Matteo Benedetti, Founder at Debtist: Debtist scaled to €15M ARR in just 3 years

0:00Hello and welcome back to Skating Europe show. I'm Seb Johnson. Today I'm joined by Matteo. Matteo is one of the co-founders of Debtist. Matteo, thank you for so much for joining me. How are you doing today? I'm doing very well. Thank you so much. And also thank you for having me. It's my absolute pleasure. You've been in the news recently, but before we get into all of it, can you just, for those who don't know, give a bit of a brief introduction to what you've built? Yeah, very happy to. So, I mean, it all started with me being a consultant at McKinsey. So it starts very boring and it gets very exciting.

0:30And I saw that in the receivables management space, that there's a white spot. And the idea was always with my two co-founders, Tony Branton, to build an end-to-end software solution that basically can run native AI in the receivables management space. So we basically collect outstanding payments, completely digitized and optimized, and basically now in Germany, UK, Scandinavia, and many, many other European countries. And very shortly before scaling this to all of Europe and perhaps even further. Amazing. And you scaled quickly, what, 12 million of ARR was the last public figure I saw, profitable, all done in a very short space of time.

1:07Where did that growth come from? That's a very good question. So, I mean, by now we're at 15, so it's not public yet, but we continue to grow at that pace. The biggest growth level was really not so much existing competition. So the typical collection agency, for example, is normally very legacy driven. On top of that, we were also very, very good at doing enterprise sales. So our main client base is basically enterprise customer, mid-market, etc. We first managed to grow within fintech scale-ups. So most of the fintech scale-ups by now are customers. And we're able then to basically convert more and more enterprise mandates.

1:52So that now we have, I don't want to lie, but roughly 500 clients. And those, again, are mostly very big corporations. and we're being blessed that in the UK, for example, or in Denmark, Sweden, we are continuing basically this growth even outside of our main market, Germany. Amazing. Amazing. European domination. Yes. But that's great. It's the dream. And tell me about this deal. A few weeks ago, you announced this deal where you've been invested in. Anyway, you tell the story. What's the headline? Very, very happy to. So Norvestor, which is one if not the private equity investor from the Nordics, specifically from Norway, basically bought out our existing shareholders and invests now massively in the operations of the business.

2:40So we're not only glad to have basically convinced one of the most prominent investors in the Scandinavian region, but basically also all their partners with them. There were many private equities and many growth investors that we talked to and that we elaborated with. But Novesta really was very much like our culture. They are idea first and not seniority first. They have a very, very good and strong network in Scandinavia and the UK, which basically helps our main growth ambitions, which go into those two markets. And again, like we've been super blessed with the people at their side and they have the exact ambition as us.

3:22this europe domination and this this hyper growth that we're in we want to continue that on that path and i'm currently basically wrapping the deal up we're short before closing signing was already like one and a half months ago so now it's basically back to a daily business and with them and they're very very much involved onboarding new customers scaling the software solution further and yeah, onboarding great people. We just onboarded one of the key people from 1.5. I think you talked to their founder not so long ago and also basically have been able to also now get key people from the CFO space, et cetera, that we can onboard due to Novesto being part of the game.

4:06So they open a lot of doors for us. Amazing. Was that the key reason why you did it? I mean, on paper, very young, grow very quickly, profitable. I imagine you could have raised a more traditional VC round. If you had that choice and you had this kind of private equity, why did you make that choice over kind of continuing on the VC backed path? That's a very good question. We started profitable from the start. So from our first month of inception, which is now three years ago, we were profitable. And it took us six months to raise venture capital funds because in receivers management, it's rather tricky to raise funds.

4:47So our thinking was, why, if we're profitable, not go with a long-term partner instead of like a short VC-term partner so we can basically double down on what brings us growth instead of just hunting down the next VC partner, telling the story and basically continuing this, I don't want to say vicious, but in this cycle that would burn a lot of our resources. So we talked to a lot of VCs. I don't want to say that we didn't. And they were prominent from Sequoia to Elephant to like a few dozens of the most prominent VCs we had in talks. But we just saw the vision and the continuity and the long-term vision of our business is mostly aligned with private equity investors.

5:29There also has to be said, like either way, it's a nine-digit transaction as publicized by Nidia. VC valuation would probably be much higher than that. but private equity valuations of course are normally a bit lower a bit more realistic so i want to say and tell me about your role going forward because there's no sign of you or your co-founders going anywhere you're sort of doubling down and continuing the business what does it change for you operationally that is uh that is interesting like from the very start actually my role changed all every six months so it was super rewarding as a founder to not always do the same kind of work but to always basically develop into a new role so from the very start as a founder you start with the nitty-gritty so you do the operational work yourself then you lead a team that does the operational work then basically i moved on to basically the ceo role and basically doing the back office and and the german and sales steering you could say and now i'm moving more into an expansion role so we basically hired a lot of like senior leadership from our CEO, Lukas Stoffel, to our CSO, to the coming CFO.

