Budapest Letters #5
👋 Hi All! Hope you had a great past week and look forward to this upcoming one. Before we jump into this week’s edition of Budapest Letters, very warm welcome to our new subscribers, great to have you with us! One more thing before we get going, if you like what you read, subscribe (if you had not done it) and share it with friends. Cheers, Aron
📢 TL;DR
This weeks main stories are as follows: ✍️ The boss of HSBC, a global banking giant, commented that they are “not into” Bitcoin ✍️ Printful, Twisto, Interactio, Driveto and SeedBlink bagged major investments, making the end of May exceptionally strong for the CEE startup scene ✍️ Revolut launched invoicing for its business customers ✍️ BlackRock, the biggest asset manager in the world, sided with climate friendly shareholders to accelerate change at oil giants
🔥 Story of the Week
It was easy to pick this weeks main story as Noel Quinn’s (CEO of HSBC, one of the largest universal banks in the world) comments on Bitcoin and the wider cryptocurrency field rocked the mostly crypto-positive (or crypto-hyping) international business news cycle. Last week, in an interview with Reuters, Mr. Quinn noted that his bank is “not into” Bitcoin (or any other cryptocurrency) as it is too volatile and not transparent enough. As a result, HSBC is not planning to offer these to customers and will not set up a dedicated trading desk, either.
Not suprisingly, supporters of cryptocurrencies heavily criticized Mr. Quinn for having views that - according to them - are outdated and backward looking. But what is more interesting in all this, on the one hand, is that other major incumbents, like UBS and JP Morgan (fun fact: Jamie Dimon, JPM’s CEO, once called Bitcoin a fraud), are in fact planning to do what HSBC is now dismissing (i.e. offering crypto to clients and setting up trading desks). And on the other hand, people adore crypto or are at least super curious about it. In the past one year or so I am continously asked, from all walks of life, about crypto, whether I am investing, how can one invest, difference between crypto coins and stables.
What this means is that regardless of one bank executives comment, the future already started, crypto is here to stay. Nonetheless, Mr. Quinn is (surely) entitled to a personal view that goes against hyped market developments and can, legitimately, make sure that his company stays out of this. The things he cannot dismiss are diminshing profits, shareholder returns and client losses.
For now, HSBC is in the black so there is no urgency to act and Mr. Quinn has low to no pressure on his shoulders to change his beliefs. But this might change soon.
He might just ask Mr. Dimon.
Show Me Da 💶
👏 Printful, an on-demand printing provider from 🇱🇻, became the countries very first unicorn startup thanks to a €130M investment it recently raised from Bragel Sagemount, a large US private equity firm. Huge news for the tiny Baltic nation.
👏 Twisto, a 🇨🇿 buy-now-pay-later (BNPL) platform, got acquired by Australian BNPL startup Zip for €89M. The acquisiton comes just months after Zip’s initial investment in the Prague-based company which solidifies its place as one of the global leaders in this space, next to Sweden’s Klarna and fellow Aussie Afterpay.
👏 Interactio, a startup from 🇱🇹, raised €24.4M for its solution that provides real-time multilingual interpretation services for remote or hybrid meetings. The company was founded in 2014 and already has some heavyweight clients under contract but luckely for them, the COVID pandemic boosted interest in them.
👏 Driveto, another startup hailing from 🇨🇿, secured a €5M investment from local banking giant Česká spořitelna which will help the company build up its own car offering, next to the existing ones from incumbent leasing providers. In short, the startup offers its clients flexible car hiring which is fast becoming a popular way to use cars, instead of the old school way of buying and owning one.
👏 SeedBlink, a popular equity crowdfunding platform from 🇷🇴, bagged €3M from investors, including €1.1M from small investors via its own solution. The fintech is one of the fastest growing investment platforms in Europe, thanks to its sleek UX, easy to understand and use process, and great selection of pre-vetted startups.
