of a Charles Schwab wealth accumulation game than it is of a trading game. And so we've been, uh, very privileged to do a round with them, and, um...... I think that was obviously the cornerstone of then, um, now still pacing through the last two years and making the company, uh, bigger.

    3. HSHarry Stebbings35:33

       Can I ask you, where, when in terms of Robinhood, there was a lot of rumors that they would come to Europe. How did you answer those? And I mean, they had confirmed plans to come to Europe bluntly so calling a spade a spade. But how did you respond to those questions? How did you feel about that? And what were the thoughts there?

    4. CHChristian Hecker35:49

       Obviously, we admire Robinhood, right? I think they opened up the category and they did a tremendous job. They're culturally rel- very, very relevant, right? Um, at the same time, we never felt that they were so overlapping with what we're doing, right? I think, yes, if you look from the outside, it might be it, but if you look even on the pricing of Trade Republic, a trade costs one euro, a savings plan is for free. So I think it's clearly where we want to nudge people, right? And to be honest, our competitors, um, um, are much more the traditional banks, uh, e- e- in continental Europe. And so we felt that even if they might come, there's a reason for those two companies to exist. But then at the same time, we knew from own experiences how huge the entry barriers are into the market in terms of regulation, in terms of, um, product market fit, in terms of, um, having a great quality product, right, for exchange trading. And so we've been never too nervous, um, uh, that they would come around the corner quickly and take Europe by storm.

    5. JBJohan Brenner36:42

       And going first to UK is a different thing than, than taking continental Europe. It's a different regulatory environment. And, and, uh, and UK is a... it's completely different comparative environment because it's... I mean, the, the- there are a lot more competition in the UK.

    6. HSHarry Stebbings36:56

       How do you advise founders to think about competition? Grow your own race or be very aware and be cognizant of them?

    7. JBJohan Brenner37:03

       I think if you should put a percentage there, it's about 75% mind your own business, but keep an eye on competition. But never, never be, um, too dependent on checking what other peoples are doing. Follow your own, follow your own path. But you, you have to keep some eye on the competition, uh, to learn from, et cetera.

    8. HSHarry Stebbings37:21

       So with these rounds, Christian, you accumulate this board

15. 37:24 – 41:59

    Managing the Board

    1. HSHarry Stebbings37:24

       of incredible people. As I said, you've got Johan, you've got Doug Leone, you've got Keith Rabois, John Doran, Ontario. It's a lot of opinions on a board. In terms of board management, what have been your biggest lessons in terms of how to manage a board effectively?

    2. CHChristian Hecker37:40

       So I think because we, um, had the opportunity to build with each and every member, uh, a personal relationship even before investing, right? I think everybody knew kind of what they're getting, right? And what they're not getting. So, um, we stick to the plan and I think everybody appreciates that, which is the best asset game of accumulating recurring deposits and stuff. And then again, I think, yes, we have these board meetings, but I have a really vivid relationship with almost all of my board members. Like, we, we, we talk on a monthly basis and we spend time. And so I think there's no surprises. Everybody sees changes coming and we're very transparent about things that work and, and things that don't work.

    3. HSHarry Stebbings38:15

       Do you send, do we send out the deck beforehand?

    4. CHChristian Hecker38:16

       Of course, yeah, yeah. Everybody can comment and should comment. Um, we follow the same structure. It's very predictable. There's a monthly update which is quite lengthy, um, and then when somebody has questions, we follow up. Um, and whenever we see something not working, that's the first thing we share with people, right? So we rarely to- talk about the things which work well. We, we most often talk about the things which don't work well. And I guess over the years, it just created a trust and reliance.

    5. JBJohan Brenner38:40

       I think also the, the board is, uh, very loyal. I mean, every i- every individual is present. They come to the physical meetings. They, they're prepared and I think, uh, it, it's, it, it... you know, every board is special and unique, but I think, uh, uh, g- g- given where people come for all o- from all over the globe, I think it's really impressive that everybody participates.

    6. HSHarry Stebbings39:01

       How do the best founders manage a board, Johan? You've worked with some of the best outside of Trade Republic as well as with Christian. How do the best managers manage a board and how would you advise them if they were listening to this?

