E678 | Giovanni Daprà & Paolo Gesess: Moneyfarm’s Journey, United Ventures’ Playbook & How Europe’s Fintech Winners Scale

0:00Welcome back everyone to another episode of the UEasy Podcast, where we connect and champion the people building European venture. Today, we're sitting down with two pillars of the Italian and European tech ecosystem, Giovanni D 'Apra, CEO and co-founder of MoneyFarm, and Paolo Gheses, co-founding GP at United Ventures. Together, we'll unpack how MoneyFarm went from Milan to a pan-European fintech player, what it takes to build globally from Italy, and how United Ventures backed the founders shaping Europe's financial future. Zero 100 returns to Vienna this February with an expanded audience that now includes private wealth professionals alongside a new track focused on defense-related topics.

0:36In its 12th edition, the conference will host leading firms and thought leaders from Anthemis, the Austrian Federal Ministry of Defense, B Capital, Burgos, EIB, EIF, KFW Capital, Lennox, and Co., and many others. Cannot wait to see you there.

1:02and a liar. This is a union of values. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. I'd like to do the podcast, guys. Thank you. Thank you. So I think we should start at the beginning to make sure that everyone knows Money Farm. You're primarily active in Italy and the UK, but of course also somewhat across Europe, but maybe everyone doesn't know. So Giovanni, would you tell us all about MoneyFarm? Yes, absolutely. So we are a digital wealth management. So our mission is really to make finance more simple and accessible.

1:43The perspective is that a lot of people are going to need to invest more. Most of the people will do it digitally. And we are there to create a platform that supports them, not only in the execution of the trades and investment, but also in the decision-making. So advice, discretionary management, so everything that you really need to fulfill the need of making your capital and your savings works harder for you. We run about£6.5 billion now. As you said, the main market is Italy and the UK, and we've been partnering with United Ventures since almost more than 10 years now. So, Paolo, let's then ask you, what made you make the bet on Giovanni and MoneyFarm?

2:27What Giovanni just described is MoneyFarm today, but it's not very different from the idea that they proposed to me back in 2012, starting the company just to make finance easy for other people. So when we met the first time, we did see a strong conviction in Giovanni and Paolo, the other co-founder of Moneyfarm, of this need in the market, to create a platform where people could easily manage the money in a very transparent way. And I think the mission that was there in 2012, after 13 years, is confirmed. Then the company evolved and now has an offer. And then Giovanni will explain much more.

3:14But I think the core of the idea is still there. And it was the one that convinced us to invest. You know, the conviction that Paolo and Giovanni could make this become a big solution for a big profit. Giovanni, let's start there. You founded off, obviously, in Italy. You've then moved afterwards to the UK and had that as your second market. Let's talk about first the decision to build in Italy and what it was like to first break out of Italy as well, so to say. So what would you say that's important to learn from our audience when it comes to building in Italy first or in your home market first and then going to a big market like the UK?

3:58Italy at that time was very, the ecosystem was very, very young. And I think we were talking about 2012, 2013, 2011. So I think that at the time it was effectively just Paolo and another fund in Italy, incredibly. So it was really a matter of, you know, building up the business, but also trying to build up the ecosystem. So, but on the other side, Italy is one of the most expensive market for investment managed product. It's a huge market, it's a huge pocket of fees. So there was a huge opportunity for disruption. And being local, we have the competencies, the capability to navigate the regulation, particularly in financial services where, you know, the regulation plays a very big role.

4:49You have to be able to understand the local nuances of the country. So starting from Italy for us was the natural choice, but we always had the view to build up an European business. I was living in London at the time and I was commuting back and forth. So my view has always been we start in Italy, but because it's easier for us to start there given the fact that we understand the market and the regulation better. But it was never the view of remain only in Italy. And I think, Giovanni, this is the key message that we always try to transfer all the founders where we met. Italy is a big market, so you can really start there.

