with Pete Townsend, host of Money Never Sleeps podcast

In this episode of Money Never Sleeps podcast, Rudi and Pete cover the below topics:

Rudi's inspiration and his affinity for people who understand and believe in the imperative of growth, fueling innovation and relentless new product development. Teaching entrepreneurship versus learning by doing or from those who have done it before. Raising capital outside of your home market when you're from a small country but have a global ambition. The rational or irrational approach of deal flow sourcing by VCs. Corporates engaging in "open innovation" and what startups should look out for to reduce "innovation theater" to a minimum.

Here is the full transcript:

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00:12 Pete Townsend: Hey there, welcome to Money Never Sleeps, a podcast that looks inside the head of entrepreneurs and at what makes them do what they do. I'm Pete Townsend, your co-host on Money Never Sleeps, along with Eoin Fitzgerald. This episode of Money Never Sleeps is kindly sponsored by Ireland's FinTech and financial services recruitment specialists, Top Tier Recruitment. If you or a colleague need help attracting or retaining great talent for your FinTech or financial services company, it is highly advisable that you build a relationship with the team at Top Tier Recruitment. You can find them at toptierrecruitment.com and tell 'em we sent you.

In this episode, I talk to Rudi Falat from the Voice of FinTech, a podcast mapping out the Swiss and European fintech ecosystem. Rudi and I met in 2013, while we were on opposite sides of the table for an M&A deal that we were working on. After we both moved on to other things, we were reconnected by another guy from the same deal team, Benoit Mercier just last year. Since then we've been engaging a lot more frequently and I'm really impressed by what he's built up around his Voice of FinTech brand in the past year. So let's get on with Rudi Falat in our first podcast crossover episode of Money Never Sleeps.

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01:18 PT: Here we go again, welcome to Money Never Sleeps, I'm Pete Townsend, and we're on today with Rudi Falat. Rudi and I go back a few years, he and I worked together on a deal way back when we were both in the corporate world, he's now got his own podcast called Voice of FinTech and we'd like to welcome Rudi to the show, how are you doing, Rudi? Great to have you today.

01:35 Rudi Falat: I'm great, thank you very much, Pete. Thank you for having me.

01:38 PT: Awesome. So why don't we just dig right in and you get into your back story and tell us what you're up to, yeah?

01:43 RF: Yeah, absolutely. So first of all, I'm a finance guy. Last few years I worked in banking, post-MBA, that's where we met, I worked in in-house M&A team at Credit Suisse and we sold you guys a business in Ireland when you were at BNP Paribas and before that I worked in London for Deutsche and HSBC, but I started in New York, in Finance, in Consumer goods and then I switched over to Banking, and now I'm looking into the start-up world, the innovation world. Sometimes it's a crossover of the corporate world and the start-up world but we can talk about it a bit more as we progress.

02:25 PT: Okay. And tell me why you started getting involved in the startup ecosystem. I know we talked a little bit about this last year, but would really like to understand kind of your motivation for doing what you're doing.

02:39 RF: Right, I mean, it started with a bit of a self-reflection and also I tried to read a lot and I've been inspired by people who understand and believe in the imperative of growth, and I believe that the growth comes from innovation and from relentless focus on new product development or new services and improving the way we do things around in the business. I started looking into this and I've been attracted to people who think along those same lines and they know that sometimes it takes a while to bring the business to life or a new product and they're patient and they also can experiment and they try to be creative. So I'm still looking for the right home or the right role in that ecosystem, but in general, I love to hang out with the founders who have the courage to get going and start a business from their own and also the incumbents who are the believers in what I just said or the investors as well.

03:46 PT: Gotcha, and is there, if you think about the last last year or so, Rudi, and some of the inspiration in terms of the reading that you've been doing, anything really stand out as being an author or a book that made you think, "Wow, yeah they're on to something."?

