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03 _ State-of-the-Tech From the noble stock market to the new-fangled smartphone
04 _ Work in Progress Smava – A marketplace for peer-to-peer lending
08 _ Panorama Established players and newcomers make for strange bedfellows
10 _ Done Deal Interhyp – Comparing mortgage rates per mouse-click
16 _Vision Futurist Paul Saffo on the future of money, banks and credit cards
18 _ Up Close and Personal Earlybird Managing Partner Christian Nagel
The Partners of Earlybird (from left to right): Wolfgang Seibold, Hendrik Brandis,
Christian Nagel, Roland Manger, Rolf Mathies, Thom Rasche
“Welcome to the EARLYBIRD Magazine.
We want to share our insights in technology segments
relevant to our industry such as Internet-based services, communications,
cleantech, medtech and others. This first issue is on Financial Services.”
welcome | content
We’reapproaching a rather obscure anniversary. Six hundred years
ago, in 1409, the first stock exchange was opened. It was the brainchild of
Robert van der Beurse, a citizen of Bruges who had seen merchants from
many parts of Europe doing business in his cosmopolitan city. He observed
in transporting their goods.A traditional market could not solve these prob-
lems, so he thought of a different way. He invited a group of merchants to
his house – to do trade without bringing their goods or their money.
In those days, the concept of dealing with commodities that were
miles away and letting an independent third person fix exchange rates left
many uneasy. It was simply too…virtual. Today, our tech-savvy financial
industry is many orbits further away from “reality”– and we have experi-
enced both the highs and lows of such detachment. But technology has not
yet liberated consumers in the way I’d hoped. On the contrary, the finan-
cial crisis of 2008 has shown that the system is still dictated by an exclusive
club of players – ratings agencies, hedge funds, insurance and mortgage
companies and, most notably, big banks.
I have never been a friend of big banks. As a student in Hamburg in
the early 1980s, I scouted banks to see where I should open an account. But
instead of welcoming me as a customer with a set of services, they all let me
feel that they were the ones doing me a favour. I thought this would change
once I was working and had regular income. It didn’t. Even when I started
buying companies and wanted to partly finance them on loans, I felt treated
as a solicitant, just on a different level. I thought this was odd – and a clear
indication that traditional banks had lost the sense of their original purpose:
serving people who trust money to them, and others who need money and
who are trustworthy.
This lack of consumer orientation has been a huge business oppor-
tunity for new players. Many industries have already been transformed by
newcomers using the Internet. The fact that finance has become entirely vir-
tual means that newcomers in this sector do not have to bother with phys-
ical infrastructure. They just have to work fast and hard enough to reach
economies of scale. A company that has managed this in a most impressive
way is Interhyp, an online mortgage broker. It was one of the best invest-
ments Earlybird has ever made (pp. 10-15). We see equal potential with our
investment in Smava, a peer-to-peer lending portal (pp. 4-7).
Thanks to increased transparency and competition, new players in
the mortgage and lending sectors are upping the ante on the old. Some of
the traditional players were fast enough to enter voluntary alliances with the
new kids on the block, some were later forced to link arms (pp. 8-9).
sion in this respect (p. 16-17). Once cyber finance goes mobile, smartphones
will become the most powerful tools in consumers’ everyday lives – and
that will be really exciting for financial entrepreneurs.
new players in
upping the ante
on the old.”
Of Stock Markets and Smartphones
“STATE-OF-THE-TECH” | editorial
Eckart Vierkant remembers that life-changing
phone call from his old college friend,AlexanderArtopé. It was
inApril 2005. “One dayAlex called me at home and asked what
I thought of the idea of social lending,” he remembers. “My in-
itial response was: ‘In Germany? With Germans? No way!’”
Despite his initial skepticism, he immediately sat down and
looked at established peer-to-peer lending sites on the Internet.
Within an hour, he calledArtopé back, telling his friend: “I like
the business model.” A few months later, he left his job at a
British healthcare company in Wolfsburg and moved to Berlin.
Artopé had considered a social lending venture long be-
fore starting Smava, but had decided to bide his time. “Around
2003, Germany had seen something of a renaissance in online
marketplaces,” he said. “But at that point I felt that there would
be too much of a problem with consumer acceptance. We al-
so realised that you need an entire eco-system built around it,
including a credit scorer, some kind of payment system and a
Not to mention a bank licence. After shopping around
for a bank that could solve a number of these problems by act-
ing as a middleman, Artopé and Vierkant partnered with the
Bank für Investments und Wertpapiere (BIW), and drummed
up enough institutional investment to launch the site in March
2007. Using a PR agency to help put the company on the map,
they compensated for a lack of an advertising budget by boost-
ing brand recognition with as many media appearances as pos-
sible. Eighteen months on, Smava numbers 25 employees and
has facilitated a total loan volume of €5 million.
The company’s sprawling but scruffy office crammed
with workstations is tucked away on the fourth floor of a court-
yard tenement block in the Berlin district of Mitte. With its
faded grey carpets, functional furniture and untidy kitchen, the
look is wholly in keeping with the fabled Silicon Valley geek
house. CEO Artopé acknowledges the Californian influence.
With his blue eyes, carefully parted hair and preppy roll neck,
he bears a striking resemblance to James Spader in the 1987
movie “Wall Street” – a film that reflected the ethos of its era.
But at 39, Artopé is too young to have been a Wall Street yup-
pie in the cut-throat me-decade, and instead came of profes-
sional age in the comparative Garden of Eden that was Silicon
Valley before the dot com bubble burst.
It was here that he was first bitten by the start-up bug.
“It was a very innocent time,” he said. “So much made an im-
pression on me. I met Tim Koogle, then president and CEO of
Yahoo. I saw a talk by Marc Andreessen, co-founder of Net-
scape Communications Corporation.They were sitting in these
tiny offices talking about conquering the world, and initially, I
just thought they were crazy. But then I saw that you need to
Born: Sept. 12, 1969
Family Status: Long-term relationship
Education: Business Administration
(Ludwig Maximilians University, Munich),
M.A. in Communication Science
(Free University Berlin)
Brother, Can You Spare a Dime?
