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The support across Europe and the contacts that Creandum provide is extremely valuable for a small startup from the Nordics

Fintech leaders

Company Focus: iZettle
Founded
2010
Creandum Invested
2015
CEO
Jacob de Geer
Creandum Partner
Johan Brenner
Fintech leaders

Johan Brenner: Creandum participated in your A round but we should have invested in your seed round. As I recall it, we did some due diligence and we felt that the regulatory environment was initially too big of a burden. In retrospect I think iZettle has proven - more than many others - how important the team has been.

Cofounder and COO Magnus Nilsson: You know, just to take a look at that decision, Jacob and I quickly decided that I would be the hardware expert. And that was somehow based on the fact that I had been in charge of importing GPS equipment from China at my previous company. I set out to find someone who could make hardware, and, looked all over the world to see who could do a an EMV certified chip card reader for us. And I found a company very early on that was making all the e-banking devices that were used to put in chip cards.

I found through the CEO the person to talk to and called the guy, and I have never, in my entire business life, been treated that way. Before or after.

So I call this guy, he’s an expert on chip and EMV, and I tell him, “This is our game plan”. We started this company and we want to do this payments system. We’re doing it with without magstripe, we’re doing it for chip cards only, and I believe that you would be the perfect partner for us to produce our hardware.

And you could hear a deep sigh on the other end of the line.

He says, “You know, how long have you been in this business?” And I said, “Not for very long, as you can tell. But I really believe this will fly. I have some proof points, but there are some hurdles to overcome.”

He says, “Magnus, do you know how many cab drivers there are in China?”

I said, “No.”

“There are 6 million cab drivers in China. Isn’t that amazing.”

“That’s amazing,” I said

“And he said, “Well, don’t you think they would like a product like this? Well they would love a product like this! You know why they don’t have it? Because it can’t be done. So I only have one advice for you. And that is to close down this company. It’s never going to work. And trust me, I’ve been in this business for a long time."

I said, well, you know, that’s a pretty hard statement to give someone who’s just started a company. But I hear you, and I will continue to fight for this. And if I find a solution that is compliant with all the rules you find out there, can I then call you back? Because I think you really are the ideal partner for us.

And he was silent for a while and then he said, “Don’t call me. Mail me.”

[Both laugh]

We hang up, and then two and a half years later we get them to produce half a million of those devices that we still ship in Mexico.

But so you know, there were moments when your assessment that it was never going to happen was believed to be absolutely correct.

Johan: Yes, but we followed you closely and had some great discussions because we were in the A round, which was a privilege.

Magnus: I think the A round was very interesting in that we were in the fortunate position where we had just issued this video that really went viral - or at least from a Business To Business point of view. From that video we suddenly had hundreds of banks across the world who wanted us to come to their country and launch the product together with them. So that made us really popular everywhere. Apple called and asked “how many million dollars did you spend on this video it was amazing.” And we spent 30,000 Kronor.

Johan: It was an amazing video.

Magnus: So we had all these people that really wanted to be part of this. And you stood out, actually, as one that was easy to be with, in that you said, “We’re not going to be the lead in this, but you will need a good Nordic player to help whoever is lead, whether it’s Index... Accel... Greylock... and we want to be that partner to you. We absolutely want to be part of this deal.” That made life really good for us in the way we could focus on finding the lead.

I also remember when we met for the first time that you said something that stuck in my mind - and made me think, “This guy should be involved in us somehow,” even if it’s not in the seed round. You said “I love payments.”

And I had never heard that from anybody before or after! [laughs] That absolute interest in our key area was, I think, good and very helpful beyond the A round.

Johan: What is your general view as founders working with investors at iZettle?

Magnus: I think in the first phase, it was really about helping us connect to the right people in the right places - getting more intel from you than we would be getting ourselves.

And then of course the whole process of getting to the point where we had a defensible customer acquisition strategy with the whole methodology around that. I think maybe Jacob and I were a bit slow to take on the advice you were actually providing in that context - how we should look at payback time, lifetime value, and so on. Which is of course natural [for a VC to suggest], but still early days we didn’t want to focus there so much. We thought we had to just focus on penetration and getting people in, and not getting to locked into counting every last cent at that juncture.

We knew [that focus on these metrics] will come. But we were sort of talking-about-early-days for a bit too long. So if anything you could have been tougher with us! But I think that whole concept led us in the right direction.

I must say I think another thing we have done well was that I think the fact we had very different profiles on the board. We had these two older gentlemen, Vigo Carlund and Hans Dahlborg who were sort of the industrial side, and then you, Laurel Bowden and Ben Holmes from 83 North and Index respectively on the VC side. That was good in some ways, because it helped balance our board meetings. You very often as VCs, in general, led the meetings like they were working meetings. Whereas Hans and Vigo were more like, “these are board meetings where we either approve or don’t approve what management is proposing”.

Johan: Or we fire the management!

Magnus: [Laughs] And I think that was pretty healthy balance. So all in all, you know, the vast experience you have from different cases on the key areas of customer acquisition, churn, all those things I think are so vital to any entrepreneur when you start.

I think you, Johan, are one of the more questioning guys, actually. And I think it is good. You ask a lot of really pertinent questions. Sometimes we’re good at answering those, and sometimes not. But I think it just makes us sharper. We know if you’re asking a question that we need to know it. If we don’t know it, then we know that something is going to make life very difficult. It just sharpens us.

Johan: I have to say, as a board member sometimes you don’t really need to hear the answer. It’s more about being able to feel that you guys understand the question. I know that’s something that you understand. But speaking of asking too many questions, thank you for your time, Magnus, and sharing all these stories!

Magnus: Thank you!

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