04:02 RF: Well, in terms of growth, I think it's one of the books from Dambisa Moyo where she talks about that the growth is the imperative. If you don't grow, then the business cannot function, right? But of course, if you're in a large corporate sometimes, you need to get stuff done today or this week, and you don't think about the things that can bring fruit in the next few years or something like that. So that's one of the ideas here. And in general, of course, there are different sort of motivational clusters or incentives that work for the corporates and the startups. And unfortunately, the professor Clayton Christensen just passed away and he talked about it a lot, when you could look at Kodak and you would see, "Oh my god, why didn't they go for digital, right?" They could have and they didn't, but to be honest, at that time, it didn't really make sense for them, right? So, but essentially that led to their demise. So I'm attracted by thinking about those sort of problems and see how you can prevent that. You could be an incumbent and maybe you can be still agile and change things, still foster innovation and entrepreneurship also within that sort of large framework. Or am I being naïve, I don't know, I'm still hoping...

05:30 PT: No, no, you're onto something there, Rudi. My reflection really from leaving the corporate world and getting up to the start-up worlds, it's really night and day, right? In the corporate world and someone that I nearly went to work for a few years ago said, "Pete, you sure you wanna leave the bank? Do you know that when you're working for a bank, you can just go hide in the corner for two weeks if you don't like the way things are going?" [chuckle] And I said, "No, no, I'm ready for that, I'm ready for that." And then I didn't take that job a few years ago and then when I left BNP Paribas a few years ago, and the story I've been telling recently when people asked me why I left, I said, "Listen, in 2014, I kind of woke up to some of the technology that was going on around me, and I felt like I was the manager of a blockbuster video store." And that there's gotta be folks that will still want to go back and stock videos on the shelves, but in the long run, everyone's gonna need to be able to eventually go do something else, for the part of the business that I was in. But long story short, that when it comes to the startup world, my first real lesson learned was that the very first one I went to go work for, a share hedge here in Dublin.

06:55 PT: We had this great agenda for what I was gonna do for the first month. And then once you get into it and you see where things are, you say, "Well, listen, the main objective here is fundraising because this is about survival." This is about getting to the next stage of funding, and everything else that you think about in terms of building an organizational chart for the next level, building a culture, building a stock ownership plan, all those types of things like listen, it's just about survival a lot of these times, and contrasting that to the corporate world those corporates will survive, it's inertia, it's momentum. And that's one of the things that yes, rest in peace, Clay Christensen, that he talked about as well competing against inertia, as well as his book Competing Against Luck, but yeah, lots of thoughts in there. Speaking of thoughts, what do you think about the Swiss and European FinTech scene? What are you seeing happening there?

07:48 RF: Well, I mean, I'm a foreigner who was fortunate enough to being able to live in Switzerland for more than 10 years. So I obviously enjoy it. I think it's a fantastic country as people know. And now it's winter, so people think about Switzerland and skiing or chocolate and the watches and things like that. But it's actually a huge startup scene as well and especially a FinTech scene. And in particular, that's true for Zurich. You have lots of people coming out of the great technical universities, like ETH in Zurich, and the EPFL in Lausanne and they're coming up with great tech, which is amazing. However, I don't really see them pairing up with the founders from business schools. And that's where the incubators come in. So I've been mentoring an F10, which is also called Home of FinTech. And this is what the F10 does, they fill in the vacuum in terms of education. We can debate whether you can teach entrepreneurship or not but I think there are certain things that you could learn as a founder that would improve your chance of survival, whether that relates to how you should teach for one minute, three minutes, etcetera.

09:06 RF: What should be in the deck? How you should prototype, how you should test and things like this. This is sometimes something that I don't see in... I don't see that as a skill that people have developed in a business school. They either learned that in the incubator, or just by doing or from advisors, or mentors and people like that. But the hardcore tech skills, yes, they are being taught and developed and nurtured within those tech clusters, as I mentioned in Zurich and Lausanne. So that's something what I've seen and I've been mentoring in F10 and I'm trying to help as well leverage my experience from a big corporate, especially helping B2B FinTechs and that relates to basically saying also how to navigate that decision-making at the big corporate, right? And also maybe share some knowledge about how just the packaging should look like, right? When you go to see a big boss, what should you focus on? How you should play this and things like that.

