Tips on when to fundraise and how the team built Europe’s largest NeoBroker
This post is part of Accel’s Secrets to Scaling series. Since we opened our doors in Europe in 2000, we’ve seen the continent become a vibrant ecosystem of talented entrepreneurs, inspired by the success of their peers, and the creation of category-defining global winners. But the opportunity for global entrepreneurship from Europe is just getting started. In Secrets to Scaling, leaders from across our portfolio will share their learnings and advice on team building, leadership, scaling internationally, and more, with the next generation of entrepreneurs building Europe’s rising stars.
Trade Republic is transforming personal financial management across Europe and, since we joined the company on its journey in April 2020, its mission to set up millions of Europeans for wealth creation with secure, easy, and free access to capital markets has rapidly gathered pace. In just two years, Trade Republic has reached more than one million customers in Germany, France and Austria, becoming Europe’s largest NeoBroker.
This momentum has culminated in the company’s $900M Series C round announced today. The new valuation of over $5bn makes Trade Republic one of the highest valued private fintechs in Europe and is a huge milestone for the team. Congratulations and we’re looking forward to the next stage of Trade Republic’s journey!
Earlier this year, I sat down (virtually) with Trade Republic co-founder Christian Hecker to get his advice for people setting out on the entrepreneurial journey. Now seems like a good time to share his tips for other founders! Read on to hear what Christian had to say on the importance of listening, over-communicating, and direct involvement in hiring when it comes to creating a successful business…
The start of Trade Republic’s journey
Prior to starting Trade Republic in 2015, you worked in investment banking. How and why did you make that shift? What was your inspiration?
Assigned to work on the Rocket Internet IPO, I flew into Berlin from New York wearing a suit and tie, but when I walked into the hall, everybody was wearing t-shirts and shorts. The contrast between the two work cultures really stood out - there was a different energy and way of thinking.
In early 2015, (co-founder) Thomas Pischke was in Frankfurt, where he’d been programming in fintech. We met up and discussed macroeconomics in banking and the future of pensions, and we both agreed the pension gap was going to be huge. The idea for Trade Republic was born from those conversations. Later, in Munich, we spent three days brainstorming, discussing macroeconomic drivers, the product we wanted to build, and the steps needed to bring it to life.
You mentioned Thomas Pischke’s technical background. Marco Cancellieri, your other co-founder, has a mobile app design background. Do you think this mixture of expertise has been key?
When your strengths and weaknesses complement each other, you’ll work well as a team. I’ve known Thomas since university, so I knew he had exceptional technical skills. We met Marco at a Munich hackathon and his skills and personality were the perfect fit - I knew we had a well-rounded team. As well as having complementary professional backgrounds, our personalities blended well from the start. In six years, we’ve never had a big fight -- for one of those years we shared a flat!
It’s a big leap of faith moving into the world of entrepreneurship and leaving a career that was going well. Have you ever had second thoughts - especially early on?
I always knew that if it all went wrong, I could fall back on investment banking. I also try to keep some distance. If you're trying too hard and getting caught up in everything, you’re more likely to fail at some point. In the first four years, the feedback was very positive, and this very much kept us going.
"It’s also important to celebrate small successes along the way, not just the big milestones - you feel you’re making progress."
You set out to revolutionise European investing and decided to build a state-of-the-art tech stack and apply for a banking licence - a notoriously long and hard process. Why not launch a lighter version of the product first and improve it over time?
To provide the level of service we wanted for our customers we knew we’d need to be an independent bank. Having a commission-free, full banking licence for German trading was a no-brainer, so we looked for someone who could introduce us to [German financial regulator] BaFin. This process took two years and it then took six months from May 2017 to prepare for the licence. Thomas, Marco and I made a deal to work from 6:30am until 11pm, seven days a week, until it was done and we eventually shipped everything for the licence at the end of January 2018.
Trade Republic took on a highly regulated industry. What advice do you have for entrepreneurs set on disrupting other highly regulated industries?
