Penta just got listed by CB Insights, the research company, as a challenger bank, who disrupt banks: https://www.cbinsights.com/research/disrupting-banks-startup-market-map/.They raised a recent venture capital round, a Series A, totaling 7 m Euros from Inception (https://inceptionvci.com/). They talked to many investors and number 67 was the one, which invested in them. Finally, they had to decide between two bids from investors. They have already raised 2,4 m Euros as a seed round in the past.
We keep track of Penta, the fintech startup from Berlin who offers SME banking in a new way. They just raised 7 m Euros Venture Capital and we get together with Lav (https://www.linkedin.com/in/lavodorovic/), the CEO to get some insights on how they have done it.
We talk about their argument with Transferwise, concerning their really close look of cards: http://www.eu-startups.com/2018/01/berlin-based-fintech-startup-penta-accuses-transferwise-to-have-stolen-its-debit-card-branding/
You can find the Trello board, where the Penta roadmap is posted here: https://trello.com/b/v0hXe4kb/penta-product-roadmap
In the past, we have talked to Penta or “Get Penta” at this time. We keep track of them, ever since we recommended them for Startupbootcamp Fintech in London. You find the other interviews of Lav’s co-founder Luka here:
- Plus Luka participated in our annual fintech review: https://www.startuprad.io/news/2017-fintech-review-germany-2018-outlook/
The Penta card is very green, it almost shines in the dark.
Lav Odorović – CEO & Co-founder Penta
In the first 20 VC meetings, you have no chance to get money.
Lav Odorović – CEO & Co-founder Penta
It took Uber more than 250 VC meetings, before they got funded.
Lav Odorović – CEO & Co-founder Penta
Announcer: Welcome to startuprad.io. Your Podcast and YouTube blog covering the German startup scene with news interviews and live events
Joe: Hello and welcome everybody. This is Joe, from startuprad.io. Your startup Podcasts and YouTube blog from Germany, and today I do have get Penta again with me. The history with Get Penta goes way back into time. They reached out for us I think like two years ago and we ended up recommending them for startup boot camp Fin-Tech. They went into startup boot camp Fin-Tech and ever since we kept track of them. Most of you people will know Luca, who’s one of the founders of Get Penta. But always talking to Luca, we thought gets a little bit boring. He’ll be back for the Fin-Tech review nonetheless, but today I do have another of his co-founders. Hey, Lav, how are you doing?
Lav: Hi there, and nice speaking to you. Sorry, just a small correction at the beginning it’s not ”Get Penta”. It’s Penta.
Joe: I’m so sorry. [Laughs]
Lav: No problem no problem at all.
Joe: For everybody who’s first, encounter with Penta, this video is. Can you tell us a little bit about it, except for the fact, that CB insights just called you one of the challenger banks? To establish banks and you’ve been included in a list of I do believe 60 startups all over the world right?
Lav: Yes, yes. Amazing and we are very happy to be such a good crowd. Yes, maybe just a bit about Penta. So, Penta is a bank that we founder at Penta never had for our own startups. So, it’s an SME Bank but a very-very different kind of-of one. So, we can’t really say even at the moment if we a Bank. However, we offer a bank account. And this bank account is very powerful and it saves a lot of time and energy for our founders. From the main view open account which is fully digitalized fully online. And the way we communicate with them. The way the app looks and feels and actually the capabilities that our customers have to enrich their business and save time.
Joe: Just to avoid some heart attacks here from everybody who’s looking at this from a national oversight body. I know some people are out there… You’re offering a bank account but you do this in a corporation with a real oversight bank who pay slips.
Lav: Yeah. That is correct.
Joe: That is the insurance and all those stuff right?
Lav: Absolutely, so we are not a license institution [Inaudible] or any other national authority. We do work with a bank called Solaris bank. So with the Penta, we offer account incorporation with Solaris Bank.
Joe: Understood, and can we go a little bit into what special about Penta? You told us its mobile-based it’s SME focused. Just a little bit more facts about what’s special about it until we get into your journey so I do believe a digit Venture Capital round.
