- 17 hours ago
For years, local bank branches knew their small business customers by name. Today, the small business financing gap in Europe sits at €400 billion. Max Schertel co-founded finmid on the belief that this relationship can be rebuilt through the platforms small businesses already rely on daily. In this Founder’s Story, he unpacks why data and distribution are the real barrier to solving SMB lending, the hard lessons of building lending infrastructure across Europe, and why the next chapter of SMB lending will not be written by banks.
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00:00Hello everyone, good afternoon. My name is Friederike Kunter and I'm a director in
00:06the legal department of the digital bank N26, which is where I also met Max a
00:12couple of years ago, where we worked together before you founded FinMed. And
00:17back in 2016-2017 we even shared an office room together and we're part of
00:24an incredible team disrupting the retail banking industry. And today Max you are
00:29disrupting business lending. But before we are diving into your interesting
00:34founder story, I want to give you the opportunity to say hi to the audience and
00:41yes, let me know how you feel today sitting on stage at ViverTech.
00:45Yeah perfect, great to be here in Paris and I think we were saying when we caught
00:49up two days ago it only took us six years to talk about what I actually do these
00:54days and how things are going at N26, so great to be here today with you.
00:57Cool. So Max, you co-founded FinMed in 2021, you came out of stealth in 2024, you
01:07raised a total of 35 million of capital to date and you are active in 30 European
01:13countries. Your vision is to allow small and medium businesses easy access to
01:20capital. Tell us a bit how do you want to or how are you bringing this vision to life?
01:25Yeah, I mean, what does that practically mean, right? When I knew I would come to
01:30Paris, first thing I was booking an apartment here on Airbnb, right, where I'm
01:35staying right now. And then today I had lunch at a restaurant and when I came here
01:40to the conference, I took a taxi. Now all of these businesses have something in
01:44common. Throughout the course of a year, they need money, right? The rental unit owner, they
01:50need money for renovation. The restaurant maybe has a tough time, needs money for that.
01:55And the taxi driver, the fleet operator, they need to buy new cars all the time, right? And if you
02:02think about what they have in common, today they all use some sort of software, right? The fleet
02:09operator is probably using Uber and FreeNow and Bolt, the rental unit managers at least using Airbnb and
02:17probably a couple of other tools as well. And the same for the restaurants, right? I think here in
02:21France, it's mainly Uber Eats and Deliveroo. But in Europe, there's a couple of more, right? And
02:27the thesis that we had when we built FinMid was that if you can put access to capital, to credit
02:35into those software platforms, then you should be able to reach the businesses better. It should be a
02:40much, much more convenient process for them to access capital. And with the data that the platforms
02:45have, you should be able to make more offers and more attractive offers to more businesses, right?
02:51So also those that don't get an offer today. And I think that was really the thesis. How can we
02:56execute that? How can we build infrastructure in which any platform can get that done?
03:02Let's maybe take a step back because given you experienced the challenges that are coming with a
03:09highly regulated business, I must say I'm quite impressed that you stayed in FinTech. However,
03:17I also know that this was not your first idea when you decided to start your own company. So maybe
03:24guide us a bit through the very early days of you deciding becoming an entrepreneur together with your
03:32co-founder Alex. What were your challenges along the way, the obstacles? And then ultimately,
03:40was there a decisive moment to then actually start FinMid?
03:45Yes. I mean, if I think back, right, I'm not sure if any of you here worked in a regulated
03:50environment. But when you decide to found your own startup, after you've worked in a regulated
03:55environment, the first reaction for me was, I don't want to work in a regulated environment
04:00anymore, right? So that was, I think, the starting point. And clearly, that went off track at some
04:04point. But we then, Alex and I looked at a few different topics. I have a brother. He's a smart
04:09guy. He has a PhD in physics. And we looked at, should we do something together for a while? And
04:15I think
04:16what I realized and that I would contribute very little to the success of that company. And he's actually
04:22very successful and the company's very successful. But I said, okay, maybe I should go somewhere and
04:26do something where I actually know a few things about. And well, how to deal with the regulated
04:32environment was that thing, right? And why did we end up building what we are building? I think,
04:39you know, even back at N26, there was a small scale at the time, but it was a business banking
04:44product. And
04:45if you were talking to the businesses and you would ask them what really matters for them,
04:51I'm saying that I'm not working at N26 anymore, but it's probably not the account, right? The thing
04:57that matters is, can I get access to capital when I need capital, right? And so that was something that
05:03I felt was a little bit unsolved. And then why build it not as a direct to business lender, but
05:10rather
05:10infrastructure? I think we believe that you really need to rethink how businesses can access capital to be
05:16able to compete with banks. Because ultimately, they're the dominant force today. If I need money,
05:21my first thought will be, I should go to a bank. And we felt that you have to really make
05:27a step
05:27change in terms of what a product can deliver to be able to be successful. And that's, yeah,
05:33that's how we ended up here.