5:31But you have to have the ambition to scale outside. And for the Italian founders, it's a sort of very challenging kind of mindset to get. Because if you're in Holland or in a smaller market, you start, or in Sweden or whatever, you start with the idea that you have a global market to address. while if you start in Italy, you can have the idea that you have the Italian market together. And sometimes you need to understand that, yes, the Italian market is big, but it's not big enough if you want to really build something strong. So you need to have this mindset that Giovanni had at the time just to start there because it's a big market, but with the ambition to create something that can go behind the Italian barrier.

6:19And I think, Andreas, the other point about Italy, which are, Italy is a cheap market to start because the reality is that the talent is cost less. So there are more infrastructure and bureaucracy to a degree, but your ability to stack up and launch a product is probably easier to do the community with less capital than it would be in London or definitely in the US. I'd love to ask both of you to reflect a bit on where Italy is today because everyone, or not everyone, there's a lot of conversation about Italy, obviously with Bending Spoons and yourselves as well, that we are seeing some great companies come out of Italy that really managed to scale and be luminaries in Europe.

6:59So I'd love to ask both of you, where do you see Italy today? How is it different from back then? What do you see moving that's really clearly signed posts to everyone that things are changing? Compared to 2012, it's a completely different ecosystem. there are much more capital than it was at the time. There has been a lot of push by the government and also by investors just to put more money in the venture capital system on one side. On the other side, I think the most important thing to build the ecosystem is to have success stories, to have serial entrepreneurs, to have stories that show other founders that you can do it.

7:44And so it's a virtual circle that started. and now it's just growing and growing. So ManySpoon is just one story, but there are other stories since the beginning that are like Music's Match, FaceIt, and other companies that have shown that you can start from Italy, but you can grow and become an international player. This is, I think, besides the money, I mean, there is a completely different ecosystem compared to 12 years ago, but the success story of the one that's going to change the mentality and the willingness of founders to create international companies. And we're getting there. I think also I would say that the talent pool has changed materially.

8:33So when we started 10 years ago, the people who work in the digital ecosystem effectively were always related to three companies. and there was like four companies that have done digital and you have a team of maybe 150 people that kind of was part of the ecosystem. Today it's different. Today you can hire a CMO which has direct-to-consumer expertise and can understand the nuances of running a product-led operation, et cetera, et cetera. It wasn't there totally 10 to 15 years ago. And I also had, you know, there are a lot of Italians and I've done experience in pan-European companies. A lot of people have worked at Google, have worked at Amazon, have worked in Berlin or in Paris.

9:21So you have those people that are coming back and they're starting companies in Italy because, as Giovanni was saying, it's sort of cheaper. You've got the talent, but you also have the people that arrive with this international experience, which is building a more European mindset compared to the Italian one. I'd love to now turn a bit to that decision to scale out of Italy. And thus, my question is, could you talk to the audience a bit about how do you make that decision that now is the right time? And I'd love to, like, obviously, Giovanni, you know your own story incredibly well and things have changed since.

10:04So let's start with you and talk about the decision for Money Farm to do so. And then afterwards, Paolo, maybe you can go wider and say, what do we see? How do we try and help founders think about this? So our decision was taken at the point where there was a convergence of we need more capital. We want to have a more friendly regulator. And we want to continue to move forward with the vision of being pan-European. So we kind of put the three things together. As Paolo said, one of the problem, structural problem we have at the time in Italy was that it was very difficult for Series A, Series B capital raises at the time.

10:48Something that today is slightly different. So to raise the Series A, we decided to find the UK investor who allow us to an open operation in the UK. That was pre-Brexit. So of course, the UK at that point was also a more friendly regulatory environment. you can export back into Europe. So I would say there was a contingent of things that put it together, made sense. And we kind of took the opportunity to do that by the fact that the virtue of having two, three things that were coming together at the same time and leverage a fundraise to effectively sustain the story of expanding international.

11:30on. Maybe you can then kind of try and abstract this a bit to how you see founders thinking about it today. I think in a startup path, there's happened something at a certain point, which is a tipping point. The company needs to do something different from what it was doing. Just going back, it was not just a fundraising need that we need to make more money, but So we definitely need that, you know, because it happened after a couple of years, you know, of building the product, trying to test the product in Italian markets, seeing the sort of stickiness. I mean, the wealth management is definitely a stick market.

