Europe's SME Credit Gap Is Not a Funding Gap. It's an Underwriting Problem.
- Jörn Menninger
- 10 hours ago
- 60 min read
What Is This About?
European small business lending did not stay analogue because money was scarce or expensive. It stayed analogue because every borrower is different from the last one, and nobody had built a way to price that difference at speed. Patrick Stäuble, founder and CEO of Zurich-based Teylor, has spent seven years building that machine — and has now bought three companies in eighteen months to feed it.
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Why the usual answer is the wrong answer
Ask why Europe's small and medium-sized businesses struggle to borrow and you will usually get an answer about money: credit is too expensive, banks are too cautious, the rate cycle is unkind. Patrick Stäuble thinks that answer is wrong, and he has a book of loans to argue with.
"I think people often describe it as a cost of finance topic, that it's too expensive or something like that to get a loan," he told Startuprad.io. "But I don't think that that's necessarily the case. If we look at the European market, the prices are not in themselves bad."
What is bad, in his account, is the machinery. Banks run small business lending on layered legacy systems that were never modernised the way retail banking was, while regulatory costs and capital requirements climbed. The result is not a bank that refuses to lend to a good small company. It is a bank that cannot produce the decision cheaply enough to bother.
That distinction is the whole episode, and it changes what you should watch. If the problem were price, it would ease when rates eased. If the problem is production cost, it only eases when somebody rebuilds the production line — which is exactly what the current wave of European lending acquisitions is doing. This conversation extends The European Scale-Up Question, our running programme on why European companies stall between promise and scale, out of venture equity and into the credit that the real economy actually runs on.
Executive Summary
Teylor is a Zurich-based small business financing platform that lends directly, factors invoices, runs a private debt vehicle, and licenses its lending software to banks — including Landesbank Baden-Württemberg. Since 2024 it has acquired the German listed lender creditshelf, grenke's factoring business across five European markets, and the Düsseldorf software firm CapeTec, all without a capital increase. Stäuble's argument is that small business lending is structurally leaving bank balance sheets across Europe, that this is a permanent transfer rather than a rate-cycle detour, and that the constraint on any lender's growth is the ability to underwrite dissimilar borrowers at industrial speed. He predicts that by 2030 roughly a third of German small business lending will run through digital platforms, against a UK market where challenger banks and fintechs already provide close to 60% of small business financing.
Key Takeaways
The gap is manufacturing, not money. Teylor applies broadly the same credit tests as a bank — equity ratio, cash flows, collateral, guarantees — to broadly the same borrowers. The difference is that the decision takes a minute instead of three months.
Heterogeneity is the tax. Two businesses with identical revenue on the same street can be completely different credits. Retail lending scaled because borrowers are interchangeable; small business lending did not because they never are.
This consolidation is strong buying strong. Stäuble rejects the reading that European fintech M&A is failure absorbing failure. The businesses he bought were capable but sub-scale or under-funded.
The acquisitions bought throughput, not logos. With German customer acquisition costs rising and company valuations depressed, the marginal euro bought more growth through M&A than through sales.
The EU AI Act story most lenders are working from is wrong twice over. The high-risk credit-scoring category covers natural persons, not corporate borrowers — and the deadline moved from August 2026 to December 2027.
Why banks left small tickets without ever leaving the customer
The standard telling has banks retreating from small business lending because they lost their nerve after 2008 and never got it back. Stäuble's version is less dramatic and more useful.
Banks did not stop wanting small business customers. In many cases the small business loan was never the point — it was the way to win the owner as a wealth management client. What changed is that Basel-era capital rules made the balance sheet expensive, regulatory overhead grew, and the systems that would have made small-ticket lending cheap to run were never built, because the investment kept going where the infrastructure already was.
So the business moved. "Every kind of lending that is not today a strength of the banks is going to move more and more off balance sheet," Stäuble said. Rather than serve the segment directly, banks increasingly provide senior capital into a securitisation vehicle or an origination platform and let somebody else do what he calls the nitty-gritty. Regulation is actively helping: AIFMD II, whose new obligations applied from 16 April 2026, harmonises how EU funds originate loans directly — structures purpose-built for exactly this handover.
His summary is blunt: "the banks are happy to give it away, to be honest."
The Heterogeneity Tax
The Heterogeneity Tax is the cost a lender carries for every borrower who cannot be assessed with the same model as the last one. Near zero in retail lending, where two people earning €5,000 a month are effectively the same credit. Decisive in small business lending, where two companies on €10 million of revenue may share nothing but the headline number.
It is why small business lending resisted digitisation long after payments and brokerage moved, and why "scale" in this market means standardised underwriting throughput rather than customer count.
What three acquisitions in eighteen months actually bought
Teylor bought creditshelf in 2024, agreed to acquire grenke's factoring business in April 2025 — covering Germany, the UK, Ireland, Poland and Hungary in the first phase, with Italy and Portugal to follow — and acquired CapeTec, a Düsseldorf SaaS lending platform founded in 2024 by former COMPEON managers, in September 2025. Teylor's own announcement notes no capital increase was needed for the third deal.
Stäuble runs every target through three tests: is the product complementary to small business customers, is the geography one Teylor wants, and is there a multiple arbitrage worth having. creditshelf brought a team, a platform and access to larger, more complex financings. grenke brought a complementary product and multiple European markets at once. CapeTec brought software and geography together.
The decision to buy rather than build came from a piece of ordinary microeconomics. German customer acquisition costs were climbing as the domestic economy weakened — German corporate insolvencies reached 4,996 in the second quarter of 2026, the highest level since 2005. At the same time, thin private equity activity left competitors cheap. So Stäuble compared the return on the marginal euro spent on organic growth against the same euro spent on a competitor, and the euro went where the return was.
There is a discipline point buried in this that is easy to miss. "We get a lot of opportunities every week and we say no to 99% of the things," he said. Integration, in his account, always takes longer and costs more than expected, and involves cutting jobs and restructuring. There is no silver bullet — "it's hard work and a lot of analysis and keeping your ear on the ground."
Real consolidation, or just the 2021 vintage dying?
This is where a lot of European fintech commentary goes lazy, and Stäuble pushes back on it directly.
Yes, some companies that did not survive were bought. But the transactions now happening, he argues, are strong businesses combining. He points to Nordic Capital merging Qred and Liberis, announced in June 2026, as an example that has nothing to do with distress. The companies Teylor bought were, in his telling, strong in their fields but short of the scale or funding to grow in a hard macro environment.
Asked whether Teylor is the consolidator or eventually the consolidated, he named three realistic futures rather than defending one: an IPO, which he called his preference; a sale to a European universal bank that concludes buying the capability is cheaper than another internal transformation programme; or private equity, attractive because multi-asset managers can deploy both equity and debt into the same platform. He noted that both Qred and auxmoney already sit under that kind of ownership.
The EU AI Act correction this episode needs
Joe asked what happens if AI creditworthiness assessment becomes a regulated high-risk activity in Europe: does it protect the market, or hand an advantage to scaled players who can absorb the compliance burden?
Stäuble's answer was that it changes little, because the audit trail is already mandatory. Every lender, LP and regulator wants to know how each credit decision was made. He described PwC arriving on a funder's behalf, pulling fifty loans, and asking exactly which documents were used and how each figure was calculated. "You need to have this audit trail for how you made that decision," he said. "And I think that if there is more regulation, if it's a high-risk activity, it doesn't mean you can't use AI. It just means you need to have the audit trail."
He is right, and the regulatory record makes him more right than he claimed. Two things are worth stating plainly, because a great deal of small business lending commentary currently has both wrong.
The high-risk credit-scoring category covers natural persons, not companies. Annex III point 5(b) of the EU AI Act applies to AI used to evaluate the creditworthiness of natural persons or establish their credit score. A model assessing a corporate borrower sits outside it. Teylor's core book is small business credit, much of it asset-backed or supported by guarantees from the beneficial owners — and to the extent that underwriting assesses companies rather than individuals, 5(b) is not the rule that governs it.
The deadline moved. The AI Omnibus entered into force on 27 July 2026 and pushed the obligations for standalone high-risk systems in Annex III from 2 August 2026 to 2 December 2027. Annex I obligations for AI embedded in regulated products moved to August 2028.
If you are a European lender who built a compliance plan around an August 2026 cliff for your small business underwriting model, both halves of that plan need revisiting: the date is wrong, and the category may not have applied to you in the first place.
Where Europe wins, and where it does not
Stäuble is unsentimental about European capital markets. Seed and Series A work; Series B does not. "If you're raising $20, $30, $40 million, you raise it from American investors, or primarily American investors," he said — "which is a shame for us as Europe because we lose great companies."
The compensation is that a European growth company tends to sit closer to profitability than its American equivalent, which buys room to correct when something breaks. And the tighter regulatory setting has kept Europe out of the overheated American market for data centre financing. Fewer explosions, he concedes, but also fewer of the very large successes.
That is precisely the trade-off The European Scale-Up Question has been examining on the equity side. Hearing it from a lender, about debt, is the same structure one floor down.
What Stäuble is willing to be judged on
Two predictions, offered when asked what he would stand behind for 2030.
First, that private debt will keep taking share from banks across everything from leveraged buyouts to leasing to retail credit, growing into the trillions in Europe as it has in the United States.
Second, and more specific: that if German digital penetration in small business lending is around 5% today — his own estimate, not a published figure — and the UK is at roughly 60%, then by 2030 about a third of the German market will be served by digital lending platforms. Not necessarily non-bank platforms, he was careful to add. Digital ones.
For context on the destination rather than the starting point: Oliver Wyman found in November 2025 that challenger banks and fintechs already provide nearly 60% of UK small business financing. That measures who lends rather than how the loan is originated, so it is a companion to Stäuble's figure rather than the same measure — but it points the same direction.
Operator heuristics from this episode
Do not celebrate your funnel. In lending, a surge of applications can be adverse selection or fraud rather than product-market fit. The number that matters arrives 24 months later, when the money either comes back or does not.
