0TO9 wants to build 1,000 profitable fintech companies: Jessica Holzbach, Partner and CEO at Germany 0TO9

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0:33Hello and welcome back to the Scaling Europe show presented by Deal. I'm Ted Johnson. Today I'm joined by Jessica. Jessica is an amazing guest, serial entrepreneur, now venture builder. Jessica, for those who don't know you or aren't familiar with your journey or experience, can you give a quick introduction to your career today to now where you find yourself?

0:52Jessica Holzbach:Yeah, of course. Hello, everyone. I'm very excited to be here. My name is Jessica. I'm currently sitting in Berlin and as you rightfully said I'm a partner at Zero to Nine which is a venture builder and investor. We originally started in Sweden and are now also having a headquarter in Berlin and there's like four other countries to come. So a lot happening. Before I joined Zero to Nine, I actually grew up outside of Frankfurt in Germany. started back then in consulting because I thought that's the only way to work with financial service instead of working in a bank you can work in consulting them too it's a better future but what I realized very quickly is that consulting is saying a lot but you never have to do it so I wanted to change that trajectory a bit and so I started my first company and right out of university of my master's degree um we wanted to import acai berries from brazil to germany was the time of superfoods and e-commerce so you could sell everything online um and yeah we tried to to sell a super breakfast bowl and realized it's really hard to build a business uh and uh we did this for six months stumbled upon the problem of opening a bank account and i yeah i had to say like i didn't like the whole lifestyle e-commerce thing so i wanted to go back to banking and financial service which I really I don't know why I love so instead of continuing this first startup actually joined a second one as a late co-founder but as the last co-founder which was called Penta we built up a SME neobank in Germany recruited to over like 80 ,000 customers collected 80 million in venture capital and after four and a half years sold it to Quanto which is still around one of the biggest SME neobanks in Europe now.

2:41Jessica Holzbach:So happy to have contributed to that journey. It was very interesting from zero to exit. Then started to invest a bit for AQT, but also as an angel investor, fund investor, LP. I tried all sides. Started another company, sold it again to another neobank, which is called Vivid. And now instead of doing a third time, I'm actually helping set up this fund fund and try to pass along I would say some of the mistakes I made to prevent people from doing the same again in the future amazing do you think two was enough two successful companies and exits was enough for you and now you're now you're happy to sort of you're still building I guess but more you know a step slightly back I guess yeah it's um it's interesting like I I don't know what happens I still feel uh I'm I'm young and I still feel there's like so much more to come and so I never know what happens in the next I would say 10 years but for now I really enjoy you know what we have found is sitting with us in the office like every day diving into a topic and really trying to I would say accelerate and manufacture a bit or put it down to like an assembly line like the learnings that that I had and I really enjoyed this this kind of hands-on work together with the portfolio companies.

3:57And what attracted you to Zero to Nine?

3:59Jessica Holzbach:um exactly that so i was i would say since um we sold penta was always on this edge of in between building and investing um i really considered multiple times of changing the site and what prevented me from doing it was that i felt like investment is sometimes very detached from the actual building um and i had so high aspirations towards my investors that i could not fully live up to when I was an investor um so I still try to find like this perfect I would say role for myself and with zero to nine it was this kind of new way of thinking again about venture building about like especially in fintech approaching a problem because it's very hard to build successful companies in fintech so I felt it's on the one hand creating like a new category in trying to reinvent the way how we could build fintechs.

4:57On the other hand, still, you know, not only managing a portfolio, but really working hands-on on go-to-market and license applications

5:05Jessica Holzbach:and compliance and, like, things like that. So, yeah. It's really interesting. When I was doing my research on you, I really got the sense that you were a builder at heart. There was something about your background and your experience and things I'd heard you say before that was almost like reluctant to let go of that part of your job or your skill set that you still wanted to be building that I thought was really interesting that came across when I was doing my research that actually this is not somebody who you know I'm sure you could have you know gone all in maybe tried to raise your own fund or joined one of the big prominent VCs you there was something really interesting that and especially because zero to nine relatively young as you mentioned expanding quickly you're not just joining a sort of like venture builder you're joining a very early stage venture builder so it felt like wow this is someone who clearly wants to be building why do you think what about it what do you love why is it so sort of it felt like really ingrained in who you are to be building what why do you think that is um i think the red line through most of the things that i did was that i always loved to learn so every time i kind of got myself into a new environment into something it had to be like new and you had to kind of figure your way out and like learn how to basically do it and there was I think every time I was standing on a crossroad deciding what I should do next I chose I would say the opportunity where I had to learn the most and so far I mean the older you get the more times you're standing at this crossroads and so far it kind of served me really well and now again like I was I was actually considering exactly what what you said so it's interesting that this came out of the research I was considering joining like one of the more like established funds or like you know doing something again and this year felt like to a lot of questions I had there were no answers and I think I love that like it's you know you have the chance to kind of shape that as well you have to take over responsibility um but you can like create and in the end like you make as many mistakes as anybody else but you learn a bit quicker from them and um yeah i think that's what what fulfills me in a sense so it's it's fun yeah no it's good to hear and can you i guess actually before we get into your experience today can you talk a bit about about the ambition and the mission maybe touch on the bit that you mentioned about the expansion that's coming up because maybe some Some people may not have heard, but it'd be good to kind of get the introduction from you, what the big ambition is, because there are big ambitions.

