Founder Spotlight: Christoph Rieche, Co-Founder and CEO, iwoca

Based in London, iwoca offers credit facilities to small businesses in the UK and Germany. Christoph founded iwoca in 2011 with James Dear: they were both working in finance when they noticed how small businesses were getting left behind by big banks. So, they quit their jobs and put together a team to invent a new type of lending service using lightning-fast software: one that would give small business owners a great experience while getting the finance they need. 

Over the past decade, iwoca has grown from a small start-up to one of the fastest-growing business lenders in Europe. Now they’re a team of more than 300 in London and Frankfurt working towards the goal of funding one million small businesses.  Talis first backed the company in 2013. 

Talis’ Vasile caught up with Christoph to hear about the company’s response to the COVID crisis, how they’re supporting business owners’ mental health, and what’s next for the company. 

Vasile: Hi everyone, welcome to Talis’ Founder Spotlight Series. We’re excited to have Christoph Rieche, founder and CEO of Iwoca with us today. We’ve been on a long journey with the company, so we’re here to hear a bit about their progress over the past few years. 

It’s great to have you with us today Christoph. Could you please introduce yourself and tell us: what is Iwoca, how that journey over has transpired over the past 10 years, and what exciting things you’re working on at the moment? 

Christoph: Thank you very much Vasile for having me. So yeah, our journey started nearly 10 years ago, and I think you joined some eight years ago. So we’ve been together on a fairly long and exciting journey. The starting point of Iwoca was really that we perceived a challenge that small businesses had when accessing financing, and we felt that through a better use of technology and data, we could be solving that challenge. And we’ve been doing that over the last 10 years: we have provided more than a billion and a half pounds in funding to more than 50,000 businesses and have made a lot of progress over these years. Hopefully, we’ll continue to do so over the next few. 

Vasile: I remember our first few meetings vividly. I think this was summer 2012; I think you launched your first product in March, and the first loan had been issued that year for around £5500. By the time we invested, your whole loan book was, I think, around £600k. You were also a small team of three: you and James both coming from investment banks, you from Goldman, James, from Deutsche Bank. And now almost 10 years later, you have over 50,000 customers, from three people to 300-strong. It’s been quite a journey. 

So I think from what we’d like to discuss at this point is COVID and the pandemic: we’ve seen a lot of changes in our portfolio companies. How has the pandemic changed what Iwoca is doing now? Has anything fundamentally changed? 

Christoph: It’s been an absolutely insane year. The last 12 months have been testing us as a company: and, of course, our customer SMEs who have really been in the epicentre of this pandemic, as well as James  and myself as leaders of the company. In Q2 [2020], when the first lockdown hit, every small business was affected and were looking for support from us, which we’ve provided, by giving them all the help we could in understanding the fast-changing environment around them. Then we got very quickly accredited by the Government support scheme. We’ve been helping businesses over the last [twelve] months in accessing very vital financing through this programme: [as of April] we have about a 10% market share in the UK of CBILS, which has been a really fantastic feeling to be able to provide that vital liquidity. Kudos to the Iwoca team that have been rolling out this new product for us in an absolute record time and scaling it very, very quickly. It’s been all around a winner. 

You asked me what changed fundamentally, and to some extent, everything has changed. And to another extent, nothing changed at all. You know, we’re there for small businesses, we help them access financing. And last year, everything was just turned upside down and we had to adapt very quickly to what was, and still is, a very challenging situation. 

Vasile: I think when we invested I remember vividly, I think you were targeting online retailers at the time, and then later added offline businesses. Iwoca has developed over this period of time, utilising automated lending as solutions, and using various machine learning models to automatically assess businesses based on the data taken from eBay, Amazon, Sage Pay. There’s lots of things happening, we’ve seen you launch the new product, Iwoca pay. So, what is the vision for Iwoca, if you look 5-10 years ahead? 

Christoph: I think there are a few building blocks, as you’ve alluded to. One part, to a large extent, that we have solved was making that experience that a small business goes through when applying for financing as easy as possible. And the consumer experience is that it’s 100% automated. Small businesses are just a more complex entity than an individual. 

Therefore, there are a lot more hurdles that are related to it, which we have to a large extent solved, and so we are able to make automated decisions and provide the fully self-serve experience to a vast majority of businesses that are coming to us when they are applying for finance. That’s been a huge achievement and has been a massive investment in the infrastructure that we have built. SME lending, at its core, is really a hardcore infrastructure play. I feel that with the investment that we’ve made over all of these years, we’re leading on that front, certainly in Europe. 