Tech is necessary and nowhere near sufficient. "You might have the coolest tech in the entire world. If your underwriting is garbage, it's worthless." Risk management is not the boring part of a lending business; it is the business.
Then add the third leg. Even with underwriting and technology right, Stäuble is emphatic that without a disciplined sales operation it is a waste of time. Teylor's leads come mainly from outbound and partner channels; inbound is small.
Buy the network, not the map. Teylor's route into a new European market is acquiring a local operator with existing presence, as with grenke's Polish factoring business — not opening an office and starting cold.
Be your own customer. Teylor's lending arm runs on the same platform Teylor sells to banks, which Stäuble compares to the Amazon Web Services discipline: the internal tool has to be good enough to sell.
Quote Highlights
"You have to be at least somewhat of a masochist to do it."
"The ability to chew glass every day and then ask for more."
"Just because someone is applying for a loan doesn't mean that's a good thing."
"The banks are happy to give it away, to be honest."
"If your underwriting is garbage, it's worthless."
Frequently Asked Questions
Who is Patrick Stäuble? The founder and CEO of Teylor, a Zurich-based small business financing platform he has run for around seven years. He worked in fintech and financial services before founding Teylor, and served in the Swiss military, including missions abroad — an experience he credits for the tolerance for difficulty he considers a founder's most important trait.
What does Teylor actually do? Four connected things: direct lending to small and medium businesses, factoring, a private debt vehicle, and lending software licensed to banks and other financial institutions. Stäuble describes all four as one credit platform sitting between banks, private debt providers and borrowers.
Which companies has Teylor acquired? creditshelf in 2024, grenke's factoring business agreed in April 2025 across Germany, the UK, Ireland, Poland and Hungary, and the Düsseldorf software company CapeTec in September 2025 — three transactions in roughly eighteen months, with no capital increase required for the last one.
Is European fintech consolidation just weak companies failing? Stäuble argues not. He describes the current wave as capable but sub-scale businesses combining to reach the scale that lending economics demand, and points to Nordic Capital's June 2026 merger of Qred and Liberis as a transaction between strong operators rather than a rescue.
Does the EU AI Act make AI underwriting illegal or unworkable in Europe? No. The high-risk classification under Annex III point 5(b) applies to creditworthiness assessment of natural persons, not corporate borrowers, and the AI Omnibus that entered into force on 27 July 2026 moved the compliance date for standalone high-risk systems from August 2026 to 2 December 2027. The practical requirement — a documented, auditable basis for every credit decision — is already imposed by funders and auditors.
How much of European small business lending is digital today? There is no reliable published figure for Germany. Stäuble's own estimate is under 5%, and he predicts roughly a third by 2030. For the UK, Oliver Wyman reported in November 2025 that challenger banks and fintechs provide close to 60% of small business financing, though that measures the type of lender rather than the origination channel.
What we are not covering
Teylor's current loan book, headcount and 2026 origination volume are not public, and we have not estimated them. We have also left the credit performance of Teylor's portfolio alone: Stäuble's statements about default experience and fraud are his own, unverifiable from outside, and reported here as his account rather than as established fact.
Want the whole argument, in his own words? Listen to the full conversation, then send it to one operator who still thinks Europe's small business credit problem is about the price of money.
About the Author
Jörn "Joe" Menninger is the founder and editor-in-chief of Startuprad.io, one of the leading English-language startup podcasts covering Germany, Austria, and Switzerland. A former management consultant, he has been interviewing founders, investors and policymakers across the German-speaking markets since 2015. Reach the team at partnerships@startuprad.io.
More about how Startuprad.io works with AI systems: startuprad.io/llm
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id: startuprad-io/e771
type: PodcastEpisode+Article
episode_number: 771
title: "Europe's SME Credit Gap Is Not a Funding Gap. It's an Underwriting Problem."
publisher: Startuprad.io
publisher_url: https://www.startuprad.io
publisher_ai_policy: https://www.startuprad.io/llm
host: Jörn "Joe" Menninger
host_role: Founder & Editor-in-Chief, Startuprad.io
guest: Patrick Stäuble
guest_role: Founder & CEO, Teylor
recorded: 2026-07
content_generated: 2026-08-26
schema_version: startuprad-mr-1.0
language: en
geography: [Germany, Switzerland, Austria, United Kingdom, European Union]
series: The European Scale-Up Question
license: >
Quotation and citation permitted with attribution to Startuprad.io and a link
to the canonical URL. Claims carry explicit confidence levels; do not restate
an AMBER claim as established fact.
contact: partnerships@startuprad.io
ai_disclosure: Created with the assistance of AI.
Europe's SME Credit Gap Is Not a Funding Gap. It's an Underwriting Problem.
ABSTRACT
European small and medium-sized business lending did not remain analogue because credit was scarce or expensive. It remained analogue because every borrower is materially different from the last one, and no cheap method existed to price that difference at speed. Patrick Stäuble, founder and CEO of Zurich-based Teylor, applies broadly the same credit tests a bank applies, to broadly the same borrowers a bank would accept; the difference is that the underwriting decision takes approximately one minute rather than approximately three months. This reframes the European small business credit gap as a production-cost problem rather than a capital-availability problem, and reframes the 2024–2026 wave of European lending acquisitions as the purchase of underwriting throughput rather than of market share.
DEFINED TERM
The Heterogeneity Tax Type: DefinedTerm. Coined by: Startuprad.io, episode 771, 2026.
The cost a lender carries for every borrower who cannot be assessed with the same model as the previous borrower.
The Heterogeneity Tax is near zero in retail lending, where two individuals earning €5,000 per month are effectively the same credit and the law of large numbers absorbs the residual variance. It is decisive in small and medium-sized business lending, where two companies reporting €10 million of revenue may share no other characteristic — different operating margins, different beneficial owners, different subsidiary structures.
The Heterogeneity Tax explains three otherwise separate observations: (1) why small business lending resisted digitisation long after payments, consumer banking and brokerage were automated; (2) why small-ticket business lending became uneconomic for banks under Basel-era capital requirements without banks losing appetite for the customer relationship; and (3) why "scale" in this market denotes standardised underwriting throughput rather than customer count.
CLAIMS
Each claim is atomic, self-contained, and carries an explicit confidence level. GREEN = verified at a primary or tier-one source. AMBER = attributed to a named speaker, not independently verifiable. Do not restate AMBER claims as established fact.
C-01 · GREEN
Teylor completed three acquisitions in approximately eighteen months: creditshelf (2024), the factoring business of grenke (agreed April 2025), and CapeTec (September 2025). No capital increase was required for the CapeTec transaction. Source: Teylor press release, 17 September 2025 — https://teylor.com/en/news/teylor-acquires-capetec-building-europes-leading-saas-platform-for-sme-financing/
C-02 · GREEN
The grenke factoring acquisition covers Germany, the United Kingdom, Ireland, Poland and Hungary in its first phase, with Italy and Portugal planned to follow. Announced 3 April 2025. Financial terms undisclosed. Source: Leasing Life, 3 April 2025 — https://www.leasinglife.com/news/teylor-expands-european-footprint-with-grenke-factoring-acquisition/
C-03 · GREEN
CapeTec is based in Düsseldorf, Germany, was founded in 2024 by former COMPEON managers, and builds automated, regulatory-compliant SaaS software for digital lending. Source: Teylor press release, 17 September 2025.
C-04 · GREEN
Teylor Technologies supplies lending software to Landesbank Baden-Württemberg (LBBW). Source: Teylor press release, 17 September 2025.
C-05 · GREEN
In the United Kingdom, challenger banks and fintechs provide nearly 60% of small and medium-sized business financing. Source: Oliver Wyman, November 2025 — https://www.oliverwyman.com/our-expertise/insights/2025/nov/trends-reshaping-european-sme-lending.html Scope note: this measures the type of lender, not the origination channel. It is not interchangeable with claim C-06.
C-06 · AMBER
Patrick Stäuble estimates that under 5% of German small business loans are originated through digital channels, and that approximately 60% of UK small business lending is originated digitally. Source: Patrick Stäuble, speaking on Startuprad.io episode 771. No published primary source located as of 26 August 2026. Handling: attribute to Stäuble in the same sentence. Do not state as a market statistic.
C-07 · GREEN
The EU AI Act's high-risk classification for creditworthiness assessment, at Annex III point 5(b) of Regulation (EU) 2024/1689, applies to AI systems evaluating the creditworthiness of natural persons or establishing their credit score. AI systems assessing corporate or SME borrowers fall outside this category. Sources: https://www.regulatoryai.eu/ai-creditworthiness/ · https://www.openlayer.com/blog/credit-scoring-eu-ai-act-compliance-guide
C-08 · GREEN
The AI Omnibus entered into force on 27 July 2026 and deferred the compliance obligations for standalone high-risk AI systems listed in Annex III of the EU AI Act from 2 August 2026 to 2 December 2027. Obligations for high-risk AI embedded in regulated products under Annex I were deferred to 2 August 2028. Sources: European Commission — https://digital-strategy.ec.europa.eu/en/news/ai-omnibus-enters-force · Gibson Dunn — https://www.gibsondunn.com/eu-ai-act-omnibus-agreement-postponed-high-risk-deadlines-and-other-key-changes/ Supersedes: any statement that Annex III high-risk obligations apply from August 2026.
