Europe’s Fintech Future: Capital, AI & Breaking Regulatory Barriers

We are here at Money 2020 Europe in Amsterdam, and I'm very pleased to be joined by Jessica, Jessica Holtzbach, who is the partner and CEO for Germany of 029, that's spelled 0T09.

Thank you so much for joining us, Jessica.

Thanks for having me.

So you, of course, are working across different startups, and I would love to ask you about the capital gap, and there's a very big difference between how startups scale up in Europe versus in Silicon Valley.

4 in 5 scale up deals involve a foreign lead investor in Europe.

What does that mean for founders who are trying to get off the ground in the first place?

I think for getting off the ground it has not such a big impact because in Europe we have a very strong seed investor network.

We have strong angel investors, seed, Series A, Series B, and then as you mentioned, only.

It becomes a problem in the really big mega rounds and a lot of times then either US or international investors join the startups, but I would say for every startup just getting off the ground, getting going, it's more important to just get started, find traction, get the first customers.

The first money will be there, and then later it's also OK to take money from abroad.

The the jurisdictions that you work in, you work across the whole of Europe.

I know you have offices in Sweden, Poland, etc. and that's a large number of jurisdictions to work across.

How does that fragmentation of the different legal and tax regimes, how does that impact your startups?

Yes, I've been a FinTech founder myself for the last over 10 years, and back then it was really difficult to start in one country, for example, Germany, and go to another country.

And that's exactly the problem that we want to help solve.

So with CO29 we are basically a platform across Europe and we help fintech founders to go on day one into multiple different countries by combining all the different jurisdictions and having experts in the different legal frameworks.

And I think the biggest problem, but obviously not only we, but politics is also trying to address it, is that in Europe if we have one rule we have.

7 different interpretations of that one rule, tax regime, legal forms, and I think there are some good initiatives with the 28 regime that are really trying to solve that.

And from my point of view, it's either politics will solve this now or companies will use AI in a way to solve it themselves, and that industry-led initiatives have the baseline rules that are clear and we can use.

And then we'll find the solutions on top of that to make this is how the rail roads were built.

So talk to us a little bit about the EU proposal and that single incorporation framework.

What does that mean for founders?

So just taking an example, in Germany versus UK, I think in the UK you can go to a company house and set up a company within a couple of hours, and you have the bank account and everything ready for. below €100 or a pound in that case, and in Germany it still takes weeks to set up a company and you normally need €25,000 to even get started and what the 28th regime wants to do is especially setting one level playing field for starting companies and that's the first step or the first hurdle every founder has to overcome in making.

Even easier, we expect the numbers of companies to increase, and especially in Europe we have a lot of talent coming out from university or the scientific background, and they are not necessarily so familiar with setting up a company, commercial register and everything, so making it easier for also scientific-based startups to get off the ground easily with like.

Immediate registration, lower initial capital requirements, the same requirements across borders will be a big boost for I would say this top funnel.

Such an important part of progress in the economy is bridging that gap between the innovation scene in universities across Europe and true business.

And growing that.

So, um, it's fascinating to hear the different parts of that.

Um, and you've touched briefly previously on the role of AI, uh, in sort of making that a cohesive and easy thing to do.

Uh, what else can you tell us about what you're seeing about digitally native AI startups?

Yeah, I think especially in the fintech funding cycles there was a lot of quietness over the last years.

So while we had fintech funding always as one of the top categories in the earlier days, for the last 5 years it has been really, really slow because I would say investor expectations were hardly met even with big success cases.

So we were missing the IPOs, we were missing the liquidity events on that side.

And therefore there was quite some, I would say slow time, and what we see now since I would even say only the beginning of this year is also true AI.

Companies, products and services within the fintech space, and the reason why we only see it now is that regulation was always a bit of a barrier or like a protection wall, like a moat that was protecting the incumbents from this AI place, and these kind of walls are now slowly I would say tackled, and there are some really interesting businesses coming up now.

So I think it's a really fantastic time again to invest in fintech.

That's a very nice thing to hear cos it's certainly a changing landscape and to hear that it's still certainly exciting is, is, is brilliant news.

Um, I'd love to ask you about Revolut, um, an incredibly impressive, if at times controversial European FinTech.

He's just er decided to list in the US.

Um, what can you tell us about what we do to keep European fintechs here and, and, and what needs to change earlier in the journey, if anything?

And to ensure that the success story remains this side of the pond.

Yes, I would say the obvious answer is that we have more capital in the US.

The exchange is more fluid.

If you list there, there's more chances of raising follow-on capital.

So I think even any company scale-up startup that would love to list in Europe is probably not well advised to do it today.

That's why I think.

It's not the right question to ask what should we do to keep revolut here.

I think it's more what should we do to get the next 10 revoluts off the ground here and then we have a bit of time to really work on the fundamentals to also build this same exchange here.

We need more institutional capital.

We need to free up private capital to be investing into.

Venture capital and private equity cases, but I think right now the focus should be on layering or lowering the borders to get started and really make sure that we get the next 10 revoluts in Europe.

Well, I hope that we'll see that very soon, and I wish you success in your search to find them, and I really hope that the rest of the conference is wonderful.

Thanks a lot.

Thank you for joining us.