05:33Okay, let's maybe talk a bit more about the opportunity because FinMed also aims to close
05:41400 billion euro financing gaps that SMBs are actually facing in Europe. I'm wondering banks,
05:52like traditional banks, they have had decades and possibly trillions of euros of money to actually
05:59close that gap. Why can't they fix it? And what might be fundamentally broken in the way how
06:08traditional banks are operating that makes it so hard to solve?
06:14Yeah, I mean, like, if you think about, you're absolutely right, but banks have decades of experience
06:20in the space. Ideally, they own the customer. They should have the account information and all of the
06:26data. Why don't they do anything about that? Right. But we could probably ask the same question.
06:31If you think back 10 years, why did nobody build proper mobile banking? Right. So there's always
06:36an opportunity by others moving a little bit slower. And I think in lending, it's two things. A,
06:42banks are maybe not the fastest to react to market change. Right. And then the second thing is,
06:48I think they also don't have what we have, which is much, much better access to customers and
06:55very different data. So to make that a little bit more precise, what I mean with this,
07:00if I, as a bank, want to make an offer to a business, I need to wait until they come
07:04to me.
07:05Right. I won't be like, maybe I'll have ads and then I'll try to push the product onto them,
07:10but I'll have to wait until somebody tells me I have a problem. Can you give me money to solve
07:14that?
07:15Now, if you change that and what we do with the platforms is we get the data from the platforms
07:21and then
07:21we evaluate the businesses and put offers in front of them. So they know that when they need money,
07:26it's there. And so maybe the fleet operator, he sees an offer of 200,000 euros to purchase new vehicles.
07:33Does he need the vehicles today? Probably not. Right. Realistically speaking, no. But over the course
07:39of the next 12 months, probably one of the 10 cars that she's operating will break down and then they
07:46need money.
07:46Now, who is the first one they'll think about when they saw that there's an offer every time they open
07:51the fleet management app? Obviously the fleet. Right. And then they won't even think about the app.
07:56So I think distribution is something we can do a lot, lot better. And then the second thing is data.
08:02I'm with you with the same data that banks have. We're not going to get to a much better result.
08:07Like bankers are very smart and know what they're doing. Right. So we're we're not even trying to predict the
08:13same thing here. A bank wants to understand, will the business be able to repay and will they go
08:17bankrupt? Right. And the question that we're asking is very different. We want to understand,
08:23will the business still operate on the platform? Why do we care about that? Because we get repaid
08:30through the revenues generated on the platform. So the question we're trying to answer is something
08:34inherently different. And that means we're not using the same data and try to be smarter about
08:39the same data, which I think would be very difficult. But we're just trying to answer
08:45fundamentally different questions. And so I think that then is something that banks just
08:51haven't been building for, frankly speaking. And again, no offence to anyone. I think with the
08:58speed that both of us have seen them perform it, I don't think they will get into building infrastructure.
09:05There's, you know, too much politics in between that and people that have to lose their, you know,
09:12let's say, department or whatnot that that will prevent them from doing that efficiently.
09:19And let's maybe also speak a bit more about why you chose Europe, because founders building
09:26lending infrastructure usually look at the US first, but but you are betting on Europe now.
09:33Beyond this 400 billion euros financing gap that we were speaking about earlier, is there
09:38is there any other hidden European opportunity that many others might be missing? And what is the one
09:46thing that that FinMed must get right to to win here in Europe?