Lav: Okay, so several things so yes we recently announced Series A round. We have raised seven million Euros from BC called inception from the UK. And this money will fuel our growth further. So when you ask me: “What is what is really special about Penta?” I think it’s a very different approach to banking. It is the one that puts in center of attention the customer and not you know like the huge amount of bureaucracy but what does this really mean for customers? It means that they open their accounts much quicker that there is far less friction from the moment they find out about Penta until they start trading until some of them start using some of their products. For example, when they issue MasterCard multiple Master Cards for directors but also for their team and they set up limits or many other features that offer from FX to accounting integrations and many many more features that are coming literally every eight weeks.
Joe: If I do remember it right wasn’t there an incident where one of your competitors was a little bit too inspired by the card you are issuing?
Lav: Yes, that is a great card [Inaudible] so yeah. We… A Penta Card is very distinctive. It’s really beyond green so it almost shines in dark and many people recognize it but what’s really interesting is that many different banks are following the color and almost the look and feel. So, we had the guys from trans-wise launching card that looks… That’s exactly the same color. But we don’t mind we actually think it’s cool that you know we will bring the card to the world that inspires others to do similar things.
Joe: In China calligraphy. You know the painting of the characters is a real art form and you appreciate an artist by copying their style so you can also see it as a compliment.
Lav: Yes, yes very much so. You know the Penta card is really cool for many other reasons and not just the color. Those who use it there are photos all over Instagram and Twitter about our customers from all over the world using it but we also use it in a bit different way. We completely… It’s very simple so there is nothing on the card apart from Pent Logo on the front and we moved the number and all the other codes on the back which makes it more secure when you’re paying shops. And also the card is of portrayed it’s not landscape because you don’t push the card in a landscape formats to pay which we also are quite surprised that it took banks forever to realize that’s not how you want to use it.
Joe: Yes. What came to mind when I was just rethinking what you just said I came up with the with the slogan welcome to Penta the bank which cards shine at night but there may be not the-the main slogan you get customers with [Laughs]
Lav: Yes, yes and we still can say we’re are a bank it’s [Inaudible] but yes it’s. Listen it’s I think the bank innovation especially business banking sense is 1% done this is a quote that I often borrow from guys from [Inaudible] and we really truly believe and live this every day. We keep experimenting. We keep listening to all our customers and keep trying to please them by releasing the features they actually want. And you can also see this with our applicant’s fellow roadmap so even you can now go and just Google the roadmap and probably the first thing on your Google takes you there and then you can see all the features released and also the ones that are coming and always the direct feedback from our customers.
Joe: Cool let me just… ”Penta roadmap” have a look. This is actually live it’s the first thing on Google 0.34 seconds and here we go to Penta green yeah Lucas, writing and a lot of other people. You could see the roadmap short-term medium-term released 22nd of October 1, 2, 3 months 3 to 6 months yeah! That-that is pretty impressive.
Lav: But this is not only… You know this is a real example of how customer-centric organization can look on the inside on the outside but it also has implications of how we are organized as a team. You know how quickly we want to put these things and how we legal that job, we have to be in order to do this. So, there’s also a huge slant community that anybody can join. And there we communicate on a daily basis customers who say listen: ”Maybe we want this a bit different or this is missing or maybe this button is in the wrong place” And they really get surprised when two weeks later we to be delivered what [Inaudible] And this was so far the number one channel for us to grow word of mouth.
Joe: The main reason you’re here today, is we want to talk about your VC round raising venture capital especially for a Berlin-based Fin-Tech [not a bank] and what I had in mind is first talk about how long it actually took you and to how many people you had to talk to? Can you take us a little bit in through the journey you actually took? Because I do believe something like this raising 7 million takes much more than just a few weeks.
