Future of Finance - UK & European perspectives with Yusuf Özdalga

In this episode of Fintech Thought Leaders, QED's Head of Early Stage Investments Bill Cilluffo speaks with Partner, Head of UK & Europe, Yusuf Özdalga.

Episode Transcript

Speaker 1 (00:08):
You're listening to the FinTech Thought Leaders
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(00:30):
If you're looking to learn moreabout what motivates our
founders and team members tosucceed, you're in the right
place.
Hello and welcome to theFinTech Thought Leaders podcast.
I'm Bill Salufo, head of earlystage investments at QED
Investors.
Today on the podcast, I'm veryexcited to be joined by
colleague and QED's head ofEurope, yusuf Azdalga Yusuf.
Welcome to the podcast.

Speaker 2 (00:50):
Thanks, bill, thanks for having me.

Speaker 1 (00:52):
Yeah, it's awesome to have you on.
We've known each other for avery long time, going back to
your college days in Virginia atUVA, but I wonder if you can
share with our listeners a highlevel overview of your journey,
on how you eventually came toQED.

Speaker 2 (01:06):
And a different way to say it is you're my first
boss at Capital One and veryinstrumental in my career, as
I'm clearly working for the sameperson.
I'm more than 20 years later,which is great.

Speaker 1 (01:16):
Don't say that, yusuf .
It makes a sound old.
I'm scared.

Speaker 2 (01:19):
I know Time goes by very fast and we're still
building FinTech businesses,which is good.
Yeah, I was at UVA and I wantedto study a few different things
.
I was even thinking betweeneconomics and math as a double
major, or finance and MIS as adouble in the business school
and the economics departmentwasn't top notch at UVA back

(01:40):
then I will not comment about ittoday and neither was the math
versus the business school wasquite highly rated.
So I joined the Mac entireschool of commerce, which is
just a small plug for that and Idid a finance MIS dual degree.
So for me there was acombination of money and
technology, combining both.
My dad always likes to jokethat he asked me when I was like

(02:01):
four years old what I want tobe when I grow up and I said I
don't know, but something thathas to do with money.
And I guess I added computersto that and did this finance MIS
thing.

Speaker 1 (02:09):
So you're doing FinTech back in college already.

Speaker 2 (02:12):
Exactly it wasn't a term, as you know.
But sure enough that dualdegree put me in the
gravitational pull of capitalone because I graduated in 97
again reference to our age thatgoes by here, but Katwan's IPO
is 94.
And they were recruiting quiteheavily on the UVA campus in
addition to a lot of the IvyLeague schools on the East Coast

(02:33):
and West Coast.
So joined in 97.
I think the interview processstarted in 96.
And I was meant to join as anintern in the summer of 96.
It didn't happen but I wasfortunate enough, I'd say, to
join as a faculty.
I had a full time in 97 workingwith Bill Salufa.

Speaker 1 (02:52):
Excellent.
You were at Capital One for atime and went to business school
and had an interesting pathpost business school as well.
I wonder if you can share alittle bit of your career path
into investing.

Speaker 2 (03:03):
Yeah, absolutely so.
You know, my years at CapitalOne were transformative.
I thought about going toinvestment banking out of
college actually out of UVA butwhen I realized as an analyst at
an investment bank there's agood amount of groundwork versus
at Capital One, you get a lotof experience and get to build
businesses and do real decisionsand all that kind of stuff, I
chose Capital One.
It turned out to be a great,great choice.

(03:25):
We had more responsibility atthat age and at that stage than
I think I would ever get oranybody else out of college
should get, so that was anamazing experience.
As the years went by, though,capital One started becoming
more and more like a bank.
In those years, in the late 90s, it was a bit more like a scale
up startup and it startedbecoming more bank.
Like I said, you know, maybe Iwant to reconsider my options,

(03:48):
do something else, and also Iwant to be close to Europe,
where my family lives Swedish,turkish by background so I said
let me do an MBA at Chicago.
I actually had an uncompetewith Capital One, so, again,
fortunate enough that my salarywas paid in the second year, so
enabled me to get a freebusiness school education at the
University of Chicago, or notfree but paid for by Capital One

(04:10):
, and then from there I joinedJP Morgan's FIGM&A team, where
Capital One actually became ourfirst client.
And those days were differentdays for Capital One.
They actually had an MOU withthe Fed, as you well remember,
and they ended up agreeing tohaving to buy a bank, and so we
worked on that deal, which endedup becoming the hiberny
acquisition, and then, with JPMorgan again to get close to my

(04:34):
family came to London.
Eventually I wanted to moveinto a career investing, so that
was something that was alwaysfascinating for me, and I got an
offer from Lehman's principalinvesting team to join them.
So I did that.
I think the year was 2006.
So very interesting timing tobe joining Lehman, turns out.
But those years, I mean, weretransformative in many ways.

(04:55):
I was on a desk which consistedof structured loan traders and
securitization people and I wasthe only one who had FIGM&A and
business building experience.
So when they saw loan platformsthey sort of scratched their
head and said how do we buythese?
How do we build these?
How do we value these?
We just care about the loansthey spit out.
So sort of that part was my jobto value them and help build

(05:16):
them.

