Magnus Nilsson chats with Tech.eu researcher Natalie Novick about iZettle's path to becoming one of Europe’s leading fintech success stories.
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Turing Fest 2019
Fireside Chat: Magnus Nilsson
Magnus Nilsson , Natalie Novick
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Thank you, Brian, and thank you all for being here with us today. Thank you so much, Magnus, for making the time to come and spend with us at Turing Fest. Really appreciate it. Wonderful. Well, Magnus, of course, needs and Eisettle needs no introduction being one of Europe's most successful fintech companies of all time.
And you've been at the helm of the company for almost a decade, nine and a half years. You were founded in twenty ten. I wonder if you can take us back in time to those early days. When did you know you were on to something with iZettle?
Well, I I think, actually, quite quickly. We we spent about a year with a website which said, you know, we're doing something really cool. We just can't talk about it yet. IZettle. Right? And that was it, you know. And then we went on and on.
And then the day we we produced a video clip that we thought would would sell the whole concept of what we were trying to do, and and we showed it to a few friends, and and they didn't react the way we wanted them to react.
So we thought we need to do something drastic about this. So we actually went back two weeks prior to launch and redid, reshot the video with no money and found, you know, talented students to put it together. And then we launched that. And and I'd say, you know, from having you know, the day before, if you put in Isaac, maybe you got two, three hundred hits on Google.
That was it. And, you know, a week later, it was like two hundred thousand hits. And it was banks from all over the world that were contacting us. We have to have this in our country. Please come and help us. So we had a sense that there was a real interest.
And that was then, of course, confirmed in a way by the reaction from merchants, because this was all banks and industry people really reacted very quickly. But the merchants, we had the whole the kitchen of our office was just full of boxes, and we had interns come in and packed, you know, just shipping out readers as fast as we possibly could.
There was no end to it. And people had told us, the banking industry had told us, there is no interest in this. There's no growth in offline card acceptance. Come on. It's it's all ecommerce. But, you know so, you know, it it was very quick.
You could sense that, wow, they really need this. You know? So Right. So a video really kind of got the ball rolling for all of these merchants to come on board. You know, it was very little. We didn't have any money to spend on marketing.
So Jacob and I had basically, you know, been running the company on a shoestring and and and funded it ourselves. And we so so we had PR was really, you know, what we thought of, and we had a free reader, you know, a free card reader.
So our our view at the time was, let's you know, there are in Sweden at the time, there was hundred and seventy thousand places where you pay with a card. And you had more than a million smartphones. And we thought, let's bridge that gap and turn those smartphones into card acceptance devices.
So that was sort of the initial thought of how we would go to market. And then we gave away readers that we had managed to produce at a reasonable cost. And that there wasn't a newspaper in the world who didn't pick that up.
When we started giving that out to you have lots of different examples of that around the world where you have homeless people that actually sell magazines, and suddenly they had a card reader. Know? So many people say, no. I I don't I any any any money. No. But no. But I take cards.
You know? That made it. You know? Wall Street Journal, Financial Times, CNN, everywhere. So it was a very easy way to get attention in the early days. No more like that, but but at the time, it was definitely the case. Right. But the banks initially were very skeptical.
And also the manufacturing side wasn't sure that you were a gonna be able to build this product. No. I I think I had I had, you know, a very unusual experience. I mean, I've been doing business for a long time, and I had it at that time as well.
So I thought, you know, when I called up a company that I thought was the ideal partner to produce our hardware, I was told in no uncertain terms, you know, Magnus, I just have one piece of advice for you. Close this company down. It's never gonna work.
You know, he he started talking about, do you know how many taxi drivers there are in in China? No. I don't. No. Six million. Don't you think they would like this? I absolutely do. Well, why don't you think why do you think they don't have it?
Because it can't be done. There are these rules and these rules and these rules. So it was really telling us this is not gonna work. And in the end, you know, actually, two and a half years later, they did start producing our device, but I had to find another manufacturer before we got to them.
So there's a lot of lot of obstacles. And and, of course, also in the beginning, curiosity and interest, but then fear in some banks, which which tried to start making life difficult for us. And and what was keeping you going during this time when you're trying to build these relationships with manufacturers, with merchants?
What was keeping you going? Well, you know, I've I've been starting a few companies before, and together with my partner, Jacob, we he he was the one who came to me and said, I think we should start a company together. And I said, no, Jacob.
I'm not you know, I'm fifty five years old. I'm not gonna do that. You know? It's I I know what it means. And and they said, well, you know, promised my wife to get a haircut in a real job, you know, but this is really interesting.