10:10 PT: Yeah, I'm with you, I'm with you, that interesting point you raised about teaching entrepreneurship. And when I did my MBA back in the '90s, I took an entrepreneurship course, right? Did I learn entrepreneurship then? Of course, I didn't, right? All you're doing is you're learning about these themes and these topics and doing a couple of projects. I think we did a project on creating an online tee time system in Boston, right? Back in 1998 it was novel to be doing something like that. Entrepreneurship to me is... And we've talked about this on a number of episodes of this podcast is that, sometimes can you build a great, incredible tech product? Absolutely. But is that entrepreneurship? No, that's tech. Can you build a great product full stop? Yeah, but can you sell it, right? And can you build a team? Can you grow that team? Can you build a culture of people that just want to do an incredible job for you, for the business, for the shareholders, for customers, right? Those are much, much bigger questions than just entrepreneurship. And I think that what the business schools do is just give you some of the repetition with things like case studies, and just basically put a few tools in your toolbox, so that you can draw on these things and draw on these other experiences that you've heard from folks, but it's really entrepreneurship is just getting out there and doing it, right?

11:32 RF: Right. And there is one thing related to it, which I didn't mention is ambition. And I did speak to Geoff Ralston from Y Combinator about this on my podcast, and he said, look, ambition comes from within, right? And yeah, good ideas can come from anywhere. But when I meet founders, I try to be a good coach. As you know, I love tennis. So I think the best coaches are the ones who are positive as well. They try to stretch the players, but they stay positive. So the tech, I think, very often is great but sometimes people are not ambitious enough on the continent, you don't have that problem in the US.

12:11 PT: No, you don't. You don't, no. Ireland, I'm still a student of this, and I will forever be but in Ireland, you see, yeah, you can get it off the ground here, but in order to get to that billion level valuation, you need to go to the UK, to Europe, to Asia, to the US, right? Do you see that same thing happening in Europe is that, whether it be in Zurich, or whether it be in Lausanne, where people are thinking, well, I've got to, yeah, get my product off the ground and get up to maybe series A level but then I got to go somewhere else. Do you see that?

12:48 RF: Yes. I mean, I'm more aligned with the founders who say, look, Switzerland is our launch market, then of course, we'll go to Europe and we'll go to the world, right? So that's kind of my bloodstream or my kind of thinking or philosophy, even though there are other people who say, "Well, there's nothing wrong with having an SME, and having a higher chance of it, you know, having a smaller business that can sustain you, etcetera." And yes, there's nothing wrong with that, but then when you go to business angels or VCs, let's be honest about it, right? So I'm more in line with people who say, look, we have a tech, it's a software. So why not be ambitious, right? So you need to go further than from Zurich to DACH which is, Germany, Austria, Switzerland, you need to go further than that. And if you struggle, because sometimes people say, "Well, there are not even funds here who can grow with me past A round or something like this." Then again, what is the problem to raise money elsewhere? So, I think you just have to think big, especially when you're developing a software or a tech business, why not? And learn from others. Look at the examples, there are some people who lack ambition and they are weak in tech, once you have a strong tech, I think the ambition should be an easy fix.

14:16 PT: Yeah, yeah, absolutely. I mean, they say that being a really successful entrepreneur takes half determination and half delusion, right? So it's a learning experience all the way throughout. You mentioned investors a couple seconds ago Rudi and we'd like to hear your thoughts on that. What do you think that investors could be doing differently so that we get to see more unicorns in Europe?

14:39 RF: Well, a lot of the things I've heard were also about sourcing, and that the people want to only deal with founders that have been introduced to them by other people that they know and they trust. And I understand that, but I think also the investors should think more widely and spread their net more widely. So I like some of the founders who are also starting to think about the startup that, for example, would be a software that does your long list for you, ideally, in three places first round of analysis, if you're a small fund, and you don't have 10,000 analysts to look at 1,000 startups that you like around the world, you use that software and then, yes, you find out whether you get a reference on the team, on the company, on the tech and you see if there is a warm introduction that you can use, but I think to limit yourself only to do business or invest in friends of friends, I think that's not a way to go, especially in Europe, where we have lots of frictions in terms of preventing us from scaling up. So let's try to break those barriers down and compete with the US and China, because I think there's great ideas here, but we need to be a bit stronger around commercialization.