Speaker 1 (05:17):
That's fantastic, and you've already alluded to this.
You've lived in many differentcountries over the years Sweden,
turkey, us, uk.
I know you're in Dubai for alittle while before coming back
to the UK.
How has all this internationalexperience really adapted your
view and helped round you as aninvestor today?

Speaker 2 (05:34):
So my mom is Swedish, my dad is Turkish.
I was born in Sweden but grewup in both countries.
I always joke that my mom triedto mess me up by taking me back
and forth between the twocountries constantly, and she
succeeded splendidly in creatingthat outcome.
No, but joking aside, I thinkit's been transformative.
Sweden and Turkey, I would say,are on the opposite sides of

(05:55):
the European spectrum, and beingpart of two very different
cultures has given me a greatperspective in life.
Not to take anything for grantedPeople may have very different
views across the aisle alwaysforces me to think that the way
you do things shouldn't be takenfor granted.
There's a very different way todo the same thing in a
different circumstance.
So I think it's been verybeneficial.

(06:16):
And then, to add to all this,as I said, I came to the US for
college very transformative andloved American culture at a
great time there, with college,business school, working at
Capital One, and then came toLondon.
So, when you all added up, I'venow lived in six different
countries and, I think, 11different cities and looking
forward to settle in London now,god willing, but in the

(06:37):
meantime it's been a goodexperience.

Speaker 1 (06:39):
Yeah, so in preparing for the podcast we had a chance
to interview Portman Wills,co-founder of Waystream.
That's a company both of usspend quite a lot of time with
and he says you have very strongviews on what the optimal
number of passports are.
Love to hear about this, yeah.

Speaker 2 (06:56):
I mean, I think the optimum number is very difficult
to answer, but I think havingmany different ones is good.
I'm very biased in me sayingthat probably shouldn't come as
a surprise to anyone, but I mean, having looked at how the world
evolves and starting a businessor doing any other thing,
having optionality is good andhaving different passports give

(07:16):
you optionality.
I think more than one is oneway to answer that question.
Portman should know he has two,so he came from Silicon Valley
to help set up Waystream as aco-founder with Peter here in
London and him having a UKpassport helped in that process.
And I believe his kids hadpassports as well.
So having more than one is good.
There's a lot of forces in theworld today that are a bit more

(07:39):
protectionist anti-immigrants,whatever you want to call it but
I think open borders, morepeople moving around, can only
be a good thing.

Speaker 1 (07:46):
Well, a little bit of a family story on our end.
We lived in Toronto for fiveyears and want to become a
permanent residence of Canada.
Back at the time and mydaughter, when she was applying
to college, wrote her collegeessay on how mad she was at us
that we never were able to takethat last step and get her a
Canadian passport.
We're stuck at one.
She desperately wishes she hadmultiple, but hopefully it'll

(08:08):
all work out.
Yusuf, I know you have a lot ofinterests.
We're going to spend most oftoday talking about investing,
but I think it's fair to saythat you're a bit of a history
buff in that you have a numberof talking points around the
economics of finance andbusiness cycles.
She talked about studying somefinance back in college, but how
did she develop this love ofhistory and finance and the
connection of the two?

Speaker 2 (08:29):
I did think about studying economics and some of
the good classes I took wereeconomic history, so that was
actually a big part leading intoit.
And the other thing was,believe it or not, inflation.
So growing up in Sweden andTurkey, I saw a very stable
country in Sweden where youwould go to the same shoe store
a year after a year and it wouldbe the same people working in
that same shoe store.
And then on the other extremeyou had Turkey, where the shoe

(08:50):
store itself may not be thereand you had inflation sometimes
of 140%.
So that made me really thinklike what are the historical
circumstances that create suchdifferent outcomes in different
societies and what exactly leadsto inflation and why can't they
keep it stable and whatprevents that?
So the historical context ofthat always interested me and my
interest in history reallycomes from a very large extent

(09:14):
from my interest in sort ofeconomic outcomes and wealth
distribution outcomes.
You know I went to Sweden.
I was quite young when I firstcame to the US in 86.
It was just for a summer, but Iwas there for four months and
seeing these vastly differenteconomic outcomes in different
societies with older pluses andminuses in their own ways was
really interesting and trying tounderstand the really big, deep

(09:36):
, macro forces that drive thishas been interesting.
And then you start on peelingthat onion and you find very
interesting things.
You think why did the FirstWorld originate in Sarajevo, in
Bosnia?
And you realize, well, you lookat, you know where the Roman
Empire split up and how thatcontinued with the Byzantine
Empire and then later theOttoman Empire, and how were

(09:56):
those empires rubbing up againsteach other.
So you know, before the warstarted you had the
Austro-Hungarian Empire, theRussian and Ottoman empires, all
sort of grinding against eachother.
There you realize those bighistorical forces have a huge
impact in the lives of usaverage people trying to, you
know, make a living, if you will.