The US has Prosper, the UK has Zopa – and now Germany has Smava.
A Web-based marketplace founded by college palsAlexanderArtopé
and EckartVierkant, it allows people to sidestep banks and instead
borrow and lend money directly from each other.
Car: Audi A3
Favourite Entrepreneur - Alive:
Favourite Entrepreneur - All Time:
Andreas von Bechtolsheim
by Jane Paulick
Smava founders Alexander
Artopé (left) and Eckart Vierkant
(right) are confident that social
lending platforms will soon be
giving traditional banks a run for
CASE STUDY | SMAVA
have this kind of conviction. The two lessons I learned in Sili-
con Valley were: you can do whatever you want and, whatever
it is you do, you have to do it with passion.”
He andVierkant are passionate about Smava’s mission,
which they describe as nothing less than democratising the
lending process. As an online marketplace for money, Sma-
va matches people who have money with people who need it
– for anything from a divorce to therapeutic riding lessons for
a sick daughter. The company simply runs a credit and identi-
ty check on the users, and leave the marketplace to decide the
rest. “We don’t make the credit decision, and we don’t set the
interest rate,” saidArtopé. “We just present the data in the loan
listing. We provide people with the tools, and they do the rest
themselves. All we do is control
access to the marketplace.”
What makes Smava more
efficient than banks is its ability
to offer transparency. “With nor-
mal banks, it’s not clear why peo-
ple do or do not get loans,” said
Artopé. “But we tell them exact-
ly why we’re not admitting them
to the marketplace. With us, peo-
ple can see exactly what the price
of their loan is. Basically, we can
behave like a bank without being
Ideally, borrowers will also
pay less interest than they would
with a bank, while the lenders can
enjoy healthier returns. But the
prospect of cold, hard cash isn’t
the only motivation. “If you ask
people why they come to Smava, on the one hand they will say
it is because they get good interest rates,” saidArtopé. “But it is
also because they like the feeling that they are self-empowered.
Smava democratises the lending process.” Right now, Smava
boasts some 30,000 members and oversees around €600,000 of
loans per month. The company takes a cut of 1 percent of the
credit sum, and in case a borrower defaults – which happens in
roughly 2.5 percent of cases – it sells on the debt to a collector.
Lenders can invest up to €25,000 in a single project and
decide themselves which projects appeal to them – and therein
lies Smava’s chief strength.Artopé says that what primarily at-
tracts members is the fact that loans are secured against people
rather than financial institutions, allowing for optimal trans-
parency. “People really like the idea of investing into single
loan listings,” he explains. “It puts you as a lender in the driv-
ing seat, and people love the idea that they can decide who to
give their money to. That’s what we call the social return ele-
ment. People can invest in projects that are important to them,
they can change someone’s life – and that’s very gratifying.”
Antje Stobbe from Deutsche Bank Research agrees.
“These lending sites are a product of the Web 2.0 wave and rep-
resent a specialised business model which allows people to con-
tact others directly when they want to request or fund loans,”
she said. “The motivation to join this kind of lending platform is
often very personal – lenders want to know who they are lend-
ing their money to and for what purpose.” That’s exactly what
attracted lender Benjamin Herz, 29. “What appeals most is the
peer–to-peer factor – helping others and at the same time en-
joying a considerably better return than offered by a normal in-
vestment account,” he said. “At the
moment I am looking at an average
return of 9.4 percent, but I also like
the fact I can choose who gets my
money, and support projects I con-
The growing popularity of
Smava and its US and UK prede-
cessors Prosper and Zopa also re-
flects an emergence of consum-
ers characterised by self-reliance
who have given up trusting insti-
tutions, particularly in light of the
current lending crisis. “There are
distinctly differing groups using
these sites,” said Professor Michael
Hulme from Lancaster University
in the UK, author of a 2006 study
on Internet based social lending.
“Some (groups) are intellectually
disaffected with large banks, and there is therefore a degree
of idealism. Others see investment in social networks as part
of the broader investment portfolio. Others might struggle to
get loans through more conventional sources.” Smava is well
aware that one of its strengths is that it caters to demograph-
ic groups that tend to be disadvantaged by normal banks, such
as retirees and the self-employed – as well as people in tran-
sitional phases of their lives who fail to meet the standard cri-
teria for loan approval. “In November/December 2007 I was
looking for a bank loan,” said borrower Friedrich Niemann,
54. “My current job had only begun in August that year, so I
was still in a probationary period. Moreover, the company I
was working for was a branch of a Dutch firm and was not al-
lowed to operate independently. My car had broken down, and
I needed it for work. But no bank was willing to give me a loan
to repair it. I started looking for ways of finding a loan on the
Born: March 19, 1972
Family Status: Married, one child
Education: Business Administration
(Free University Berlin)
Car: BMW, 3-Series
Favourite Entrepreneur - Alive:
Favourite Entrepreneur - All Time:
Werner von Siemens
Smava lenders can make use of many different tools to
find out about borrowers before investing their cash.
“Smava is an
risks. I think
How much did Earlybird invest in
Christian Nagel: We initially
invested €3 million, and we invested
another €2 million in a second insti-
tutional round of financing that was
closed in September of 2008.
Skeptics think social lending sites like
Smava will only ever remain a niche
market.You obviously think otherwise.
Nagel: If we’d thought it would only
remain a niche market, we would nev-
er have invested in it. We believe it’s
an efficient platform that has the po-
tential to change the banking industry.
Will current developments on the mar-
kets affect Smava’s performance?
Nagel: The whole banking industry
is re-grouping. Smava might profit if
banks start to get more risk-averse,
and they probably will.
What is your vision for Smava?
Nagel: Right now, the platform is
driven by private people and the “so-
cial” aspect, but I think this will
change. Smava is an ideal vehicle to
show credit needs and their risks, so
I think institutional investors, such as
asset managers, will soon discover it
and act as lenders.