12:13So we needed to enlarge the potentiality. And also we needed to discuss internally, you know, between shareholders and founders how to do it. And there was, I think, a very good combination of a couple of shareholders that didn't really believe it and the potentiality. So we did a buyback of those shares. We reached out to international investors. That was a sort of very important moment for MoneyFar at that time. And I think that, you know, just as of today, we like to sit down around the board and discuss, you know, if everybody is convinced, if we need to do some different move. There's not a golden rule, but in my experience, in 25 years' experience, there has always been this, I mean, there is this moment where, you know, we have to take a kind of strong decision and try to do something different.

13:09and this is the decision if you take the right decision, then you scale. And that was that moment in 2015 or 16. 15. 15, just right before we broke breakfast. And so in the story of Money Farm, I think this happened two times. The first time was 2015 with this sort of shift from Italian co-investor to international co-investor. And then the second, I think, moment where the company did, it's not a pivot, but enlarged the market was when we thought about not only the B2C proposition, but also, you know, incumbents and then let's say the B2B2C or the B2B proposition. And Giovanni, looking to you, you're now in the UK, you've been there for seven-ish years, and you've obviously done an incredible job there.

14:04I would say your vision is to be pan-European, but you're not one of the truly big behemoths that are everywhere yet. Could you talk a bit about then how do you go about capturing the rest of Europe? I mean, going back to the decision point, we also were in Germany, for instance, we decided to do what went out in Germany after COVID. So every time a company requires kind of different framework. And I think that the challenge is always to understand which one is the right framework at the right time. From two years ago, you know, there has been a big push where capital became from relatively cheap to relatively very expensive.

14:43And that, I think forced us to change the approach to scale and growth, which I think we did actually quite well because in the end of the day, we managed to move from a loss-making business to a profitable business in 24 months in a sector, which is complicated because you have a lot of infrastructure that you need to support. So FinTech in that sense is different probably from other places. But going back to the framework for decision-making, that was informed by the fact that at that point in time, the best thing for us was to grow stronger in our boat market where we were already operating without sustaining another J-curve to open a new market.

15:28Now that we have done that, because we are profitable, we're in two countries and we are more at scale, now is probably the time to start discussing how do we go back and thinking about expanding in other markets. Let's double click on the going from a scaling mindset where profit loss is not a problem to what I think a lot of companies went through in this period is going back to default alive, which is definitely a better position to be building from, unless you're in one of the hyperscaler markets where money is very, very cheap. I'd love to hear, how did you go through this? Making that decision, I think to everyone, it became clear that, okay, we got to make the decision.

16:10So that was forced upon us. But how did you go through that process? what happened both inside Moneyform, but also, of course, in the board with you, Paolo. Yeah, I think, listen, from my perspective, it was relatively clear. So, you know, when you have 2022, we're interested in, when I found the business point, and, you know, we work on the market, we manage money. So we are, one of the things that we are lucky is that we see this every day on Bloomberg, when we wake up. So it's like we are very close to that force of the capital market. So for us, it was really easy to understand the signal saying you guys have to adjust.

16:52The more complicated part is actually doing it. And then at that precise point, making the decision is very easy. The more complicated thing is executing on that decision. In other phases, the decision making is also difficult. That side, the decision making was relatively straightforward. But Paolo, what do you think? I mean, at the end, it's always a matter of the convention and the ability to drive that decision into executing and factor in the company to have the right people for doing that kind of path. And so I think it's always important to have a very strong communication process inside the company, you know, that everybody has clear that we are going in that direction or in another direction.

17:44And I think this worked pretty well in Manifar at the time. Yeah, I don't think I fought a lot of the decision. I don't know, Paolo, what do you think? From a board perspective, did I fought a lot of the decision on moving from growth to profitability? No. No, it wasn't. Let's unveil this a little bit. And it's an interesting question, I think, because many, I think, would say the usual story about venture capital is that while the founder has all his chips in one company, for that reason, he's going to want to drive towards profitability instead of growth. And the VCs, though, they just want size, size, size.