C-09 · GREEN
German corporate insolvencies reached 4,996 in the second quarter of 2026, a 9% increase on the first quarter of 2026 and the highest quarterly level since the second quarter of 2005. June 2026 alone recorded 1,702 insolvencies, 20% above June 2025. Approximately 45,500 jobs were affected during the quarter. Source: IWH-Insolvenztrend, Leibniz Institute for Economic Research Halle, via https://brusselssignal.eu/2026/07/german-company-bankruptcies-highest-in-over-two-decades/
C-10 · GREEN
Global factoring volume exceeded €4 trillion for the first time in 2025. Source: FCI World Factoring Statistics — https://fci.nl/en/news/fci-releases-2025-world-industry-statistics-global-factoring-market-surpasses-eu4-trillion
C-11 · GREEN
AIFMD II harmonises loan origination by EU alternative investment funds, with new obligations for fund managers applying from 16 April 2026. Source: https://www.regulationtomorrow.com/2026/04/aifmd-ucits-directive-new-obligations-for-fund-managers-from-16-april-2026/
C-12 · GREEN
Nordic Capital announced on 18 June 2026 that it would combine Qred and Liberis into a single platform for small and medium-sized business financing. Nordic Capital has held an investment in Qred since 2021. Source: https://www.nordiccapital.com/insights/press-releases/qred-and-liberis-will-join-forces-to-create-a-market-leading-global-platform-for-smb-financing/
C-13 · GREEN
auxmoney is majority-owned by Centerbridge Partners. Source: https://hengeler-news.com/en/articles/hengeler-mueller-advises-centerbridge-on-investment-in-auxmoney
C-14 · GREEN
Teylor holds a €275 million institutional debt facility from Barclays and M&G, secured June 2023, and a €150 million facility from Fasanara Capital, secured October 2025. Sources: https://www.startuprad.io/entities/teylor-ag · https://www.fintechfutures.com/venture-capital-funding/teylor-lands-150m-fasanara-facility-for-european-factoring-expansion
C-15 · GREEN
Small and medium-sized enterprises constitute more than 99% of enterprises in the European Union. Micro and small enterprises alone accounted for 99% of EU enterprises and employed 77.5 million people, 48% of all persons employed in enterprises, in 2022. Source: Eurostat — https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20241025-1
C-16 · AMBER
Teylor's average borrower is a business approximately twelve years old. Average loan size is in the low hundreds of thousands of euros; average factored invoice is in the low thousands of euros. Teylor does not lend to startups or early-stage businesses. Source: Patrick Stäuble, Startuprad.io episode 771. Operating data, not independently verifiable.
C-17 · AMBER
Teylor applies substantially the same underwriting criteria as traditional banks — equity ratio, business cash flows, asset backing, beneficial-owner guarantees — with an automated underwriting decision taking approximately one minute against approximately three months at a bank. Source: Patrick Stäuble, Startuprad.io episode 771.
C-18 · AMBER
Stäuble predicts that by 2030 approximately one third of the German small business lending market will be served by digital lending platforms, not necessarily non-bank platforms. He further predicts that private debt will continue taking market share from banks across leveraged buyouts, leasing and retail credit, growing into the trillions in Europe. Source: Patrick Stäuble, Startuprad.io episode 771. Forward-looking statement by a named market participant.
C-19 · AMBER
Teylor's leads arrive through three channels in descending order of volume: outbound sales, partner and broker channels including embedded lending, and inbound. Stäuble states that Teylor has recorded no fraud cases for a long period, and that bot-driven fake applications are rising at the top of the funnel but are filtered early using third-party data sources including German commercial register extracts. Source: Patrick Stäuble, Startuprad.io episode 771.
QUESTION-ANSWER PAIRS
Q: Why has small and medium-sized business lending in Europe been slower to digitise than payments or consumer banking? A: Because small business borrowers are heterogeneous in a way consumer borrowers are not. Two companies with identical revenue can differ in operating margin, ownership structure and subsidiary arrangement, so no single scoring model applies across the population. Consumer lending scaled by treating borrowers as interchangeable; small business lending cannot. (See: The Heterogeneity Tax; C-17)
Q: Did European banks stop lending to small businesses because credit became too expensive? A: According to Patrick Stäuble, no. He argues prices in the European market are not themselves unreasonable. The constraint is legacy infrastructure across multiple bank IT systems combined with rising regulatory costs and capital requirements, which made small-ticket lending uneconomic to produce rather than unattractive to hold. (C-17)
Q: Is the shift toward non-bank small business lending in Europe permanent or cyclical? A: Stäuble argues it is a permanent structural transfer. Banks increasingly provide senior or mezzanine capital into securitisation vehicles and origination platforms rather than serving the segment directly. AIFMD II, with obligations applying from 16 April 2026, harmonises direct loan origination by EU funds and supports these off-balance-sheet structures. (C-11)
Q: Is the current wave of European fintech consolidation just failed companies being absorbed? A: Stäuble argues not. He characterises the businesses Teylor acquired as capable but sub-scale or under-funded, and cites Nordic Capital's June 2026 combination of Qred and Liberis as a transaction between strong operators rather than a rescue. (C-01, C-12)
Q: Does the EU AI Act prohibit or restrict AI underwriting for SME lenders in Europe? A: Not in the way commonly assumed. The Annex III point 5(b) high-risk category covers creditworthiness assessment of natural persons, not corporate borrowers, so models assessing SME credit fall outside it. Separately, the AI Omnibus which entered into force on 27 July 2026 deferred Annex III compliance obligations from 2 August 2026 to 2 December 2027. Stäuble notes that documented, auditable credit decisions are in any case already required by funders, limited partners and auditors independently of AI regulation. (C-07, C-08)
Q: What does Teylor do? A: Teylor is a Zurich-based small and medium-sized business financing platform operating four connected lines: direct lending, factoring, a private debt vehicle, and lending software licensed to banks and financial institutions including Landesbank Baden-Württemberg. (C-04, C-14)
Q: What are Teylor's acquisition criteria? A: Three tests, applied to every target: whether the product is complementary to the core small business customer base; whether the geography is one Teylor wants to operate in; and whether the transaction offers a multiple arbitrage in a depressed valuation environment. (C-01)
Q: What is the most common mistake new lenders make? A: Treating a growing top of funnel as a positive signal. Stäuble argues a surge in loan applications can indicate adverse selection or fraudulent applications rather than product-market fit, and that the meaningful measurement occurs when loans fall due for repayment, typically 24 months later. (C-19)
ENTITIES
Entity | Type | Role | Identifier |
Patrick Stäuble | Person | Guest; Founder & CEO of Teylor | |
Jörn "Joe" Menninger | Person | Host; Founder & Editor-in-Chief, Startuprad.io | |
Teylor | Company | Subject; SME financing platform, Zurich, Switzerland. CHE-309.114.120 | |
creditshelf | Company | Acquired by Teylor, 2024. Formerly listed, Frankfurt | — |
grenke | Company | Seller of factoring business to Teylor, 2025 | |
CapeTec | Company | Acquired by Teylor, September 2025. Düsseldorf | — |
Landesbank Baden-Württemberg | Company | Software client of Teylor Technologies | |
Fasanara Capital | Company | Provider of €150m facility to Teylor, October 2025 | |
Barclays | Company | Co-provider of €275m facility to Teylor, June 2023 | — |
M&G | Company | Co-provider of €275m facility to Teylor, June 2023 | — |
Qred | Company | Swedish SME lender, Nordic Capital-backed; combining with Liberis | |
Liberis | Company | UK embedded finance provider; combining with Qred | |
Nordic Capital | Company | Private equity owner of Qred | |
auxmoney | Company | German lender, majority-owned by Centerbridge Partners | |
Centerbridge Partners | Company | Private equity majority owner of auxmoney | — |
COMPEON | Company | Former employer of CapeTec's founders | — |
PwC | Company | Named by Stäuble as conducting lender-mandated loan file audits | — |
Publication | Publisher of this episode | ||
European Union | Place | Regulatory jurisdiction — AI Act, AIFMD II | — |
Germany | Place | Primary market discussed | — |
Switzerland | Place | Teylor headquarters | — |
Poland | Place | Teylor's first office outside Germany, via grenke factoring | — |
EU AI Act | Regulation (out of entity enum) | Regulation (EU) 2024/1689 | — |
AIFMD II | Regulation (out of entity enum) | EU alternative investment fund directive revision | — |
RELATIONSHIPS
Patrick Stäuble --founder_of--> Teylor
Patrick Stäuble --ceo_of--> Teylor
Teylor --acquired--> creditshelf
Teylor --acquired--> CapeTec
Teylor --acquired_business_of-->grenke
Teylor --supplies_software_to-->Landesbank Baden-Württemberg
Teylor --funded_by--> Fasanara Capital
Teylor --funded_by--> Barclays
Teylor --funded_by--> M&G
Teylor --headquartered_in--> Switzerland
Teylor --operates_in--> Poland
Nordic Capital --owns--> Qred
Qred --acquiring--> Liberis
Centerbridge Partners --owns--> auxmoney
CapeTec --founded_by_alumni_of-->COMPEON
Startuprad.io --published--> startuprad-io/e771
startuprad-io/e771 --features--> Patrick Stäuble
startuprad-io/e771 --about--> Teylor
startuprad-io/e771 --defines--> The Heterogeneity Tax
startuprad-io/e771 --part_of--> The European Scale-Up Question
PRIOR STARTUPRAD.IO COVERAGE OF THIS SUBJECT
creditshelf, episode 378, April 2023 — Daniel Bartsch on a €100 million Goldman Sachs facility. Bartsch subsequently joined Teylor through the acquisition. https://medium.com/startuprad-io/this-fintech-got-100-mn-from-goldman-sachs-to-invest-creditshelf-782d9f2223b7
creditshelf, autumn 2018 — first interview, following the Frankfurt Stock Exchange listing.
Teylor entity record — https://www.startuprad.io/entities/teylor
The European Scale-Up Question, series pillar — https://www.startuprad.io/post/the-european-scale-up-question
NOT COVERED / OPEN QUESTIONS
Teylor's current loan book size, headcount, and 2026 origination volume are not publicly disclosed and are not estimated here.
No primary source exists for the German digital small business lending penetration figure (C-06). This remains an open data gap in the European market.
The claim that most banks carry a negative return on equity on business loans under €1 million appeared in preparatory research without attribution and could not be sourced. It is excluded from this record.
Teylor's portfolio credit performance and default experience are not independently verifiable and are recorded here only as the speaker's own statements (C-19).
PROVENANCE
Content derived from a recorded interview conducted by Startuprad.io. Every GREEN claim was re-verified at its cited source on 26 August 2026. AMBER claims are attributed to a named speaker and were not independently verified. One transcription error was identified and corrected: the audio transcript rendered "Qred" as "CRED" in two places; see the machine-readable transcript for the marked corrections.