Never stop trying. You need stamina when working with any regulator. Never cut corners and be sure to over-communicate. It will take time but these processes work like a machine and, if you fulfil all the requirements, you’ll eventually emerge on the other side with a licence.
You built partnerships with HSBC, BlackRock, and other global financial institutions ahead of your product launch. These have been key for creating trust and credibility with your first customers. How did they come about without having a product?
My advice would be that, as with any B2B business, you need to secure your first partnership and the rest will follow.
It’s fair to say that the first partnership is typically the hardest to set up. Thomas and I had connections with HSBC from our university days and after two years of working our way up the communication ladder we finally secured a meeting with the CEO in Berlin. He’d had another meeting cancelled and we went for a hotdog together and discussed what could be done. HSBC became our first partner, after which other financial institutions were more interested. It was the comfort factor they needed.
"In many ways, building a company is similar to building a plane while you’re in the air, but stay focused on that first partnership."
You've grown to 600,000 customers in the last year and about half of them are buying shares or Exchange Traded Funds (ETFs) for the first time. How do you think about Trade Republic’s role as a financial educator, providing customers with information to make better investment decisions?
The biggest ingredient to empowering people is transparency. Our user-friendly commission-free trading platform empowers people to take control, begin their investing journey, and accumulate knowledge along the way. Contextual education and helping to show what – and what not - to do is an important pillar of our mission to help people take their first steps into capital markets. We plan to do more in the future to help people better understand investing.
Any other recommendations for entrepreneurs thinking about taking on the role of educator and bringing more information and transparency into similar industries?
Always ask yourself whether you can improve on what’s already available in your field or industry. If you're going down the education route, you need to identify something new, unique, and beneficial for the customer. Don’t just add to the noise. At Trade Republic, for example, the fact that we have a mobile product that so many people interact with means that we can provide tips and information within the app and educate people on the fly.
Trade Republic’s route to growth
Let’s talk about international expansion. Trade Republic started in Germany, expanded into Austria, and recently launched in France. There are lots of hurdles when it comes to market regulations, local consumer preferences, languages, and so on. What's your playbook and advice for others?
Every company’s internationalisation depends on its business model and the regulatory landscape of its specific industry. One thing I’d say is that it’s worth sticking to one business model for all the countries you expand into. It’s tempting to create special solutions for certain jurisdictions, but you won’t really benefit from economies of scale. You should also consider how you can adapt your product to local preferences and develop a premium proposition.
Let’s talk about growing pains. Your team has grown from around 30 people a year ago when at the Series B to more than 500 now. How have you managed that growth as a leader and how has the onboarding process changed during the lockdowns?
Growing a company fast is always hyper-challenging and COVID-19 has presented some unique circumstances around recruitment and management. It’s been harder in terms of culture and getting a personal feel for somebody when recruiting online. On the plus side, you can run multiple processes consecutively and scale a lot faster. We’ve spent a lot of time explaining our mission and seeing how excited people get. This helps us determine if they’re a cultural fit.
There have also been important lessons around contextual leadership. Leading 30 people is very different to leading 500. What’s clear to you may not be clear to others, because they don’t have the same information. They don’t know the playbook or the priorities for the next country launch, for example. You really need to over-communicate. I make sure I repeat everything and keep the flow of information going - it helps keep everybody together.
And I also think hiring is very much a CEO task. I currently spend 30% of my time on recruitment every week.
This brings me nicely onto the importance of culture and values for startups. What are Trade Republic’s core values?
I believe actions speak louder than words, so we try to lead by example rather than have our values printed on posters. One of our key principles is to never stop asking questions. This can take you a long way towards creating something new - especially in a regulated industry. Another is to do it right or not do it at all – so we aim to do a few things very well. Our third key value is taking responsibility for our teams and projects. We want to bring people together who really own what they're delivering.
What's your view on how the pandemic has changed the future of work? Are you considering any permanent or hybrid changes to the way you're set up?