Lav: [Inaudible] especially the beginning to raise concept before we raise our seed from which was 2.4 million, in the end, it wasn’t working a mark I have to say so we spoke with 67 pieces. Actually, 66 and 67 were lucky charm where we were we got the money maybe they had two competing offers in the end. However, I always like to say to fellow entrepreneurs that I think the first 20 VC meetings you have no chance to get money. You just need to be sure that you don’t miss to answer the same question twice so this is then served or as [Inaudible] to help you find holes in your approach. And then the next 20 visits you’re slowly starting to answer the questions well and you’re perfecting the way you… You know you’re perfecting the way you are presenting this and it’s clear and understandable to the other side. And then finally in the third 60 [at least it was like that in our case] You actually start seeing the compelling story. You know what you are. Why you do it. How you do it. You know about how you can overcome key obstacles and then it’s more about finding a VC that meets your vision.
So definitely I would advise all start-uppers not to start with the business that they really care about but to start pitching to those that you know may not be too perfect fit for them just to somehow practice. And just for those who think that 67 VC meetings are you know… It’s-it’s really a lot I know that we had friends that put more than 250 VC meetings before they were able to run their business. And it was even in the US compared to Berlin where it’s getting much better there are many big cities today but I would sort of guess it’s a bit easier to get funded in the USA.
Joe: It’s-it’s still easier to get funded in the US?
Lav: Yes, that’ll be my obviously [Inaudible] kept on the US. We did speak with some US funds but i would somehow think that it’s a bit harder in continental Europe and then in the US and UK maybe be somewhere within.
Joe: Okay, so you need approximately for the startup pitches in front of VC to actually refined get your final pitch done. And then you should talk to your favorite VC’s. How did you come up with a list of all the VCS you talked to? So basically at the beginning, you have to do research not the VC’s find you. That’s like in 1 percent of the cases when you are something someone like Uber like Facebook in a late stage the VCS will start talking to you. But actually, you have to do your research. You have to come up with the more or less right fit I would say, right?
Lav: You asking several questions in one. So the first question is: How it was to get funded and right? This is the part where…?
Lav: Yeah, so my experience is that they are two general acts of VC funds. Those who are generalist funds who are waiting that you know some smart guys pitch on an idea they believed in. And then the other type of fans which now becomes more and more often the case is those who are really specialized in one or two or three or topics like let’s say: Fin-Tech and then even more specifically SME banking Fin-Tech. They did some research and then they see some statistics and they think it would be good this year to back up on SME Fin-Tech right. So when this is the case and when people are opposed by this fund. Then all they have to do is sell their vision and look for those funds that are actually being with this vision. So, in our case in case of Penta, we have a vision that the future of banking lays in API’s right. So instead of one bank really offering the whole wide area of old services in the world but doing them all average to be and selling them for a high price.
We believe that the future will lay with providers of individual vertical Banking products such as transfer-wise that offer FX or funding circle that offer loans. And also companies who will build a user experience later on and integrate that kind of services such as Penta. So, if this is how we believe that banking will move in the future and then all we need to do is find a Fin-Tech fund that wants to invest in SMEs and will share our vision arms to whom we can really sell this vision to. So, after speaking with 40 or 60 VCs and then you perfect your pitch you will already have answers to most of the questions of how you’re going to approach this is how you’re going to approach that. Then it’s all about finding the fund that shares the vision and then you can fund it.
Joe: And where do you find those specialized VC’s that are sharing your view? You go on to a lot of for you Fin-Tech events and listen to talk to the VC’S? How did you do it or…?
Lav: You to do many things in parallel. Normally it takes time to do 60 VC’S calls right and meetings. So hopefully you are you’re not the only one in your company there are other people that depend on moving. You’re building product at least v1 v2 v3. So hopefully you get some PR so for us. For example, It was very helpful that we spoke to you early on and then with some other media outlets and then VC started hearing about us. So, we started publicly pitching the vision off. You know ABI Banking in SME world so then some VC’S found us. But not always so easy to do this and we also some of the VCs who found us and thought that they maybe they agree with our vision they didn’t really end up investing for different reasons. And you’re right I can start partially very active going to conferences. Meet people get recommendations and then eventually end finding the right investor.