Speaker 1 (10:14):
What a timely topic.
We're sitting here less than aweek after, you know, the latest
conflict in Israel and Gaza hastaken place, and there's a part
of the world where it goes backthousands and thousands of
years.
You know, and understandingwhat's going on requires a
tremendous amount of historicalcontext.
So ironic that you're divinginto that topic as we sit here
recording today.
One of the things that sets QEDapart is that most of our team

(10:37):
members have been formeroperators, whether at Capital
One or other companies orentrepreneurs.
We talked a little bit aboutkind of your corporate journey
from Capital One to JPM tolayman, but I know that you've
also got a kind of parallelentrepreneurial journey of a
number of things that you'vedone in the past.
I wonder if you could share alittle bit of that with our
listeners.

Speaker 2 (10:55):
The Lehman experience was formative.
I was in this principalinvesting team that was
basically investing in anythingsecuritizable, a lot of which
were mortgages.
I used to joke that the frontrow seats to the financial
crisis.
Now I have modified it to say Iwas actually an actor on the
stage a very, very small one andI don't want to take any blame
for it and that was a tough time.

(11:15):
I mean, when I joined thatLehman team I think there's 150
people in the team their P&L ofthose people in terms of how
much money they made, was mindstaggering.
I will not share it here, butthe sort of crisis started
coming, wave after wave, in late2006 onwards, and it was always
one thing after the other, andby the time those two years were
done, right before thebankruptcy, there was just 25

(11:37):
people in that team out of 150.
And then sort of the collapsehappened and the GFC, as we all
know.
So we can have a whole podcaston that if you want.
Sometimes it's a lot oflearnings.
I was left with a sense of justwanting to do something more
positive after that experience,which was quite taxing mentally,
and I said, whatever I'm goingto do, it's not going to be
fintech or finance or mortgages,and it's probably not going to

(11:58):
be in London, which is where Iwas with Lehman.
So I decided to build abusiness and I decided that
Turkey was a good place for that, so moved back to Turkey, set
up a business in the sort ofagro food space.
We did a few sort of pivots andtried a few different things,
but where we ended very fast waslogistics for cold storage
chains.
So there's some EU fundsavailable by which you could

(12:19):
actually build a cold storagefacilities very cheap and
there's a huge gap in the marketwhere the existing quality of
stock was terrible.
And once you build these coldstorage facilities, you can rent
them at a pretty high yield inthe high teens.
It's close to zero credit risk,because if somebody doesn't pay
, you have the fruit ascollateral.
So built that business and I wasjust talking about it to

(12:40):
someone else actually didn'ttake VC money as I did that.
It was me and my businesspartner.
I set it up to tend to be alittle conservative and maybe
that's not the best trait for anentrepreneur, but I set it up
such that a year into it therewould be a decision point where
I would either go all in, sellall my properties and put all my
net worth into the business orbasically find a way to exit it.

(13:01):
And going a year into it and Irealized the dynamics with my
business partner was verypositive, but their incentives
were slightly different thanmine.
So I said, listen, great, thisis probably a good time for me
to sell you my shares and Iexited it in that way.
At that point I'd also met mywife.
She's Bosnian and she wasmoving to Turkey and we were
getting married.
So I thought it's a good timeto actually do something non

(13:21):
entrepreneurial and went intoprivate equity and the first
deal I did was actually in theagro food space in Turkey and
that company recently wentpublic, so kind of full circle
there.
But yeah, so that was thejourney.
You know the rest bill.
So I was doing private equityand then, as a political
situation in Turkey startedchanging and the investment
climate turned a bit more sour,and as our kids were growing up,

(13:42):
me and my wife decided wewanted to move back to London
where I'd lived for a long time,and I gave you a call to see if
there would be anything to dooperationally in some of the QD
portfolio companies and seemedlike QD had decided to set up a
London office, which turned outto be for Judas timing.

Speaker 1 (13:59):
It was a very well timed phone call, that's, that's
for sure.
So glad it turned out that way.
You've been with QD about sixyears leading our London office
and our European investmentbusiness and we've built a
really exciting portfolio ofcompanies within Europe.
I wonder if you could just takea minute and highlight a couple
of the breakout companies thatwe've been fortunate enough to

(14:19):
partner with.

Speaker 2 (14:20):
Incredibly excited about the entire portfolio and
we've been very fortunate tohave very exciting companies
before I joined as well.
So prior to me joining we hadamazing names like Clarna.
We had ClearScore Nigel isstill on the board Zopa, where
Nigel was also on the board.
So we've had an amazingportfolio to build on.
You and I did Waitstream as myfirst deal, as you know, bill,

(14:41):
and that's one where we're stillboth quite involved and super
excited about.
And then, more recently,wayflyer in Dublin has been a
really exciting one.
Payhawk, based out of Sofia andthe UK but covering Europe and
even increasingly lookingtowards the US, is another
exciting company in corporateand expense management space,
corporate card and expensemanagement.

Speaker 1 (15:01):
Probably the three largest of the investments that
you've made since you've beenhere, wonder if you could just
maybe give a 30 or 60 secondview on what each of these
companies do and why you'reexcited.