We want to accommodate different ways of living and different phases of life, so remote working will be an important pillar of what we do. We also believe there’s an exciting opportunity - especially in Berlin – to create an enjoyable campus environment in the middle of the city. I’m a believer in the power of watercooler chats to drive innovation and collaboration. Valuable ideas are often born out of those serendipitous moments.
Learnings on leadership
Let's shift into the leadership side of things. Can you describe your personal leadership style?
We try to be very time-efficient in our communication and we’re very metrics- and KPI-driven. At the leadership level, we align our mutual goals and have bi-weekly check-ins to discuss what more can be done to achieve them. Everybody in the company can contribute their ideas on how to improve things and provide feedback. We also try to give people a lot of accountability - it goes a long way to creating freedom of action.
Looking back at 2019 when you were closing your Series A, what do you wish you’d known back then that you know now?
You can really underestimate the power of great leaders. Last fall, we had people join our organisation from the Bay Area who really opened our eyes to what a good leader looks like and how efficiently they work. I would have invested more in the leadership team earlier if I’d known how much value it would bring to the company.
We're in a golden age for Europe and capital is readily available for ambitious entrepreneurs. What advice would you give to entrepreneurs choosing an investor? What should they think about beyond money?
Some people consider fundraising the end of a journey, but it’s not, it's a milestone. We spent four years bootstrapping the firm and building everything without any VC funding as we felt it was a better way to build a ground-breaking company. You need to be thoughtful about the right time to fund your company. Any fundraising should promise something for the future, not just value something that’s already there. You need to find the moment where you can promise 10 times what you have today.
"Also, never underestimate personal relationships with the board and with investors, as there’ll be lots of ups and downs. You can never have too many conversations or reference calls to find somebody you’d love to work with."
You've been on this journey for some time now. Have you seen changes in attitude toward entrepreneurship in Europe and in Germany in particular?
100%! During the Rocket Internet days of 2014/15, the whole of Berlin was electrified. It seemed as if everybody was working with Rocket. From starting Trade Republic in 2015 through to 2019, there wasn’t as much VC interest and it was hard to get their attention. However, in the last two and a half years there’s been a 180-degree turn. There's capital in abundance, a lot of interest in the market, great leaders, and many experienced people. We're in the third or fourth wave of super-visionary companies – those that really forge the way, proving what’s possible and providing talented leaders and experience for the ecosystem.
When it comes to day-to-day activity, are there any life hacks or habits you’ve developed that help you cope with the stress and demands of being a CEO of a fast-growing business?
I try to carve out two to four hours per week to think about my main priorities, as you can’t deal with everything during hypergrowth! I ask myself every week what the three biggest bets are and focus everything on these. Also, an obsession with metrics and reports can save hours of talking. And in any meeting, I try to ensure I’m listening more than I am talking. You learn so much more that way.
How difficult is it graduating from an organisation where you know everyone, and you’re involved in almost everything, to a place where you need to delegate and trust others?
It’s tremendously challenging, especially in COVID-19 times. We’re fortunate that a lot of people on the team have been with us for a long time. Having that established team in place means we’ve already developed a natural trust, so delegation follows very easily. It's just giving somebody a budget of trust, and then adjusting it as things evolve.
What part of building a business has been challenging? What did you not anticipate?
It’s a bit like football. You need to go in with the goal of winning and try to get more goals than own goals! There are continuous setbacks when building a business and you can underestimate the motivation and resilience you need to bounce back. The key is to stay focused on the end goal and keep moving forward. You can’t let setbacks derail you - all those ups and downs are part of the journey.
What’s been easier than you expected?
It’s never been easier than I expected. One of my favourite quotes is from Tour de France winner Greg LeMond, who said: “It never gets easier, you just get faster.” You soon learn that the company’s just faster and bigger - you have 500 people and things are exactly the same.
Finally, is there anything you believe should be discussed more openly when it comes to entrepreneurship and building a business from scratch?
Founding companies is often glorified, but not everyone is committed to the longer journey or appreciates the amount of hard work involved. Building a company is tough. I think we need to be more open and honest about how much work goes into starting something from scratch.