The other building block is something that we’ve been investing in quite a bit for the last five years is understanding where small businesses access financing.  In the past, you would go to a bank, and you know, even further in the past, you’d go to your bank branch, and you would ask for financing. So, you have identified the need for finance. And then you’d be thinking about, you know, how can I now get to financing: your first thought would have been I’ll go to a bank. But I think that’s not how SME lending will be in the future. And we’ve been investing in enabling financing through many different platforms over the last few years. So our product vision is very much to bring financing to more businesses when and where they need it. And that’s why, through our embedded financing capabilities, we’re now reaching 1.8 million businesses directly with integrations via third parties.  

These third parties might be neobanks that would like to offer a digital experience to their customers; it might be bookkeeping; or software companies that have become a very important cockpit for businesses. Or it, it might be directly at the transaction level where a small businesses is buying something and would like to have financing directly related to this to this transaction. And I think that that is the future of SME finance. The direct analogy is in the consumer space, you know, people go to Vodafone to buy a phone, but once they have selected the phone, they’re not going to Barclays to get a loan and then go back to the shop to buy the phone. I think more than 60% of all consumers would be entering a longer-term contract and would get the device as part of their contract, and they would be choosing the device and the amount of data that they would like to have.  

It just goes a long way back, seeing how embedded finance in the consumer space has really enabled a lot of the growth that we have seen in smartphones over the last 10 years. That’s what we do. You know, this second big building block is really changing the way the landscape of how liquidity is added into the SME ecosystem. 

You mentioned that we launched Iwoca pay last year, which is a checkout for businesses that are issuing invoices to their customers. By the way, invoice is still the dominant way of how businesses are getting paid, as you know, most of them would deal either B2B or would have invoices that are for higher amounts. And those are typically not dealt with card payments. The invoice checkout that we have built enables their customers to make an immediate digital bank transfer in two clicks. And that is based on open banking technology, or it would give them the option to split that payment into a number of installments. We have developed that both for SMEs as well as for consumers as the ultimate buyers, which makes it really unique in the market. But if you think of it conceptually, it’s really bang-on the strategy of embedded finance, because we’re embedding financing into every single invoice that our customers that are using this checkout product, who can then offer it to their customers when buying services of goods from them. And I think that’s going to be one of the most exciting themes in in SME lending.  

Vasile: I mean, we are also very excited about Iwoca pay, and I’m sure it will be huge success. 

Christoph: It already is, Vasile! 

Vasile: I think we all expect this to go all the way up. I think as we know that a lot of our viewers – other entrepreneurs, founders – by watching these type of videos, they’re looking for advice… 

So, we want to maybe to ask a few questions on the leadership side and talk about your team. Hiring is normally one of the biggest challenges. Finding the talent can be tough, maybe with the current situation, even harder. You managed to scale, not just from three to 300, but also internationally. So, what qualities do you look for in people who come to work for Iwoca? 

Christoph: We are looking for, first of all, people who are smart. And that sounds maybe a bit obvious, but smart can mean many things. It also depends on the type of role, of course, but there’s a smartness to every role. That means that we like people who are asking questions, we like people who are curious, we like people who think first and then then speak. We have sort of a general “smart” test. Then, we’re looking for people who are humble. We’re not a sales-driven organisation. We see ourselves as a tech organisation, and we feel that there’s a certain humbleness to a tech organisation. And that’s seen in being a team player and thinking of the best possible solutions that we can apply. There’s a certain attitude towards it: we don’t want people that are shiny, or that are looking for a quick win. And that’s an important characteristic that we’re looking for in people. We’re looking at people that are passionate for something in life and that are totally passionate about everything that we do. Having a certain attitude to life that makes them want to do a good job. To be passionate about the quality of work that they deliver. More passionate about, generally, the work that they do, and see a little bit more in work maybe than others would. And then, finally, we want to hire people who have a growth mindset. Who want to excel themselves, who want to progress in their careers. And I think all of these characteristics together, if you look at how we’ve grown over the last 12 months, is also giving us a certain resilience that people have been really giving their everything in what’s been an exceptionally challenging period for us as a company, as it was exceptionally challenging for our customers. So clearly, we have felt a lot of the pain that they’ve been going through. But if I take these characteristics together, they really, I think, helped us to respond to the crisis in the way that we have done. 

Vasile: Coming to response to the COVID crisis, we’ve noticed that you’ve launched mental health initiative to support SME owners. What inspired this project? Are you doing this also for Iwoca employees as well? 