🚨 Startup Alert
Revolut, probably Europe’s most successful digital challenger bank, launched a new feature for its business clients: invoicing. According to the company, this tool (which enables users to craft personalised, branded invoices) was one of the most sought after from customers so they are positive that it will be a huge success.
🧐 Personal take: Revolut’s business proposition is developing by the book, especially with this new feature. A streamlined payment experience is very important for small business owners. From creation to sending invoices and then keep tracking of their progress (incl. monitoring fulfillment), preferably by using real-time notifications, is crucial. And Revolut Business will now offer this.
Of course, this is not revelatory, many SME focused fintechs and challenger banks are offering this or something very similar already. But Revolut, while not new to this party, might become the leading provider in this arena thanks its customer base which crossed 500k last autumn, making it one of the biggest in the scene.
Still, overall success in the SME business banking market is far off for the fintech where incumbents reign. Limited digital-awareness and a lack of trust in new providers makes SMEs, especially in CEE, hard to acquire. But the fact that freelancing is becoming more and more popular across Europe, plus many SMEs will see a change of ownership in the upcoming years due to succession (i.e. children taking over the family business), there is a big opportunity here.
🧠 Food
Big oil had a rough last week as two of its dinosaurs, BP and Exxon Mobil, saw landmark shareholder wins against the will of its corporate boards. Although at the former, the win did not happen technically as the resolution to accelerate more climate friendly policies were voted down by the majority of shareholders (with strong backing from company leadership) but the support was very visible. Thanks to this, and having BlackRock behind it, the topic most probably cannot and will not be ignored by C-suit so BP - one way or the other - will act on it.
Exxon’s story is different in that climate friendly investors there not just scored a presumed victory but an actual one when a tiny activist investor, with the backing of large ones (like BlacRock), managed to obtain 2 board of directors seats at the energy corporation; which, by the way, could be even 3 if all votes are counted. And from here on, this is a different ball game: when you have a board seat, you sit with the big guys and you actually have a say in what direction the company takes.
This is bad news for Exxon’s current CEO and leadership but great news for the rest of us. If Exxon, an oil giant that worths ca. $250 billion becomes greener, the climate wins. But let us not why away from the fact that the industry can also benefit from this. Because if Exxon succeeds, thanks to the accelerated change that will happen due to this shareholder decision, that could easily serve as a model for other energy companies to follow suit. Now that would be major.
🧐 Personal take: If the new board setup at Exxon will change the direction of the oil giant (i.e. making one of the globe’s top greenhouse emitters a champion of tackling climate change) that could serve as a model not only for other energy companies but also for all industries that have an influence over our climate.
Like financial services and banks, in particular.
Of course, this is already visible with the ongoing ESG discussions and legislation (on EU-level, especially) that aims to transform the industry into a champion of climate action but this, at least in my opinion, will not happen until change is paired with financial success. I know, this might sound disillusional.
Still, I believe that without financial incentives the main interested parties (i.e. company leadership, boards, shareholders) will not act in a meaningful way. Currently, it is said that becoming more climate conscious can result in bigger financial rewards than maintaing old ways. Sounds great. But as far as I am concerned, tangible data does not back this claim up as most oil giants are still doing business as they always did. Drilling, polluting, doing harm to nature. PR talk is different, that is climate friendly and ESG committed. But as the saying goes: “always follow the money”.
And this goes out to the banking industry as well. Much talk. Tiny action.
Nonetheless, I am positive about the future and I feel that this win at Exxon might actually start the tide that is long overdue in business and capitalism, in general. Why? I have three reasons. Firstly, the transformation of Exxon will be a success and so activist investors and climate groups will put even more pressure on large incumbents to change. Secondly, the attitude of younger generations, of which many will become employees/clients/investors of these companies, will not tolerate further inaction. And lastly, the upcoming years will see more climate disasters that could have been otherwise avoided, resulting in politicians and regulators putting more emphasis on punishing companies that do not act.