16:12 PT: Yeah, I'm with you, we talked last week on the episode that we did with Ivailo Jordanov, I finally got his name right after a few months of saying it wrong. He's from 7percent Ventures, they're an early stage tech investor based in London and on your note on growth that is a critical part of what they do. On their website they quote Paul Graham, the famous investor who said, "A successful growth rate is 5 to 7% per week, the best are doing 10% per week, if you can't hit that 5 to 7% you're really not gonna get too far as a startup." So that's why they call it 7percent Ventures and they only invest in what they consider to be billion dollar opportunities. But in that conversation we were talking about the warm intro. And I said listen, it almost feels like the warm intro has become a bit of a cliche in the VC community but there's a lot of truth to it in that it helps to somewhat de-risk the proposition or de-risk this relationship. But if you take a look at what some of the other VCs are doing, well, not even other VCs, but some more creative approaches to this, Rudi, I think it's SignalFire VC in Silicon Valley, they spent about $10 million a year on their own tech platform that goes out and runs these algorithms and runs these social media programs to find the startups, right? And find the ones that might fit their thesis just based on an algorithm.

17:44 PT: I even heard about one that went so far as to say, we're gonna do a personality type screening on folks in LinkedIn and find people that may end up becoming excellent founders and invite them to an event for those thinking about starting a business. And out of the 100 people that they invited, 75 came and maybe five started businesses and I think out of four of them they invested, right? So, people are taking new and interesting approaches here, the VC business, in terms of what I've seen of it over the last few years it's cumulative. People say it's not scalable, but yeah it's cumulative, in that every single deal you do, is just another deal on top of another deal on top of another deal and that it is hard to make that, as an individual partner, scalable, you could scale a VC business but the individual partner has trouble doing that. So you look for anything you can get, in terms of saving you some time and those warm intros do help but in the longer term, even perhaps in the medium term, there's some more interesting technology plays coming to market here that I think is really gonna open up VC to a whole new approach which is gonna be fun to see.

18:54 RF: Yeah, I don't want to sound too academic or anything but if you want to end up with some sort of a rational portfolio in the end, you also need to have a rational approach to sourcing and that may mean that you need to use some AI algorithms that also obviously can have biases build into them, but you can be careful about that. Then on top of that, you would obviously have the analysts and your judgment, but to just purely rely on the referrals, I think that may not lead into the right direction in the end. You may get lucky, so you will never see it or you will not see it in the near term. But I like some of the innovative approaches that you mentioned where people also can leverage that too, they don't have to develop it in-house for themselves, some of the bigger funds they just develop it for themselves, and they have kind of an algorithm that they don't want to share, but there are others who could benefit from using that as a kind of standardized software. And then, of course, the knowledge and the experience of the partners and the team would be feeding into it.

20:03 PT: Absolutely, and just to flip it a bit if you think about those things that are perhaps coming out of the corporate world right now, people talk a lot about open innovation and I've been hearing that a lot lately. What's your opinion on that? What do you think?

20:18 RF: Well, I think it's a necessity, these days if people in corporates cannot rely on being able to develop every single product or service themselves, they need to look outside. I like the people who respect the other people's time, so if they do speak to startups, I think it's great that they engage with them but also there should be clear process and open honest communication in terms of what the corporates are looking for, what the startup is looking for, what the milestones and definitions of success are so that the people know, right? You can't have a situation where somebody just meets with the startups, makes a report out of it and entertain their bosses and in the meantime, the startups are starving and hoping that they would make some money out of this. So it's no problem if you don't do business with them, but just tell them or tell them what they should do differently and things like that. That's what I would say to the corporates.

21:21 RF: On the other hand, on the side of the startups, I think in Europe we see that startups are hoping or trying to do more of the partnership deals and take a partnership approach that's not maybe happening in the US. Some of the founders, they have already some experience, they worked in the corporates. If they don't, I would really encourage them to get an advisor or a mentor who did and that they can save them a lot of time, and prevent some miscommunication and then the things can move slowly. And lastly, I think, of course as it is with every corporate or individual, you need to see whether you're dealing with somebody that I call a believer or not. So when you are a startup, you need an advocate for your project, for that particular corporation, that advocate has to believe in you and has to have clout within an organization to push it to a resolution, whether that's positive or negative, so it's not a zombie project. So that's another thing I would say, obviously open honest communication and by the people, and driven by the people who are actually capable of doing that and they are willing to do that, and then everything can work nicely. And in terms of innovation theatre hopefully we can reduce it to the minimum.

