Investing in Spain’s #1 Neobank
My partners at Conexo Ventures arranged an initial meeting at Barajas Airport last April as I was just on a trip home from Madrid to Boston and the founders of Bnext were on their way back from Mexico.
There are few first impressions so strong that they leave you in no doubt as to the immency of your investment and the timelessness of your faith you immediately know you will invest and feel your first impression will never fade.
Bnext, the fresh Spanish leading neobank was an early pick from Stefan Klestil, leader of one of Europe’s largest and most successful Fintech fund: Speedinvest.
Stefan and I have been doing business together ever since we were students, young and green and pursuing a crazy Marketing study for our respective Junior enterprises, mine in France and his in Austria.
This dates back to the ancient time of 1989, just after the berlin wall fell yet it was yesterday. I became a 3-time fintech entrepreneur moving late to VCs after my last venture LoopPay was sold to Samsung to build Samsung Pay and Stefan became one of the best fintech entrepreneurs in Europe — an early investor in N26, the leading neobank in Europe with a valuation > 3 Billion Euros — , he is now long since enamored by Bnext vision and incredible traction.
After becoming No1 in Spain as Neobank in less than 1 year with over 200K active consumers and beating giants like Santander and BBVA in their own game and country, they were going after one of the largest untapped opportunities: the Mexican market. This raw opportunity caught my interest most seriously.
True hope for bankarizing 50% of Mexico’s still unbanked population and many more in Latam.
I started my career in 1991 as a fresh graduate. I had managed to fulfill my military service, compulsory at the time, as an employee of France Telecom, the French state telecom operator (now known as Orange). I felt that the economic war was really happening abroad…
France Telecom had partnered with a so called “seller of tires” to participate in the privatization of TELMEX … or so I had been told…
The tires seller was none other than Carlos Slim, owner of what was then called Euzkadi (largest tire distributor in Mexico in 1990) so well connected politically at the time that he won the privatization of Telmex deal, 2nd richest man in the world today. However, while Carlos Slim augmented the number of people with a phone line from 10% of the population to over 90%, he failed to get the same number of people to have a bank account despite having many of the keys to do make this happen. While not concentrating at that opportunity and despite having his own bank INBURSA, he let the major Spanish banks BBV and Santander that own the major banks or CITI who in turn owns Banamex concentrate on the affluent and medium upper middle-class market but that today is still less than 50% of the population.
Neobanks are the opportunity that can change this dynamic very fast…
Neobanks provide a simplified and better user experience via a mobile phone only interface for millennials in developed countries, they have created serious challengers in Europe and especially UK & Germany.
In emerging markets, the opportunity is much larger, as Nubank in Brazil has proven by capturing close to 10% of the Brazilian market — with a large part of unbanked or underbanked population — in very little time, far exceeding the unicorn status. They attracted close to $800M in funding and close to 10 million customers.
In this context when intuition combined with solid assumptions and referrals count, we easily made all our criteria work to take a quick decision and participated in Spain’s largest fintech fundraising among some of the greatest European fintech Vcs such as DN Capital or Red Alpine on top of Speedinvest. 22 Million was raised for this round in a round that was the largest fintech round close in Spain closed last September 2019.
Interestingly enough Bnext also raised again via crowdfunding a record 1 Million euros within 1 hour with 4995 small investors mostly bnext users for an average 700 euros valuing the company above 80 Million Euros already,
There were many good reasons to invest but here are a few that counted more when presenting to our Investment Committee.
1. An exceptional team that knows its stuff
It has to start with an exceptional team that knows its business extremely well…
The team is led by superbly charismatic & salesman CEO Guillermo Vicandi. Focusing on a major problem and big market, Guillermo knew his cards/business after 5 years at ING and BBVA. He struck me as knowing everything you need to know and learn about Marketplace of financial services. He wanted to provide banking services without becoming a bank and he had the right approach. White labeling initially and focus, ready to later move to the big game with a full banking license and back end.
His CTO (and brother in law in fact) proved very complimentary as should be the case in all startups as well as we could see a relationship of great complicity. Their customer service teams, and marketing team proved extremely efficient when we had students test trial the Bnext cards and we did.
Above all, we saw ambition, but humility served / grounded with the right attitude. No Ego…no fear, exit aware yet not exit driven. An ambition that led them aspire to becoming #1 in Spain. Truly #1…not mere #2!!!
