Episode Transcript
Speaker 1 00:00:04 Welcome to the special episode of the Tech I p O Podcast by Founders Forum and London Stock Exchange. This series goes behind the scenes of London's markets with some of the leading voices in European tech with a record number of technology companies poised to go public. This series can guide the next generation of ambitious founders by drawing on the expertise of the pioneering founders that have come before them. I'm Brent Homan, co-founder of Founders Forum, founders Factory and First Minute Capital, and I'm honored to be hosting today's discussion with the formidable founder, who I've known for many years, tar Henrik, co-founder of Wise, formerly known as Transfer Wise, known for its cross border money transfer network, and commitment to Transparency. The famous FinTech wise went public in London earlier this year with a record breaking debut as the largest ever tech direct listing on the London Stock Exchange. So welcome Tard. It's great that we can have this chat as you're dialing in from Estonia.
Speaker 2 00:01:02 Hey, Brent, it's great to click to be in on the show here.
Speaker 1 00:01:05 You started your tech career in this space in the very early days of Skype, and you've now cut your teeth with an incredible journey that led to the Wise listing. Were you thinking about an exit plan when you started the company?
Speaker 2 00:01:18 We definitely had no idea about exit plans when we started. You know, I think when you, when you start as an entrepreneur, you start because you have an itch to scratch and you kind of start seeing if you can, if you can fix that, you know, if you can, if you can build something better compared to what already exists. So, you know, in the beginning we were purely driven by first proving that it works and then seeing how far can we take it, you know? Tell
Speaker 1 00:01:46 Us about the decision process. How did you and the team decide that a direct listing was the best route for whys to go public? So, as we said in the intro, I think you were the largest direct listing in London. Um, but also I think one of the first, I haven't heard of many tech companies going direct in London, so you didn't have many forerunners. Um, I think Spotify was, it was famous on another market for doing it, but, um, t tell us why you chose that route.
Speaker 2 00:02:11 I even believe, uh, we were the first direct listing in the UK and the biggest tech listing in the uk, but I'm sure there will be some viewers or listeners who know, who knows this fact much better. Um, this story actually, it starts with the first fundraiser. Yeah. When you first take money from institutional investors, venture capital, I mean, I think that's kind of when the clock starts ticking in some ways. And while I, I wouldn't say that we had pressure from the investors, but you know, we knew that, I mean, like I mentioned that we didn't think of the money in the beginning, but you know, when you're five years into it, senior investors start asking you this question like, Hey, what's, you know, what's the end? What's the end game gonna be? And we kind of realized that, you know, what's, what are the end game?
Speaker 2 00:02:53 The end game is stay private and, you know, have one happy ambassador that you have to keep happy on annual basis with secondaries or something. Uh, then, you know, you can go public, you can think of an acquisition. You know, we didn't really feel there's anyone out outside that would be an interesting acquirer. So we're kind of left with going public. I mean, we did, we did a few bigger secondaries on the way, but we realized that that's not really sustainable. You know, it would mean we need to do a secondary on a kind of annual basis, and at some point they become awkwardly huge. So we kind of left with that's the only way to control your destiny is to go public. And we, we spent years kind of, I don't wanna, I don't wanna say agonizing about it, but kind of thinking about when to do it and, and going, uh, back and forth on should we do US or Europe?
Speaker 2 00:03:48 Should we do direct or not? And three years ago, I think direct, I mean, probably even three years ago we didn't think of direct because Spotify had not done a direct yet, which is when this really became an option. But, you know, we did spend time throughout the years engaging with public markets. Every time we did a a secondary fundraise, we spoke to a lot of people for whom it was too early, but they might come in. So next time we did it. So that happened on quite a few occasions and, and a lot of people we spoke to during the last secondary, say, actually our, our investors now or they will be in, in six months from now. But so we, we did sat, we did sat in the US visit in Europe, just trying to understand how people view us, you know, kind of will there be any difference between us and UK and, and, and thinking through all of these things.
Speaker 2 00:04:43 In the end, it kind of, you know, it came together to us that I think it's time to do it now. You know, I like, I think in a, like if you, if you have the perfect world, I think you either want to go public as soon as you can, maybe not as soon as you, Brent, but you know, maybe, maybe you rather rather want to do it a little bit earlier than we did it to be, to, to keep more of the growth story for the public markets. Or maybe in an ideal world, you wanna push it out even a little bit more so, and to go public when you are, nobody even will think of you as a growth stock anymore. So may I think, you know, we probably did it somewhere, somewhere in the, in the middle, but, you know, we just felt that it's time to, it's time to get this, uh, get this part done.