22:47 PT: Yeah, I'm with you, I'm with you. I've been having some conversations around open innovation recently with a few corporates and the main message I give to them is you just need to be transparent and be respectful about what this really is about, right? Some of the time, it's just about branding, to be able to say to all their corporate customers that we are doing something in the startup ecosystem, that can be one. Sometimes it's about giving your executives and your middle managers an opportunity to go on a bit of a field day and go play in startup land for a day or two and then go back to their day job. Other times, it's about inspiring new and creative thought. And when you start getting to that level where you're kind of expecting startups that you're engaging with to contribute at that level to your business, you gotta get something back. So whether it's a paid pilot, whether it is levering their technology as a true customer or perhaps making some well-founded introductions for them to other corporate buyers that might be in your network, that's where it's really gotta start to go both ways. But I think there's a place for it but it just needs to be transparent and clear as to what the intentions are of both parties before you really spend too much time on it, right?

24:13 RF: Right.

24:13 PT: Cool. So when you're looking at the rest of this year, Rudi, what do you think your plans are for the remainder of 2020 given that we're at beginning of February now?

24:26 RF: Well, I have a very strong pipeline and fantastic guests in store for the podcast, but also I'm doing live events and I want to do more. The reason being is that it's great fun to do the recorded interviews, but it's a completely different experience if you do it live and in front of people. I try to do it in a small group where people actually ask questions and the topics range from Digitalization of the Art Business to AI in the Recruitment or AI in Financial Services, things like that. And I do a bit of entertainment and hopefully in June, we'll do a one year anniversary party for the Voice of FinTech podcast. And other than that, I'm trying to graduate from being a mentor to being an advisor or a board member in the startup. And ideally, an investor like yourself.

25:20 PT: Absolutely, absolutely. It's a journey that's different for everybody. And it's been three years for me, actually approaching three-and-a-half years now, in March, it'll be three-and-a-half, which is pretty crazy, but it's all about listening, is probably the biggest lesson learned that I've had over the last three years, that when you're in the corporate world, it's all about trying to get your point across. When you are doing what we're doing, Rudi, you do really have to listen, right?

25:49 RF: Right, so how was last year for you and what's in the store for you in this year or this decade?

26:00 PT: Yeah, 2019 was interesting. It was my third full year and Q4 was excellent and I built up a number of new relationships on the advisory side as well as on the non-executive director side. I'd like to try to contribute in one or the other of those two areas. It's hard to kinda do both, but what I spent a good chunk of last year doing was helping a new venture capital fund in Ireland to get off the ground, did the full 10-year projections, the portfolio construction, did the modeling, the pitch deck, the legals with the lawyers. But then I think the fundraising appetite was less than anticipated. So I stepped away from that in August but going through that experience really supercharged me to be able to hold my own as a venture partner within a VC so focusing really on one specific plan right now in that area and I will be able to share more in the future, as those discussions move along, but I have my own strong-willed ambition to participate in the upside of the companies that I have been helping and I am shifting gears so that, yes, I will still be helping companies on an advisory basis, but where I'm really gonna see the upside is through directing investment towards them and as a venture partner.

27:37 PT: So that's for this year and probably going into next year as well, and perhaps the year after, and each year, each month, each week that passes, there's new lessons learned and feel like getting stronger and stronger doing this as each day passes even. So it's just about determination, staying on the path, knowing what it is that your main target, your main ambition is, but allowing yourself to veer a little bit left-of-center or right-of-center in order to continue to have these interesting creative experiences that still form perhaps an alternate path towards your goal, but perhaps not a very straightforward path.

28:18 RF: Right, fantastic.

28:19 PT: So what do you think, just to wrap up before we get to my last question, what do you think in terms of business partners that you're targeting, who would you like to hear from?