    7. JBJohan Brenner39:12

       I think it's hard to... I think Christian asks me every time, every- e- after every board meeting, "How was this board meeting? What should we have done better?" And there's always something to do. But I think the key points are to, um, uh, decide on what are the two or three points I want out of this meeting and make pre-reads around that comprehensive so that when the board starts, you have enough information provided to everybody that you can actually have a fruitful discussion on those two to three points and make a decision on them. That's hard to do, but I think that would be my, my, my primary recommendation. Make sure you decide what you want to discuss and make ample preparation for those subjects. And then I would say, uh, making sure that the, um, that you, that you prioritize time in a way that you have time to discuss and make sure that it's... you don't fall into the trap of a lot of reporting and fact-checking, et cetera, but rather focus on those subjects.

    8. HSHarry Stebbings40:12

       Do you and Christian, do you bring your wider exec team into the meeting?

    9. CHChristian Hecker40:15

       Yeah, of course. So basically how we structure the meeting is, um, we try to share the deck one week in advance. Likely it's three, four days. Um, and then we always start with a, with a, with a founder-only section where we talk very, uh, openly about what's good, what's bad. Um, and then we invite the team and then we have like finance, product, operations, legal, whatever is like on the agenda. And then these people come and present it independently. And to be frank, I prepare the board for what I like about my team and maybe don't like and, and, and where we, where we have areas to discuss. And so everybody can, with that context, listen to the pieces and then we wrap up again, um, uh, together in a small group without the team and discuss next steps. Um, and that's working always like this for, for years now.

    10. HSHarry Stebbings40:57

        How do you think about ensuring equal weight of voice? And what I mean by that is some people have large, um, how to say it, profiles-... uh, some people have large voices. Some people are very opinionated. Uh, (laughs) how European and English can I be in being conservative here? Like, how do you ensure that everyone is heard but no one has more weight than another?

    11. CHChristian Hecker41:21

        Well, I think naturally over the years you anticipate certain things, questions and points which usually people do, right? So you try to anticipate this already in the conversation to frame, "Okay, well, we see A against B," and so, uh, you take away a lot of the, um, um, anecdotal discussions already in the meeting. Um, but then again, I mean, um, everybody's professional and, and it's a structured debate, and we try to be very, um, lean and efficient in those discussions, right? Um, and yeah, then the rest is just going with the flow and, and then trying to moderate it a tiny bit.

    12. JBJohan Brenner41:53

        But it is an interesting question, right, as you evolve a company because, um, I think in this board, uh,

16. 41:59 – 43:44

    Ensuring Equal Weight of Voice

    1. JBJohan Brenner41:59

       uh, everybody is professional and, and allows each other to f- to, to hear h- out everybody's opinion and voices. And that's, I think, also unique o- of this board. But over time, boards are mostly, you know, formed by investors and not maybe what's best for the long-term, uh, benefit of the company. And very seldom, uh, there are some companies that do it well, but have, have yearly evaluations of boards and with contributions and how it really works. Uh, and everybody sits there as investors and want to keep their board seat rather than what's best for the company. So I think that's something that founders should, as they grow up, really, uh, look at. What's the best board that we have and do we have, uh, uh, you know, a, a board that works from, from, from a decision-making perspective?

    2. HSHarry Stebbings42:41

       Johan, outside of Trade Republic, what is the best board that you are on and why?

    3. JBJohan Brenner42:46

       I think Pleo, uh, i- i- is the one and, and, um, because they d- they do actually that. It's a, it's a very diverse board. We have independent board members, not only investor board members, and we evaluate each other every year, uh, on what's on the competencies and about the lack of competences that we have in board. It's very strategic, at the same time, operational.

    4. HSHarry Stebbings43:07

       When do you think is the right time for founders to establish a board?