18:22So, like, forget it. We're not creating a small profitable outcome here. We're creating something very big or it might as well just go home. I'd love to just, because, and I love this discussion because it challenges the assumption that is completely incorrect because obviously there are more nuances at play. So maybe you can just riff a bit on what I just said. I think in the industry, it's pretty common to, after certain phases in building and scaling a company, to sit down with the founders and try to understand the financial need and the stress of being there, risking your job, your money, everything that you have.

19:07which is of course the personally in United Ventures we try to be very you know close to founders want them to be you know in the best position to run the company and of course if they they fail to be a little bit too stressed and and tight on results, then this is not going to work. So we have been, and I don't want to talk specifically about Vanifar, but a lot of time we try to do secondary transaction just to give more liquidity to founders or working on incentive plan that can be a little bit more real incentive without putting too much stress on that. And in other cases, I mean, maybe even changing the position.

19:59So, you know, having founders that just move from one, you know, very operational role to a more strategic and in order to manage this kind of process, because it's a very long run. And what is working in the first two, three years is not going to work in fifth or seven years. And in the money fund case, it's more than 10 years now. So it's definitely we need to change the way we interact and the way we believe. So I think in the early stage, it's very important to very, you know, ambition and work out. But then after you reach a sort of dimension, then you need to change, you know, the sort of the relations and the role of founders and investors.

20:47Company needs to have more independent board members. they need to become another thing. It's not just an investor-founder relation, but it's a broader discussion and a broader ecosystem around the founder. And I think from my perspective, I would say that the money farm cap table is a bit strange because we have industrial shareholders, we have VCs and we have private equity. So it's really, I would say, a combination of perspective and view. So we never had a situation where you know, the VC was like, yeah, I have to spend all your cash in six months because that works for, I think our governments would have made it impossible.

21:30I don't think also, Paolo, your attitude to be honest is in that camp. So in that sense, maybe That was the first two, three years. Let's try to see if this is going to crack the market. Yes. But then when we made it, then of course we need to raise money and manage money in a different way just to grow and that. And I also think, Andreas, we were a bit, let's say the bleedscaling kind of concept came a bit later than when we started the business. So that approach of building businesses was not possible for us in 2012 in Italy. That just wouldn't have worked. Well, and it is not for much of Europe, which I think is why I'm very married to the mission of writing the playbook of European venture, because for most founders, it's not attainable to run a blitzscaling strategy, as an example, both because of the go-to-market motions, but also because of the accessibility of capital, which is why I think it's so interesting to talk about this growing with discipline mindset, both from the founder perspective, but also from yours, Paolo, because it, of course, also impacts how you as a VC can manage your portfolio and go on the boards and act and what you should be putting out on Twitter to let everyone know how you invest and think.

22:49So I think that this is a very important conversation. Yeah. I mean, we try to do investment with people that have this kind of ambition and mindset to become international. And also, we try to write down rules that are easy to understand. I mean, there should be international rules, standard rules for VC companies. And this, I think, is one of the things that United Ventures was, you know, the idea and the mission since day one, when we started with Massimiliano, you know, to build an European VC based in Milano, but, you know, with European standards and ambition. so we try to put this sort of mentality and process on the investment that we've done not only Italian companies we invest also outside but the idea is to have a company that wants to, company and founders that want to build something and we know that we need to go to Series B, Series C round and most of the time the Series B and the Series C round are led by international investors and so the company has to be prepared for that kind of investor and we are really happy to have all those French, UK, German and Nordic investor, co-investor with us in the company, in the series B and C of our portfolio company.

24:19So this was the mission at the beginning and I think it's still very important to maintain that kind of attitude and willingness. We now described how you've gone through the refining profitability after the CERB era, and you described earlier, well, we grew from Italy to the UK, and now we're in the UK. We've done very well in the UK, and we're now scaling across the rest of Europe. Let's talk about, because you described it, right, that this is the next stage that you're starting to figure out how to do. So what are the questions you're asking yourself now? And maybe you can describe a little clearer to everyone, where exactly are you on this journey?

25:02You spoke about Germany before as an example. So I think at the moment we are meeting in the UK and we want to reach proof-to-base in both countries. So the fundamental point for us was that to get them to have a competitive model in both countries. In the last few years, we really focused more about product expansion. So we saw a convergence between our traditional, let's call it, robo-advisory business. So the point about we manage your money, we advise on your money, to also being a fully fledged investment platform with brokerage trading and other products. So rather than country, we focus on product expansion for the last two, three years.