Speaker 2 (15:11):
So maybe starting with Waitstream, the wage stream
does earn wage taxes.
They have a very strong numberone market position in the UK
and basically the idea is quitesimple.
So if you work for a place likeStarbucks or a coffee shop or a
pub, or if you're in any way anhourly worker, you have your
shifts.
So that's one targetdemographic.
But more broadly, zooming backfrom those kind of everyday

(15:32):
workers, half the country, bothin the UK and in the US,
actually live paycheck topaycheck, and what that means is
at the end of the month theyhave about less than 300 pounds
or dollars in their bank account.
So financial stress is veryhigh for these people.
If something unexpected happens, they will need to find money
from their family.
If they can't do that, they mayhave to go to a payday lender.

(15:53):
What earned wage accesssolutions like wage stream
enable is that they can actuallyaccess their earned wages as a
first step before having to goto either family or any other
alternative lender, and that's ahuge value proposition for
these people.
It's a unique product where ithas benefit, even if people
don't use it.
Just knowing that they haveaccess to that extra buffer of

(16:17):
their already earned wages incase they need money is a huge
relief.
And then, as we see with wagestream, a lot of the people use
it.
So, in a nutshell, it's thisearned wage access as the first
product.
But what makes it even moreexciting is this concept of
they're combining the world ofwork and the world of banking
and basically creating what wecall the workplace bank.

(16:38):
If you go back, you know apropose, your comment of being
interested in history.
When we look historically, youknow people's bank accounts,
their bank and their jobs werequite intertwined.
Even today in Turkey, manytimes when people join a new
place to work, they open up abank account with the bank that
that employer works with.
And this is common in manyplaces across the sort of

(16:59):
developing and emerging world.
Now in the western world, in US, in UK, that's kind of been
modified over the years.
So people have their bankaccount that's totally separate
and they have their job that'stotally separate.
They get a paycheck into thatbank account and those worlds
don't communicate to each other.
Wage stream actually opens upthose communication lines and
that enables a whole world ofinnovation that can happen there

(17:22):
.
So that's just a sort ofglimpse into what wage stream
can do.

Speaker 1 (17:26):
Wage streams are a really interesting case in that
it was our first of severalinvestments in the earn wage
access space around the world,something that resonates deeply
with me, just in terms ofbuilding a business that can be
a fantastic business but alsoadds so much value to consumers
in terms of this kind of almostemergency spending account,
which is so critical.
You mentioned Wayflyer.
Can you share a bit of whatWayflyer does?

Speaker 2 (17:48):
Yeah, I mean Wayflyer is revenue based funding and
they work exclusively withe-commerce merchants, and for an
e-commerce merchant meaninge-commerce, they don't have
physical stores and they'reselling out there in the whether
you call it MetaWare or theMatrix or the Internet, or they
sell their goods online.
And the challenge is either youcan have a really amazing brand

(18:10):
, which few of them do, or youcould have a very, very dominant
position like an Amazon.
But most of them need toacquire customers and to do that
they end up paying eitherGoogle or Facebook usually, but
also now increasingly otherplayers as well to acquire those
customers, and that marketingspend needs to be financed.
And what the innovation thatWayflyer had was twofold.
One is we can actually financethat spend and then get paid

(18:34):
back via merchant cash advance.
Effectively, as you acquire thecustomer and they buy the goods
that you're selling, we can getpaid back via deductions from
your point of sale.
And the more I think excitinginnovation is they understand,
because they themselves are sodigital.
They understand this e-commercemerchant better, both at a sort
of empathy and sort ofunderstanding level, but also

(18:56):
from a sort of ingesting theirdata level.
So the example I always use isif a bank goes and tries to lend
to an e-commerce merchant,they'll ask for historical
statements, the financialstatements that, by definition,
are already stale by the timethey get them.
But what Wayflyer can do isthey can look at those financial
statements and, by the way,they get them via open banking,
so they get them much more realtime and much more fast.

(19:17):
But, more importantly, they canalso look at the marketing
analytics data, and what theycan then know is that what is
the ROI on this marketing spend?
And just to use a theoreticexample, if the ROI on the
marketing spend is 300% or 250%,they know that maybe the
financials from six months agodon't tell the full story, but

(19:39):
this particular merchant isselling something that is really
resonating with consumers,because the sales are going
really well today.
They can really make a veryaccurate prediction about the
financial state of the company,not just in real time today, but
over the next two, three months, which is the cycle during
which the financing will sort ofpay itself back.
And that insight enables themto lend to a lot of customers

(20:02):
that others would find it hardto lend to, and they could do
that at a pretty low very low, Iwould say loss rate and very
fast in real time.
So it's one of those uniqueexamples as win-win-win the
merchants win, sort of the banksthat finance this operation.
They win because the losses arelow and the returns are
attractive for the banks and thecompany wins by sort of being
the one who still takes this andin the end also consumers win

(20:25):
because e-commerce merchants nowhave more funds, can do more
marketing and can bring betterand more products to the world.