09:52Yeah, I think the interesting thing is, it's not even Europe, right? When when people or platforms
09:58approach us or you talk to banks about corporations or investors, the first question we're getting,
10:04and we're a Germany based company, but also you're operating in Germany, Germany is your biggest
10:08market. Now, that's not true, right? We've from the from the get go, we knew that to be successful,
10:14we have to be operating wherever the platforms are. They're often not regulated from a financial
10:19services standpoint. So they will naturally be multinational. And so I think the first big difference is
10:25we've always seen us as a European company that should operate in every single country. And we
10:29actually we actually do that, even the smallest ones in Southern, Southern, Southern Europe or Eastern
10:37Europe. So I think the first key here is once you see Europe as one country, not right, but one
10:45conglomerate that you can really serve with one company, the opportunity is huge. Now it's it's as big as
10:51the US. So it really doesn't have to shy away from that. But you have to be willing to say,
10:57I don't
10:57care about Germany specifically, or France specifically, or Spain specifically, what I really want to do is
11:03I also want to be operating in Romania, Czech Republic, Estonia, Lithuania, wherever. And I think that was
11:11key to be successful, because when you and going back also to your question before, like what is difficult
11:16for banks, this European thinking is still challenging, I would say for banks much more,
11:22much more than than smaller companies, right. And so really building it European first, not country
11:28specific. And yeah, being really live there from day one, then you have a huge opportunity that that
11:35really doesn't need to shy away from anything in the world. I think the second question now that we've
11:40proven what can what we can do in Europe, right, that the interesting opportunity is that the data
11:46that platforms have, is the same here as in the Philippines, right. And I think that's where for us,
11:53not necessarily this year, but but in the future, like there are a lot of hidden possibilities,
11:59because Europe is certainly more strict when it comes to regulation, like you really need to know how
12:04to how to control what you're building, right, how to run it, how to stay compliant. Once you've proven
12:10it here, when you know how to work with the platforms, how to ingest the data, how to make sense
12:15of it,
12:15I can make sense of that data. And I can predict whether, again, a fleet in Germany, I can predict
12:22whether a fleet in the Philippines will leave a platform or not. It's really the same data model behind it.
12:29Max, let's do a quick fire round, meaning I ask you a question, and you have one or two, as
12:36we have a bit of time,
12:37one or two sentence to answer this. Ready? You're a lawyer, and I studied laws, so this will be a
12:44challenge,
12:44but let's see what we can do. Exactly, the other thing that we have in common. So, first one, easy
12:50one.
12:51What did you carry into FinMid from your time at N26 that turned out useful?
12:59Like, ignorance to the impossible, I would say. Like, N26 is very, very ignorant to what you can do or
13:06not do,
13:06and I think it's extremely helpful to have that mindset when you build.
13:13Next one, AI and lending. Is it an absolute game changer or is it 90% marketing noise?
13:21We actually had an internal discussion on this yesterday in the company, right? And I think
13:28operationally, like, it's a game changer how you run what's happening behind the curtains.
13:33And I think, but the question for me is always, like, are you at a point where AI generates value
13:40in itself for the company? And I think this is where it's a lot blurred. A lot of people will
13:44say,
13:45this is AI, that is AI. And then you ask, well, does it help you run the process or is
13:50it the process
13:51itself? And I think there, when I think, where do we create value at its distribution? Like, you have
13:57the platforms and ultimately that's still a sales game. AI enables that, but it's not running it by itself.
14:03Then you have the, the underwriting models. And I think here there are huge, huge opportunities.
14:09There are at least 20 sentences now. I'm sorry. Yeah. But I think, so the answer is,
14:14it's a bit of a mixed thing operationally. Yes. Is it AI everything? I think, no, also not. Right.
14:22Last one. So when things are getting really incredibly heavy and quitting looks like the only,
14:31like rational option on paper, what stops you from quitting?
14:36You see customers asking for the product and using it. And, and whenever something takes,
14:43I don't know, half a day longer than they think it should, they will come and ask, where's the money?
14:48How does it work? And I think that demand, like you, you see that you actually solve problems for
14:53businesses every single day, makes it pretty easy to get over that and say, okay, fine, let's,
14:57let's fix it. Right. Let's, let's solve it. We'll just get going up. Okay. Next question. You have
15:03again, a bit more time to answer. We are moving, we are moving out of a decade of easy money
15:11into a more
15:13volatile credit environment. And how does embedded lending actually perform when the economy dips
15:21compared to traditional bank loans? And is the data, I think you party already elaborated on that,
15:28but is the data to predict defaults actually much better? Yes. I think it goes back a little bit to
15:36what we want to predict and then how fast can we react to economic change, right? Because I think the
15:44challenging thing about credit is that you take a decision today that impacts repayment behavior
15:50over 12 months, 24 months, 36 months. So you have to be certain that everything's still fine,
15:58right? Within that time period. And I think that's what makes it challenges in particular in times of
16:02economic change. As we're trying to predict something different than just the default, right?