6:38So that basically I'm not any more involved into the, I don't want to call it daily operations, but let's call it that way. And my job is now basically to drive the future growth in coming markets. So basically opening office in Norway, Sweden and Denmark, we already have, and doubling down on the UK and also opening other offices. So the geographic expansion is on top of my list of new tasks. On top of that, also, we're looking into inorganic opportunities. This is also not publicized yet, but I think I can be so open to say that we are looking at inorganic growth because it just makes a lot of sense.

7:13You have a lot of current players in the market that basically sell at very low valuations. If you would put them onto our technology platform, the entire margin and multiple gain changes. So there's a huge inorganic opportunity as well. but again I think my main job right now is to learn a lot of languages to open a lot of offices and do the legal stuff behind and it's interesting because I guess that sort of inorganic play is much more possible with the private equity backing than a typical VC route which will be exciting if that's kind of the path that you go down and a super exciting European expansion how have you found it so far I mean you're obviously you're Italian and the company was founded in Germany so you're obviously very international by nature How have you found it, you know, moving around Europe, opening new offices, expanding?

8:03It's difficult to say the least. So you don't only have to open like a limited liability company in every country you operate, but you also have to get licensed. Opposed to, for example, a banking license, which you can passport normally within Europe. I mean, the UK, of course, is the exception. But normally within the EU, you can passport that. The licenses in our business for collection business, is not passporting. So you have to get a license in each single market and every application, every requirement is completely different from country to country. So it's been very tedious to double click on every country, to talk to the specific ministry or sometimes it's even the police giving the license and basically doing these processes.

8:48But it's super rewarding on the same side because this complexity we solve for, right? our clients have a dispersed fragmented legal field in all of Europe and through our solution basically they only speak in a human language to us and we translate it in every jurisdiction so it is a bit of a pain but we solve for pain and make it easier on a European scale for our customers yeah I guess that becomes remote you know if you if you're able to get all the licenses all the approvals that you need in every single market that makes it much harder to compete with you for somebody else trying to do the same thing.

9:24I've seen, I think, a few people in this space talk about AI and how AI is changing and transforming it. Can you talk about maybe some of the AI use cases that you've got a dentist? I would love to. So AI is, I think, in our industry, one of the most prominent use cases. So in collection and receivable management, AI basically touches the core, the operations part. So you normally have email ticketing, calling, letter writing, analysis of legal documents, and a lot of back and forth. You have so much data and so much information on every single case that it's the perfect use case for artificial intelligence.

10:01So every collection agency, at least the prominent big ones, they normally are very loud in marketing that they use some sort of AI. The reality though, in like the previous legacy, so to say, player, is that they have a lot of island solutions. so they do have software that are off the shelf bought from externals they have somewhat internal software but they have a dispersed data landscape which makes it really hard to have gen ai work at nearly full capacity so what we built as the i believe the only player in in europe is a complete end-to-end solution that we own in-house so the entire data is on a single landscape and the entire workings basically aren't by us so we can change everything very quickly the gen ai in our case it does letter writing it does email ticketing it does calling it does bookkeeping so everything in our software that can be done by a human or it competitors that can be done by human the i can do just as good at scale for us currently and we're above 90 percent of activities done by artificial intelligence.

11:12And in every KPI that we measure, this could be output KPIs, process KPIs, the AI far outpaces humans in quality and quantity. We have still roughly 8 to 10 % of cases where humans are better. Those cases or those activities are escalated to humans. And these are especially calling or very complex legal cases. But we are working hard on basically automating the majority of those as well. You always will need some type of human interaction. So we have our paralegals and lawyers internally. Nonetheless, artificial intelligence is going to change the industry very, very dramatically. And you see that without talking too long, but you see that in the customer journey.

11:56So if I have a problem and I write, before you just got an automated email and not a real human being talked to you because the margins are very low. So now you get an amazing assessment by an artificial intelligence on your case. If you have a right that this claim against you is wrong, the artificial intelligence will take the time and look through all the documents and assess your case. So you basically prove the entire situation for both the debtors to the creditors to ourselves also in the margin perspective. So it's really the industry for artificial intelligence, I would say. Amazing. It sounds like you're doing really cool things.

12:34I think one of the interesting stories about your I guess your journey, your background is coming from McKinsey there's always an interesting angle talking about talking to ex-McKinsey consultants what are some of the skills that you have learnt from your time at McKinsey that you've kind of been applying as a founder I think the most important skill I learned at McKinsey and I learned so much so I'm very very grateful for my time at the firm for the toolkit and for the amazing people and the very most important skill I learned is hypothesis-driven thinking. So start with an hypothesis of, for example, what you need to be a successful founder, and then basically you can change along the way.