Speaker 1 (20:32):
Lending exists in both of those places today, you
know consumers, if they need anemergency loan, can go to a
payday lender, can go to otherplaces.
Some of these e-commercemerchants can go to the small
business equivalent of those toget super high-priced loans.
And one of the reasons thosebusinesses are so hard is that
losses tend to be really highand both wage stream and way
flyer have developed mechanismsthat both use data but then also

(20:56):
use kind of the interception ofpayments as ways of running
businesses serving the same need, but with loss rates that are
way, way lower.
I mean, I know wage stream isin the single-digit basis point.
Way flyer might be a littlehigher than that, but it's a
pretty impressive use of datatechnology and operational
process to really reinvent thosebusinesses.
You also mentioned payhawk inthe expense management space.

(21:18):
Just maybe one minute on them,and then I'd love to talk more
generally about what you'reseeing throughout Europe.

Speaker 2 (21:23):
Payhawk also a very exciting one from the Balkans in
Bulgaria.
And again going back tohistorical context, my family
the Turkish side of my family'sorigins is from the Baltan
Peninsula as well, so it's theregion that's very close to my
heart and what they do iscorporate cars and expense
management.
And as you know, bill, we haveseveral big thesis around both

(21:44):
expense management and corporatecards being QD and having so
much capital-1 DNA going throughour veins.
Obviously we like cards.
So that was a big sell and thatwas very interesting.
And there's a number ofinteresting players in the card
space corporate card space inthe US that we thought looked
interesting and we thought whatis the sort of translation of
that into Europe?
But I think almost moreimportantly is this idea of back

(22:05):
office automation and CFO tools.
As we always say in our sort ofthesis-driven meetings where we
bat around ideas, some of thebiggest companies have come out
of that space.
If you can automate back officesuccessfully, whether it's CFO
tools or otherwise, expensemanagement or otherwise, it's
where you can easily buildmulti-billion companies and it's
not one that's obviousnecessarily from the get-go, but

(22:27):
one that we feel very excitedabout as a big thesis.
So those two things corporatecards and expense management,
back office automation cametogether in Payhog along with a
very impressive team.
So Christo and Boiko were bothecstalletic.
And ecstalletic was, I think,the biggest exit in Bulgaria.
It was $160 million exit, ifI'm not mistaken back in the
days and by the standards ofthose days, there was a really

(22:50):
big exit.
They came from that ecosystemand they were both very strong
product and tech-driven founders, which is something we also
like, as you know.
And when all that coalesced wethought it was a great occasion
to lead their Series A, which wedid, and it's been exciting so
far, growing really really fast,doing well.
Product is delivering reallybeyond our expectations.
Obviously a lot of wood to chopstill, but a company we're

(23:13):
really excited about.
And the other exciting thingabout it is it's really
pan-European and actuallypan-global now, so they're able
to sell successfully in multiple, multiple countries and a lot
of interesting insights therefor other companies that are
looking to go cross-border.

Speaker 1 (23:27):
Yeah, I mean it's interesting.
You've brought up companiesHeadquartered in London, dublin,
Bulgaria, all of which areserving multiple countries in
Europe, all of which are alsoserving the US.
So it's kind of interesting tosee these business models that
have proven to be able to jumpto your graphic boundaries.

Speaker 2 (23:43):
As you know, at Wastream we used to joke that
the only one that's gone to theUS successfully from London has
been the Beatles and everybodyelse is trying to match it since
then.
But yeah, you pointed out,we've been lucky that some of
our companies we've been able tohelp and I think that's in
large extent thanks to ourstrong presence in the US and in
Europe and sort of the strongcommunication lines we have

(24:04):
between the teams and how we canshare our insights.

Speaker 1 (24:07):
You said in London.
I would say historically thebulk of our focus has been on
the UK, but over the lastseveral years we've started to
look more broadly throughoutEurope.
What are some of the uniquekind of opportunities and
challenges that you see as youlook at the landscape over the
next couple of years in Europe?

Speaker 2 (24:22):
Yeah, I mean I think there's a lot of challenges if
we decide to think about it.
I will not get into the globalpolitical macro too much
Obviously, a lot of saddevelopments that we're seeing
and we can only hope for peaceacross all of Europe in the very
near future, whether it's inthe Middle East or it's in
Russia and Ukraine.
We just hope that innocentpeople stop dying.

(24:42):
I think there's no better wayto say it other than that it's
super, super tragic and reallydepressing to see that.
So that macro backdrop isreally worrisome and I think
there's nothing worse than a waror terrorism or whatever form
of conflict where innocentpeople die.
So finding solutions to allthose conflicts and all the
other ones across the globe butspeaking about Europe, those two

(25:04):
are really paramount Fast isreally the key.
We can only pray for peace anddo what we can.
So I think that's one sort ofnegative and worrisome trend and
there are some other sort ofworrisome trends that go along
with that and that could include, like the rise of sort of very
hard right politics and otherthings.
But I think there's a lot ofthings to be optimistic about.