    5. JBJohan Brenner43:10

       At the earliest stages, a board is just a meeting agenda. I mean, as you know, you're in pre-seed and seed, you don't really have a board. Maybe you're on the board, but you're, you're just talking about product recruiting, other stuff than the regulatory matters. In Trade Republic's, uh, situation, you needed a board from day one because we're a regulated company and make sure that we adhere to those, those, those regulations. But I think when you've raised that... when you've raised 10 to 15 million or 20 million or pass your A round, I think you should have a formal board because it needs some governance around the company and making sure

17. 43:44 – 44:52

    Building an Effective Board

    1. JBJohan Brenner43:44

       that you have, uh, the right decision-making, uh, uh, qualities.

    2. HSHarry Stebbings43:50

       Christian, can I ask you before we do a quick fire, when I spoke to some of your team, when I spoke to some other of your investors, this is not Johan, so Johan is, uh, you know, excused from this, but, um, if there was a weakness that they gave you, it was, it was actually very similar. They said that you're brilliantly strong at being on top of everything and being able to go very deep into certain things, but you're also able then to use that as a weakness and then kind of micromanage and jump on things. I guess my question to you is, how do you think about that and how do you determine what to delegate versus what to jump on top of? And Christian can own again.

    3. CHChristian Hecker44:25

       Uh, so first of all, we killed the word micromanagement in the company, right? It's not allowed anymore. We call it hands-on, right?

    4. JBJohan Brenner44:31

       (laughs)

    5. CHChristian Hecker44:32

       So you can do decisions on the fly. No, uh, jokes aside, I, I, I guess, I mean, looking left and right, I think it's because of many, let's say, product-driven founders that they want to be close to the product, close to the decision, close to every detail, right? Because that's what you used to do in the, in the seed and Series A phase where you can decide every button's place, right? And then that might hold back certain teams and obviously it's very hard to decide which,

18. 44:52 – 46:47

    Delegating & Micromanagement

    1. CHChristian Hecker44:52

       uh, decision is really valuating and which maybe is just, um, um, inefficient to do. And, um, the more you groom your executive team, the more you get people, you want people who actively disagree with you and call that behavior out, right? And so example, um, my chief of staff, Julian, he now leads all growth, right? So we have a very intimate, very great relationship. And so he has no problem saying, "Well, I think I got it, uh, let's do it." Right? And so you want to establish this, but, um, obviously it's hard, but I need to, uh, uh, have the final decision because eventually, um, um, it's a direction I need to give to the company, right? And so therefore I'd love to stay close. Um, but again, I would really say it's, um, um, in a company culture, like if very independent from me, which would try to install really of hands-on decision-making, like few meetings, everybody in the room, and then just do a decision on the fly. Um, I think that helps sometimes, but obviously something to work on, uh, uh, uh, for myself as you grow up as a CEO.

    2. HSHarry Stebbings45:44

       Tough question for you to finish before the quick fire, Johan. When you, we, we mentioned kind of the reserves pricing earlier and kind of that, that never being a question, there are sometimes misalignments between venture investors and founders. What do you think from your, you know, many years in venture now are the biggest misalignments between founders and VCs that we should just acknowledge more?

    3. JBJohan Brenner46:04

       Maybe first-time founders that haven't, um, made, uh, any money yet and they come to a situation where, uh, you have a B or C round and a nice valuation and the paper, paper gain of these founders are healthy and they haven't taken much o- off the table. I think that's a sensitive question for many investors that why do you want to sell now? What's the story? Something we don't know, et cetera. But I think what, what investors can really do is be proactive in this matter and making sure that there is an opportunity for founders at some point to get some exit and liquidity, um, and in order to, to be able to swing the whole way. And I think that's, that's something that, uh, we think... some, some investors think is,

19. 46:47 – 47:49

    Misalignment Between Founders & VCs

    1. JBJohan Brenner46:47

       is, is pretty difficult to understand, but I think as investors we have a duty to do that.

    2. HSHarry Stebbings46:50

       Listen, I would love to do a quick fire round then, chaps. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

    3. CHChristian Hecker46:57

       Yes.

    4. HSHarry Stebbings46:58

       Perfect. Okay. So let's start with Christian. What was the most challenging moment in the Trade Republic journey?