13:13But first have an intuition and based on data or like a guesstimate, and then basically working towards a solution saves you so much time and trouble. One example is when I started, my thinking was what are the key things I have to nail as a young founder to be successful? And they were who are my co-founders, what is the idea and how do I finance it. If I nail these three decisions was my hypothesis I can make a thousand mistakes along the way but if I have the right people, if I have the right idea and the right market at the right time with the right financing I will basically be successful no matter what.

13:48And in every single decision throughout the day and every big decision having a first hypothesis and then basically adapting to new data new information that helps a lot so um this structured thinking and structured hypothesis testing is i think the most important skill there are many more but i think in simplicity this is the most important one it's the same thing that i've heard people talk about before it's like the yeah the ability to break down a problem test use data analysis you know like go through the motions and have that structured thinking is the thing that people always talk about do you think consulting does do you think consulting can survive in the age of ai and And what do you think about the future for young consultants?

14:24Is there a risk that so many young consultants are going to lose out? That's a difficult one. I think there is an inherent, and I don't want to make enemies at my previous employer, there is an inherent use case for consultancy. The complexity cannot always be grasped by artificial intelligence. I mean, we see it ourselves. We have very straightforward cases in data, but still AI has some sort of limitations. So we need human experts. It becomes ever more complex if you move into a McKinsey kind of environment. So I believe you will still need consultants. One profession or a few professions that are more going to suffer, I would say, is probably law firms, notaries, especially.

15:10I mean, you in the UK don't have the problem as much as we have it in Germany, and also bookkeepers. So if these industries don't adapt to artificial intelligence, the thinking and the problem solving that artificial intelligence applies, I think, is much more adapt to that than for consultants. I think consultants will have a much easier job. They will have way less juniors than they used to have. But the use case is still there that you need these kind of people, these experts, these very intensive work hours. but I think lawyers, notaries, etc they have to work with AI to not be replaced by AI.

15:46Yeah, absolutely and I think you're right, there's always going to be I said in the first few years when I consulted, there's always going to be a place for them, they've just got to get on board and learn the new skills and adapt. Can I talk a bit about Italian tech as well? Please go ahead, I would love to. What are your thoughts on it at the moment? We're seeing some great companies coming out of Italy, there feels to be a bit of a memento, I'm going to be at Wave by Vento later this year. What's going on? What's your view on your Italian tech? Amazing. I think we have a moment in Italy. So I will also be at Vento Wave.

16:20So hopefully seeing you there, Seb. Nice. There are a lot of cool investors and people. So just to name a few, Lorenzo Franzi, for example, in Milano, Benedetta Reze, who's also in the UK as an Italian founder, and many, many more. I think what I've seen is like when I found it three years ago, I talked to many funds, among others, Vento, etc. And the valuations were much, much lower than in Germany or the UK. Now the valuations that you get in the Italian markets are getting higher and higher. And I think that's a very good sign for the capital efficiency that you have in Italy, that there is at least capital for risky endeavors like startups.

16:58on top of that I think there's more risk taking mentality by Italians so even in the collection space we have one for example in Italy, Alberta an Italian founder who did something very similar to us that for example in Denmark with Debbie was there 10 years ago so we are slow to adapt but because the market wasn't there but Italians historically are founders by heart so in Florence to Modena, all these entrepreneurial stories from the past, I think we're just reviving them because now the framework is adapting. Amazing. Do you see yourself ever going back there and, I don't know, trying to bring the company with you?

17:46Do you see your future more being, I know that you're doing a lot of international expanding now, but do you see you're going back to Italy and help grow the ecosystem there? That is an option. I love Italy. The weather is definitely better than in the UK. But there are also downsides. We opened our Debt is Limited not so long ago, like last year. And it's already doing amazing success. In Italy, things are slower. So we're starting in Italy now with a subsidiary. But the time to open a subsidiary, the notary costs, the legalities are so complex. And that also applies to private people. So I'm just here in Italy, for example, because I have to renew my passport.

18:25and renewing a passport in Italy is very, very complex. Whereas in the UK or in Germany or even in Denmark, you basically do it in a day. So here in Italy, it's more like you have to write an encyclopedia of letters to get your passport. So like, I would love to move to Italy, but I don't think like the tech space is there yet. But in perhaps five years, I could definitely imagine it. Amazing. Well, thank you so much for joining me. It's going to be really exciting to watch you on the next stage of your journey as you sort of take debtors across Europe even further and continue to grow quickly and build a great business.

19:00Thank you so much, Seb. It was a pleasure.