28:36 RF: Right, so if you're in FinTech, B2B that thinks that could use some help in sales strategies or in fundraising or if you're an investor that focuses on B2B FinTech in Europe, then I would love to hear from you. Also, if you have ideas on regarding the podcast, either the themes of the speakers as well and for the live events, I've done them so far in Zurich, but I think going forward, I'll also do them in London or elsewhere in Europe. So you can email me at info@voiceoffintech.com or you can check out the website voiceoffintech.com and you will see lot more of what we've referenced here, whether that's the episodes or the events or other activities that I have and I'd love to hear from you. Thank you very much.

29:27 PT: Yeah, that'd be great, Rudi. And I'd love to get you to Ireland here, to Dublin and we could do a joint live event, that would be pretty cool, 'cause there's lots of opportunities to do that here in Ireland and it's a hungry market for that kind of...

29:39 RF: Fantastic... I'd love to do that. I've seen that you're very active on the conference or speaker circuit as well, so I'd like to do more of that as well. So, in many ways, you've been very inspirational and very positive and that's what you sometimes need when you're thinking about doing something new. You don't know how it's going to pan out and as we talked about a podcast, a year ago, you sounded so positive about it, I thought I have to give it a try and it's been a great journey since then.

30:11 PT: Yep, someone said to me, sometimes you just gotta get out there and tell the story and see what sticks. So it's so awesome to see how far you've taken this, Rudi, it's just fantastic, in only one year to see how far you've gotten, which is great.

30:29 RF: And I've been following your podcast, and I know that you always ask the guests a tough question, if not all of them are tough, right? And that's why I'd like to ask what is the one thing that people don't know about you that you'd like to share today?

30:46 PT: Well, I've shared so much about myself over the years and have been pretty transparent, but the one thing that I was thinking about that many people may not know, they might not be too surprised but that I'm quite a spiritual person. Never been very much of a religious person, but if you ask me what I believe in, I believe in the universe and I believe that there is a lot that we haven't discovered about how the universe works and I think the next 100 years and unless someone plugs in a hyperdrive into the healthcare system, I don't think I'll see the next 100 years, but hopefully see at least 40 of it, that we're just going to see such a massive change in humankind and our awareness of the universe, and I think that, just the imagination of what that might be just keeps me running, keeps me moving towards helping to create that future. So whatever it may be, but yeah, that's my deep thought for the day.

31:53 RF: And I didn't know about this, so I can concur that this is a new piece of information, right?

32:00 PT: Absolutely, absolutely, and it's just... You know what, I think it's 'cause one of the books I read recently Homo Deus by Noah Yuval Harari or the other way around, but where he really gets into where humankind is going and it gets you thinking and it's like, geez, you're right. The way things have been unfolding over the last 10 years around technology and just the human race, it's where this could end up is just completely fascinating.

32:30 RF: Yep, but let's stay positive and there should be a roaring '20s in front of us, and hopefully, we'll make the best out of it and make the world a better place than it was at the end of last year.

32:47 PT: Absolutely, absolutely. Well, let's wrap up there then, Rudi, thanks so much for coming on the show, really appreciate it and let me just give a shout out to all of the Voice of FinTech fans and I know you've been building up that base and we'll hopefully be able to either see you in Dublin sometime soon, or get down your way to make a stop through, yeah?

33:05 RF: Yeah, and thank you, Pete, and Money Never Sleeps and we'll keep in touch. Thank you so much.

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33:19 PT: That does it for this week, folks. And thanks to Rudi for opening up his mind to help us figure out why he does what he does. Links and show notes for this episode are on moneyneversleeps.ie, so check us out online. Remember if you or a colleague need help attracting or retaining great talent for your FinTech or financial services company, it is highly advisable that you build a relationship with the team at Top Tier Recruitment as they really know their stuff. You can find them at toptierrecruitment.com. Also, thanks to Conan Brophy from Create Sound for editing this podcast. As for me, I increase the odds of startup success, get in touch through the contact page on norioventures.com and you could follow Eoin on Twitter @EoinFitzgerald9. Finally, till next time thanks for listening, see you.