Smava’s revenues in 2008 are some-
where around €50,000 – is this in line
with its business plan?
Nagel: We revised the business plan
at the end of 2007, but this had noth-
ing to do with bad performance. We
wanted to have clarity on regulatory
approval and so we curbed the origi-
nal expansion plan. The company is in
line with the revised plan.
When do you expect Smava to break
Nagel: We foresee this happening in
the last quarter of 2009.
Internet, and ended up on the Smava site. Once my loan appli-
cation was online, it took just six hours before I had obtained a
loan for the full amount, at a very reasonable rate of 12.5 per-
cent. At a bank, I would be paying closer to 13.9 percent.”
But, as Artopé says, money is a cultural issue. So how
exactly did he and his team persuade Germans to overcome
their natural caution? “It helped a lot that Stiftung Waren-
test (a consumer ratings service) gave us a good review one
month after we came on the market, because that gave prima-
rily borrowers the sense that Smava was a trustworthy place to
go, and surprisingly, they were ones that needed most reassur-
ance,” said Artopé. “Germans hate risk, that’s why they spend
so much money on insurances. We knew we had to structure
preferences in a way that the risk would be calculable and par-
ticularly, automatically calculable.”
Smava therefore slots borrowers into six risk catego-
ries, while lenders can reduce risk by joining pools. By sharing
it between the lenders, no single party bears the full credit risk
of a single counterparty. “Still, we knew we had to create an
additional layer of trust in the marketplace,” said Artopé. “So
we allow users to find out more about prospective contracts by
using Smava’s messaging system, we post user histories and
there is a lot of information circulating in threads in the Smava
forum. The marketplace can control itself.”
“I look carefully at the borrower’s credit score; I see
how old he or she is; I study the project and how it is presented
and even take spelling into consideration,” said lender Herz.
“Any questions I have are always answered promptly, either by
e-mail or by phone. You find out whatever you need to know
in the forum, where users discuss Smava in general as well as
specific projects. Investors and fans provide a lot of tools that
take much of the work away from amateurs like me.”
Smava is growing by 10-15 percent per month, and its
expansion to Poland is already well underway. And although
Artopé takes a modest view towards expansion, saying he
would be happy to operate in just two countries, he admits that
he sees interesting prospects in Russia.
It is still early days, but he thinks social lending will
soon be giving traditional banking a run for its money. A re-
port by the Gartner information technology research and advi-
sory company earlier this year appears to back him up, predict-
ing that by 2010, social-banking platforms will have captured
10 percent of the available global market for retail lending. “I
knew I could create a marketplace which is more valuable to
consumers than the existing banking industry – and that’s what
gets me out of bed in the morning,” he said. “We believed that
if we could create a safe, fair and efficient marketplace, then
our site could become as big as Ebay. We’re pretty confident
this will happen.”
CASE STUDY | SMAVA
Just a decade ago, most people looking for a
loan would have gone directly to their high street banks. Since
then, their options have expanded enormously thanks to tech-
nological developments, financial deregulation and the rise of
new players, who sometimes even end up working in tandem
with the competition. Over the last few years, online mortgage
brokers have been popping up everywhere. France has Meuil-
leurtaux, Italy has Mutuionline, the United States has E-loan
– and Germany has Interhyp, the country’s leading Web-based
mortgage broker. These companies allow consumers to com-
pare scores of offers before applying for the most suitable one.
This is clearly good news for the man and woman on
the street. But as Interhyp founder Robert Haselsteiner says,
banks have found the development to be something of a dou-
ble- edged sword. “Traditional banks understand that the Inter-
net has brought a new dimension of transparency to the mar-
ket and that they have to react,” Haselsteiner said. “In the case
of mortgage brokerage, they know that if it wasn’t Interhyp, it
would be somebody else.”
While some banks are being pushed into forging new
partnerships, others are jumping. On the upside, partnerships
with large online brokers can guarantee certain volumes of
business as well as lower office overheads. In the face of in-
creased cross-border competition in the financial sector, banks
have been actively looking for intermediaries to help them to
better vertically penetrate the market, according to Alexander
Grous of the London School of Economics. He says newcom-
ers often have the agility and the vision more traditional insti-
tutions lack. “When it comes to the Internet, the banks haven’t
been moving forward in quantum leaps,” said Grous. “The de-
velopment has been more evolutionary. In principle, banks
tend to be more cautious and less entrepreneurial. Entrepre-
neurs have stepped in and bridged this gap.”
Volker Breuer, the founder of pre-paid credit card com-
pany Payango, is one of them. His credit cards are designed to
appeal to the Net Generation, allowing young people aged 12
and up to pay for their own online purchases without the risk
of getting into debt.
The 32-year-old entrepreneur acknowledges that there
can be a potential conflict of interest between traditional banks
and new start-ups like his own. Germany’s Landesbank Berlin
and Dresdner Bank, for example, both offer their own prepaid
credit cards targeted at the youth market. “To some extent, we
represent a form of competition, but we also help the banks,”
Breuer said. “We do things that they can’t. They find it very
difficult to authentically address young people.”
After a six-month search, Payango teamed up with the
southern German Baden-Württembergische Bank. It’s a clear
win-win situation, according to both parties. Payango needed
a bank to act as the card issuer, and the regional bank was look-
ing for opportunities to expand its activities Germany-wide.
“We bring our know-how in the pre-paid card business to the
partnership, and they put their enthusiasm and their heart and
soul into it,” said Eric Bayer, head of product management of
accounts and cards at BW-Bank.
While these two partners might be able to envisage a
future of happily growing old together, peer-to-peer lending
platforms and banks make for slightly more uncomfortable
Hooking Up With the
New Kids on the Block
Financial newcomers have much to offer
traditional banks willing to embrace change.
The mortgage busi-
ness has its roots in
ancient Rome, where
modes were developed.