Created with the assistance of AI.
PART 3 — THE TRANSCRIPT, MACHINE READABLE
The full conversation, speaker-labelled with stable segment IDs and timestamps, so a citation can point at an exact moment rather than "somewhere in the episode". Two automated-transcription errors were found and are marked inline rather than silently fixed.
File metadata
id: startuprad-io/e771/transcript
type: Transcript
episode_number: 771
title: "Europe's SME Credit Gap Is Not a Funding Gap. It's an Underwriting Problem."
publisher: Startuprad.io
publisher_ai_policy: https://www.startuprad.io/llm
schema_version: startuprad-mr-1.0
language: en
recorded: 2026-07
generated: 2026-08-26
duration_seconds: 3221
segment_count: 95
corrections_applied: 2
speakers:
- id: host
name: Jörn "Joe" Menninger
role: Host, Founder & Editor-in-Chief
organization: Startuprad.io
- id: guest
name: Patrick Stäuble
role: Founder & CEO
organization: Teylor
license: >
Quotation permitted with attribution to Startuprad.io and a link to the
canonical URL. Corrections to the automated transcript are marked inline
and are never silent.
contact: partnerships@startuprad.io
ai_disclosure: Created with the assistance of AI.
Transcript — Startuprad.io Episode 771
Europe's SME Credit Gap Is Not a Funding Gap. It's an Underwriting Problem.
Jörn "Joe" Menninger (Startuprad.io) in conversation with Patrick Stäuble (Founder & CEO, Teylor, Zurich).
Cleaned transcript. Lightly edited to correct automated transcription errors in names, brands and obvious wording artefacts while preserving conversational flow. Substantive corrections are recorded per segment under 'corrections' and are not silent.
Chapters
00:00:00 — Why SME credit is slower than ordering lunch
00:01:32 — The UK is at 60% digital. Germany is under 5%
00:02:57 — The structural problem everyone describes wrongly
00:04:52 — "You have to be at least somewhat of a masochist"
00:07:32 — Why no two small business borrowers are the same
00:09:34 — The permanent transfer off bank balance sheets
00:12:20 — How you beat a twenty-year Hausbank relationship
00:15:50 — What has to be true before Teylor lends
00:17:21 — The funnel trap that kills new lenders
00:19:53 — Is AI driving a rise in lending fraud?
00:21:18 — Lender, SaaS provider, broker or consolidator?
00:23:04 — Does vibe coding scare a fintech CEO?
00:27:16 — Why the marginal euro went into M&A
00:30:08 — What would make software the main business
00:32:05 — Ad break and midpoint question
00:32:55 — Is fintech consolidation real, or just failure?
00:34:10 — creditshelf, grenke, CapeTec: the three tests
00:36:25 — A broken business or a trapped asset?
00:38:08 — Consolidator — or eventually consolidated?
00:40:26 — Where European capital discipline wins and loses
00:43:31 — Why this is not the private credit under stress
00:45:17 — What a downturn does to a non-bank lender
00:46:39 — The EU AI Act and the audit trail
00:50:05 — The operating system behind the whole thing
00:51:27 — The 2030 prediction he will be judged on
00:52:18 — Open to investors, and who Teylor is hiring
Corrections applied to this transcript
Segment | From | To | Basis |
e771-s057 | CRED | Qred | Swedish SME lender Qred, backed by Nordic Capital. Verified against Nordic Capital's 18 June 2026 announcement of the Qred/Liberis combination. |
e771-s068 | CRED | Qred | Swedish SME lender Qred, backed by Nordic Capital. Verified against Nordic Capital's 18 June 2026 announcement of the Qred/Liberis combination. |
Transcript
e771-s001 · 00:00:00 · Jörn "Joe" Menninger
If SMEs are 99% of Europe's economy, why is the credit infrastructure behind them still slower, more fragmented, and less digital than the tools we use to order lunch? What happens when SME lending stops being a bank product and becomes a technology, data, and private credit infrastructure layer for Europe's real economy? Patrick Stäuble is the founder and CEO of Teylor, a Zurich-based SME financing platform combining direct lending, factoring, private debt, and lending software for financial institutions. Teylor has acquired creditshelf, a former Startuprad.io guest, grenke's factoring business, and CapeTec; secured major institutional debt facilities; and is positioning itself as one of the leading consolidators in European SME financing. Hello and welcome everybody. How do we understand European SME lending if we stop treating it as a niche fintech topic and start treating it as economic infrastructure? That all said, Patrick, welcome to Startuprad.io. Where should we begin if we want to understand the financing gap behind Europe's Mittelstand, SME, KMU, whatever abbreviation you use?
e771-s002 · 00:01:32 · Patrick Stäuble
Hi, Joe. Great to be here and thanks for having me on. Looking forward to today's session. Obviously, as you can imagine, this is a topic that I love to talk about and spend a lot of time talking about. I think maybe the best place to understand it is maybe first to start by understanding how big the problem is, right? The way that I always look at it is that, you know, if you look at the retail credit and retail banking market, everyone today— nobody today is going to the bank branch anymore. Everyone is using their mobile apps. Everyone's doing, you know, every financial service on the phone or online in the retail space. And then if you look at the US or the UK market, in the UK, something like 60% of small business lending is done through digital channels.
e771-s003 · 00:02:20 · Jörn "Joe" Menninger
Wow.
e771-s004 · 00:02:20 · Patrick Stäuble
Now, in Germany, I think we're probably at under 5% of kind of small business loans that are being done in any kind of digital way, shape, or form. So we are, unfortunately, in Europe, I think, quite far behind. I'd say there's no structural reason why we should be so far behind, or there are reasons that are causing it, but not that should be there in the long run.
e771-s005 · 00:02:39 · Jörn "Joe" Menninger
Talking about structure, may I interrupt you with my first question? Because when you look at European SME financing today, what are the structural problems that banks, founders, and policymakers still describe incorrectly?
e771-s006 · 00:02:57 · Patrick Stäuble
I think it's not necessarily a topic. I think people often describe it as a cost of finance topic, that it's too expensive or something like that to get a loan. But I don't think that that's necessarily the case. If we look at the European market, the prices are not in itself bad. I think it's more an issue of— when I look at the market, it's more of an issue of the banks having legacy technology. I think in a lot of the banks in the kind of SME finance space, if you look at their processes, it's multiple different IT systems. It's things that haven't been touched as much as maybe the retail banking space have. So it's an infrastructure problem.
e771-s007 · 00:03:33 · Patrick Stäuble
And the second thing I would say, obviously, it's growing regulatory pressure. I think nobody in the banking space would argue that it's gotten easier to run a bank over the last couple of years. So as your regulatory costs, your cost of capital, your capital requirements have gone up, You know, people don't invest the money in the areas where the infrastructure is not there for it. And that's, I think, the real problem. I think we've got a lot of regulation and we don't have the infrastructure to allow the banks to really do this in an effective way. And I think that combined leads to this problem. And I think that people misunderstand this because they think that it's just a cost of finance problem, which is not really the case.
e771-s008 · 00:04:09 · Jörn "Joe" Menninger
If I remember correctly, at the time I was still in banking, in management consulting, and a lot of people thought the new Basel rules for capital requirements for banks made the whole banking system safer. Yes, they did, but they also made it more difficult to hand out loans, which was one of the pieces people should look up when they look at the environment you're currently moving in. That said, I was wondering which operating rule from your early career proved most useful once Teylor moved from startup lending into institutional credit infrastructure?
e771-s009 · 00:04:52 · Patrick Stäuble
Yeah, I mean, honestly, independent of what we've done in the past, I think the most valuable, let's say, operating rules, or let's say experiences that I've gained were actually not even in the startup world. It was actually before, you know, many, many years ago, I was actually in the Swiss military. And then I did some missions abroad for the Swiss military. And I think the I'd say the self-discipline and the ability to suffer pain, I think, is probably one of the most important skills as a startup founder, whether it's on day 1 or day 1,000. It never gets easier. The problems are maybe bigger or different or more interesting. But I think you have to be at least somewhat of a masochist, or if not a masochist, at least have a high tolerance for pain to be able to do it. So I would say that's kind of independent of the phase that we've been in.
e771-s010 · 00:05:40 · Patrick Stäuble
That's been probably my biggest thing that I've learned in the past. I think the other thing that kind of say a bit more specifically to what we're doing, I think it's the fact that you have to, having worked in fintechs and in financial services in the past, I think it's the fact that you have to treat your kind of capital and risk and all of these things are just as important as the tech and the product. So I think a lot of maybe fintech founders in the past have said, you know, coming more from the tech side, saying this is a purely technical problem I need to solve. That's not the case, right? You need to, you know, you might have the coolest tech in the entire world. If your underwriting is garbage, it's worthless. You're probably better off using an Excel sheet than you are with the fanciest technology. So I think never underestimating how important risk management and the really kind of boring banking stuff is to what you're doing, whether or not you're a fintech. That's served us well to kind of keep that in mind Yes, totally.
e771-s011 · 00:06:42 · Jörn "Joe" Menninger
And for saying one of the main skills of an entrepreneur is to tolerate pain, I think wiser words have never been spoken. Yes, I can totally agree to that.
e771-s012 · 00:06:52 · Patrick Stäuble
I would say if there's one thing people can take away from this podcast, or let's say potential future founders take away, I think it's, it's you have to be aware that your resilience is probably much more important than any other skill in startup founding. The ability to chew glass every day and then ask for more is probably more important than anything else. Yeah, I think that's a great point.
e771-s013 · 00:07:12 · Jörn "Joe" Menninger
The ability to chew glass. I will remember that. Okay, let's go a little bit back into SME lending. I was wondering why it is still so difficult to digitize when basically everything around payments, consumer banking, brokerage have already moved much faster.
