Martin Saidler, a Swiss high-tech entrepreneur and investor whose fortune is estimated at hundreds of millions of dollars, has already recruited a number of well-known Israeli investors to his $1 billion fintech company.
All Israeli tech companies aim for the US as their main target market. Europe as a block of countries comes second, although it has dropped to third place over the past decade in favor of countries in the Far East, mainly due to a less favourable macroeconomic environment in the Euro Zone.
Martin Saidler wants to change all that. Saidler (50) is a Swiss businessman and entrepreneur who has fallen in love with the Israeli tech industry. And yes, he is a millionaire on his way to becoming a billionaire. In 2013 he was worth 325 million Swiss francs (roughly the same number in US dollars), and it is reasonable to assume that this value has risen thanks to the success of his largest tech company.
Saidler is a regular visitor to Israel, and recently arrived for a special visit, this time in order to advance his plan of establishing an Israeli R & D Centre to serve his tech company, Centralway Numbrs, whose latest fundraising campaign (launched last February) attracted in excess of $125 million, with several well-known Israeli financial figures amongst the investors. Saidler, unsurprisingly, wants to grow it into an even larger company.
Saidler’s bond to Israel was forged by Dr. Boaz Barack, a former senior investment banker. Barack was a senior member in Credit Suisse for over 15 years and later served on UBS’s senior management team for another eight. Barack was in fact the most senior Israeli figure in the Swiss banking system, and in both of these positions managed the Israeli aspect of Credit Suisse and UBS’s activities. Two years ago, on retiring, he joined Saidler and Centralway Numbrs as an investor and senior manager, and has been responsible for B2B matchmaking between Israeli investors and Saidler’s companies.
Saidler is an example of a ‘Made in Europe’ family equity business, with an insatiable appetite for the Israeli tech industry (and especially its fintech niche). His investment portfolio can be divided into three branches, and they all come under the umbrella of Saidler & Co. his Family Office. The first, Statmentt, is a company that builds and invests in fintech companies, its main goal is to lead the fintech revolution. Its focus is Europe and Israel and it employs 300 people throughout Europe, all mentioned on its home page; The second is an investment fund with a capital of 300 million Swiss francs (more or less equivalent in US dollars) invested in tech companies, including Israeli companies; and the third is a real estate investment fund operating in Switzerland, Austria and Hungary: "This is our most boring activity", Saidler says with a smile, adding that over the past two decades he has invested in and built nearly 200 Internet companies. Saidler’s first Israeli investment was in Elevator, an accelerator ("about $1 million"), followed by Pinchas Buchris’s venture capital fund, State of Mindd, followed by another start-up company, all three financed by the tech investment fund.
"We are an entrepreneurial family, and over the past 20 years I have done nothing but Internet, so I am amazed by Israel every time I come here," Saidler says. "I'm looking for suitable investments here, and I prefer it to Silicon Valley, California, for two reasons: US companies are priced higher, and flights from Europe to the US are longer. It doesn’t make any sense. Sometimes when I get to California I'm so tired I don’t have the energy to explore investments. Israel is much closer, and more convenient. When I invest in companies I want to keep in close contact with them and I can’t keep up that kind of connection when I have to fly to California every month”. According to Saidler, he prefers investing in companies in the Seed and A stages, but does not rule out investing in later stages.
"Israeli entrepreneurs don’t view the European market in the same way as the US market, and that’s a pity", he says, "they have to view Europe more and more as a target market, both in terms of customers and investors. The population across Europe is larger than in the United States and includes many rich families. There is abundant money in Europe, and I plan to make many investments in Israel. Israeli start-ups should contact me and send me their business plans, to both my fintech and tech branches. Please mention my email address in this article."
Back to Centralway Numbrs and its link to Israel, or to be more precise the fact that 20% of its investors are Israelis. So far, the company has raised 125 million Swiss francs ($125 million), of which $25 million came from Israeli investors. Who are they? Apart from Barak himself ("invested considerably"), there is Ronald Cohen, founder of the Apax fund; Leon Recanati, through the Glenrock Foundation; Shlomo Nechama, former chairman of Bank Hapoalim; Medinol (owned by Kobi and Yehudit Richter), Israel Makov, former CEO at Teva; Dan Ziskind, formerly CFO in Teva; Joseph Ackerman, former chairman and CEO of Deutsche Bank; and other well-known names, including former bank managers. Saidler is still the majority shareholder, commanding 70% of the capital, and he has also invested further during every fundraising campaign. According to Barack, most of the company's shareholders have invested twice, and last February it was revealed that the Dubai investment fund had invested 40-45 million Swiss francs.
"Committed to establishing an R & D center in Israel"
The Israeli connection motivates Saidler to try and establish a company development centre in Israel: "We are looking for the right partner and someone to lead it. We will not act until the right management is found, but we are committed to our plan... If someone wants to lead this centre, send me your resume".
Centralway is a big success. Six years after its establishment it ranks number one in Germany amongst mobile banking apps, and is currently taking its first steps into the British market. "We have not yet decided on a third country", Saidler says. The company, which employs 150 people, has positioned itself as one of Europe's leading fintech companies, and the reason it started operating in the German market - apart from its proximity to Switzerland - is its population of 82 million. "This translates to 60 million bank accounts. It is a difficult market from the regulatory perspective and also because it is conservative. It took us a long time to convince the German consumer to use our application, and so if we succeeded in this market we can succeed in any market”.