Banking was frowned
upon and money lenders
were held in contempt.
It was tulips that caused
the first crash on a
stock exchange in
1637 in Amsterdam after
contract prices for the
bulbs reached extraor-
dinarily high levels and
then suddenly collapsed.
The first public share
issued in Germany was
for Dillinger Hütte steel
in 1809. The oldest
known share certificate
(1288) was issued for
Swedish mining com-
pany Stora Kopparberg.
From the much-
loathed bankers of
ancient Rome to
the savvy smart-
phone owners of
today – through-
out the history of
have played a key
role in shaping the
way people interact
in the US such as
General Motors and
Ford kickstarted the car
loan industry in 1919 by
becoming the first non-
bank financing sources
for automobile loans.
Financial Transactions – Yesterday, Today, Tomorrow
The Minitel, launched
in 1982 in France, was a
precursor to the Internet.
People could make pur-
chases, search phone
directories and have
virtual chats, all from the
comfort of their homes.
Pizza Hut was the first
national food chain to
in 1994. It started with
a test delivery service at
one restaurant in Santa
Cruz, CA, and the rest,
as they say, is history.
An online auction de-
termined the initial share
price of search engine
giant Google when the
company went public in
2004, circumventing the
order books traditionally
used during an IPO.
The Automated Teller
Machine (ATM) was
the first way to get
money from a bank
without having to go to
a cashier. The first ATM
was installed in 1967 in
London by Barclays.
bedfellows. By enabling ordinary people to lend money to oth-
er individuals directly over the Internet, Web sites such as Ger-
many’s Smava and the UK’s Zopa pose a considerable chal-
lenge to the banks’role as the traditional middleman.
It comes as something of a suprise, then, to see that here,
too, banks have been enabling newcomers to gain a foothold in
the market. In Germany, for example, Smava needed to secure
a partnership to avoid the protracted and prohibitively expen-
sive business of securing a banking license. While his proposi-
tion frightened off more conservative suitors, company found-
er Alexander Atropé finally hooked up with BIW, a bank based
close to the western German city of Düsseldorf. “In principle,
it wasn’t all that difficult to find banks willing to partner with
us,” Atropé said. “Obviously not the big universal banks with
strong branch networks, but others. The real problem emerged
when we told them that we wanted to connect to their banking
system. If you talk to a high-ranking manager of a bank about
touching their system, they usually respond by saying they
would rather kill you than allow that. Once, I mentioned this in
Mobile financial transac-
tions via smartphones
and similar devices are
often seen as the future
of financial transactions,
with some experts even
predicting the dawn of a
a phone conversation and the immediate reaction was, ‘Never!
Never!’The call was over in less than three minutes.”
British leaders Zopa UK also encountered a degree
of resistance when looking to strike up a partnership. Unlike
in Germany, the activities of P2P platforms in the UK do not
have to be underpinned by a banking license, but the company
does need a third party to hold its lenders’funds. “A number of
banks who shall remain nameless did take the attitude, ‘Why
should we cut off our noses to spite our faces’,” said Zopa
UK’s Managing Director GilesAndrews. “But banks are inter-
ested in large money movements. That’s what they make their
money from. Rather than worry about what kind of competi-
tion we might represent in the future, the Royal Bank of Scot-
land decided that it would rather profit from those transactions
now,” he added.
When it comes to fresh talent, some banks at least are
clearly open to offers – particularly in niche markets. Social
lending has been a fast-growing market over the last three
years, but the market remains tiny, for the time being at least.
Zopa UK has 220,000 members in the UK and has lent GBP 27
million to some 6,500 people. Smava has around 30,000 mem-
bers and facilitated a loan volume of €1.4 million in the last
three months, with a growth rate of 40 per cent per quarter.
“The P2P platforms are taking a chunk out of a very
specific market,” said the London School of Economics’Alex-
ander Grous. “Mainly it is people looking to borrow in the re-
gion of GBP 5,000 - GBP 10,000. The big banks are still stand-
ing at the top of the tree looking down far below.”
by julie gregson
Finding good partners is one challenge many new players face,
understanding the regulatory environment another. While P2P
lender Smava faced hardly any regulatory hurdles in Poland, the
company spent a long time in Germany making sure that the fi-
nancial watchdog BaFin would not object to the site. In the USA,
P2P lenders Prosper and Lending Club had to temporarily stop
their operations in 2008 after it emerged that their loan notes
were regarded as securities and, thus, had to be registered with
the regulatory body SEC. Prosper even had to pay a $1m fine.
Race to Success While some online banks and
brokers are already established players and many
insurance or mortgage portals are experiencing strong
growth, there is a long list of new players that are in
the starting blocks or have just begun to operate.
Their activities range from P2P lending (Zopa, Smava)
and micro-financing (Kiva, Finca, Microplace) to por-
tals for money management (Mint, Rudder, Geezeo) or
investment clubs (Updown, Betterinvesting).
OVERVIEW | Partnerships, regulation, history
Born: January 28, 1971
Family Status: married, two children
Education: International Relations
(Brown University, Providence)
Car: Porsche 356, Audi A6 Allroad
Favourite Entrepreneur - Alive:
Favourite Entrepreneur - All Time:
Ferdinand “Ferry” Porsche
Born: April 7, 1962
Family Status: married
Education: Business Administration
(University of Economics, Vienna)
Watch: Omega Seamaster (in orange
and black, Interhyp’s corporate colors, yet
not custom made)
Car: Audi A6 Allroad
Favorite Entrepreneur - Alive:
Favorite Entrepreneur - All Time:
John Pierpont (J.P.) Morgan
by Thomas Clark
Full Speed Ahead
The road was strewn with obstacles, but
Interhyp’s founders expertly navigated
them, driven by their aim of transforming
the German mortgage market.
CASE STUDY | INTERHYP
exclusively via the
Web. But, recogni-
sing that many people
still need a “human
touch,” the company
now has 17 branch
offices where custo-
mers can discuss their
In its first year, Inter-
hyp brokered just
over 1,000 contracts.