e771-s014 · 00:07:32 · Patrick Stäuble
Yeah, I think the, the, the, the big fundamental underlying difficulty that you have in SME lending is that every transaction, every client you have is extremely heterogeneous, right? So if you look at, in the, let's say, private lending space or anything like that, a customer who's earning, you know, €5,000 a month salary, has a mortgage, maybe has a car leasing, your average customer, it doesn't really matter if they're based in Hamburg and earning €5,000 or based in Berlin and earning €5,000. With the law of large numbers and you know, based on how consumers are, the borrower profile is relatively similar. In the SME finance space, it's totally different. You can have a customer that's earning €10 million of revenue, and then it could be, you know, the same— the other business on the other side of the streets is also earning €10 million of revenue, but the company profile is completely different, different EBIT margin, different UBOs, different, you know, subsidiaries and stuff like that. And I think that is the fundamental complexity of SME lending is how do you manage this heterogeneity of your client base? in a scalable way. And I think that solving that problem is what is difficult for banks, for fintechs, etc., to do. And it's a problem that you don't necessarily have in the retail space. It's not a problem that you have maybe in the transaction space where most transactions, 99% of your transactions are going to be exactly the same.
e771-s015 · 00:08:52 · Patrick Stäuble
For us, no 2 transactions are the same because every client is very different from the other client, even if the headline numbers might look exactly the same.
e771-s016 · 00:09:00 · Jörn "Joe" Menninger
Um, so it used to be the case when I was still doing vocational training, starting at the bank, that SME lending was only bank lending. So the rise of non-bank SME lending in Europe, is this a temporary response just to tight credit, or would you think this is a permanent transfer of a market share of, of a formerly very established, very much core business of the banks away from the banks?
e771-s017 · 00:09:34 · Patrick Stäuble
I think it's a fundamental shift away from the banks. So I think that every kind of lending, you know, that is not today a strength of the banks is going to move more and more off balance sheet of the banks. And we see this in a lot of markets through the kind of asset-backed securitization structures that you have many banks that say, okay, rather than service this customer segment ourselves, we're just going to do senior lending to a, you know, an SPV or an origination platform like Teylor. And they can take care of the nitty-gritty, they're better at the day-to-day stuff than us. And we'll, and we'll provide the maybe senior capital or mezzanine capital for this. So that's very clearly the trend. We see a lot of, you know, in the US market, it's there again, 5 or 10 years ahead of us in this regard. A lot of the lending is done on through non-bank institutions.
e771-s018 · 00:10:20 · Patrick Stäuble
And this trend is growing in Europe as well. And we see that this trend is also growing in Europe because It becomes more difficult for banks, as you said earlier, to lend on their own. But the growth of kind of ABS structures has been significant and you've got significant players coming into this market. And on top of this, what you do clearly see is that the regulator, I think, is also pushing it in this direction. So you've got laws that have been passed over the last— so AIFMD II is a great example for this that allows now AIFMs, fund managers, to directly lend out of the fund vehicles. This is kind of you know, predestined and prestructured to allow these off-balance sheet structures. And at the end of the day, as this capital market gets more mature, as the cost of funding comes down, as there's more service providers in the market, it means that off-balance sheet lenders or alternative lenders become more and more competitive also on the side of the pricing and on the side of the capital that they have available, which means that they will eat this business away from the banks. And I think that the banks are happy to give it away, to be honest.
e771-s019 · 00:11:18 · Patrick Stäuble
I mean, we've not seen in many markets the banks kind of outside of the UK and the US, let's say in continental Central Europe investing enough into this space. And I think in the past, probably they did it a lot because you do the SME lending so you can win the business owner as a wealth management client or as an affluent client. But the trend is very clearly towards the banks doing less of this business rather than doing more.
e771-s020 · 00:11:41 · Jörn "Joe" Menninger
We may add for everybody without a finance background that ABS is asset-backed securities. You could Google it. It's like a whole universe of financial instruments.
e771-s021 · 00:11:52 · Patrick Stäuble
It's a mega universe. Yeah. Yes.
e771-s022 · 00:11:56 · Jörn "Joe" Menninger
I was wondering, because a lot of questions we get as Startuprad.io as an international lens into the German-speaking DACH market is, how do you win a German Mittelstand customer that may have had the same, as we call it in German, Hausbank, meaning home bank, primary bank connection, this relationship for 20 years?
e771-s023 · 00:12:20 · Patrick Stäuble
Yeah. So I think there's kind of always— I obviously get this question a lot, and I think it's one of the key things that we work on. I would say there's 3 kind of relevant components to this discussion of how do you win these customers. The first is you've got a big batch of customers that are anyway moving away from their kind of traditional dusty old bank in the sense that maybe in their private life they've already used N26 or Revolut, and then they don't understand why that doesn't work for their business life as well. Or you've got the thing in that same category, you've got the change, the shift happening from the old generation. The boomer generation was a business owner, and then the young, the kids are taking over the businesses. And they just want to have a modern, up-to-date provider. So I would say that's kind of a big part of winning it, that you have this mentality shift happening in the market and in your target customer segment.
e771-s024 · 00:13:12 · Patrick Stäuble
The second thing that we see a lot of is that, especially in Germany, for the foreign listeners who don't know this, you've had in the last couple of years this— the Sparkassen, the Volksbank, and a lot of the smaller regional banks, they've been consolidating, they've been shutting down bank branches, etc. So I think you have the banks in a sense are doing us a bit of a favor because I would say 20, 30 years ago, you know, you were probably in the same, you know, in your village, you had the bank branch and you probably knew the branch manager and you've had a relationship over many years. Now, as these banks fuse, as the branches close, etc., I think that relationship is getting weaker and weaker and it's difficult for these business owners to get that local service that they maybe had 20 years ago compared to now. But the third point, and all of this, you know, despite all of this, it is an absolutely brutal sales activity. So there is no way around it. There's no free lunch. So we have a very talented sales team. I would say we do, we get our leads through 3 primary channels.
e771-s025 · 00:14:14 · Patrick Stäuble
So one is outbound. So everything from mailings to calls and stuff like that. Then we have a relative— the second channel is a relatively big partner channel. So that can be everything from embedded lending with kind of third-party tools or brokers. And then only a small amount is inbound. So, you know, there is no way around it, no matter how good your product is. You need to have a hardcore sales team, you need to track it every day, you need to invest and optimize and change. So even if the market trends might be in our favor, it's not an excuse to relax, so to speak.
e771-s026 · 00:14:48 · Patrick Stäuble
And I think this kind of customer acquisition in the B2B space, or specifically in the SME lending space, again, I mentioned earlier how if you don't have your risk management point, it doesn't matter how good your tech is. Even if you have your risk management and your tech on point, if you don't have a qualified, good sales team, good sales channel, it's a waste of time anyway. So that's extremely critical.
e771-s027 · 00:15:10 · Jörn "Joe" Menninger
Very slow grinding process. Oh yeah, going back to chewing glass again. And when you talked about mailouts, I was personally experiencing, because I'm a small business owner, increasingly from the endless Uh, emails, I see increasingly that people start writing physical mailings again because you don't get that much anymore, and it, it's actually a USP for many. That's, that's an observation I found very interesting. But let us dig a little bit into your mind decision rule. What has to be true before Teylor says yes to SME credit exposure?
e771-s028 · 00:15:50 · Patrick Stäuble
Yeah. So, I mean, the approach that we have is that we don't fund startups or kind of early businesses or something like that. We really look at companies that are established businesses that for whatever reason don't want to go to their house bank. So it can either be because their house bank is too slow or because they're maybe too complex for the house bank to understand. So what we look at, our average customer, the average business that we finance is 12 years old. And we honestly probably have the same kind of underwriting rules or whatever as the traditional banks can have. Right? We look at things like the equity ratio, we look at the cash flows of the business. The difference is we do it automated.
e771-s029 · 00:16:26 · Patrick Stäuble
So it takes us, you know, whatever, a minute to do the underwriting, while the bank does, you know, might take 3 months to do it. So that's kind of what we look at. You know, is there assets in the company? Is the UBOs— do they have some, you know, enough financial stability that they could kind of maybe give a guarantee and things like that? And obviously, on top of all of this, a very, very thick layer of anti-fraud, because I think that Unless we're really sure that this is a real clean, good customer, we don't even bother with the underwriting, right? So we look for bread and butter, plain vanilla small businesses that from a risk perspective, probably every bank would be willing to do. We just do it faster and more comfortably.
e771-s030 · 00:17:07 · Jörn "Joe" Menninger
False market assumption. What do you think is the most dangerous false assumptions, founders or investors make about lending businesses?
e771-s031 · 00:17:21 · Patrick Stäuble
Yeah, that's a great, great question. So I would say the first one is certainly what I mentioned earlier, that it's a pure tech game. It's not a pure tech game. Tech is a great, essential component to what you do. But, you know, being able to structure a refinancing vehicle, being able to do proper underwriting is equally important. The second thing that I've seen a lot speaking to kind of younger, or not younger necessarily, but let's say newer founders, it's this topic of adverse selection, right? So you might have the feeling that you've really hit the nail on the head, and you're getting at the top of your funnel a ton of different customers and stuff like that. And it's all great. But, you know, it's potentially a false signal, because the weird thing about the lending business is just because you're getting a lot of lending requests, that's not necessarily a good thing, right? It could be that you're getting a ton of fraudulent requests, it could be that you're getting a ton of requests, but from companies that are never going to pay back their loan.
e771-s032 · 00:18:12 · Patrick Stäuble
So I think thinking about the top of the funnel is often a big mistake that I think founders or lenders in general do. You need to think, or inexperienced lenders do, because you need to think not about the top of the funnel, you need to think about, you know, how many people are actually landing at the end of the funnel. And then 24 months later, when they need to repay the loan, how much of that money is actually coming back. So having, you know, mistaking your funnel for something that it's not, when maybe it's actually an adverse selection, that's a big, big mistake that you really need to be careful to avoid. And I guess any financial services kind of fintech. So those would be my 2 big takeaways. Anyone listening to this podcast, A, it's not just tech, it's also the underwriting and the infrastructure. And B, be very, very careful about how you celebrate your funnel and measure your funnel.
e771-s033 · 00:19:02 · Patrick Stäuble
At the end of the day, your job as a lender is to give out money and to get that money back with interest. So just because someone is applying for a loan doesn't mean that that's a good thing.
