12 questions with Dr. Daniel Bartsch, Founding Partner at creditshelf
creditshelf is a German mid-market lending platform, who provides credit up to 5 mn Euros to small and medium businesses. Already a well-known startup in Frankfurt, creditshelf caught the attention of several international players this past July, as they took an ambitious step for a relatively early-stage company : an IPO on the Frankfurt Stock Exchange, which allowed them to raise €16.5 mn. It became in the process the first — and for now, only — listed pure-play fintech from Germany. We sat down with founding partner and member of the board, Dr. Daniel Bartsch, to learn more about the process.
1. creditshelf provides an attractive option to match the interests of borrowers and investors in an efficient way. What are the main objectives to achieve through this initial public offering?
Fund proceeds from the IPO will be used to invest in the further development of our software, algorithms and models as well as the expansion of our product portfolio. One of the side effects of the IPO is that it increases the level of awareness of creditshelf in the market. A stock exchange listing in the Prime Standard, which is linked to strict regulations on transparency, is certainly a seal of quality that lends further credibility to a growth company such as creditshelf. This strengthens our attractiveness for clients as well as investors.
2. Disrupting small — and medium size enterprises (SME) financing is an innovative idea within the German market. Can you comment on your strategy to acquire new customers and how have you tackled the limited knowledge and familiarity of German SME borrowers with innovative lending platforms?
First and foremost, an efficient and easy-to-use online presence that attracts the attention of suitable borrowers is key. Of course, this also includes a good, contemporary corporate design and effective online performance marketing. Using efficient SEO / SEA measures as well as content marketing / newsrooms creates an online presence. Targeted direct marketing with haptic mailings, newsletters and a special creditshelf magazine can directly reach the desk or screen, mobile phone or tablet of the creditshelf customer.
In addition, we organise a large number of events on site both for business partners and medium-sized companies. Furthermore, target group-specific press work and advertising as well as strategic alliances are of great importance to us. Also, interesting annual partnerships with suitable media partners should be considered.
3. How is the creditworthiness of potential borrowers analyzed? Is there a credit score, algorithms, models that also provide information to establish a range for interest rates?
Our creditshelf platform covers the entire credit process from application, credit analysis and risk management to disbursement and servicing of a loan. The creditworthiness of the potential borrower is checked with the help of a detailed analysis. The process is a combination of digital financial analysis based on detailed historical data and personal know-how. An employee from the risk management and customer service departments conducts an in-depth interview about the relevant operational and financial parameters of the respective company. In addition, creditshelf offers clients a free financial analysis. This includes company and financial key figures as well as data evaluations as an overview and forecast in various operational and financial areas of the company.
4. As service provider, which would be a suitable credit project for creditshelf?
The offer comprises SME loans with final maturity or monthly repayment with a loan amount from EUR 100,000 to EUR 5,000,000 and a maximum term of 60 months. We like to finance working capital, seasonal capital requirements, strong growth, expansion of financing partners, use of cash discounts, equipment financing, M&A, succession arrangements, project financing, stock building and digitisation projects.
5. Who coordinated the offering in terms of structuring and executing the IPO? Are there any previous relationships with the underwriters and how did you choose them?
During the IPO, creditshelf was advised by experts from the financial sector. Commerzbank AG kept the books and Bankhaus Lazard acted as financial advisor. The law firms involved were Allen & Overy, Orrick, Herington & Sutcliffe and Wagner Arbitration/Hyazinth. Warth & Klein Grant Thornton acted as auditors. The experts from cometis AG supported the company in strategic financial communications and media relations.
6. As in any investment, prospective investors should consider the risks prior to making any investment decision. How do you think creditshelf AG approaches these risk factors within the business strategy? (Market environment, limited corporate history, scale internal structures, competitors)
We believe our in-depth credit analysis makes a significant contribution to minimising the risks for investors. creditshelf strives to achieve an above-average attractive risk/return profile. To this end, customers are systematically integrated into the creditshelf value chain and the digital process chains are processed in real time. This ensures that the monitoring of review dates, the electronic transmission of current balance sheets and asset statuses without media discontinuity (and the subsequent retrieval of the customer’s updated key financial figures) functions smoothly. [TB1]
7. creditshelf has innovative products and services for which the market has not been fully developed yet. How does the company strategy approach the rapidly evolving technologies and the introduction of new products and services to the market?
Indeed, the market and competitive environment are changing rapidly, requiring a high degree of flexibility. What is important is the combination of processes, integration and real-time analysis software in a comprehensive digital business platform. This is naturally easier for FinTech companies such as creditshelf because our processes are more efficient and leaner and the value chain can be reconfigured and digitized more easily.
8. The high degree of future automation of the platform will allow a cost-efficient scability of the company’s business model. Are there any expansion plans within Europe?
For now, we are concentrating on the customer side of medium-sized companies in the German market. However, it cannot be ruled out that we may at some point look at other markets as well.
9. The transition from a private to a public company requires to comply with new legal obligations and administrative requirements which may divert the attention from the day-to-day business. With such a capable team do you see any difficulties to this transition?
We have a very experienced management team and that is clearly one of the necessary conditions to manage the transition in a short time frame. The transaction was also accompanied by experienced legal advisors who initiated all necessary steps. They professionally supported the management and employees in setting up the appropriate structures and processes.
10. How did you identify the structural gap in unsecured credit supply for SMEs?
The creditshelf founding team and its Executive Board members have many years of experience in lending and advising companies at major banks and in advisory services. In the course of their activities there, they have noticed that there is a structural supply gap in unsecured loans for small and medium-sized enterprises due to regulatory obstacles and business policy restrictions.
11. Regarding cooperation between Fintechs and Banks, in your opinion what would be the relevance of this relationship within the financial ecosystem and how could customers benefit from it?
Fintechs and banks will enter into collaborations and partnerships, offering customers solutions that banks alone would not be able to provide. Due to their agility and size, Fintechs are able to develop business models and implement products and processes much faster than banks. The individual, bespoke and manually delivered customer service of the past is no longer affordable for banks except for their largest customers. Through digitalization and smart process management a more individual and personal service through Fintechs becomes possible and affordable.
12. To achieve return on equity and increase revenues, Banks are cooperating with Fintechs to build better ecosystems. What is your perspective and vision of the startup and Fintech ecosystem of the Rhein-Main region?
As Germany’s largest financial centre, Frankfurt am Main is becoming more and more attractive for Fintech companies that want to co-operate with banks. Hubertus Väth, Managing Director of Frankfurt Main Finance, explained in the bank magazine that the Hessian Ministry of Economics and Technology, together with the Techquartier, had presented an ambitious master plan to develop the Frankfurt-Rhine-Main region into the leading Fintech hub in continental Europe and an internationally recognised tech region within five years. In Comdirect’s Fintech Hub Ranking of November 2017, the Main metropolis ranked third behind Berlin and Munich. Frankfurt am Main is creating an environment in which many different forms of cooperation between established financial institutions and innovative start-ups can function.
About Dr. Daniel Bartsch :
Daniel has 15 years of international consulting and banking experience. At creditshelf Daniel is responsible for operational business and relationships with customers and business partners. Previously, he held a senior executive position at UBS, managing the institutional distribution of bond and equity products. Professional assignments took him to Zurich and Singapore. Daniel graduated with a degree in business administration from the University of Mannheim and a doctorate from the University of Düsseldorf.