By 2007, this number
had skyrocketed to
well over 38,000
€ -5.74m / € 0.6m
€ -2.69m / € 2.0m
€ -0.76m / € 4.8m
€ 0.16m / € 8.7m
€ 1.9m / € 16.6m
€ 12.93m / € 39.4m
€ 22.41m / € 60.1m
€ 28.47m / € 75.4m
The company took
less than three years
to break even, starting
with a profit margin of 2
percent. Four years on,
it reached an impressive
margin of 38 percent.
Robert Haselsteiner had just finished his pres-
entation, confident that his audience would sign a partner-
ship agreement – an agreement urgently needed in order to
launch an online mortgage broker that would allow home buy-
ers to compare offers. Without sufficient offers from mortgage
banks, of course, there wouldn’t be much to broker. And giv-
en his investor’s stipulation that the further flow of money for
the venture depended on at least 10 banks joining the platform,
time was short, pressure high.
Haselsteiner was working hard on acquisitions. When
he was invited by RheinHyp to come to their headquarters in
Frankfurt, he was hopeful, mainly because a board member
had said he would attend. During the presentation, his hope
seemed justified. The group was interested and asked lots
of questions. “I was sitting there, discussing details with the
board member,” remembers Haselsteiner, “when suddenly he
said, ‘We like that model but unfortunately we can’t work with
you, because we have decided to launch our own service called
ExtraHyp. So we are actually competitors.’” Ouch!
A few weeks later, Haselsteiner and his partner, Mar-
cus Wolsdorf, were invited to have lunch with the new Euro-
pean head of E-Loan, Mirko Siepmann. E-Loan was the com-
pany that had pioneered the idea of online mortgage brokering
in the United States and built up an impressive track record
– both in terms of snapping up market share from traditional
players and venture capital from investors. Laden with success
and money, the company was looking to expand to Europe.
Dining at Munich’s upscale Mövenpick restaurant
(now Lutter Wegner), Siepmann wasted no time on verbal
diplomacy. Instead, he presented a threat couched in a seem-
ingly nice offer. “He told us that E-Loan would come to Ger-
many and that we wouldn’t have the slightest chance against
them,” recalls Wolsdorf. “He then said that we had the unique
opportunity to get 2 percent of the German subsidiary if we
joined forces.” Wolsdorf knew that E-Loan had a budget of
$100 million to set up the venture. At the time, Interhyp had
secured just DM8 million, roughly $3.5 million. Ouch again!
Both episodes happened in autumn 1999, a few months
before Interhyp’s Web site was launched. A pullback then
would have been possible – and some might have argued that
it would have been wise, given the dark clouds forming over
the fledgling startup. But bailing out was not an option for Ha-
selsteiner and Wolsdorf. Molded by the tough turf of Goldman
Sachs, they were determined there’d be no going back. But
they realised that in an environment where at least four com-
petitors were vying to establish the same service, they had to
act fast, very fast.
Visiting their headquarters in Munich, one can still
sense the speed that drove the company right from the outset.
The receptionist knows immediately who we are, and with-
in seconds passes us on to a colleague who quickly leads us to
a conference room where, minutes later, a spokesperson reels
off some background info as if he were trying to improve his
words per minute score. Consequently, when Robert Hasel-
steiner enters the conference room, one is tempted to fire off a
slew of questions in the fear that he might suddenly disappear
to another meeting. Surprisingly though, Haselsteiner con-
veys an aura of calm. He has an unhurried conversational style
which has much to do with the fact that he comes fromAustria,
where people generally take their time, and instill melody in-
to their sentences.
In relating the story of Interhyp, it emerges that the two
partners’ personal styles complement each other. This is re-
flected in the way they decided to split tasks. Haselsteiner is re-
sponsible for marketing and personnel, and is the liaison to the
outside world. Wolsdorf deals with IT and finance and took the
role of internal master. “Marcus would say that if this were a
car race, he would be the engineer and I would be the one driv-
ing the car,” Haselsteiner says. Wolsdorf later confirms that
statement. The racing team analogy aptly describes not just the
delegation of tasks, but the whole Interhyp story – from build-
ing the vehicle to waving the start flag on the race itself.
Drivers, rev your engines
Haselsteiner was brought up inAustria in the 1970s and
80s, in a society that was both stable and stagnant. Wolsdorf,
born in Germany, got to experience life on the other side of the
Atlantic from the age of 14 onwards, when his father, a man-
ager with Daimler, was transferred to help manage the compa-
ny’s US truck business. Haselsteiner studied at the large state
university in Vienna where just getting a seat in a lecture hall
was a challenge. Wolsdorf went to an elite Ivy League univer-
sity. Yet both chose careers in investment banking and end-
ed up at Goldman Sachs. When the firm opened an office in
Frankfurt, both men moved to “Mainhattan” where they occu-
pied neighboring chairs on the trading floor. That was in 1992,
when Haselsteiner was 30, Wolsdorf 21. Despite the age dif-
ference, the two got on well – and soon decided that a well re-
munerated job at a pedigree address was not what they were
looking for long term. “We talked intensively at that time and
agreed that what we really wanted to do was set up our own
business,” remembers Wolsdorf, “We started to discuss the
first ideas as early as 1994.”
Two years later, they made the leap into entrepreneur-
ship when the Stuttgart-based retail bank Landesgirokasse of-
fered them a consulting contract. Their remuneration wasn’t
anywhere near the $500,000 plus salaries they had received
at Goldman, but it wasn’t money that drove them. It was the
evolution of a logo
The first drafts of Interhyp’s logo (first and second from the left) were never used.
The original logo (third from the left) has since been updated to its current form (right).