(25:25):
I think the EU has withstoodthe shock of Brexit quite well
and the EU is now talking aboutexpanding again.
Brexit was a bit of a sort ofunexpected event in the UK, but
UK is still very vibrant andshows that it can be successful
and thrive outside of EU.
So I think that points to asort of different path to
success.
Eu can be very successful, ukcan be very successful without

(25:49):
being within the formal block,and innovation can be strong,
and I think there's a lot ofregulatory sort of innovations
happening in the UK as well, asEurope, especially the FCA in
the UK, is constantly innovating.
Open banking was one of thosealmost a decade or, if not more
ago now, and that's been, insome cases you would say, copied
, but in many cases improvedupon in other places in the

(26:11):
world, like Brazil and India, aswe know really well from our
investments in those GEOs.
So that's exciting in Europe.
I think the VC ecosystem isjust that day one here in Europe
.
It's so much more to go.
It's growing very fast.
There's now founders that havehad multiple exits, they're
setting up funds, they'resetting up new companies.
The ecosystem is only gettingricher, whether it's AI or all

(26:33):
these new technologies.
All that is really transformingthe system here across Europe.
So I think those are the thingsto be excited about.
I think there's a few things asan investor we got to be mindful
of, and that is basicallythinking about the right course
for the right course, if youwill.
So a company coming out ofBulgaria or Ireland is very
different from a company comingout of Germany or the UK.

(26:54):
So I think there's all thesedifferent filters we put, one of
which is the domestic marketreally big.
That's interesting, because ifyour domestic market is small,
it's going to force you to bemore export minded and globally
oriented in your vision.
If you're in a bigger market,like France, uk, germany, etc.
There's a temptation to saylocal.
That could be fine, but thenyou have to assess is that

(27:14):
market big enough?
And in many cases, certainly byfar it is.
These are some of the biggesteconomies in the world.
So those are some of the thingsto keep in mind.
So some things to worry about,many things to be excited about,
and then just a lot oflearnings we've gathered here
over the, I think, 15 plus yearswe've been investing in Europe.

Speaker 1 (27:31):
Obviously, one part of this is the macro in which
countries and how's theiroutlook.
Another is just kind of whatindustry are folks in?
Are there a couple industryverticals that you're
particularly interested in rightnow, or you're seeing a
particular amount of activity asyou and the team are out
hunting.

Speaker 2 (27:47):
I think international payments and FX related plays
is very interesting to pick one.
London, from a capital marketspoint of view, is a FX foreign
exchange clearing hub and we dothink that very exciting
companies will come out of thatin the future from London.
Obviously it's a huge marketand there are some very big
players and, depending on whereyou play in the market, there

(28:10):
could be a lot of sort ofcompetition from the incumbents.
But then there's a lot ofinteresting gaps.
I think if you look at evenfrom an enterprise company all
the way down to an SME, howcompanies solve their FX
problems is far from optimal.
I mean I can just give you QEDas one example, bill, where you
think about how much foreigninvesting we do and how much FX
exposure we have and then howmuch we think about hedging that

(28:33):
on the other hand and we've hada lot of internal conversations
about it, obviously but sothat's just one example where I
think there's a big space forsomebody to come and basically
innovate on how companiesconsume hedging and FX solutions
.
So that's one interesting area.
Embedded FinTech is one we talkabout a lot, as you know, and I
think that we're just startingthe journey on embedded FinTech.

(28:55):
The example we always use isUber, with their drivers really
transform mobility.
But a big part of thetransformation is you could just
sort of close the door gently,not slam it and leave the car,
and the payment just happened inan embedded, invisible manner.
And that revolution is juststarting.
Whether you think about travelpayments, insurance payments,
how those payments becomesmarter and how that gets

(29:17):
orchestrated and feels likeinvisible and magical to the
consumer, a lot of companieswill be created there.

Speaker 1 (29:23):
Great example and again, you know, as we're, as
we're covering the wholelandscape of a continent.
Obviously we talked tocompanies and just about every
sector within fintech, but Ididn't give in time and there's
always a couple that stand outin terms of having lots of
activity.
Clearly, as we're makinginvestments, a big part of the
decision is based on what is thebusiness, what are they
building, what's the spacethey're in.

(29:44):
But the founder and foundingteam are also, you know it's
very central in that effort.
You know, I wonder if you candescribe kind of what you look
for in a founder and how youthink about sort of the founder
versus the business model andKind of evaluate both of those.

Speaker 2 (29:57):
So, starting with the latter question first, I think
this idea of the right coursefor the right course is super
important.
As we said, we apply that toourselves Right.
So as investors, we try toinvest in areas where we the
right investor for that, meaningwe know the space.
Can we help the founder and Ithink the same applies to
founders Is this the rightfounder for this idea?
The big challenge maybe go tomarket and then you may think

(30:21):
about how the sales team and thesales function is built up
differently.
The other one may be veryengineering and product driven,
and then you think about how thefounders Stack up in those
areas and if they have the rightskill sets across the
leadership team to tackle that.
Some businesses that need to bebuilt will have some sort of
temptations to spend a lot, butactually the right answer is to
be very scrappy.

(30:41):
So then you look at the founderand think is this person going
to be very scrappy and not gettempted by Capital that may get
thrown at them from otherinvestors?
So I think doing that fit isvery, very important.
Going to your first question, Ithink building any business is
incredibly difficult and theodds are always stacked against
you.
So perseverance and speed areprobably two things that we look

(31:04):
at quite a lot.
Speed is is a very importantone.
To paraphrase Portman, I thinkthis I'm gonna steal that quote
from him as long as I'm thefastest, I just have to be
correct 50 point one percent ata time, and that's, I think,
that something that reallyresonates with me.
Again, speed is not always theright answer.
Sometimes you need to bedeliberate and make sure that
the solution is 100% accurate.