You know? We should really be looking at this. And so so he told me about Square in the US. Have you known? Yeah. I've read about MonTECH Crunch. Well, go and read up on them, really, and then and then call me back. So I spent a few hours in the afternoon, and I called him in the evening.
Said, you ruined my day. Let's meet. You know? So then we met, and we just, you know, we we just so so then we I don't know. It's just inside. You just decide this is gonna happen, you know, and then then there's no turning back in a way.
You just have to go all the way. That's that and we're both the same way. So Right. And and the heart of this company and this venture and the heart of all successful startups is really a relationship between two cofounders that aren't gonna give up in any means, and also relationship that you build when you're creating your team.
Can you speak a little bit about what it means to build a strong team and how you can manage relationships at a company that's growing exponentially fast? You know, I mean, it is very difficult, particularly with multilocations. You know, it it becomes increasingly difficult.
But I think when we started talking about what we what kind of company we wanted to build, we we talked about, you know, do we understand technology well enough to understand that this can really scale? Do we have a distribution model that can scale across different markets?
Because if you know if you if you're born in Sweden, ten million inhabitants. If you're gonna build something big, you know you have to go outside of of your own country. So that mindset is there for most Swedes to start companies, at least in the digital world.
And so I think we said, okay, so we think we can scale customer acquisition. We think we can scale the the the technology. The question is, you know, how do we scale culture? And what kind of culture do we want to build? So we we spent quite some time on discussing that.
And in the end, we came up with, I'd say, you know, a Scandinavian company with a California touch. That was sort of what we what we decided on. And and that meant a a few very concrete things. You know? It it meant that we immediately hired a guy from California that I knew from before, who has been writing, you know, copy for Facebook and lots of companies.
He came over, all copy, everything we did, he was writing it, you know, to get the right kind of feel. And and then, you know, internally in the company, I think it has a lot to do with trying to be, you know, a kinder version of a US company in a way, know, sort of very driven by by results and and so on, but but still, you know, it's not not as tough, you know, but rather more trying to create the family feeling, you know, it's okay to fail.
You know? It's okay. Everybody fails, you know. Just try not to do it twice, the same thing, you know. But and and and, you know, rather help each other. And that that, I think, is the strength of you know, it makes Swedish companies sometimes very slow, because, you know, you want everyone to be aligned, and it takes forever, and so on and so forth.
But once we have decided, I think that culture is is very productive and can really create results. And we're trying to make that sort of empowerment of the individual be a very strong point. And and then it's about taking the fear out of making decisions, you know, which which otherwise I think can be there.
Right. And so you're developing this culture at the really at the beginning of the company's development. And how has this developed and grown as the company has has scaled larger and encompassing more locations? I I think, you know, about in in twenty sixteen, which was fairly far down the road of of the company, we we made a decision that we're gonna prepare ourselves to go public.
And in that context, we said, you know, what's going to happen to our culture? How are going to make this work, you know, and still be innovative and fast and not too driven by, you know, the reports we need to to hand out to the markets and so on and so forth?
But we we realized we need we need to hire people that are better at building and managing teams. Because, you know, Jacob and I, we were into every single minute detail of the company and and worked, you know, round the clock to but we became the bottlenecks of the company.
So we hired a CFO from a publicly listed company, we hired a COO from publicly listed companies. And and particularly to this day, I think the most important part was really the hiring of the COO. She has made such changes and built such amazing team culture in the company that has made it possible to scale in a way that we otherwise couldn't have done.
And that's a lot about accountability, empowerment, openness, transparency. You know? These are, you know, words anyone can say them, you know, but I I really believe we try to live by those, and she is much better at making sure that we do that, you know, than than than Jacob and I are.
And when you what is it what did it feel like when you got to that point where you realized, you know, I need to make I can't do all of this on my own. We need to make a strategic hire. How did what did that feel like?
And for founders in the audience, what are some things that can highlight that this is something that they should think about doing, that it's the right time. Yeah. And the question is when is the right time, you know. And I think, you know, when when the company starts growing and then when when you hit, you know, forty, fifty people, things in one location.
If you have several locations, it becomes even more difficult, because there is immediate head office or whatever you want to call the head office. We don't want to call it head office, but some people always come back with the HQ, and really hate that.
I don't want it to be an HQ and something else. But nevertheless, when you are forty, fifty people, you start seeing that. And very early on, we measured employee satisfaction as well as customer satisfaction. And I think for for me, you you look at any business.
You know, if you don't have those two and just have financials, I'm completely uninterested. You know, I wanna know what does your staff think about working here and And and how happy are your customers with what you're what you're what you're delivering. So that measurement is important.