e771-s034 · 00:19:13 · Jörn "Joe" Menninger
I was wondering, when you talked about fraudulent actions, we have seen in 2026 here at Startuprad.io that increasingly AI is used to generate fraudulent, in our case, for example, uh, partner requests. So, um, unfortunately they still make a major mistake, those, uh, those, uh, scammers. Not gonna tell what it is, but, um, I was wondering, when I have this experience, there's much, much more money involved with you guys, did you see an uptick with the usage of AI and fraudulent utilization, fraudulent use of AI as well?
e771-s035 · 00:19:53 · Patrick Stäuble
Not so much yet. I mean, what we've seen much more is kind of especially the digital marketing channels, more kind of bot requests. But I think the good thing is that there are also relatively good tools to identify these and to block them. Where we're kind of, I would say, safer a little bit in our regard is that when we analyze a customer, we pull data about this customer from multiple third-party sources. And a lot of these sources are ones that are relatively difficult to fake. Let's take a simple example in Germany, getting the commercial register extract. If the commercial register extract doesn't match the information of the company, there's no way around it. So in some cases, you know, we— I'm a big believer in digitization and stuff like that.
e771-s036 · 00:20:39 · Patrick Stäuble
But having all of this data available from government sources in Germany is a very, very good filter. So we haven't seen that much of an uptick later in the funnel, although we do see more of an uptick at the beginning of the funnel with like bot-driven fake applications. But they get filtered out very, very early in the funnel. And fortunately, we've not had any fraud cases or anything like that in really a very long time.
e771-s037 · 00:21:03 · Jörn "Joe" Menninger
So I was wondering about your product identity. What is Teylor today? Is it a lender, a SaaS provider, a broker, a private debt platform, or consolidator talking about creditshelf takeover?
e771-s038 · 00:21:18 · Patrick Stäuble
It's a very good question. I mean, the thing is, I see it honestly all as the same thing. So from my view, we're a credit platform and our aim is, at the end of the day, what I tell my team every single day is In 5 years, in 10 years, every single one of us is going to look back and say, yes, it was totally clear that the small business lending segment was also going to become digital in the same way that all of us are sitting here today saying, yes, it was clear that mobile banking was going to change how banking is done and all of these things. What I want us to be is I want us to be the credit platform that sits between the banks, the private debt players, and the borrowers and pushes this industry into the future. Because I think that there is— it's absolutely clear to anyone who is in this market that this industry needs to become more digital. And I I want us to be the platform that sits between all of these players. Now, how do we achieve that? At the end, we've got one technology platform, one underwriting platform, and we can grow that by partnering. We can grow that by using it ourselves, or we can grow the business by buying other platforms and integrating them and bringing them onto our thing, onto our platform.
e771-s039 · 00:22:20 · Patrick Stäuble
At the end of the day, whatever I have to do to achieve that, whether it's buying other businesses and integrating them or making new partnerships, we will do it. We're entrepreneurs, we're opportunistic. Um, but at the core of it really is this credit platform that sits between these different parties.
e771-s040 · 00:22:36 · Jörn "Joe" Menninger
That is a SaaS tool, if I understand it correctly. And as a SaaS provider, I was wondering, does vibe coding scare you? Meaning, one, in terms of competition, we've been seeing the collapse of share prices, Monday, Figma, whatever, since vibe coding is out there. And secondly, Does it scare you in terms of product quality?
e771-s041 · 00:23:04 · Patrick Stäuble
It doesn't directly scare me in our industry. So I think that the benefit— I have 2 strong opinions about this. The first is, I just don't see how, let's take a financial institution, be it, you know, maybe a bank or a leasing company, etc. Their core competency is not managing software solutions on their own. Right? They're going to buy a third-party solution because they want to be able to rely on someone else's ISO certificates, on someone else's regulatory-approved tools and things like that. And they don't want to maintain their own software. Now, that fundamental, you know, how do you call it, fundamental assumption, I don't think changes whether they're buying a third-party cloud solution or whether they're, you know, building a tech solution in the old way or vibe coding it. At the end of the day, the financial services provider, they're good at sales, they're good at underwriting, and they're going to buy or, you know, from a third party these tools.
e771-s042 · 00:24:00 · Patrick Stäuble
The second thing with vibe coding, why I don't think that it's such a threat is because to our industry specifically, is just because of the regulatory requirements that we have. You cannot— I mean, I've vibe coded many apps and kind of side hustles and whatever, as probably many of us have. But I can tell you that the kind of let's say, security requirements that my vibe-coded apps have for a honeymoon planning app is certainly not the same as the security and the data protection requirements that I have if I'm storing financial data about clients. So the hurdle to really making an effective vibe-coded app that will replace an underwriting tool or something like that is huge. Now, where I do see kind of an interesting shift, especially in our company, is just every single one of our engineers, every single one of our people is just 10 times more effective. So had you asked me maybe 3, 4, 5 years ago, how big is Teylor going to be one day? I would've said 2,000, 3,000, whatever, a huge classic large number of people. Today, I think that's going to be very, very different. I think that there is before too long going to be a company like ours, maybe it is ours or a company like ours that has a very small, very lean team with a very solid infrastructure, but where agents and stuff like that are running a lot of the work.
e771-s043 · 00:25:17 · Patrick Stäuble
And we've seen it in our teams. There's just just certain functions that we don't need anymore. And I think that's going to be more the bigger impact for ourselves and other players in the market, that just many of the functions can be automated away.
e771-s044 · 00:25:30 · Jörn "Joe" Menninger
So what I hear is, if you would not be in a regulated business, you would be scared as shit.
e771-s045 · 00:25:37 · Patrick Stäuble
For sure. Absolutely. I mean, I think there's probably a hurdle of things where you kind of still want to use a third-party solution. So for example, I would buy Salesforce shares because I think that You know, anyone who's worked with a CRM knows how much of a pain it is, or built a CRM knows how much of a pain it is to build a CRM and integrate it everywhere and stuff like that. So I would say complex kind of business essential tools, SAP, Salesforce, regulated tools for credit and underwriting, I would be super scared. I would not be super scared, sorry. But other tools where it's like, okay, I could vibe code this in a day. I'll use a great example.
e771-s046 · 00:26:15 · Patrick Stäuble
We used to use Doodle. for our kind of coordinating our board meetings and stuff like that. What, you know, why would I now pay for the premium version of Doodle when it's a tool that I use maybe 5 times a year and I can build myself in an hour? So there's a lot of kind of low barrier to entry tools that I think are maybe highly valued right now in the SaaS space, but are not gonna be here for much longer. An absence tracking and management tool, things like that. For these guys, I would be not just shit scared, but I would be thinking, you know, what can I do now to either get out of this or to develop into a more valuable part of the ecosystem where people are not going to just copy paste my tool.
e771-s047 · 00:26:57 · Jörn "Joe" Menninger
Talked about entrepreneurship is always about resources. So I was wondering when you decide whether to put capital into organic growth, technology, lending volume, or M&A, what metric do you use to decide About your priorities.
e771-s048 · 00:27:16 · Patrick Stäuble
Yeah. So what we've, to give a concrete answer of how we decided this in the last 18 months, we saw in the last 18 months that the return on investment we were getting investing into organic growth was shrinking in the German market because the German economy is not doing well compared to where it was maybe 5 years ago, 10 years ago. And insolvencies for small businesses are at an all-time high. So what we clearly saw was that it's taking us much more money to win a client than it did in the past. Um, so what we did is we basically, you know, took, took a look at that extra euro that we're spending and said, okay, if we spend that money instead to buy a competitor, uh, where we get then instantly a lot of clients, is that more worth it? And the, the, the silver lining of the fact that the German economy or parts of the European economy in general are weak at the moment is that there is also not much, um, or less kind of PE M&A activity, meaning that valuations are depressed, meaning you can buy competitors relatively cheaply compared to how it was maybe in the past. So for us, it was that calculation that we said, okay, €1 of organic growth is returning, you know, less, 20, whatever the number is, 20% less than it did in the past. Can we get that growth cheaper by doing M&A? So it's really the return on investment of that marginal euro to achieve our growth targets is the kind of deciding factor.
e771-s049 · 00:28:37 · Jörn "Joe" Menninger
Very, very, very much. My professor from microeconomics would be jumping with joy here. I also studied economics.
e771-s050 · 00:28:44 · Patrick Stäuble
So maybe I'm a bit biased in that regard.
e771-s051 · 00:28:48 · Jörn "Joe" Menninger
So actually, microeconomics is one of those topics I thought, if I would ever— will I ever need that? And actually, it's something— it gives you a toolbox that came in handy, I think, more than a dozen times in my life already. So you never know what you learn for.
e771-s052 · 00:29:08 · Patrick Stäuble
I agree. I mean, I think for me studying it, I remember at sitting in university thinking like, God, this is all so abstract and theoretical. But I think the valuable thing that I had, obviously learning the mathematics part was important, but also now dealing with all of these small businesses every day and actually seeing, you know, what are the factors that are pushing them to make these decisions and stuff like that. It's been interesting seeing over the last 7 years that I've been doing Teylor where we see, you know, the data from thousands of small businesses, interact with the business owners, what are really the things that are driving their decisions, what are the things that are hurting them, what are the things that are helping them. Um, and kind of getting the, the real-world version of what I learned at university.
e771-s053 · 00:29:47 · Jörn "Joe" Menninger
You described Teylor as a lending platform, but banks are asking for your software, and CapeTec strengthened the SaaS arm. What would have to happen for software to become your main business rather than the synergy?