They were ready to tackle the bigger market (~ 43 Million people, the 60% of unbanked Mexican population aged 17–70 and in the world 2 Billion unbanked people) in spite of the huge competition already present.
2. Amazing KPIs and very competitive pricing vs the industry
Looking at the KPIs of what had been achieved: almost 300K customers that had costed them 15 euros to acquire in average, a fraction of what it costs to any other Bank with a real usage of at least twice a month.
Clearly, we saw that they were doing what all others were doing: focusing on consumer growth rather than revenue. However, we were pleasantly surprised by the revenue growth through modest and a certain articulated path to becoming profitable.
Bnext customers using a premium card were definitely growing as fast as the nonpaying customers. Bnext now processes €100 million in transactions every month ($109 million) and grows month over month.
As of January 2020, they almost added 100,000 more users in Mexico weeks after their soft launch getting them already close to 500,000 users and making very realistic that they reach 1 Million users before the end of 2020.
Bnext diverges from the other neobanks in its stronger marketplace proposition having contracts with various fintechs. Bnext connects all the services of these fintechs thus offering its users the experience of traditional banks in addition to the countless advantages of fintechs. Furthermore, Bnext expects to launch its very own services in 2020 and get a full stack banking license like the big guys at N26, Nubank or Monzo.
In addition to the promising KPIs, beaten month over month, their cost of consumer acquisition was largely inferior to that of their larger competitors in Europe.
However, the most valuable comparison lies with Nubank: we were completely struck by how fast Nubank grew not only in users but also in valuation, besting $10B for 12M customers mainly in Brazil, and even in funding rounds with over $1B raised. Their valuation is of even greater appeal when one considers it how justly it applies not only to Europe but also to Brazil.
Bnext sought out the right investors and kept mercifully far from the absolutely outré valuations we come to see when such customer growth is aurendezvous(if you’ll allow Frenchman the expression).
Overall optimum valuation vs all other large and medium neobank funding operation including latest of Argentinean neobank Ualla by Softbank and Tencent for $150M series C.
3. A superior customer experience
It sounds obvious but… we went deep in the customer experience.
Having worked myself for 3 years at deploying a wallet: Samsung Pay from the acquisition of my startup LoopPay I knew how crucial the user experience is. We fought for months to get people really at ease with our mobile payment apps and the benchmark is so high now with the regular bank mobile banking apps.
ApplePay proved it recently with the Apple card experience. Bnext in some way before even apple card was live already were displaying in their app amount and the date, instead of incomprehensible codes.
“Usability and design of the app was clearly there and we could see the impact on engagement”.
The ability to provide cash with no fee in any ATM was also a fairly big argument for using the bnext card for so many users. These are small things that make a huge difference for users and part of a great consumer experience.
4. Is an ideal fit for our fund
Bnext was the ideal fit for our fund. Most of our investments are in startups that can scale in Latam or the US after acquiring a dominant position in South Europe. Thus far… we have seen great synergies!
Buguroo-our banking Cybersecurity startup- has become no1 in Spain. It leads an immensely successful expansion into Latin America especially Mexico where they operate their cybersecurity solution for major banks like Inbursa. We helped them close a round of $11M led with American venture cybersecurity expert 1011 Ventures.
Kushki pagos: -our 2ndinvestment- aims to becoming the “Stripe” of Latin America and to this aim has recently acquired one of their competitors in Chil
https://www.contxto.com/en/chile/kushki-pagos-acquires-fintech-qvo-to-expand-into-chile/
Equally impressive, Kushki Pagos also closed a major bridge round and grew 300% in their transaction volume also setup a major presence in Mexico this year.
We were honored to be part of an elite team of VC really bringing concrete value to Bnext like Variv Capital (now COMETA) bringing huge value for Bnext in Mexico including fast path for banking license.
My partner Isaac and I were in Mexico last month attending the soft launch of the Bnext card’s Mexican debut. Although it will doubtlessly be pitted against many powerful competitors…., we have never been so confident in Bnext’s success!!!
Of course, there are many other reasons why we invested in Bnext but …remember… metrics and team really matter!!
Carlos Slim, just watch! already 100,000+ people just a few weeks after soft launch.
Good luck Team Bnext Mexico !