(31:26):
So then again, going back tothis right founder for the right
challenge.
You know, knowing thedifference between those is
crucial, but speed is almostalways one that is paramount in
the startup world, and beingable to execute fast is when we
look, for we have a Very longlist.
I'll just name one more, whichis, I think, also the sort of
intellectual chops andintellectual honesty to be able

(31:47):
to look at a situation, assessit intellectually, honestly,
openly, but, you know, verydiscerningly.

Speaker 1 (31:53):
No, that's great.
I've heard you say somethingthat's probably a little bit
contrary into what many peopleare thinking, that the comment
that, whether it's five years,ten years, twenty years, people
be tired of carrying a phone intheir pocket and that there will
be technology that voicebecomes the largest channel to
deliver financial services.
For can you talk about thatkind of long-ranging vision that
you have?

Speaker 2 (32:13):
Yeah, I mean, I think part of that is just sort of
looking into the trends and partof that is also wishful
thinking, where I'm getting verytired of putting my Fine in
trying to.
You know, london is real estateconstraints, for dinner tables
tend to be quite small and I'malways looking for a place to
put my you know iPhone 13, max,pro or whatever it is, and it
never fits anywhere and then Iput it in my pocket and it falls

(32:34):
out and it sort of pokes me inUnexpected places as I try to
sit.
So I'm hoping a peak mobileengagement, I think, especially
with AI and all these otherthings, I think it's just gonna
turn to a much moreconversational note.
I think there's possibilitiesthat it goes a bit more like
sort of Google Glass, augmentedreality.
I find that slightly harder.

(32:55):
I do think a Disconversationalpiece may trumpet very hard to
predict, but I do think therewill be a sort of trend towards
just sort of more talking tocomputers and instead of looking
at the screen, you can just sayyou know what was the growth
rate of this business over thelast three years, instead of,
like you know, squinting at achart that's showing the same

(33:17):
inside.
So so that's one thing.
And then so what theimplication for VC is?
That the channels may change.
I mean, I think everybodyremembers how challenging it was
for Facebook to grasp theoncoming mobile revolution and
they effectively fell a yearbehind.
But then they quickly caught upand now you know, a lot of
things are mainly consumed onthe mobile instead of the
desktop.
I think there will be a sort ofchannel shift at some point,

(33:39):
and certainly mobile will not beforever.
I think you'll be maybe in earset combined with a watch, and
you just talk into your ear setand hear back, or Maybe it's a
glass, but that's this thoughtthat I have.

Speaker 1 (33:50):
Well, that's one thing fun about the business
we're in is some of these trendsare really hard to predict and,
depending on which way it goesAgain, we're not not investing
at the primary technology therebut, depending on which way the
world goes, has a big impact onwhat types of financial services
businesses will be built.
Yep, so for our closing segment, I just love to move into
talking about you as an investor.
How would you describe yourbiggest superpower?

Speaker 2 (34:13):
For me, I think it's all around people at Capital One
.
I think you probably rememberthis quote I think Nigel used to
say it that we're not in theconsumer finance business, we're
in the people recruitingbusiness and to some extent even
like a factory with likemachines and robots.
It's still a people business.
But I think, yes, everybusiness is a people business,
but none more so than VC, whereit is just all about the people,

(34:34):
whether it's the investmentteam, the people that work with
us at QED, or the founders, orthe People that the founders
recruit, everything just startsand ends with how good those
people are and how good they areat their job and how good of a
fit that person is in whatthey're doing.
That really appeals to me and Ithink I don't know if I would
call it a superpower, but Ireally find People very

(34:56):
interesting.
I found founders veryinteresting.
I was a part of an angel club inthe early days at QED and I
would spend all day at work, youknow, listening to pictures and
ideas, and at night after 9 pmI was set down to the angel club
and we went through like eightmore pictures until like 11 pm
and I thought, if I can do ituntil 11 pm Like this and still
find it interesting.

(35:16):
I'm probably doing the rightthing.
So I find the people elementssuper interesting and I'm
energizing and I just Can't hearenough of different ideas and
different people and I find, youknow, meeting different people
and getting into their thoughtprocess super interesting.
If I can understand of someonethings, that is one of the most
fascinating things for me and Idon't want to call it getting

(35:36):
inside people's heads becausethat sounds very creepy, but
understanding how they think andhow they react circumstances is
fascinating and, as a result,spend a lot of time thinking
about how people react and howthey, how they will react in the
future.

Speaker 1 (35:50):
What's one thing that you wish you were better at, or
actively working on improving?