16:09Are you leaving a platform or not? I think the data set is different and we're not looking at these
16:16things on an individual level. Obviously, ultimately you take an individual credit decision, but you want
16:21to understand how is a portfolio of 10,000, 50,000, 100,000 customer businesses on the platform performing.
16:29And so really what we're looking for is peer group performance comparison, right? And then we take
16:34decisions on that. And I think there we do have advantages because you can see how consumers,
16:42which ultimately end up being the ones that businesses make money from,
16:46behavior, we can see how that changes relatively quickly. We can also see how it changes regionally,
16:53right? And you can think about like economic change, whether for better or worse, a little bit
16:58like seasonal effects. Again, we talked a little bit about what businesses we serve,
17:03rental unit managers on Airbnb. One in Paris has pretty consistent demand throughout the year.
17:10One in Cyprus does not, right? How do I understand that? And how do I use the data to understand
17:16the
17:16differences between those businesses and still make the correct prediction around what's happening
17:21within a given timeframe? So I think you do have advantages. I think the other thing we can touch on,
17:28but we could probably talk about this for 20 minutes then, is how do you actually finance all of
17:33that? Where's that money coming from? You know, what's the world of private credit actually doing
17:37there? And I think a big advantage that we have here is that given you have the relationship between
17:45funders, us as technology providers, and then the platforms, you can rely much, much better on
17:52independent data that can be validated through third parties to make decisions on an individual
17:58level, but then in an overall portfolio. And I think that's what will make this ultimately a lot more
18:02stable, even in downturn. So FinMIT is essentially doing the work of a bank without being one. And I was
18:15wondering about how you bake that into your company culture. So you need to have a massive regulatory
18:24discipline to handle this kind of capital. So you need to bag that somehow into the culture. And at the
18:32same time, you need to keep the
18:36flexibility and the speed of a startup alive. How do you do that?
18:43So I think what helped Alex and myself was that we saw bank grow from literally zero to a couple
18:52of million customers in Europe. And you do see things that work very well. And you also see things that
18:58maybe you wouldn't do exactly like that in your own business, right? And I think a lot of learnings came
19:04from that. How do I engage with regulators? How do I make the decision also where I am ultimately regulated?
19:10And then how do I handle the exchange?
19:11How do I manage with those regulators, right? So I think from a company culture perspective, making sure that businesses
19:19or like that internally, everybody understands how crucial taking regulation seriously is to the longevity of the company, I think
19:29is really, really important.
19:31And I think the big advantage we have compared to when I think about previous roles that I had is
19:37that if you build infrastructure, you can run that relatively slim. So you were a team of 45 people, right?
19:45And obviously you can, as a founder, you can hammer that maybe a little bit easier into everyone's head because
19:50people are very close to that.
19:52But they directly have the exposure to the consequences of being maybe a little bit too lax for that.
19:58So I think there was the other learning we had, like, let's build a company as slim as possible from
20:04a headcount perspective, because it will make it much, much easier to make sure everybody's aware of the consequences of
20:10what you're doing there.
20:12I also know that you partly work fully remotely with your team. So you have a headquarter, I think, in
20:21Berlin. How does that work? I guess that evolved over COVID, but how does that work?
20:27Yeah, the fortunes of COVID, I guess, which we've all forgotten. When we founded the company back then, Germany was
20:36very strict. You lived in Paris already, I think, right?
20:40No, I moved during the COVID season.
20:44Germany is very strict and we couldn't even rent an office, right? And then so the natural thing was you
20:48can't rent an office, fine, I'll hire people everywhere.
20:50And then when you're a small company, it's a little bit hard to force people back into an office that
20:56you never had in the first place.
20:58The way we're solving for that is making sure we meet everyone face-to-face at least three times per
21:04year for a full week where we bring the full team together.
21:07That can be in Berlin in the headquarter, but that can also be at another place.
21:11And I think that helped a lot with aligning people on work.
21:15Now, I think where that is true or the two places where that's not true is probably people that are
21:21very early in their career, where I've seen you just need to be in the office.