But when you come to forty-fifty, it becomes almost impossible to deal with it in the way that we did in the beginning. So there somewhere, or if you really want to build up something in a different geographical location, it's extremely important that you have very powerful individuals that are empowered to to make decisions.
And and speaking of twenty sixteen, that was also the time where Eisel made a very important investment in the Scottish tech ecosystem. Yeah. You know, we we had been working for a long time starting with, you know, almost you know, a lot of the interest in the beginning was, like, from individuals, you know, who got a free reader, and they didn't use it much, but they thought it was quite cool to have be able to take cards.
You know? But But so over time, we've gradually grown to to larger and larger merchants. Still, we're completely focused on, you know, our mantra is, you know, helping small business succeed in a world of giants. You know? That's that's our sort of reason for being in a way, you know, that trying to really help small businesses that account for depending on country between thirty and fifty percent of GDP in any given country.
So it's extremely important and the future of any country, really. So that part was clearly were we were moving upstream, and we had a lot of partners. And one of those partners was Intelion point of sale in Edinburgh. And we were looking at all those partners that had similar products or offerings in the market, which was really the software play.
So payments, we really mastered, I think, quite well across different sized merchants merchants. But but on the software side, we found, particularly in the hospitality side, that our our software was not really up to delivering what slightly larger merchants needed. And that's when we decided to approach Intelion point of sale.
And what was particularly attractive about them? Well, there were there were a few different things. You know? One, you know, there was it was a pool of talent. It was in the UK, the most important market already by then for us. We really wanted to build a strong presence.
And we found, even though, you know, we can recruit into Stockholm talent in tech and in in in product and design and so on from anywhere in the world because quite easy, it was still there are other problems like finding housing in Stockholm was almost impossible.
So so to have another center where we could actually attract talent, There was talent at the time. I I think we were around thirty five people in the company when we acquired it, and now we're close to eighty and and growing, looking for more talented people, by the way, in tech, design, and product, and most positions.
And so but that was important, though. Another center to to recruit talent and to be to help grow the larger segments of our business. And speaking of relationship building and acquisitions, last year iSettle was engaged in a new partnership with PayPal. And this was something that in some views of the European startup ecosystem was considered controversial because we were all waiting for iSettle to IPO Yeah.
Some some prominent voices. And especially hearing from your communication up until that point, there were suggestion that you were going to IPO. And your previous company, Wayfinder, did list on the Swedish stock exchange. Yeah. Can you talk a little bit about the partnership with PayPal and why you decided to to work with them instead of pursue the IPO?
Yeah. You know, it was a an unreal sort of, you know, development really in a very short period of time. We had, over the years, of course, you knew PayPal well, they knew us, and we had had partnership discussions in different countries, you know, on a pure partnership level.
And they never really materialized, because there was always something, you know, particularly, I think from our end, we we were a bit afraid to to sort of let go of our customer base or not let go, but even to expose it to PayPal, you know.
So what if, you know, we this is our sort of most precious asset in a way, you know, our customers? Do we dare to open up so that we can really effectively cooperate? And that always stopped, you know, a good and efficient corporation.
So so we were really on the path, you know, I I was on the day, just to understand, you know, the the day at eight o'clock in the morning on the seventeenth of May, we were we had meetings booked to hand out our prospectus for the IPO.
We signed twelve o'clock in the evening on the sixteenth, and we spent about four weeks PayPal had to close this transaction. They, you know, they called me up and says, we'd like to meet with you. I flew over, and they and I asked, you know, how how long time do you need?
And they said, oh, we're fast, you know, six to eight weeks. Well, you don't have six to eight weeks. And that's how the whole sort of so it was a very, very and and we had this discussion on the board. Should we should we not do dual track?
All the bankers want to do dual track, you know, so they sure they lock in all the potential fee generating activities they can. And and we we just decide on the board, no, we're not gonna do that. You know, if someone wants to acquire the company, they will come around because everybody will know that that we're we're go we're about to go public.
And so that was really what we were shooting for. But then things changed. And and and looking at why we chose to go that route, you know, we had then maybe about four weeks, Jacob and I, to discuss, you know, which way is the right way for us.
And and I think it boiled down to a few different things. You know, we we serve the same type of size same type size of merchants to a very high degree, though PayPal, of course, on the e commerce side. But as you know, all of that is merging into one.
So you have online and you have offline, and that's particularly in retail but also in other parts of the industry segments. And we looked at that and saw we'd always wanted to build a global company, but we'd never found a smart way to enter the U.