    5. CHChristian Hecker47:03

       Hiring the first person. I, I remember like it was like Thomas and me and Marco, like three founders, and then it's so hard to find the first person who is as crazy as you. So basically, you don't have any money, you don't have any funding, right? You just say, "Well, it's, it's gonna work out." And then this guy was a backend developer. Um, he had a wife and kid, and I think it took like six to nine months. I had like twice dinner with the entire family, right? So that was the thing, in hindsight, one of the hardest phases. Because when you have the first person who's like an ambassador for you, and then the second, third hire gets much easier. But I remember like this time I said, "Fuck, if we don't... If we lose this guy now, all right, we start again and I need to meet the family." And so this is very hard.

    6. HSHarry Stebbings47:40

       (laughs) Uh, Johan, uh, what do you know now that you wish you'd known when you started in venture? All right. This is gonna be a boring one. It's,

20. 47:49 – 1:00:44

    Quick-Fire Round

    1. HSHarry Stebbings47:49

       that it's all about the founders. But you have to remember, I came from an operating background, big companies, and then into my own startup. And then I went to angel investing, which is pretty much hand on, hands on. And I, then I joined Benchmark and I thought, "This is a great product, a huge market. It's, they're so-so founders, but I'm gonna be able to fix this because I'm an operator." And that's totally wrong. And, uh, I didn't get that. It took me a number of years to really understand that it's all about the founders. I think the biggest mistake I see operators turned investors make is that they're attracted most to the founders where they feel they can have the biggest impact. Exactly. And that may not be the best investment. Christian, what have you changed your mind on in the last 12 months?

    2. CHChristian Hecker48:29

       Performance marketing. Um, so I think we've been in this, uh, uh, uh, trap or rabbit hole, right? I think 2020, 2021, we would spend hundreds of millions at Facebook and Google, right? And then came 2022, we just raised our round and we thought, "Okay, how can we do, um, uh, uh, focus on new economics, um, and just d- drive down cash consumption?" And from one day on the other, we just basically stopped all things performance marketing. And we just killed it to zero, right? And we saw that almost we get as many customers as before, and, um, again, that totally changed my mind where to spend money, uh, uh, for in growth, right? We don't spend much on Google, on Zayo, on Facebook. We do affiliate influencers, ambassadors, brand marketing, benefits for the consumers. But, um, I think one of the biggest surprises I really had like 2023 is that all the money we spent on performance marketing might have been, uh, an unclever investment.

    3. HSHarry Stebbings49:23

       That's fas... Can I ask, how do you think about influencer marketing? Sorry, I know we're in quick fire, but this is too interesting.

    4. CHChristian Hecker49:28

       So this is something we underestimated. We thought those chaps are incredibly expensive and why would you give them so much money? And now we, it's a bunch of ambassadors who really drive your authenticity and, and, and are your, your, your, your biggest, um, um, connection pieces to the audience, to the community, right? Especially for a product like ours that when you get it once in your hand and you use it, you tell your friends and family about it. So I guess this is one of the largest marketing channels we have by now.

    5. HSHarry Stebbings49:52

       Got you. Johan, tell me, everyone has an anti-portfolio. What's the biggest anti-portfolio for you, and what should you have seen that you didn't? Ooh. That question hurts. Uh, we have, we have a great, uh, portfolio. Klarna, ʻI zette de Pio, Trade Republic. Uh, I used to... I think most about tax fix, uh, Tide, et cetera. We're really happy. But of course, we miss them and Konto is, is one. Uh, thinking it was too, too much overlap with Tide. Wefox was one, the, uh, German insurance play. But the one that I think is interesting and learning from is a couple of ǁs, but Tink, which we could invest a million, uh, at, um, at eight million in their seed round. This is now many moons ago. They were launching a personal finance app in the US from Sweden. And I said, "This is not gonna work. They're great founders, but I, I'm sorry, we can't buy into that idea." And they went over to the US, failed, went back, turned around their business, built a huge open banking platform, uh, business that they sold to Visa for a couple of billion. Lesson is, there was a, there was a real poor idea that I was, I was asked to back. I didn't, but they, they, they learned from that, went back, pivoted severely, and made it into a brilliant success. And I should just have invested in the two great founders. Those are just the worst, aren't they? When it's like, when the idea changes completely and it's a completely different proposition. And I've had it so many times before and it's like, "Fuck, it just..." And, but then it's so hard when you have someone great doing something terrible. Yeah. But I'm so happy for those guys. I, I'm actually, you know, I also think that those, those things... I, I said no for, in retrospect, the wrong reason, because I should have backed them. But, you know, I, I'm so happy for those guys. They're, they've done a fabulous job. And hopefully I can back, hopefully I can back them next time. Christian, what would you change about the EU tech ecosystem? You know, we have Keith Rabois on your board. Uh, you know, Keith famously laughs at me and says, you know, "Why are you in a museum, Harry?" (laughs)