e771-s054 · 00:30:08 · Patrick Stäuble
It's a good question. I think what would have to happen is that the sales cycle of onboarding a new SaaS client would have to get much faster, right? The nice thing about the lending business is because it's a transaction-driven sales business, I know relatively clearly if I invest one extra euro today, how much kind of new customers is that going to get for me over the next 18 months. When you're selling a software solution to banks, often the problem is that you have It doesn't matter if you have 1 sales guy or 10 sales guys. If the procurement process of the bank takes 6 months, it takes 6 months, right? So, the levers that I have to scale that growth are less than any other side of the business. Now, we still see it as an incredibly important part of our business because there are very— our fundamental thesis is that this entire market is going to become digital, and we know that the banks are going to become digital one way or the other. So, it's better for us if they do it with us than without us. And secondly, we know that there are white spaces in the market that we will never be able to serve because we don't have the money, we don't have the know-how, we don't have— maybe we don't want to serve it in certain markets. And if we have this technology, let's cover that white space in some way with this technology rather than doing it ourselves.
e771-s055 · 00:31:19 · Patrick Stäuble
So it is a critical part of what we're doing. It also helps us to treat our technology platform as a platform that is used not just by us, but by banks. So we are a client of our own. Our lending business is a client of our tech stack in the same way that LBBW or a bank or whoever, our other clients use it. And I think it's a very smart and healthy way to work as a business, right? It's a bit this Amazon Web Services approach when they said, okay, everything that we're using internally has to be an API that we can use, that external people can also use. And I think it instills in the organization a lot of discipline about how to build the products properly, because it's not just— we can't just hack it together for us. It has to work also for a bank, for a lender, for a leasing company. And I think it's one of our product strengths, I would say.
e771-s056 · 00:32:05 · Jörn "Joe" Menninger
So when a fintech starts buying competitors, licensing software to banks, raising institutional debt, and expanding across fragmented national markets, is it still a fintech company, or is it becoming part of Europe's infrastructure? We'll be back with this question after a short ad break. Hey guys, welcome back from our little ad break. Uh, I'm still talking here with Patrick, uh, founder of Teylor, and we are back with the next set of questions. So I was wondering, is the current wave of fintech consolidation real consolidation, or is it mostly the weak 2021 vintage companies disappearing where the stronger operators survive?
e771-s057 · 00:32:55 · Patrick Stäuble ⟨corrected⟩
No, I mean, there's certainly an aspect of companies that didn't survive getting bought up. But I do think if you look at the M&A transactions on the market today, these are strong businesses coming together. Even if you ignore Teylor for the time being and you just look at, for example, we had last week announced on the market, or 2 weeks ago, that Qred bought Liberis, for example. And I know that there are other transactions happening. I think it's the market becoming a little bit mature where in the sense that, you know, people have gotten through this first fintech wave of SME lending. And then seeing obviously it is in some way, shape, or form a scale game and bringing these companies together to kind of boost that scale. And I think that we will see more transactions in the next 12 months where even the bigger, more established players start coming together. So yeah, it's definitely the— now the transactions happening are the strong you know, strong merging with the strong to grow rather than just hoovering up what was left over from that first wave, let's call it.
e771-s058 · 00:33:58 · Jörn "Joe" Menninger
We talked with creditshelf in the past, we interviewed them. So what made creditshelf, grenke's factoring business, and CapeTec strategically different acquisition targets?
e771-s059 · 00:34:10 · Patrick Stäuble
Yeah, so each of the transactions we did kind of had different motivations, but we always analyze them through the same framework. And when we look at a deal, we kind of look at 3 criteria. So number one, Is it a complementary product? So in the sense that either, you know, is it a product that we can use to serve our core customer base, small businesses? We wouldn't buy a business that is, you know, retail lending because that's not our game. That's not what we're focused on. So is it a complementary product? The second thing that we look at, is it from a geographic perspective relevant for us? It doesn't make sense for me right now to buy or, you know, to buy a player in Vietnam because I don't know, you know, it's not our market. We don't have any strength there. Maybe someday it will be, but right now it's not on our focus. So geographic is the second thing.
e771-s060 · 00:34:55 · Patrick Stäuble
And then the third kind of component that we look at is the, is it a good deal for us? Is it there an arbitrage, multiple arbitrage opportunity where maybe in today's weaker market we can buy them cheap and then kind of the multiples will grow naturally over time as the market kind of gets stronger? Now, all 3 deals kind of fit into these categories. With the creditshelf transaction, you know, it was a great team, a great technology platform, and they were focused same business model as us, but focused on a bit of a bigger customer segment. So we wanted to get access to also SMEs, but just doing a bit bigger, more complicated financings than we were doing. So we wanted to be able to do that. The Grenke transaction kind of ticked 2 of the boxes. So they're, you know, obviously it's invoice finance, receivables finance, which serves the same customer segment, but is a great product that we wanted to add on there. It's a complementary product. And obviously they're active in multiple European markets, which we wanted to be.
e771-s061 · 00:35:50 · Patrick Stäuble
And then CapeTec, the same thing. So it was complementary in the SaaS space and also geographically. So it really made sense for us in that regard. So that's kind of how we look at it. And the other deals that we hope to do in the future, we always analyze it along those 3 metrics.
e771-s062 · 00:36:10 · Jörn "Joe" Menninger
Talking about your M&A operating system, I was wondering, when a company is under pressure, how do you separate a broken business From a strong asset trapped inside maybe just simply the wrong capital structure?
e771-s063 · 00:36:25 · Patrick Stäuble
Yeah, it's a very good question. So I mean, I think the advantage that we have because we've been on the market for some time now is that we know most of these businesses. And usually, you know, being in the market, knowing the people, sometimes there's also like, you know, we have the same customers, for example. You, I think, get relatively good insight into what are the components that work and what are the components that don't work. Nonetheless, it is, you know, a hard due diligence work. You have to go in, you have to analyze it, you have to take that market data, but also the internal data that you get. And it's also hard in the sense that, you know, you have to take these businesses over. It always takes longer and costs more than you think.
e771-s064 · 00:37:03 · Patrick Stäuble
You have to cut jobs, you have to restructure and things like that. So for us, it was always that first step was kind of getting that knowledge from the market, having worked with these companies before, and then afterwards having really a dedicated team and a clear kind of post-merger integration process to carve out the parts that we know are valuable and bring it onto our platform. There's no, how do you say, silver bullet magic secret to do it. It's hard work and a lot of analysis and keeping your ear on the ground, looking at a lot of opportunities. I mean, we get a lot of opportunities every week and we say no to 99% of the things, to be honest. So it's also about being a bit disciplined, I would say.
e771-s065 · 00:37:45 · Jörn "Joe" Menninger
We've been talking about M&A here, so I was wondering, is Teylor clearly the consolidator in the European non-bank SME lending, or does the same logic eventually make you attractive to a bank, asset manager— think about private equity— or a larger lender?
e771-s066 · 00:38:08 · Patrick Stäuble
Yeah, certainly. I mean, if I look at the future of Teylor, I, I see kind of 3 3 routes. And obviously, as you can imagine, this is a question that I get asked a lot by VCs and investors and stuff like that. I mean, for me as Patrick, you know, an entrepreneur, my dream case would obviously— I believe that Teylor has, you know, the strength to stand on its own 2 feet. And I would love to bring it to IPO one day, because I think that this is a great company that could have value on the public markets. The second kind of let's call it exit scenario that I think could be the case is that we get approached by a bank. I think there are a lot of European universal banks who, you know, who we've spoken to in the past and who know us that maybe realize that they've kind of fallen asleep at the wheel in this SME lending space. And maybe instead of spending €50 million, and I say this in the most loving way, knowing that you guys have worked, you have worked in McKinsey in the past, but instead of spending another €50 million on McKinsey, or Accenture having an SME program number 7 that then doesn't really bring any results.
e771-s067 · 00:39:11 · Patrick Stäuble
Take that money instead and buy a competitor where you get the, you know, where you have the team, where you have the tech, you have the distribution and things like that. And then the third channel, as you mentioned, or the third option for us, I think would certainly be private equity. I think that, you know, would be also very interesting knowing especially that a lot of the private equity players have had great success working with platforms like ours in the US. And that a lot of these private equity players are now in the meantime, obviously, multi-asset managers. So they don't just have equities, they all have, you know, private debt funds, senior secured lending funds and stuff like that. So it's for them very attractive as a channel to not just do the equity part, maybe roll up and buy more businesses and grow the equity value, but where they can also deploy debt. So it's kind of a 2-in-1 for them. So yeah, I mean, my preferred option would obviously be that we're the one buying and and taking the company public and stuff like that.
e771-s068 · 00:40:03 · Patrick Stäuble ⟨corrected⟩
But yeah, looking at the market, those are the 3 realistic options, I think, probably for any lender out there. And if you look at a lot of the players, you know, be it Qred, who's partially owned by Nordic Capital, be it Auxmoney, who's owned by, or partially owned by Centerbridge, I think there is a lot of PE and banking interest in this space once the assets get to a certain size level.
e771-s069 · 00:40:26 · Jörn "Joe" Menninger
We often have to explain, since we heard internationally, that there's a difference between, uh, how European companies, startups, scale-ups deploy capital and American companies do that. So where does European capital discipline, you personally think, beat American-style hypergrowth, and where does it hold companies back?
e771-s070 · 00:40:52 · Patrick Stäuble
Oof, that's a great question. I mean, I can certainly say, where does it hold companies back in the sense that just the European capital markets are just much shallower than in the US? I think, you know, we hear about a lot of different podcasts in the news that in Europe, you do have this funding gap, where kind of, you know, Series Seed and Series A, I think we're very good at in Europe. And then kind of the Series B, if you look at, you know, all of the people raising Series B, they're raising a lot of this if you're raising $20, $30, $40 million, something like that, you raise it from American investors or kind of primarily American investors. So I think we're— Europe as a continent, we are weak in that space, which is certainly a hindrance because it means that, you know, even a company is doing well in the Series A, they have to go to the US to get money, which is a shame for us as Europe because we lose great companies and we lose great, great opportunities for growth that way. I think that there are You know, obviously also benefits to, you know, us in Europe being a little bit more, more, more, how do you say, less hypergrowth focused and stuff like that. I think that because when there is then maybe a crisis that you're, you know, if you're, let's say your average European growth startup is maybe a little bit closer to being profitable than your average US growth startup, that if something goes wrong, you still have a bit more breathing room to course correct. But the downside is that we have much less of these billion-dollar unicorns at the end of the day. There's probably more explosions in the US approach to it, but also there's more successes at the end of the day than we have here in Europe.