S. So we always looked at it, and we had Intel Capital as a shareholder in the company, and they put us in front of lots of different potential partners in the US. And we never felt that, you know, the risk reward was there to to dare do it, you know, in in the eyes of competing head on with Square in that market.
Yeah. So with PayPal comes a company with twenty one million merchants, active merchants, you know, and and we and and with enormous potential for cross sell. So we saw a phenomenal commercial opportunity without question. You know? Yeah. But and and so with that sort of put aside, you know, so so what what will the staff think?
You know? Will will we have a company? Can we retain our culture? You know? That was an extremely can we stay motivated? We have this vision of what we want to do. Is this going to completely derail us, and we will spend most of our time on trying to integrate or whatever it is that you fear that you will be caught up in, you know.
But in the end, you know, we we we felt that that and and also, you know, valuation was fantastic, we thought, you know, at the time. Not that we you know, there were shareholders who argued for not not to do this, you know, because they felt that there there was a lot more value to be gained.
But but in in the end, I think it's fair to say that that when we had discussions with our shareholders about that, Jacob and I said, well, you know, we think this is extremely good for the company. It will really benefit the ecosystem, and we will be able to build and scale across the world.
You have maybe twenty companies in your portfolio. Jacob and I, we have one. You know? So so to us, it was a fairly straightforward decision in the end, not that we could make it without those other guys. But it's rare in those situations that a a a good and solid backer, founder would go against the founders if they really wanna do something.
You know, that that I I think is very rare to happen. And I think that speaks to the uncertainty that you don't necessarily know what's next or you don't necessarily have control over what direction things will go in despite your best laid plans.
And if you want to be a tech founder, you have to be able to embrace that risk and that unknown in some regards. Yeah. I mean, that that that's I mean, that's the name of the game. Right? You you you don't you don't embark on this journey just knowing exactly how things will play out without question.
And and I don't know. That's part of the fun, actually. Yeah. And one year on thinking about the merger of a Scandinavian company with kind of a California flavor with a real California company. What do you think that these Scandinavian values have really brought to the table with your relationship with PayPal?
I'm I'm convinced it's immensely valuable for for you know, I sometimes tell the people at PayPal that, you know, that our our plan is really to do what the Greeks did to the Romans. Right? The Romans, you know, took Greece, you know, but the Greek culture took over the Romans.
They just put different names on their gods, you know. But so we we sort of tried to be to be very open about this, and I have we have lots of discussions about oddities, about, you know, the Scandinavian culture trying to explain, and we've found a very responsive PayPal.
I I I think the best example I got, the the question from the CEO early on before the deal was done, Magnus, is there something that you would like to highlight that I should be concerned about from a cultural point of view? And Dan Schulman, the CEO of PayPal, is a, you know, I think a a very unusual CEO of of of a publicly listed, you know, north of hundred billion euro dollar market cap company.
Just divert in going a little bit around the the topic, I'll come back to it, but he he I thought that my first meeting, I wonder how I should be dressed when I meet with him. You know? It's California, you know, it's laid back and so on, but still, you know, it's the CEO, And I hadn't really looked up what he looked like on pictures a lot, so I just flew over very on very short notice.
So I walked in with my with a jacket and some slacks and so on. You know? And and in comes a guy in jeans and cowboy boots and and and a t shirt. You know? So and he's always dressed like that, by the way.
So so anyhow, he asked me about this question. So do we what should I do? Well, if we if we take Sweden in particular, there is one thing you should know is that Sweden is a very dark country. And he looked like, you know, what what do you mean by that?
You know? So, well, you know, November, December, January, and February, we don't see the sun when we go to work, and we don't see the sun when we go home. It's dark. So that's how it is, and we work a lot during those times.
But when July comes, we take vacation. And, you know, if you wanna and and and they that's like three, four weeks. Three, four weeks? You know, four weeks, that's what we have as a sabbatical at PayPal every five years. And and I said, well, you know, you may think about that however you like.
You know? The fact is, you know, I think we are actually beating you with your PayPal here product in the UK, even with those work standards. So we we are productive, but in a different way than you may be used to. So a very good example of what that has meant is that when we now finally, as you may know, we were subject to a hearing from the CMA in the UK as to whether this was bad for competition or not.
So that has delayed the whole integration by almost nine months. But then, when we got in June, we got the final okay from the CMA. Of course, you know, there were lots of people at PayPal ready to jump and start, you know, all the work stream for integration.