Joe: How long all together did it take you to like in the month or even years before you could finally close around between the… Like closing your seed funding till now I do believe it was just one process how long did it take you?
Lav: Okay so there were several steps in Penta funding right. So, we started talking with VC’s very early on maybe during the startup boot camp. However, at that stage, it was far more realistic. We receive some angel money and we did. So, however, we kept on speaking to VC’s. I would say that it’s very hard for any VC to invest if they don’t know a company at least for three months and very often this is six months or more. So not for really at least 6 possibly 12 months to raise a VC round. However, the first part should also be pitching to angels and getting some angel money which would allow you to live through these 12 months and also release a product at the very least. And hopefully, you have been getting the attraction reports. Because all of them are always, full of excuses why they don’t invest. Even, if they like the vision and product and the team. If the product comes up live and also in many cases even the customers are out there.
Joe: So, that means if you have a life product. If you have customers who are actually using or in sometimes buying it if you have actual customers for your product then that’s the point where the VC’s want to enter before its…?
Lav: It’s much much harder. Obviously, you know if you just have the cure for cancer and your years of exclusivity to sell it to people then you can go straight through VC they will give money to fund it. But there are kind of clear cases where you have something extremely defensible that’s already very clear that people who want to buy are very rare it still happens. And it just means a bit more frustration from founders to VC’s but the case is not as strong early on like that.
Joe: Before we go to close your recommendations for we see around. What is the most important stuff you would like somebody have told you before you start out raising VC round? That you didn’t know before.
Lav: Yes, first I would be very very careful who I take money from so this is easy like easily said than done right. Because at very early on it so hard to raise money that you’re just like okay let me just take money. However, I would generally do a lot of due diligence and investors really discuss with them openly about the vision of the company and as they’re buying very early on feral plants. Rather and have a situation where we had some disagreements with that. We are very happy and lucky to have really great investors who support us on the way.
But it’s not always the case and I knew you make startups fail because they didn’t really provide investors on board and they didn’t share that vision with them. So this is probably one of the things and also maybe not exactly VC related but more important and choosing the right partner for your funding. Is choosing the right founders which is, of course, a whole other topic that maybe we can discuss in one of the next opportunities but also for me probably the most critical element in start-up life.
Joe: I just… What just came into my mind was when Luca, was talking to me on an audio-only podcast about it. He said the memorable quote “Don’t marry these sexiest people but the ones who bring most to the table” I do believe it’s the same he also applied it to your co-founders.
Lav: Yes, I hope you didn’t mean disregarding me the sexiest people but apart from this I totally agree with Luca, so you know it’s also hard because the early on you just have an idea ambition and now you need to persuade some friends or maybe worse if they’re not friends to leave their well-paying jobs and used to go to this crazy adventure where they will have no salary and you know a lot of risks but what I learned is that high risk is actually low risk. So, if you do a risky move and leave a well-made corporate as I did you can only get better off because even if the start-up fails six months down the road you can always come back to your old worried job with so much experience that you can immediately become your boss if not more than that. So for me, these high-risk moves are normally low-risk moves and i see this not only in the start-up world but also in real life.
If you approach a girl and say well, listen I like you. This seems like a high risk but it’s actually a much lower risk. With being a shy guy and you know like some babes from 30 meters away which seems like low risk but it’s actually high risk and doesn’t lead to anything. And yeah I somehow think we should all be doing high-risk things especially if we can really afford and don’t have family and very complicated lives already.
Joe: Very wise closing words. Before we close and say goodbye I just had one more have one more question. What do you do before you started to Get Penta?
Lav: So, I didn’t have a start-up when I was 19 and 21 and then after the start-up, it was someone who’s successful so I managed to get some funds out to different finance way studies in Switzerland down world but then I stopped working for Siemens. A big German the company and I work there four years in different positions in different cities and boss as a manager of relations. Something like a consultant.
Joe: Okay, Siemens, very good address. Well, Lav, thank you very much. I hope soon to see you again and looking forward to hearing more about Penta.
Joe: Sure, it was my pleasure. Thank you very much.
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