Speaker 2 00:05:32 And, uh, you know, we've been, we've been kind of preparing for years by hiring a board, making sure the level that we're audited with is, is similar and so on. But then we kind of ended up with a discussion of, okay, so do we do it us or UK direct non-direct. And a couple of the reasons why it ended up this way, I mean, there is, I think there is a certain element about tech companies want to go public in the US and maybe, you know, the, the whole, the whole ceremonies, the NASDAQ ceremony and, and all that is, is uh, is somewhat, has maybe a bigger kind of PR angle to it. You know, for us we realize that if you break it down into pieces, there is no pricing difference. Like, we believe that the company is well known enough. And you, you look at some case studies of similar companies going public on, on, uh, US and Europe, but similar times, and there's no reason to say there is a pricing difference.
Speaker 2 00:06:31 We spent a lot of time looking into this, surprising went off as a, as a concern. And for us what was really important was that we are actually a UK company. Like okay, we, we call us an an a British est, Australian Orian British company, but we are headquartered in the UK and we are incorporated in the uk and that means as a financial service, we are regulated by the UK regulators. So that was kind of like, in the end, what felt as a pretty big argument that we have a natural home market, which would be a home stock chain, which would be London. So we felt like we felt it's actually the right thing for us to do this in London. And then the last thing was kind of direct listing or, or not on this one. Like the tricky thing is that direct listings are still relatively new and especially to being the first one, you know, there are some things could go wrong.
Speaker 2 00:07:35 So we were kind of, I think in, in our heads, we were pretty sure that it's the right way to do it for us, you know, it's a, it goes with the ethos of the comp ethos of the company, you know, trying to avoid middleman, make, you know, a much more transparent process. Uh, so it was the right thing to do. We were just afraid that, do you wanna be the first one? But we figured, hey, you know, I think we should be the first one. So we did, we went for direct and we were really pleased with the way it went. It is a much more transparent process, makes a lot of sense, only, but only makes sense if we don't need the capital. So since we've been profitable for I think four years, we didn't need the capital. So that's kind of made it, um, a no-brainer decision in that sense. And
Speaker 1 00:08:24 Then on that process, which was, I mean, it was, it was brave as you were one of the first. So, but who was giving you good advice and who gave you bad advice? <laugh>,
Speaker 2 00:08:32 I'll save the bad ones. I mean, we, um, we spoke to, we spoke with founders of companies that had countries, had gun public recently, uk, US obviously several, lots of, uh, lots of advisors in the shape of banks. And, but I think, I think some, most of it was probably kind of our closer circle of Christo, my co-founder and ceo, our cfo, Matt, you know, we had people on our board. We have, uh, Ingo uga, who is the CFO of Aian, who's on our board. Aian went public a couple years ago in Amsterdam. Uh, and so kind of like, it was a close, close circles at, in the end they decided sis. But I think we probably heard everyone's opinion outs are, and try to digest that down to, you know, what's, uh, what's a real advice versus what's a self-serving advice that will, that will benefit, uh, the advice, uh, advice teller.
Speaker 2 00:09:30 It's a way to summarize it. I do think you, you, you need to take your time to, to get different viewpoints together. Specifically we spoke to the institutional buyers about do they care if it's a direct listing? Do they care if we list in in London versus us? And the answer to us on all of these was, we don't care like the best investors. And like, like I, I, I believe it this always an, a venture that the best venture investors invest globally. I mean, maybe it wasn't true 10 years ago, but it's true as it was the past five years. And the same seems to be true for institutional investors. It's the best institutional investors have the target list of companies and say, and say, well buy someone whatever exchange and whatever ways they go public,
Speaker 1 00:10:13 That that might be part of your point about waiting long enough. I, I, I feel, and so my, my supposition that tell me if you think it's wrong is that that's because quite frankly, you were big enough, um, you know, a market cap of, you know, well over 10 billion gets you into that group where you're starting to get global analysts as well cover you. So a lot of it's about how did you think about, what do you think about the quality of the analysts that covered you, the quality, if you can comment between the European analysts and US analysts.