CASE STUDY | INTERHYP
In its first year, Interhyp
had just 39 employ-
ees. Five years on, the
number of staff had
increased by almost
seven-fold, and is now
nearing the 500-mark.
chance to find out more about the average high street bank-
ing client. They soon added more mid-sized German banks
as customers – from Cologne’s Stadtsparkasse to Hamburg’s
HASPA. “We branched out as consultants, getting very much
into retail banking,” Haselsteiner said. What could the new
world of the Internet bring to the sector? It was sometime in
the spring of 1999 that they first
saw E-Loan’s Web site. E-Loan
had revolutionised the US mort-
gage market by brokering home
purchases and refinancing loans
over the Internet. Would such a
service work in Germany? The
partners weren’t sure. They first
wanted to analyse the market,
the technological and regulato-
ry requirements and the compet-
This analytical approach
might explain why Haselsteiner
can’t remember when exactly he
first visited eloan.com. He can’t
remember the day because there
was nothing revelation-like to
it. He certainly wasn’t emo-
tionally taken. “In German, you
summarise the mortgage and
home loan business under the
old-fashioned word ‘Baufinan-
zierung’,” he says. “Trust me,
there’s nothing sexy about ‘Bau-
finanzierung’.” What did seem
sexy, though, was the market potential. The total amount of re-
al estate loans in Germany was €900 billion, the annual growth
rate was 7-10 percent over the past five years. For most Ger-
mans, buying a house or apartment was the single-biggest in-
vestment they would make in their lives. The market was enor-
mous yet opaque, and finding the right financing was a tedious
undertaking. The two founders saw this as a chance for a via-
Test driving Interhyp
Within weeks, the two bankers had drawn up a business
plan, three months later, they had an investor: Earlybird. Their
first installment of €1.5 million was paid in late August 1999.
The remaining money – €3.5 million – would be paid once they
had reached certain benchmarks, such as a working Web site
and partners. With just four months to launch the site, Hasel-
steiner and Wolsdorf went into overdrive. While Wolsdorf con-
tracted IT specialists to set up the Internet portal, Haselstein-
er pitched to mortgage banks, hired a PR firm and worked on
an advertising campaign for the launch. “That was a fast time,”
Haselsteiner says with a grin.
Just building a Web site to deal with the lending crite-
ria of different banks as well as their pricing was a monstrous
job on its own. “The intelligence
behind the site was enormous,”
said Thomas Geiger, owner of a
Web-based company and then a
member of Interhyp’s supervi-
sory board. “Executing that in
less than four months was a tru-
ly Herculean task.”
The duo also had to re-
cruit a team, from IT special-
ists to sales people. Between
September and the end of De-
cember, they hired 25 people.
The site was to go live on Jan-
uary 10, 2000. Haselsteiner ap-
proached the day with a mix of
anticipation and sheer terror. He
was plagued by the thought that
Germans might not be prepared
to type their personal financial
data into the mask of a Web site
and then send it into cyberspace.
“We simply didn’t know if con-
sumers would file an online ap-
plication,” said Haselsteiner,
“This was unchartered territory.”
His fears soon proved to be unfounded. “We launched
the Web site early in the morning and at 10:50 a.m. we already
had our first application,” he said. “On the first day, we got
four applications. Out of these, one closed six weeks later.”
This was Interhyp’s first customer.
Full speed on all fronts
In 2000, Interhyp brokered a credit volume of €150
million and had 40 employees. By 2005, its annual brokerage
of mortgage loans surpassed €3 billion and 269 people were
on the payroll. Haselsteiner and Wolsdorf, it seems, had man-
aged to combine the accelerating power of Formula One with
the endurance of the 24 Hours of Le Mans. “The speed and in-
tensity with which Robert and Marcus built up their company
is something I have never seen before, ever,” declared Geiger.
When Interhyp started operations, it had about 15 competitors.
Five years later, it had left them all behind. Rheinhyp’s Inter-
2000 2001 2002 2003 2004 2005 2006 2007
From the time they met in 1992, Haselsteiner (left) and
Wolsdorf (right) knew they’d start a business together.
When did you first meet the founders
Christian Nagel: I first met them in
autumn 1999, and a couple of weeks
later we invested. Decisions had to be
made quickly in the dot com era.
To what extent was your investment
influenced by the fact that both found-
ers had a successful career at Gold-
man Sachs behind them?
Nagel: Actually, we had mixed feel-
ings about their background at Gold-
man. It showed that they were ambi-
tious, clever and hard working, but
at a company like Goldman you get
many benefits. So we asked ourselves,
“Are they really entrepreneurs?” In
the end, their personalities prevailed.
When you invested in Interhyp, did
you know that there were others trying
to do the same thing?
Nagel: We knew of at least two oth-
er teams attempting to do the same
thing. We also met them – and then
knew that Robert and Marcus were
Were you worried that Interhyp might
be run over by competitors with deep-
Nagel: We weren’t afraid of the lo-
cal players, but we were a little wary
of E-loan. The challenge for Interhyp
was to become big, fast. If E-loan had
tried to take over Interhyp – well, that
would have been one exit scenario.
You sold your first shares in Interhyp
at the IPO in 2005. When did you sell
your last shares?
Nagel: At the end of 2006, seven
years after our investment.
What was your return on investment?
Nagel: The return was 52 times the
money we originally invested.
net offspring Extrahyp stopped business in 2002 and E-Loan
never made it in Germany, Interhyp became the market lead-
er in online mortgage brokerage by a wide margin. In the vast
billion-euro mortgage market, it had reached a market share
of almost 2 percent. On Sept. 29, 2005, Interhyp had its IPO
on Frankfurt’s stock exchange. The company was valued at al-
most €300 million, and the share price rose by almost 30 per-
cent on the first day. It was Germany’s most successful stock
market debut in years. But there was something missing.
Pit stop for street traffic
Claudia Bochmann gives visitors a warm welcome.
As the manager of Interhyp’s Hamburg branch office, she is
the company’s face in the Hanseatic metropolis. Here, not too
far away from the railway station and the harbor, home buyers
can meet with one of 13 local agents. Some 60-100 people per
week come to the local branch for guidance on their mortgage
deal. But why do they make the effort to go there? Why don’t
they use Interhyp’s Web site and do the follow-up via phone?