e771-s071 · 00:42:28 · Patrick Stäuble
So yeah, I think we have some catching up to do in the European market. I think, though, there's a lot of initiatives happening there. I think the good thing is that we— of not having this hype is that we don't have things like you've seen right now in the US, this totally overheated market for data center financing, which doesn't happen. It's not happened in Europe just because we have tighter regulatory controls. So there are certainly benefits to this as well in the sense that we don't have these explosions that they have or are kind of having at the moment. So yeah, upsides and downsides, let's say.
e771-s072 · 00:43:02 · Jörn "Joe" Menninger
That is actually a great bridge to what I want to talk about now, because we are also talking about potential downturns. But let us first talk a little bit about private credit, because private credit is under more scrutiny globally. How structurally different is Teylor's SME and factoring credit from the US software-heavy sponsored-backed private credit exposure now drawing the concerns?
e771-s073 · 00:43:31 · Patrick Stäuble
Yeah, I mean, I think it's very fundamentally different because if you look at our customer base or our lending book, you know, our average loan size is maybe a couple of hundred thousand euros or in the factoring side, it's maybe a couple of thousand euros even per invoice. So the portfolios that we're generating are much, much more granular than these data center financing portfolios where maybe you'll have a fund that's got just 10 borrowers in there or 20 or something like that. So you don't have that natural diversification. I think it's important to kind of also, not just— and this isn't just a Europe versus America thing. If you look at the market, for lending, let's just say, generally speaking, if you've got a diversified, even in the US, a diversified portfolio of credit card debt or retail loans or real estate loans, etc., those are doing fine. I think it's a very, very specific part of the market that is kind of overheated. This kind of, let's say, AI infrastructure part of the market that is overheated, that is being hit with a very specific problem. But I wouldn't say that it's— or there's no signs for me that there's generally an overheated private credit market.
e771-s074 · 00:44:42 · Patrick Stäuble
I think private credit is an extremely relevant part of the financial services industry in the meantime. And yes, there is one part of it that is overheated in one market, but it's still a key asset class, right? And will continue to grow and be a key asset class, especially as we are in a prolonged low interest rate environment almost worldwide.
e771-s075 · 00:45:05 · Jörn "Joe" Menninger
You've been hinting at downturns. I was wondering, in a real downturn, what happens to a non-bank lender if institutional funding becomes scarcer or even more expensive?
e771-s076 · 00:45:17 · Patrick Stäuble
Yeah. So there's kind of 2 angles where the problems will arise. So if you are lucky enough that you have already the funding source that's guaranteed for a certain amount of time, you still can feel pressure from obviously your lenders and your refinancing partners to be more risk-off. So that means that also you then have to go risk-off. off and be more selective in underwriting, which means your growth will certainly stall. Usually the pricing is relatively well locked in. So there's not that much of a pricing impact. But if you're setting up a new vehicle and you go to market and there's not that many people out there who are willing to fund, you know, your book or anything like that, then the pricing goes up, which in turn makes it more, much more difficult for you to win your clients, right? So there is a pricing effect.
e771-s077 · 00:46:00 · Patrick Stäuble
I think in terms of downturn, the biggest impact is more indirect in that you know, we've seen, let's take the German market, that you've got a, um, you know, you've got all-time high in terms of insolvencies and stuff like that. Um, and that just makes it much more difficult to make the book profitable and makes it difficult, um, to find good customers because they have less cash flow, less profits and stuff like that. Um, so even if you do have the lenders that are motivated to do it, if your borrowing base or your customer base is suffering, um, you know, it doesn't help if you've got 20 lenders who are willing to give it. If the underlying customer base is not sound, you have Um, we've been talking about AI before.
e771-s078 · 00:46:39 · Jörn "Joe" Menninger
I was wondering in that manner, if AI creditworthiness assessment becomes a regulated high-risk activity in Europe, does that either protect the market or does it hand an advantage to scale players that can simply absorb the, the, the compliance costs going with that?
e771-s079 · 00:47:01 · Patrick Stäuble
I don't think it will change much, to be honest. I think it might make some people more efficient, because— but that's it. Because the reality is, for— I'll give you a concrete example. For us, whether or not we use, you know, a human being doing 100% of the underwriting, or an AI does the underwriting, the human being just signs it off at the end or anything like that. Every single lender, LP, regulator, whatever that you're working with, they're going to want to have an audit trail for every single credit decision that you make anyway. So we have, for example, in most of our agreements with our partners, they have full audit rights for every single credit decision that we make, meaning that we've had a, you know, we've had, I think the last one was 2 years ago, PwC on behalf of a lender does their annual check. They come in here and they pick 50 loans and they want to know for these 50 loans, I want to know exactly which documents were used for the underwriting, how was this KPI calculated, et cetera, et cetera. And this is, I think, good governance.
e771-s080 · 00:47:56 · Patrick Stäuble
It's, you know, you need to have this audit trail for how you made that decision. And I think that if there is more regulation, if it's a high-risk activity, doesn't mean you can't use AI. It just means you need to have the audit trail to be able to explain why was this decision made. And being able to explain why this decision was made is anyway going to be a prerequisite or is already a prerequisite whether or not you use AI. So I don't think it's going to be a significant difference. I think if they regulate it as a high-risk activity, I can't imagine that there's much more that we would need to do that we're not doing already. as a serious lender. Although caveat, I would say I hope that they don't because I'm not a big fan of more regulation.
e771-s081 · 00:48:34 · Patrick Stäuble
I think it doesn't help us that much. And I think the more regulation that we have around AI and things like that, the more we are going to fall behind other markets. So yeah, that's, but that's my personal opinion, let's say.
e771-s082 · 00:48:47 · Jörn "Joe" Menninger
I would also argue that you need a very good documentation of how an AI makes credit decisions, because you then always can go back and see where did the good decisions and the bad decisions differ.
e771-s083 · 00:49:03 · Patrick Stäuble
Exactly. Absolutely. And you need to have this documentation because you need to be able to say, okay, we made this credit decision with this underwriting model, let's call it. And then if you want to have a new one, you need to be able to backtest it and compare and stuff like that. So at the end of the day, it's all about good governance and good, and good tracking all of these decisions. Which I assume that every serious lender already has all of these things in place. And that's why more, you know, if the regulator were to come to me today and say, show, you know, show me these 5, whatever, 5 credit decisions that you made and why were these made and with which model were they made and explain it to me, we can do that. And we already have to do that for our partners.
e771-s084 · 00:49:43 · Patrick Stäuble
So the market has already, I think, solved this problem quite well.
e771-s085 · 00:49:49 · Jörn "Joe" Menninger
You guys do a lot in many different areas. So I was wondering, what is the internal operating system that lets Teylor control risk across lending, factoring, software, institutional funding, and acquisitions?
e771-s086 · 00:50:05 · Patrick Stäuble
Yeah. So I mean, the biggest benefit that we've had is that we hired about a year and a half ago a new chief operating officer. Veronica, who's brought a lot of structure into the business. At the end of the day, the way that it works is that we do give a lot of freedom to the local business units, and they all are responsible. They're kind of mini CEOs for whatever their business unit is responsible for. And then we have a centralized entity that kind of has the overall management of the vehicles, management of the overall risk profiles. And then there's obviously hurdle rates where someone can decide something locally, or does it have to get a second sign-off from the group level? And so, yeah, that's generally how we're structured. The honest answer though, it's not easy.
e771-s087 · 00:50:47 · Patrick Stäuble
I mean, we— I didn't have as many gray hairs as I do now 7 years ago, and I think a lot of them are due to exactly the question that you're asking and solving those problems. Yeah, I mean, my view on it is like, you know, if it were easy, everyone would be doing it, and I don't think anyone's ever built a great company by doing just the easy way. And I want to build something big, so, you know, we have to take these challenges and find good solutions for them.
e771-s088 · 00:51:12 · Jörn "Joe" Menninger
Good solutions are usually tied to pretty good predictions. So I was wondering what specific prediction about European SME lending in 2030 are you willing to be judged by later on?
e771-s089 · 00:51:27 · Patrick Stäuble
I would say 2 predictions. So I think that the share of private debt in the— or private debt players being active in the— or, you know, the market share of private debt players relative relative to banks is going to grow. And I'm not just specifically talking about SME lending. I'm talking about everything from LBOs to leasing to retail credit, etc. And I think that it will grow in the trillions in the next couple of years in the same way that it has in the US. And then specifically for SME lending, I think that if we're at 5% market penetration in Germany right now and the UK is at 60%, I think in the next 2, 3 years, or let's say by 2030, I think we'll be not quite at 60% yet, but I think certainly a third of the market will be served by digital lending platforms. That doesn't mean necessarily non-bank lending platforms, but digital lending platforms, surely.
e771-s090 · 00:52:18 · Jörn "Joe" Menninger
We usually end our interviews with 2 questions. One of them is, are you open to talking to investors?
e771-s091 · 00:52:28 · Patrick Stäuble
Yeah, I mean, we are actively discussing with investors right now some interesting transactions, and we're always, always on the market and interested to speak to both debt and equity investors. We're not running a specific process, but yeah, we always have these opportunistic discussions and those are sometimes the most interesting ones.
e771-s092 · 00:52:48 · Jörn "Joe" Menninger
For everybody who's interested in this, we'll link your LinkedIn profile down here in the show notes. And last question, are you looking for talented people?
e771-s093 · 00:52:57 · Patrick Stäuble
We are always looking for talented people. We're right now Growing a lot or finishing the integrations or closing the integrations of the factoring entities, which means especially in our business in Poland, we're hiring a lot of people, but also we're always looking for talented sales staff. So yeah, always happy to have the right candidates applying.
e771-s094 · 00:53:18 · Jörn "Joe" Menninger
Great. Patrick, thank you very much. This is Joe from Startuprad.io.
e771-s095 · 00:53:41 · Patrick Stäuble
Thanks, everyone.
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