    6. CHChristian Hecker51:59

       (laughs) Yeah, there's a point to it, right? No, I think we're bearish on Europe, I need to admit.

    7. HSHarry Stebbings52:03

       (laughs)

    8. CHChristian Hecker52:05

       Um, so I guess I think we love our investors and it's great to work with them, right? But the mere fact that basically when Trade Republic may exit, then pensioners in Florida get the money, right? That must kill you as a European, right? So I think, uh, we must have people who can really make the big, big cheques here, right? I think it's incredibly important so you can build this ecosystem.

    9. HSHarry Stebbings52:23

       Do you know, I think we do have the people here. They just don't want to take the risk because we have big pots of cash here.

    10. CHChristian Hecker52:31

        Yes, of course. I mean, I think there's a combination of the money and the people who are willing to commit that money to these things. But for example, take Germany, right, where, um, insurances are forbidden by law to invest in venture and all this stuff, right? So I think this is all prohibiting quite a lot. And I think we're thinking not big enough, right? Um, and I mean, to be very honest, if we really want to hire an engineer here in Berlin who has seen large distributed IT systems for millions of customers, we don't find them here in Berlin. We need to go to, uh, the UK, we need to go to Sweden, to maybe Russia to hire these people, right? And that's a pity that we don't have that talent. So I guess there's much to do. I mean, we pride ourselves that Europe has grown a lot, but still, relatively speaking, has lost, uh, a track with America and China.

    11. HSHarry Stebbings53:12

        I'm, I'm really bullish about Europe though, I must say.

    12. CHChristian Hecker53:14

        You must be. (laughs)

    13. HSHarry Stebbings53:15

        I mean, uh... Pl- please, please make me feel better because I am not these days. So hit me, Johan. N- n- no, no, there's a, there's a bu- there's some late stage capital that has appeared, but there's a lot of dry powder on the sidelines for early stage investing. You know- There is, but is, but is there a generation of like...

    14. ... really, really great founders. Enough-

    15. JBJohan Brenner53:33

        Yeah.

    16. HSHarry Stebbings53:33

        ... to supply that capital.

    17. JBJohan Brenner53:34

        I- absolutely. And I think it's just about time. We're seeing all these new companies coming out. We're seeing new unicorns that are coming from 65 cities, you know. 10 years ago, they came from three cities. Coming all over Europe, r- much bigger market, remote working, can put teams together that we couldn't see before. I think the one thing that we're missing is exit markets. I mean, still, the, the, um, the m- many of the, of the companies go to the US market for IPOs, et cetera. I think that- that's something that we, uh, that we, that we need more. But I mean, it... Hey, the US ecosystem is 60 years old, and we are, you know, maybe at 20. We just need some more time. The ingredients are there. I'm- I- I'm, I'm really bullish. I'm a bit, uh, I'm a bit, uh, um, drinking my own Kool-Aid, but I'm- I'm fine with that.

    18. HSHarry Stebbings54:22

        But Johan, I'm in London, I love London, I wanna stay in Europe, I want to buy into it, I'm just struggling. And so my question to you is, then, when you look at the regulatory environment, when you look at Figma, when you look at GIPHY getting blocked, when you look at the troubles that the Acti- happened for Activision, the CMA and European regulators are blocking this bigot of cash coming out in a way that's untenable.