“There is no logical reason,” Bochmann admits. “Tech-
nically speaking, we can handle everything over the Web and
phone. People come here because they want to meet a human
being before they make the biggest investment of their lives.”
Catering for such needs was not part of Interhyp’s original busi-
ness plan. Wolsdorf and Haselsteiner had planned to race their
business entirely on bits and bytes. “In 1999, it was all Internet,
Internet, Internet, of course, but just a few weeks after our start,
we realised that many people had a need to meet a person,”
said Wolsdorf. He says that, occasionally, customers came to
Interhyp’s headquarters to personally hand in printouts of their
online applications. “There was obviously an inherent insecu-
rity about whether we really existed as a company,” he said.
When it began, Interhyp could offer people good
mortgage deals, but it wasn’t able to offer them the “human
touch.” That all changed just before the IPO, when the com-
pany opened its first regional offices in Frankfurt and Ham-
burg. By the end of 2008, the number of local branches had
increased to 17. The investment has clearly paid off, as the con-
version rate has increased by 25 percent. The high-speed rac-
ers had learned to cater for more slow-moving traffic. In July
2008, the two founders sold their shares to the Dutch conglom-
erate ING, cashing out €67 million each. Interhyp was valued
at €400 million at that time. But Haselsteiner and Wolsdorf
have made it clear that they have no desire whatsoever to leave
Interhyp any time soon. Instead they would like to leverage the
power of its big new proprietor to expand to other countries.
The story of Interhyp as a stand-alone German compa-
ny is over. But the next race has just started – and it’s going to
be an international one.
got a return
of 52 times
€ 256m € 558m
brokered credit volume
Since 2004, Interhyp has seen a mas-
sive increase in the loan volumes it’s
brokered. This is in part a reflection of
the company’s success in acquiring
new partner institutes. In 2000, it had
just 15 partners, but by 2007, Interhyp
had brought 50 partners on board.
2000 2001 2002 2003 2004 2005 2006 2007
CASE STUDY | INTERHYP
Mr. Saffo, do you see paper
money ever going away?
Paul Saffo: Ever more transac-
tions in our lives are electronic
from the very start – like online
purchases. There is no way to
hand a $20 bill to Amazon. Or
easier to use PayPal than to send
a check. We are seeing a steadily
greater number of transactions
that are intrinsically cashless.
So where cash is an option, that
percentage is shrinking every
single day. And then a day will
come when you are walking in-
to a store, and if you offer them
cash the merchants will think
you’re a drug dealer. Already, more than a few physical retail-
ers are non-cash. My local doctor, for example, has no idea
how to accept cash, much less make change.
How far away are we from a day without physical money?
Paul Saffo: It could be 20 years out, but I think it’s going
to pick up steam and it might just surprise us by happening
very quickly. It’ll accelerate because it’s a generational thing.
Young consumers are going to say, “Why do I have to carry
this cash stuff around?” They were born with credit cards in
their hands, they are used to using debit cards for everything
– and depending on where you
are, they are used to using their
cell phones for transactions.
New technologies such as Near
Field Communication (NFC)
and corresponding payment
terminals suggest that it soon
might be as safe and easy to use
a mobile phone to pay for some-
thing in a shop as it is to use a
credit card. Will the cell phone
become the digital wallet of
the future? Can you imagine a
world where debit and credit
cards are completely integrated
in one’s smartphone?
Paul Saffo: Just as we have
seen consumers move from pa-
per money (currency) to plastic money (credit cards) over the
last few decades, we are now well into the early stages of a
move from plastic money to “digital money.” And just like the
move to plastic several decades ago, there will be lots of ex-
periments. Most of them will fail, but a few will break through.
The key to success is “universality”– for it to qualify as mon-
ey, it has to be accepted everywhere. Personally, I think the
secret to success will be a subtly different form of universality –
the ability to hold different kinds of money-equivalents, such as
frequent flyer credits, frequent buyer credits, etc. The incentive
As long-term fellow at the Palo Alto-based Institute
for the Future, Paul Saffo has built a reputation as
technological guru. The author of various books
and regular contributor to magazines ranging from
“Fortune” to “Wired” calls himself a “forecaster”.
He has been associated with the World Economic
Forum for over 10 years. Paul was educated at
Harvard, Cambridge and Stanford.
The Future of Money
We asked futurist Paul Saffo to gaze into his crystal ball and tell us if mobile
phones will replace wallets and what banks should be worried about.
by Karsten Lemm
to me as a consumer would thus be to have a digital wallet that
was intelligent enough to know which is the cheapest “cash”
to apply in a specific transaction with a specific store.
The banking industry pretty much operates in the same way
that it has for a century or more. Could an Internet startup
come along and turn this industry on its head, just like Nap-
ster did with the music business?
Paul Saffo:Absolutely. The music industry is instructive here.
Executives were so busy fighting to preserve a dying old tech-
nology, that they entirely missed new opportunities, such as
ringtones, and got completely snookered by a newcomer (Steve
Jobs and iTunes). I guarantee you that someone is going to do
the same sort of thing to the banking industry.
Because the most dangerous thing that you can
do in a situation like this is to focus on pre-
serving what’s old. If banks aren’t the ones to
destroy their old business models first, some-
one else most assuredly will.
How profound is the change going to be?
Paul Saffo: Profound – there is a hurricane
building just over the horizon. And while you
can’t stop the waves of change, you can learn to
surf. Keep in mind that it is possible for com-
panies to migrate from old to new orders. IBM
for example once made mechanical business
machines, but learned to become a computer
pioneer. There’s no reason that banks can’t do
Where do you see the biggest opportunities for startups and
Paul Saffo: I would deliver convenience in a way that makes
people feel good. I would find a way to create a system where
people were capable of lending and funding transactions that
Isn’t that what microcredit institutions such as Finca and
Kiva are already doing?