7:37And what does the immediate roadmap look like?

7:39Jessica Holzbach:Yeah. Yeah. So I think the big, very craftable, visionary goal that we have is that in 20 years, we want to build a thousand profitable fintech companies. And the way how we get there is obviously not sitting down like with each and every single one and doing it one by one. But you have to be a bit more, I would say, crazy and ambitious to do that. So we're expanding relatively fast in multiple countries. We are investing into fintechs, but we're also kind of co-building them. We're kind of creating them out of our venture studio. And the good thing is that in zero to nine, we have a very senior team.

8:16Jessica Holzbach:So everyone already looks back on a couple of years in either venture or banking or like the crosswalk fintech. So I think everyone already comes with a preset of hypotheses and ideas that should be tackled. So I think the ideas and opportunities, there's like a very, very long list. So now we're looking for the right founders to build them. And I think what's special about that is that at current times, and I mean, I experienced this throughout Penta and also throughout Paya, my second company, that how I mentioned fintech is a bit of a harder asset class in venture capital because it just normally takes longer.

8:55Jessica Holzbach:And it's very hard to compete with a bank because a bank in the end has the license and they own a balance sheet. And just, you know, as an example, like a bank sitting on, let's say, 50 million customers who have deposits. They just make so much money by just having the deposits secured at like the, you know, Bundesbank or something. That it's for them like no need to innovate. And as a fintech, like you're striving from innovation. you want to win these customers but it's as fighting with unfair you know like they just have such a moat it's so hard to crack in that and to just get a banking license in the start like you would need at least 25 million you know like just to get off the ground and then you haven't hired your super expensive chief compliance officer and so on so this whole overhead that comes with running a bank is something that i saw as a big obstacle for fintech um and that's how we kind of design zero to nine now so we are like a venture builder and fintech investor but the unique thing is that we have our own banking license so we are kind of summarizing all this overhead and compliance nerdery i would say we have people who absolutely love that even more than i and so have them basically on your side and taking care of the boring stuff um why you can actually as a founder run acquire customers make deals you know like basically get out there and innovate.

10:21Jessica Holzbach:And I think that's a really special case because that allows FinTechs also to become profitable really, really fast, at least on the first contribution margin. And yeah, in the end, it's a game changer. Yeah, it's almost like an outsourced or shared service center model. But actually, instead of it being like a very basic operational task, it's actually the more complicated regulatory, the hurdles that normally stop FinTechs. I think it's a really interesting model. I want to talk also about the state of fintech at the moment. We've seen the hype at the moment is all AI, in a way that 2021, 2022, 2020 was very much fintech.

10:59But that being said, we're still seeing a lot of the fintechs do really, really well. Penny Lane moves a big round. You've seen Trade Republic go from strength to strength. What's your view of the ecosystem, the fintech ecosystem across Europe now, given the hype around AI?

11:15Jessica Holzbach:Yeah, 100 % agree. like AI and then maybe also defense tech definitely like the biggest like areas of investment fintech keep going lower the only good thing also as you mentioned now is that there are some bigger rounds again so we see like a short uplift in terms of total volume because a few fintechs have raised bigger rounds so for me it's kind of a sign of maturity so we have penny lane we have we have like a couple of you know the big deals um and they're all i feel like cross european so that's what they have in common you know there's no not anymore like this one fintech in let's say germany who's raising this round you know all of them are actually already in multiple countries so i think that's a really cool sign that like the european market is getting closer together uh that these like once you kind of overcome this initial product market fit and kind of find your right trajectory that like there's still i would say a lot of demand and belief in these fintech companies also from big investors so i think that's absolutely fantastic i think where there's a gap is in the very early stages um because especially with ai um like your first check investor in kind of expects you to show already like you know a finished website a finished product like some not like a prototype but something working it has to be compliant has to be that that that you know it's like you have to have let's say 10k in revenue in like the first days and that's all possible with like a one-man AI company but with fintech it's just so much difficult more difficult you know because you have to get like the licenses and these stuff so there's just this natural I would say barrier that's so much higher and that's why it's also very hard for a fintech company if you put your deck next to like an AI company and then it's the same investor they're like why would i why would i even do this you know so i think there's like a huge gap that's obviously where we are targeting at like where we are like in um but the very early stage um pre-seed seed is i would say very thin at the moment that's really interesting and the founders that are building in that space are you seeing them build different types of companies are they very well you know are they so rooted in ai are they leveraging ai are they solving different problems to the companies that you founded that were being founded four or five years ago yeah so i think what they have in common is that most of them have worked in fintech before so i think that's very interesting obviously the talent is maturing a lot i mean even you know the doona founders have been at fourth line before you know like so it's the ecosystem is recycling itself a bit uh that's why um founder market fit is definitely can put like a much bigger like uh I would say, tick in the box.