Christoph: Mental health is something that is increasingly recognised as a really important issue. And I think it was first Prime Minister May who actually made this a government policy to support mental health, showing  how important it is for us as a society. In the business owner space, we’ve realised that there wasn’t any programme available where business owners would get support. We felt business owners in particular are probably some of the most stressed people in society because it’s just so much responsibility that lays on their shoulders: from managing all aspects of their business, sales, to financing the operations, as well as staff, and of course, their families. We have done research in partnership with mental health UK, which showed that business owners were among the most affected by the pandemic from a mental health perspective. We partnered up with them to design a programme, which is really for them, to give them both information from a more digital perspective, but also going further to give them actual group or one-on-one support. I think that’s something we take very seriously and have made one of our main priorities.  

From a team perspective, we’ve seen that there was a lot of pressure over the last 12 months. People were very stressed about work, because the workload at times became excessive: in some parts, mentally straining. And then of course, some more than others found themselves quite anxious about the impact of the lockdowns and restrictions on their personal lives. We’ve seen an increase in people who are looking for support. We have a people support team, which is about a handful of people that are there to only look after the well-being of our staff. We could see how much more in demand they were in this period. In some instances, they weren’t necessarily qualified to deal with all of the problems that some individuals might be facing. For our staff, we integrated a mental health service provider into Slack called Spill. Through that partner, any Iwocan can within two clicks get a session with a trained mental health expert. We felt we wanted to reduce any form of friction that would be related to asking for mental health support. When getting a business loan, there’s just so much friction that you end up not getting any financing. And I think it’s the same for mental health, there’s so much friction in getting actual professional support. And, you know, who would you ask? Because you already find it difficult to speak to your friends and family, or colleagues, about it. Who then do you ask? It’s just not trivial. So, we made it really trivial in getting access to professional support. I think it has been very welcome in the team and helped us a lot. 

Vasile: That’s great. We do like this type of initiative: Talis is providing some support to our founders from a mental health perspective as well. 

Christoph: Yes, you have done a fantastic job by giving that support to founders and running workshops. I think you’ve been really standing out of the investor crowd – so thank you. 

Vasile: So, what we wanted to understand next is: how does your typical morning routine start? How does the working day look for you, and how do you ensure that you manage your time efficiently and successfully: any hacks, tricks? 

Christoph: I’m quite lucky in sleeping quite well. So that’s the first thing. I think sleep is incredibly important. And if you go regularly to bed at the same time, and get up at the same time – and if you get enough sleep – that’s giving you a lot of energy the next day. When I’m not doing that, my energy level is dropping, and my productivity is dropping. I think the best kind of routine you can have is sleeping well, and having that sort of routine to give you that extra punch. Living healthy, I think, is also important. I could probably do better on that front sometimes. It’s these two things keeping me energised. That’s the first bit for anyone who is having a lot of stress. 

Vasile: We also noticed that founders notoriously find it hard to switch off from work. So, can you and how do you unwind? Do you have any other ways of switching it off? I know, you’ve been busy both on work, and you have a large family. So, I’m just interested in how you’re coping with that. 

Christoph: Not well. Switching off, it’s just very difficult. Even when you switch off, you still think about the business. It’s just really, really difficult to entirely switch off. The moments where I think you can really switch off is when you’re somewhere on a sailing boat and have no network, and you’ve just gone and look at the sea. That’s when I remember the really true periods where I switched off. 

Vasile: I think you’re one of the rare startups where both co-founders after 10 years are together. Are there any secrets or insights you can share on how you manage to stay together for that long, and actually keep growing together while keeping that culture in the business? 

Christoph: Yeah, it’s a good point. I do think we are a strong team; we’re also very complimentary to each other. I’m more the optimist, James is more the pessimist. James is keeping everyone grounded at all times. And I think that works quite well. For us, I think that’s the secret. This very complimentary way of looking at the world while having a good foundation of values that we share. Both of us have also continued to develop ourselves. We’re not the same people that we were 10 years, both of us have been learning a tremendous amount, growing with the business, and we still do. Both of us are trying to be as good as we can be.  

It’s a like being in a relationship. Not every day is rosy. Sometimes you need to stick together, even when times are testing. I think that’s what people who have been married for decades would probably tell you. It’s a commitment you make to each other, constantly developing and growing. That’s something that really continued to make us a good team. 

Vasile: Christoph, really appreciate your time. I know you’ve been super busy, but finding time to share your views and insights on the business, we really appreciate it. 

Christoph: You’re welcome. And thank you for your support: let’s have a few more years together! 

Vasile: Look forward to it!