    19. JBJohan Brenner54:47

        Yeah. It's- it's- it's rubbish, right? I- this is the thing I've sort of changed my mind in the past 12 months. I was a bit... When AI came and all this discussion, I thought that we need more regulations. I think Apple's business practices may be a bit of a question. But in the end of the day, uh, too much regulations could- is gonna stifle innovation. And what we've seen here, where they just extrapolate and making up their own opinions with CMA and in terms of Figma, uh, may be competing in the future, I think is totally wrong and it will stifle competition. That said, I think- do think that the big six or big five or- or- or whoever you call them have an ecosystem and platform business that's also- also stifling competition a little bit. So, there has to be something around there, but too much is certainly not good for innovation.

    20. HSHarry Stebbings55:31

        People say that in Europe, also we have maybe younger people who don't wanna work as hard. They like life more. They- they work to live, uh, and they enjoy that. And in Europe, it's just a very different culture and hunger for work. Do you think that's fair?

    21. CHChristian Hecker55:48

        I think, yes. I mean, as Europeans, we enjoy things more. Um, but take it, take it like this, right? If you, if you're entering a market with some moats, right? With, uh, uh, uh, stepping out of your comfort zone, you can already, um, out-compete, right, and outperform. So, it's a, it's a pro and a con.

    22. HSHarry Stebbings56:03

        Christian, how do you detect those mindsets when you're hiring, those people who wanna work, like, hard?

    23. CHChristian Hecker56:09

        So, I mean, first of all, and I- and I think that's really one of the biggest learnings, right? So I think if you grow up as a company, you go from, I don't know, like 50 to 200, 300 employees, you have the first bunch of people who are really unhappy in your company. And as a founder, you take it personal. You think like, "How can you be unhappy? I try to make everything so great." So you sit down with these people, you open your book and you write down everything, you try to make it better, right? And then you do all the fixes, then still people are very unhappy. And then I think we recognize that if you cannot hide it, embrace it, right? So by now, I think we- we own our culture, which is very performance-driven, which if you don't decelerate, if you don't push, you're out. Um, we evaluate you quarterly. Um, so we don't wanna be this all-everybody's-happy, uh, place. We wanna be a place where those people who want to achieve something are welcomed. Um, and so how do we determine this? I mean, obviously we have a rigorous recruiting process, but given the labor laws in Europe, we treat the probation period as an extensive form of interviews. So you're gonna be evaluated all the time. Um, at the end of your probation period, there's a, a committee to really... that you can stay. So- so there's somebody who should step in and pitch it for you, right? Um, it takes some time to implement and so for people to love that kind of culture, but I guess it increases talent density, um, a lot. And then you create a bunch of people, 200, 300 people who are really in it, right, who really love what they're doing, um, who wanna work more than 40 hours a week, um, and then it's a lot of fun actually.

    24. HSHarry Stebbings57:29

        Speaking to you, Christian, there reminds me of, like, if Nick at Revolut and Keith were one mind, that would be the outcome in terms of the answer. I- I totally agree with you and I love that. Can I ask you, Johan, you work with some of the best founders also outside of Christian. Like, who's the best founder that you work with for hiring and why?

    25. JBJohan Brenner57:46

        I think I settle. I think Jacob de Gier did a fabulous job in, in, in, in hiring. He always ha- hired ahead of the curve. He thought about what- what's not the... where's- what's not the perfect match right now, but where is this person fitting into my company a year from now? So, not being behind the curve. I think that's just one ingredient that he did that I think was extraordinary. And at an early stage of the company, thinking about that from the beginning. So, I think that's one trait that I really admire.

    26. HSHarry Stebbings58:19

        I wanna finish on a final question, which is to both of you. But is, if we paint the bull case, okay, for Trade Republic in 2034, so 10 years out... Christ, I remember when I used to play FIFA when I was a child and it was like FIFA '06, and now it's like '34 or '24. Fucking getting old. But if we paint the bull case, what is Trade Republic in 2034? And so, Johan, why don't we go with you first, and then we'll end with Christian?

    27. JBJohan Brenner58:43

        Can I go with five years?

    28. HSHarry Stebbings58:45

        Sure.

    29. JBJohan Brenner58:45

        Or do you want 10 years?

    30. HSHarry Stebbings58:46

        You can do either.

Episode duration: 1:00:44