Holvi plans credit card launch, fundraiser and IPO after split from BBVA
Holvi has lost 60% of its customers and 50% of its staff after buying out of BBVA earlier this year. But according to founder Tuomas Toivonen, the small business banking startup is now making more money than ever.
The recent success is a reminder that operating as an offshoot of a large corporation is not always a good thing for startups, and can indeed often burden them with bureaucracy and slow decision-making.
“When you’re an independent company, of course, you have more flexibility. And when you are managed by a team, there is no inertia in the decision making. You can make big decisions quickly, ”Toivonen told Sifted.
Trouble two years
Founded in Helsinki in 2011, Holvi was acquired by Spanish bank BBVA in 2016. It had built a client base of more than 150,000 micro-enterprises in Germany, Austria and Finland and planned to expand across Europe.
But in 2020, the company made an untimely breakthrough into the UK market and was forced to pull out of the country just six months later citing Covid-19 and Brexit.
At that time, BBVA was also rethinking its own neobank strategy and in January it shut down Simple, its American neobank. At the same time, she also sold Holvi, in this case reselling it to Toivonen.
It was a shock to Holvi, who has since undergone a brutal transformation. Toivonen succeeded Antti-Jussi Suominen, who has resigned, as CEO. It halved its workforce from 150 to 75, reduced its cash consumption by two-thirds and increased its monthly income by 40%.
“We’re half the size of the squad we were in January.
“We are half the size of the squad we were in January,” said Toivonen.
But he says that as a small business and with no BBVA in charge, Holvi was able to be more nimble. It’s amazing that you can increase revenue by over 40% with much less marketing spend. It’s a much more efficient business, ”he said.
The increase in revenue is due to the fact that Holvi has stopped allowing customers to open bank accounts for free. It is now necessary to pay 6 to 12 € per month for the Holvi service.
60% of people have closed their accounts. But those that remained were worth 20 times more.
“Not all customers are very keen on the idea that we put a price on a service that used to be free,” admits Toivonen. But he says the churn rate wasn’t as bad as the team expected. “We were prepared for a much stronger negative response, and we were positively surprised.”
Some 60% of people have closed their accounts, which sounds like a pretty sharp loss of customers. But, says Toivonen, the clients who decided to stay tended to be more valuable. In fact, they were 20 times more valuable overall, so doubling the number of engaged users was worth it.
Now, the company plans to use its newfound freedom to launch a number of new products, such as a credit card in addition to the debit card it already offers to users.
Holvi focused on banking services for the self-employed and small businesses, providing them with tools such as cash management and expense reports. Being able to offer credit to freelancers and independent traders was a missing part of the service offering, explains Toivonen.
After that, the company plans to offer debt financing for small businesses. Some 20% of the invoices of small traders are paid late, leading to cash flow problems. Financing options are therefore something that this clientele needs.
“Do you just want to stay 18 months to get your income or are you still interested in growing the business? “
Toivonen is reluctant to criticize its former parent company BBVA. But reading between the lines and observing the pace of change at Holvi since the split, corporate bureaucracy had slowed down many projects.
He said being able to make big decisions quickly “sure helps” now. “That’s not to say BBVA would be particularly slow in decision-making, but all large companies are. It’s just inevitable, ”he said.
People close to the company told Sifted that there had also been tensions over BBVA’s overspending on marketing and not enough on developing the technology and product offering.
Toivonen declined to comment on internal affairs. But he told Sifted that the founders should be clear about the level of involvement they would continue to have with their startup after selling it to a business buyer.
“Are you planning to stay only 18 months to get your pay – ‘rest and invest’ – or are you still interested in growing the business? If the latter is the case, then you might find corporate life too frustrating, ”he says.
That said, Toivonen says he doesn’t regret the deal with BBVA.
“The world of fintech in 2015 was very different from what it is today,” he says, noting that Holvi was one of the very first pioneers of fintech, founded at a time when the fintech was not yet commonly used as a term. . (People thought Toivonen was talking about Finn-tech, referring to Holvi’s Finnish heritage). It was not clear in 2015 that neobanks could pose such a significant challenge to incumbents.
“You make the decisions with the information you have at the time. So in that sense, there are no regrets, ”he says.
In some ways, being part of a large company helped the startup.
“Maybe something that few startups think about, but being part of a multinational financial institution, we had to build a very strong culture of compliance and governance. We are closer to being a full-fledged credit institution in terms of governance and regulatory maturity. It was because we could benefit directly now from the deployment of credit products – all the required risk frameworks were already in place, ”explains Toivonen.
Big new plans
There are no plans to launch into new markets immediately, Toivonen preferring to double the German and Finnish activities. But a return to the UK market could be considered in the future. Toivonen is clear that its ambition is still to make Holvi one of the top 3 players in small business banking in Europe.
“Our ambition is to build a leading player in the banking of small businesses in Europe.
“This is not a mission accomplished for the financial management of small businesses. It’s still a puzzle, and there is still so much to do. We have a great presence in the German market and I would say that we are the first neobank business here in Finland. Our ambition is to build a leading player in small business banking in Europe and to effectively be the leader in a number of key markets.
For that, the “indie Holvi”, as Toivonen likes to call the company, will have to raise VC funds again, and discussions about this are already underway. When a company has been bought out and recreated, it’s hard to know what the next round would be called – a Series A again? The company is currently owned by the Keru Fintech Investments holding company of Toivonen.
And if they bring in VCs, those investors will have their eyes on a future exit. But it won’t be another sale to a company, says Toivonen. This time around, they’ll be aiming for an IPO, most likely within five years.
Maija Palmer is Sifted’s innovation writer. She covers deeptech and business innovation, and tweets from @maijapalmer.