Paul Saffo: Kiva is great. I love it. But the weakness of some-
thing like Kiva is that it does only one thing. If you think about
it: My relationship with a bank is not a single relationship – it’s
a bundle of relationships. I have a credit card, a couple of bank
accounts, and a mortgage. I’m trying to minimize stuff. One
more account is one more thing to pay attention to. Fold it into
my cellphone, let me add stuff to the accounts I already have –
that’s the advantage that incumbents have.
What could startups do to overcome this disadvantage?
Paul Saffo: Commerce today is being overwhelmed by myriad
currencies, virtual currencies and various credits. For example,
just today I was making a purchase and I was startled when
the store asked if I had a AAA auto club card. It turns out that
mentioning my AAA card gave me an additional 10 percent
discount. The advantage of a single aggregating card/account,
issued by a startup, would be to squeeze all this value out for
me when it doesn’t occur to me to ask about this or that card or
membership. Now, add in the social causes I care about, and
you’d have my instant, unwavering loyalty.
What will the successful financial player of the year
2020 look like?
Paul Saffo: In consumer banking, it’s going to be a player that
can follow its customer to every retail transaction the custom-
er wants to do. It’s the player that can be a convivial partner to
the customer when they want to be close, but knows when to
keep a distance.
Let’s look at the big picture: Given that a
number of new players have made finan-
cial services a lot more transparent, from
social lending sites to online brokers for
mortgages and insurances, do you think
that the new generation might completely
dismiss brick-and-mortar banks?
Paul Saffo: Money is becoming a digital
abstraction. Consumer transactions are
becoming instantaneous, and banks are
already moving their branches closer to
the transaction by placing them in super-
markets. We already have some banks that
are purely virtual, so that will, of course,
continue. There is still a value to physical
branches, but in general, banks need to look at success stories
like Amazon and PayPal, and ask how they have managed to
gain such customer confidence and loyalty without offering so
much as phone support, much less a physical location.
How will money itself change? A decade or two down the
road, will dollars still be dollars and euros be euros?
Paul Saffo: For starters, look at all the alternatives to currency.
Things that are valuable and that we don’t consider a currency
per se; things like frequent-flyer miles or reputation points on
And you see that having an impact on the actual
Paul Saffo: The low-probability but high-impact event is:
maybe sometime in the next 20 years we’ll have a world
currency. Some collection of banks will come up with some-
thing that is just so popular that everybody uses it.
Do you really believe that’s a possibility?
Paul Saffo: It’s a wild card – a 10 percent chance, maybe. But
the events of the last six months were a stark reminder that we
have a global economy. Well, if we have a global economy,
why can’t we have a global currency?
“If banks aren’t
the ones to destroy
their old business
someone else most
Interview | paul saffo
At a regatta in the Mediterranean
Sea in autumn 2007, the “Earlybird”
team finished third out of 30. A year
later, the team won.
Holding the Course
Christian Nagel is one of Earlybird’s founders. Find out what makes him tick.
Born: May 11, 1961
Family Status: married, three children
Education: Industrial Engineering (Uni-
versity of Hamburg), Business Administra-
tion – Doctoral Studies (University of St.
Watch: Swatch Chronometer
Car: Porsche 911
Favourite Entrepreneur - Alive:
Favourite Entrepreneur - all time:
Tell us your life’s motto in one sentence.
Christian Nagel: Standing still is a step back.
Which talent would you most like to have?
Christian Nagel: I would love to be a guitar player in a rock
band. I really like music, especially guitar-based rock. Unfor-
tunately, I have no musical talent whatsoever.
What is the most memorable thing you ever did or received
that didn’t cost any money?
Christian Nagel: That was during a summer night in
August 1990. I was invited to a party given by one of
Hamburg’sYachting Clubs. I was standing at the bar, trying
to get a drink, when suddenly a beautiful lady approached me
and introduced herself as Marie. She later became my wife.
If you could be reborn as an animal, what would you be and
Christian Nagel: First of all, I wouldn‘t like to be reborn and
I don‘t believe in reincarnation, so I would almost certainly
turn down such a beastly offer! However, if I had to be reborn
as an animal, I would pick the biggest of all pachyderms, the
elephant. Elephants are fair and have a strong memory, they
are social and live in herds and they have a strong physical
presence. I find it also quite charming that they have no natu-
If you could take one year off to help solve one of the globe’s
major problems, which cause would you devote your time to?
Christian Nagel: I would promote clean mobile technolo-
gy, and help to reduce the amount of carbon emissions which
so badly hurt our environment. There are a number of young
companies that produce vehicles that run solely on electricity,
fuel cells and battery power. I would try to join or support one
of these companies. What I really like about their mission is
that they help protect the environment without asking people
to limit their individual mobility.
If you could have one day without any private or professional
obligations, what would you do?
Christian Nagel: I am a keen yachtsman, so I would try to
join the America’s Cup for a day and play an active part by
helming a match race. These are the races where two boats
compete against each other in a one-to-one regatta.
“up close and personal” | Christian Nagel
Editor-in-Chief: Dr. Christian Nagel; Development Project Supervision: Dr. Thomas Clark
Managing Editor: Deanne Corbett; Project Team: Daniela von Wedel; Dr. Marion Jung
Design Concept Art Directors: Andreas Volleritsch, Michaela Pernegger, Neubau Editorial Design
Cover Design: Caroline Backhaus, Backhaus Design Contributing Authors: Dr. Julie Gregson, Karsten Lemm, Jane Paulick
Litho: Otterbach, Munich; Print: Druckerei Kriechbaumer, Munich
Earlybird Venture Capital GmbH Co. KG; Van-der-Smissen-Str. 3; 22767 Hamburg, Germany
Tel: +49-40-43 29 41-0; Fax: +49-40-43 29 41-29, E-Mail: firstname.lastname@example.org (responsible for the editorial content: Dr. Christian Nagel)
Did you know that:
During the first 10 years of its existence, Earlybird has
invested in 56 companies.