Speaker 2 (35:54):
For me, it's around switching gears to being more
slow and deliberate.
I think everybody's Strengthcan also be their weakness.
One of my strengths is beingable to move quite fast.
The flip side of it is and also, as we said, people.
The flip side of it issometimes you need to just take
a step back, go very slow, bevery deliberate and spend time
just thinking deeply, which issomething Very important, and

(36:17):
making the time for that is veryimportant and that's something
I strive to do more of and Tryto create a lot of spaces in my
calendar to do it, but it feelslike those spaces have a way of
filling up and I have a way ofgravitating towards people and
sort of things to do and firesto fight and not enough time to
do deep, reflective thinking asmuch as I'd like to.

Speaker 1 (36:36):
Funny you talk about going fast.
So Portman told us we had toask you a question here.
Apparently, you have a test.
You watch how slowly or quicklysomeone eats a meal, thinking
that that says something deepabout their personality.
Let's ask for an analysis ofthat.

Speaker 2 (36:51):
Yeah, I know this goes back to my business partner
when I started my business Hisgrandfather.
They had a big constructionbusiness as well and his
grandfather would have lunchwith people and in that lunch he
would see how fast they eat andhe would only hire the fastest
eaters.
I know they built theirbuildings and their construction
sites very fast.
You also want to make sure thatthe buildings stood the test of

(37:11):
time and didn't crumble.
But I think looking at howsomeone eats is one out of many
ways to sort of understand theirpersonality and how they
approach things and in myexperience at least, people eat
fast will be very Fast movingpeople, and that's important in
the startup world.
So please don't take this as acriteria.
And eating slower is definitelyhealthier and I try to eat slow

(37:32):
myself, but the way you eat cangive away a lot about you.
Keep that in mind.

Speaker 1 (37:38):
Yeah well, I'm probably way on the edges of
eating quickly.
I live the downside of being abit overweight Every day, so I
think the slow plan has good,good long-term health benefits
and I need to learn how to bebetter at that.
What's one thing that you feellike over your six years of
investing that maybe you kind ofgot wrong or underestimated or

(37:58):
kind of big learning that nowyou take a different approach to
investing?

Speaker 2 (38:02):
being able to say no under sort of any circumstance
and not getting waited to eitherA founder or a thesis, and
there's been cases where Ireally liked an idea like a
thesis and then that turned intothis Work, and I ended up doing
a lot of work on the space,thinking about the space, and
then that turned into.
Well, I've done all this work,so we should make an investment,

(38:22):
and I think that's Not a goodthing necessarily.
I think my learning from thatis that even if we've done
months of work, it's probablybetter not to invest if we're
not at full conviction, becauseonce we make the investment,
we're committed and you know theqed brand is all about playing
the full 90 minutes and thingsmay not go well and we're still

(38:44):
going to be there.
So when we do investments andmany of them obviously do not
Turn out exactly as planned wewe end up spending all that time
.
So it's better to be even moredeliberate before plunging in.
And just because we've done ayears work in a space Doesn't
mean that we should invest in itand we should just keep our bar
very high.

Speaker 1 (39:02):
Well, you said it's been awesome having you today.
Great to explore yourbackground.
We almost always end theseinterviews with the same
question to everyone.
Hopefully, we have a number ofyoung prospective entrepreneurs
listening to this podcast.
What's one tip you would sharewith a young entrepreneur?

Speaker 2 (39:18):
I think surround yourself with good people sounds
like I cliche, but I think justfind those people that can help
you in all these circumstances,and I think the key to doing
that is knowing what kind ofpeople you should surround
yourself with.
It's not about just findingsuccessful people and
surrounding yourselves with them.
It's more about knowing yourown weaknesses and Knowing
yourself and knowing where youneed complimenting, and finding

(39:40):
those people that compliment you, and they could be a co-founder
, they could be your chief ofstaff, they can be your COO or
they can be your investor, itdoesn't matter but find people
that compliment your strengthsand weaknesses, and the key to
doing it is obviously reachingout to them but also
understanding yourself.
So that would be the number onething in my mind.

Speaker 1 (39:59):
Nobody's able to build a great company on their
own, so such great advice.

Speaker 2 (40:02):
Yeah.

Speaker 1 (40:02):
So anyone who's listening that would like to
pitch you.
What should they keep in mindand how do they get in contact?

Speaker 2 (40:07):
Yeah, it's you stuff at qd investorscom, please reach
out.
We're always happy to talk toFounders working in fintech and
to keep in mind yeah, be openand share as much as you can.
Share your deck, share youridea very clearly.
We will then cut back to you asfast as possible.
The more specific you are inyour ask, your idea, what you're
trying to do, the more specificand quick we can be in

(40:29):
reverting to you.

Speaker 1 (40:30):
That's great.
Well you so, if it's beenawesome having you here today
reliving your journey.
We talk multiple times a week,but it's great to take this
chance to have have a bit of aretrospective.
So appreciate you joining andto all of our listeners Take
care and thanks for listening.

Speaker 2 (40:44):
Thank you, thanks, bill.

Speaker 1 (40:52):
This has been the fintech thought leaders podcast
your window into the world ofventure capital and financial
services with today's digitaldisruptors.
Qed is proud to provide thebest fintech advice you can get.
To learn more or to read thefull show notes from today's
episode, check out qedinvestorscom and be sure to also
follow qed on twitter andlinkedin at qed investors.
Thanks for listening you.