25:45This cycle, I think, is almost completed. We have completed almost the product expansion where we wanted to be. So now it's a point of maximizing the commercial opportunity given by the new verticals, which for us are brokerage and pension. And now I think from a growth perspective, we can start rethinking how to look at different markets. Different markets, you know, it's a very different thing from, you know, starting 10 years ago, whereas there was not the product category. Now there is the product category. Most of the market have their own players. The playbook is probably going to be very, very different and it probably relate to consolidation, to M &A if there is opportunities or to identify niches where we really have a motor, we can compete compared to other existing players in different markets.

26:40and I think this is kind of the place where Monifar currently is in terms of making sure that we have completed our product expansion plan and then at that point in time we have to think what's next and that could be the international expansion back on the table. Yeah, I think in this market but happening in a lot of other markets like this one, I mean, there is one point that, you know, I have to be consolidated. So there's going to be company that's going to buy other company and company that has to be bought by other company. So at the end of the day, the expansion right now is definitely, it's not to start in a new country, but probably to pattern with somebody and maybe the partnership can evolve in an M &A.

27:28They could be, you know, one by the other or vice versa. I do believe this is going to be the, you know, the future, to create a pan-European platform. Spain is growing in this field. In France, there are quite a few operators. Eastern Europe, I mean, it's an interesting market in Poland. I mean, there are a lot of, let's say, opportunities. But of course, two things. First, we needed to get to this positive cash flow. And this is important just to be very solid. Second, Giovanni and the team have to be focused on building the product and improving the product. and then we have some strategic board where we try to understand if there are if this is the right time to get to those opportunities or if we need to wait and maybe understand if the opportunities should be down the road in months or maybe a couple of years so looking at a few years from now I'm pretty sure there's going to be money farm in more than one country with a lot of this multi-product offering.

28:49How do you prepare for this as a founder, Giovanni? You know that the next step of the journey is one that you have not been on before. Consolidation was not how you entered the UK. Could you talk a bit about how you as a founder grew through this? Yeah, actually, we need a bit of consolidation. So we bought three companies or two companies and one book. So I started doing M &A in 2023. And again, this was opportunistic because the reality is that I understood that the growth was harder for our sector in 2022 or 2023, even also by the market dynamics. And a way to unlock capital is to M &A. So in a sense, you can, if capital is scarce, M &A helps you with that because it allows you to better define the return profile.

29:39So in our product expansion, we bought one of the vertical, which was a pension consolidation business in the UK with about one billion in asset. There was always a decision between we buy or make the new product line and we decided to buy one. And we did it in 2022 slash 2023 where the opportunity for buying asset was actually probably very good. So I think we have this playbook now. So we have now done, as I said, three transactions. So it's definitely a muscle that we've built over the last few years. And in that sense, I feel like if we decide to then look at the European, I can definitely execute on that.

30:27Can you expand on that playbook? I think it's something that everyone in the audience are very interested in understanding better. You know, M &A is one of the things that as a startup, you really don't think of. And I think probably it doesn't make sense until you have a full-on product market fit and you are solid with your core business. But after that, as a scale-up, I think it's a tool, it's a lever that you have for growth. And of course, funders, we prefer organic growth by nature is better. and by all means is more rewarding. But M &A can accelerate things. And particularly in a business where scale matters, which are mostly businesses, to be honest, the ability to execute on M &A can allow us to move faster.

31:17I didn't have an M &A background, but I was always exposed to M &A also in my previous life in banking. It came, I wouldn't say naturally, but I started looking at it very, very closely when I was looking at product expansion. So again, there is always a business reason in for us was expanding the product faster and gets more scale in the UK. The question is, how do you do it? So I think that I'm very agnostic on the how, whatever works is fine. I think there is a rule though, Joe, which is, you know, you need to have the right people, you know, at board level, but also in the executive company, because running through an M &A process is something that could defocus founders or the CEO of the company to the real business.