14:11Jessica Holzbach:But I think I lost my thought now. What was the first part of the question? I'm curious to hear, like, yeah, are they building different types of businesses? You know, is it AI? Are you seeing AI fintech companies cropping up? Yeah, no, no. Thank you so much. It's Monday. I've been sick last week, all weekend. I feel like my brain is still like, you know, on the mode of like ramping up. But yeah, no, I think definitely, I think all companies that are started now are like much more like AI native, right? The way you build products now is completely different than two years ago, than like five years ago, than 10 years ago.

14:51Jessica Holzbach:I was just saying today, we have a portfolio company in sales that basically within the last two weeks built like a full product. It took them obviously like two weeks to do all the integrations with open banking and everything, you know. Have the bank account connected, have that. And I think the first time with Penta, we worked two years on that. With Pyle, it took, I think, eight weeks to build up like the full product. And now it was like two weeks. And I think that's insane. And I mean, it feels every week there's a whole new decade that starts, right? That's amazing. Yeah, and that must be amazing for you to see.

15:30I think a lot of investors talk about it, but being in the position of having built and scaled businesses, you're probably in a unique position to really see how different things are now than the words and words. I want to touch on your journey from founder, operator to investor, you're sort of playing that middle role. But how did you first start investing? At what point did you start investing? What are some of the hard lessons that you had to learn when you first started?

15:54Jessica Holzbach:it yeah um so i started probably as as many other um founders um so i think we had our first um secondary um and all of a sudden you're quite young you have some money on the bank account and you're like what do i do with this money i want to i want to invest i want to give it back and put it back into the ecosystem and i think in the beginning you're very rushed and like excited about it because I think everyone that's a founder all of a sudden realizes you know that just giving the money and waiting that the founders like do their job and then you get rich is quite a quite an interesting model I would say for a founder and so yeah but the lesson the first investment I made was actually much more out of serendipity like somebody came to me out of my network they wanted like advice I helped them a bit and then invested and I think I learned a lot through his first investment was a tiny ticket um so that was good because it didn't work out um and then with every investment i improved my own process i would say um i think one thing that i'm quite happy about is that i've never just followed other people's um you know like like four more hot rounds i always like made my own assessment which is um good if it's not your main job I guess because then you know like something comes in you help people you stand for a certain topic people with that like that identify or need help in this certain area will come to you and you learn to kind of assess what what's needed to for a company or a team to to get successful and if you only do it always on your own I would say parameters you also know at some point what's wrong with your own parameters so I feel that's um that's maybe some advice I will pass on to really do your own assessment and don't just follow along somebody else's yeah and have you got a wide range of companies that you like to invest in or do you kind of stay focused on fintech yeah it was also a process i would say uh in the beginning i was a bit more broader i spoke to almost everyone um and then realized how much work and effort this is and that i would say my main point is that um especially with fintech companies so at the moment i'm only focusing on fintech um i'm just of so much more value to the founders because they can you know send me a whatsapp and basically ask me i don't know like what's the best bank partner bank that we should work with if we want to set up a debt fund you know and then i can just send them a short text back and that's normally knowledge that would take weeks and a lot of like calls to acquire right so and you're like of much more help to the founders and i feel it also takes less of my time than to be helpful and that's why i decided to only invest in fintech um it's a faster assessment um of the of the deals it's like i said like a better value add for for both sides yeah and when you look at the ecosystem and the specifically fintech when you look at you know uh building a thousand profitable fintechs which are the areas where you think fintech still has a lot of room to improve the customer experience yeah um i think it depends a bit on the countries and the markets because we do now like now that we work very european i do see very big differences in the financial maturity between countries um let's say sweden and the nordics uh they had for example buy now pay later um clana and co starting like a couple of years before us so they're also much more in in the whole debt space so there's much more happening in debt and credit and like these type of of deals and finances and startups whereas germany is a very you know savings prone country very risk averse and it's only starting now that we see more activity in that space so there's definitely i think a lot that will come in credit collection this like quite old school areas in Germany but also in other like saving prone countries and then I mean you and you know if you talk to banks like most of the banks are still very concerned about the topic of digitization you know which they've like dealt with for the last 20 years I would say so the day that most banks will actually have the chance of applying AI properly into their process to make them more efficient and better is, I was still very far ahead.

20:37Jessica Holzbach:So even there, you know, this crossroad of AI and fintech is so much opportunity that I think we have even more space than 4 ,000 companies. Wow, amazing. I love it. And yeah, I mean, being from London, when I first started talking about tech, it was, fintech was the thing. You know, I love fintech and UK still got amazing companies. Even last week, you had another fintech Unicor and Alicobank. But look, we're out of time. Jessica, thank you. Yeah, thank you so much.