And we said, listen, this is completely useless. The office is gonna be empty. Yeah. So the the date we can start is the twelfth of August. That's the meaningful day to start. And they said, okay. You know, stepping back on the twelfth of August, which is just, you know, a week or a week and a half ago or so, is when we really started looking at different work streams that we've been preparing, of course, but but now we can really start working on it.
And in in the light of the merger, your cofounder Jacob said the culture of the company and the team is something a real asset that you bring to this new partnership. You know, I I I I really believe that, and I and I see more of it.
I I I don't know if you if you were to go back and look at how we have presented ourselves at different places and and what kind of our what our vision and mission is, and and then you look shortly after PayPal acquired iZettle, you will see that the language they use in if you look at press clippings, it's like they stole it from us.
You know? So they just copied a lot of it. And some of it, we actually we have very similar views on how to go forward. There is an internal saying about, you know, the love affair between products. You know? It's between ICE iSettle and PayPal.
I mean, they think so similarly about what is the right way forward. And speaking of the right way forward, what does the next coming months look like for iCECL? Well, you know, there is a and that is very important for us. And and and, obviously, we want to deliver on on on the plans that we have presented, and we've started presenting to analysts in in ahead of our IPO, our sort of planned IPO, we're trying to deliver on those plans, basically.
And and so that's there is a a stand alone mindset as this has to happen. In parallel, without disturbing the first, it's really about now where is the low hanging fruit where we can really do things together. So there are loads of different work streams.
Some are purely administrative, you know, where you look at how you do payroll, accounting and so on and so forth. You know, That's one part. But and and the other side, which I find a bit more exciting, is sort of, you know, the commercial opportunities that we now will try to unlock together.
And that's what we're gonna spend our time on. So what are the exciting challenges that keep you going in the same company over ten years on? You're a serial entrepreneur, started a number of different ventures before this one. What keeps you going at iSettle?
I don't know. You know? I'm I'm a and I think Jacob is the same. You know? You just you just want to create stuff and build things that that can, you know, make people excited. And I think we have a fantastic vision. I remember when Jacob asked me about starting iZettle, and I grew up in a family with you know, my mother was an entrepreneur, my father was an entrepreneur, and and small business entrepreneurs.
And he's he talked about this, you know, and he says, this is really nice. You know, this is, you know, this is just for small business owners around the world. You know? There are about twenty million of them in in Europe that have less than ten employees.
And I just remember thinking, you know, I know exactly what these people need. So I've been listening to that every evening at home for years and years. Right? So, you know, the most common thing is you have no money and you have no time.
You know? And and so part of that, we are addressing and many other things as well, of course. And what are you most proud of? Well, I I I don't know. I think sometimes when we are in the office, Jacob and I, we have an all hands or we have a summer party or something, you know, we just step aside, and we we look and we see all this enormous energy and and and and enthusiasm.
You know, we say, Jesus Christ, have we built this? No. And, of course, we haven't done it on our own, but it's been it's it's a fantastic feeling. Fantastic feeling. And I had it today. I was at the in the Edinburgh office, and there was an all hands meeting where where they were sort of presenting all the things that were happening in Edinburgh. It's just amazing.
It blows you away to see young and old, actually, talented people all working together across functional teams and and and and creating stuff. That's just amazing. And that's the office that you're doing a lot of hiring at. That's the office where we're hiring more people to come along and ensure Go go to our site and look up the openings.
There are lot of July off. So for kind of our our final question here is we're running out of time. If there's one key piece of advice or something that you can impart on our audience of founders, prospective founders, tech team members? What from your really extensive experience in the ecosystem, what advice would you have for them?
You know, it's a very difficult and and and big question. Right? And I I I still make daily mistakes, so I have a lot to learn no matter how long you go on. But but I think for us, it has been relentless focus on what why we really started.
I I I think so many times I've had to say no to things that are not in in in line with that. But then, you know, if you are an entrepreneur and you've started a company, you sort of you want to grow. You want to you know, and and and I've been I've been, you know, the one who's been creating problems for the company sometimes.
Take you know, you have big partners or big companies who want to partner with you. They and you think that they are the solution to finding customers. You know? We have had so many big partnerships, and I'm a master at closing them. But I tell you, very often, they are a disaster, you know, because you have to do this yourself.
You have to understand how you get your customer and how what the value proposition is. And whenever you get someone in between, you get lots of truths that are not truths. They're just opinions. So that to me is, you know, relentless focus on why you started this company and stay focused with that, and then and then avoid being too, you know, charmed by the big companies that you think can help you take a leap.
You know? Most of the time, my experience is they can't. You know? You have to do it yourself. Okay. Well, I think that's excellent advice, and thank you so much for your time today. K. And thank you to the audience. Thank you.