And what exactly does the company do? "Any action you can think of regarding your current account, in Bank Leumi for example, you can execute through the company's app, like checking your balance, transferring money to another account, etc. The difference is that our application enables you to do this in all your accounts, credit card account, mortgage account, PayPal account, etc. The Centralway app creates an aggregate of all your accounts, so you see only one balance. The app allows you to analyse and manage your expenses, including tax expenses, thus saving you money. All the customer is asked to do is activate the app. The analysis generates recommendations for the customer, like when to take a short-term loan to avoid an overdraft", Saidler explains.
Barack expands: "On average every user has 2.8 bank accounts, and he can connect any additional accounts he has to the app. The app allows him to do three things: first, perform banking operations; second, create a personal financial profile based on his financial behaviour, thus enabling the system to generate tailored recommendations regarding what to do and how to do it, all geared to saving money. Our job is therefore educating the customer with regards to wise consumerism. We are able to give each user a credit rating, a feature which is non-existent in Europe but exists in the US; third, the app has a financial shop where users can get loans from banks that we partner with, such as Deutsche Bank. With one click of a button the user can get a 50 thousand euro loan on the basis of the credit rating we built for him".
What is the company's business model?
Barack: "The app itself is free, our partner banks pay a commission for any new customer acquired via the app, who secures a loan, opens an online account at Deutsche Bank, applies for a credit card, mortgage or other financial product".
Saidler: "We will achieve a positive monthly cash flow in the middle of next year i.e. at the end of the second quarter of 2018".
How is it that banks are cooperating with you? Are you not competing with them?
Barack: "Banks are shutting down more and more physical branches. In Europe we are talking about 20% of all branches that close every year. This means that overall they are losing marketing channels and so our app serves as a brand new marketing channel. Centralway performs a similar function to that of Uber which manages tens of thousands of taxis around the world, but owns none of them. We don’t have bank accounts and yet we manage millions of them. We don’t define ourselves as a bank - because we would then be subject to the bank regulations - but as a digital banking platform. In fact what we are doing is disrupting old school banking practices, because by using our app Deutsche Bank can market and sell its products to Barclays customers and vice versa. This has never been possible, and will be amplified even further when we manage to penetrate the UK market, enabling German banks to sell products to British customers".
Barack explains that the consent of the banks is not required in order for app users to connect their various accounts. "By law banks are obliged to allow access", says Saidler. “European and American regulators want to create as much competition as possible in the banking sector, and the information on the app belongs to the consumers and not to the banks".
"There is not enough transparency in the banking system and this benefits the banks, not the customers. Our platform is completely transparent because it is not reliant on any bank but is consumer driven", Barack explains. "Banks thus become more like vault keepers, the guardians of the consumer’s money, and consumers choose who they want to transact with, when it suits them”.
"We may issue Centralway shares"
As already mentioned Centralway is valued at around $1 billion but Saidler is not looking for an exit. In fact he isn’t a fan of the Israeli zealousness for exits. "I want to build a large company, larger than it is today. We may issue shares so as to enable the other investors to liquidate their holdings, but I do not want to sell my shares, so an IPO is irrelevant to me as an investor. I don’t see the value in an exit. In Israel there is a rush to exit. Exit, exit, exit, exit but I don’t think it’s right for this to be the goal. It’s important for there to be large companies remaining on the scene in Europe and Israel. With regards to Centralway, I am patient and have been for the past 25 years”.
Saidler would like his European counterparts to be more like the Israelis: "In Israel people are hungry and innovative, they are constantly restless and itching to go. In Europe we wait and watch and discuss and argue and eventually say 'Oh, but we don’t have Google.' And I’m sure that in a few years we’ll wake up and say: 'Oh, but we don’t have Tesla and we don’t have a smart car industry'. For this reason I invest in Israel. And in this regard one could say, that Europe won’t survive if it doesn’t wake up”.
"Mobileye is a great company but it is Intel who will reap the benefits of its success. Waze is a great company but it is Google who is benefiting from its success. If the Waze entrepreneurs had spoken to me before it was sold to Google, I would have advised them how to build a profitable business model (laughs). I would have connected them to the VW Group and I'm sure they would have loved to work with Waze.”
"I don’t understand why people applaud when a company is sold and its entrepreneurs make an exit. I don’t see cash as the highest goal, because I can’t actually eat cash. The ultimate goal should be creating large companies, jobs, value for customers, innovation and productivity. This is what happened in Switzerland where giant pharmaceutical and food companies grew".
“Israeli entrepreneurs will tell you that they sell because an Israeli company located in the Middle East would find it difficult to break through the glass ceiling”.
"It's okay for some companies to go for an exit because they will not succeed, but those that are already defined as unicorns i.e. valued at over $ 1 billion can try and break through the glass ceiling. So I say: Take the time to build something big".
Published by Globes [online], Israel business news - www.globes-online.com - on June 15, 2017
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