21:25There's no other way.
21:27And then work that is very executionally, it's just a process and basically the stuff that you would want to
21:33automate with AI ultimately.
21:35If you have a team that's working on that, then we've also seen that it's helpful if you are in
21:41the office and you sit next to someone and you go through the suffering together versus just at home.
21:47Yeah, definitely agree.
21:49So, I think back at N26 times, nobody of us was surprised that you were deciding to start a business
21:58together with Alex, who was also a former N26 employee, because you both were like a dream team already before
22:06at N26 times.
22:08You were overseeing the banking operations department and were building the strategy.
22:15Alex was more on the execution front.
22:17How important is it for you from a founder's perspective to actually find the right person to found your business
22:26together and have the same vision?
22:29Yeah, so if I think back in general, I never thought that I would actually build a company.
22:36It just didn't cross my mind until it did, right?
22:38So, and I think having it come quite natural was one thing that helped.
22:42So, it wasn't really forced.
22:44And then what I would say, like, after five and a half years throughout, which sometimes were a lot of
22:50fun and sometimes were really, really hard also, I think what helped us is that we had been able to
22:57build trust between us in tough situations before in a work-related context.
23:01And so, I would say neither of us had the feeling of needing to second-guess decisions, right?
23:07And, like, sometimes you have this itch where you say, like, should we really do this or should we maybe
23:14do it differently?
23:15But then you've worked with that person for so long and you just say, fine, like, let's do what you're
23:19suggesting.
23:20And then if it's right, great.
23:22If it's not working out, then fine, we'll suffer through it together, right?
23:26And then, like, having that mutual trust and also, but then also being willing to live with the consequences, I
23:34think, was very, very important because otherwise, yeah, you get frustrated.
23:37And I think one of the reasons you asked me before, how did the founder journey start, if I would
23:43think now back about working with my brother, I think we'd probably go back to being 16 years old and
23:48then smash each other's heads.
23:53What was tougher, to convince the first VC to give you funding or to convince the first platform to onboard
24:05your product?
24:06Yeah, that's a great question.
24:08So, maybe also fortune that we have of founding a company during COVID where I think VCs were relatively open
24:17to fund a lot of different things.
24:19And then, so, getting first funding was difficult, but I think it would probably be harder today, unless you're AI,
24:26I guess.
24:27What I underestimated a lot was enterprise sales and how difficult that is.
24:34Because while everyone will agree with you that the product makes logical sense, the question from an enterprise buyer is
24:41always going to be great.
24:43Were there 10 companies like me that I can call for reference?
24:47How much money have you made with them?
24:49And has there ever been a problem?
24:51And, you know, like how do you explain that to the first one, right?
24:54The answer is obviously, well, we don't have any.
24:57And we don't have any is not a very good answer to convincing your first clients.
25:01That was really, really tough.
25:03Took us a lot longer than we were hoping for.
25:05I think in hindsight, I would approach sales very, very differently.
25:11You really have to fake it till you make it very, very hard.
25:15But, yeah, there was not a lot of fun, I have to admit.
25:20Okay, given we have three minutes left, Max, give us a little outlook into the future.
25:26Where do you see FinMIT and FinMIT's vision be in five years?
25:32Yeah, so ultimately the problem that we want to solve is one for business, right?
25:38How can businesses access capital?
25:40And we believe you can do that by putting into the platforms and also make the platforms more successful, right?
25:46And ultimately those platforms are offering lending to their customers because they think that helps them make more money.
25:52Now, I think what we will see is move more and more parts of the more and more software industries
25:57through there.
25:58But we've seen that hospitality industry is one where it's something that's really, really common already.
26:02We see that e-commerce is something that's pushing that.
26:05We see retailing is really moving into this direction.
26:07So I think we'll see more and more platforms move into this direction.
26:11And then, again, for me, and I've briefly touched on this before when we talked about the opportunities with data.
26:19How can we make sure that we can serve the platforms really not just in Europe but wherever they operate?
26:26I think that brings us back to a lot of fun regulatory topics, right?
26:30But that's what we're here for.
26:31That's what we enjoy to solve for.
26:34Okay.
26:36Super exciting times ahead, I think.
26:39Thank you so much for talking with me today.
26:43Thank you, everyone, for listening.
26:45Thanks, everyone.
26:46Great to be here.
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