Speaker 2 00:10:41 I agree with your point about size. I think if you are a company that is going public at a billion valuation, it is probably a lot trickier. I mean, we, we had engaged with a global investor base for years, so I think, you know, even though we spoke to a lot of them during, uh, during the marketing period before the listing, we knew the top investors from the years of engagement we had had before, during, uh, during the private secondary placement, et cetera. So I think that gave us an, an advantage. We knew a lot of these people say new as a company, if you are much smaller with a smaller offering, it's, I, I do believe it's a different thing. And then that's maybe where waiting, waiting longer does make sense.
Speaker 1 00:11:29 And on the quality of analysts,
Speaker 2 00:11:32 I mean, I just think, um, so European, so European investors in general tend to be more conservative. And I think that is kind of true for to analysts. But, uh, I'll, uh, I will, I will leave this comment at this point.
Speaker 1 00:11:53 The listing was obviously it was a huge moment for wise and the entire ecosystem, at least, at least UK ecosystem. Um, what does, what does the sort of milestone mean for the future of wise now that it's in the public markets?
Speaker 2 00:12:05 I mean, actually finally, I think it does not mean that much. You know, in some ways we're, we're do, everything that happens on a daily basis is still the same. You know, we're still, we're still only a, a very short way into a very big mission. You know, we're 2,800 people now. We keep on building, we keep on hiring people. So I don't think anything changes in that sense. I mean, yeah, what does change is that there is more emphasis now on, uh, on the right governance. You know, there is on compensation, there is a public stock element, which is more liquid things around that. But in terms of what we do, why we do it, nothing has changed. And I think so far I believe that people haven't felt a big distraction from being public. I mean, of course, finance and legal teams have a lot of, lot more stuff to do and say it took, uh, most of the burden during soliciting process. But for most people it's the same thing. I
Speaker 1 00:13:12 Mean, I guess again, that, I'm trying to think of other others who'll be listening to this thing, and it might be slightly different for them. And that, what I'm thinking is that because you are a FinTech, so you're in a highly regulated market, even when you were private, um, governance was already gonna be a key thing you would be talking about a lot and you would have to be managing. Whereas, you know, some of the people like me who do things in e-commerce, for example, you know, there's a lot less governance. Um, so I guess what I'm just trying to say, what, is there much more governance on the board agenda now than there was? You said there weren't many changes, but I guess there still must be a bit more, but probably not orders of magnitude more, is that right?
Speaker 2 00:13:51 I mean, we had beefed up our, our governance to public company levels over the past years, kind of just wanting to have this optionality of doing it when, when, uh, when we want to do it. So I think we've been slowly setting it up to be this way, uh, knowing that we might be ahead of what's technically required at the time. But I think the difference that you talk about is if you are a FinTech business, I think there is something about trust sensors, certain trusts that you gain from being public. And I think it, it makes a little bit more sense for a FinTech company. Like, frankly, I'm not sure why an e-commerce company should go public if it's, you know, not the size of, of Shopify just yet. Oh yeah. Like, like given there is a lot of capital around, you know, it's like, I think it's, it's, I think it's one of the things that every company has to think about.
Speaker 2 00:14:53 What is their capital strategy and how do they get to the, you know, how do they, how do they return capital to investors, et cetera. It's, it's a, you know, as you are kind of five, seven years into it, you need to start thinking about it. And it's a different skill set. It's something which I think many founders do not enjoy as such. Uh, but I mean, there is clearly a cost of being public, which is in the millions per year. You know, the event of going public is an extra cost. You know, you can do a lot of other stuff with that amount of money. So you, you should consider whether it's right for the company or not. Like I think in fintech's, a trust element makes it extra. I mean, and we have been doing it for a long time. It's like 10 years in the making. It's a, and I, I make it sound simple, and it was simple, but because we've been preparing for, for a while, like for a different company, I'm not sure it is the right thing to do that quickly.
Speaker 1 00:15:55 That makes sense. And just thinking about your role now, your, your chair for how much longer, firstly? Cause I, I think in the listing you said you were handing over as chair, is that right? At at some point,
Speaker 2 00:16:05 Yes. During cel, during CEL listing, uh, we announced that I will be stepping down from chair within a year,
Speaker 1 00:16:10 And then I guess finding the next chair. And, and I guess, well, firstly, I mean, you being a chair is also, you know, I guess many founders won't have that luxury of having, you know, one of the co-founders being able to step up to chair. And that's quite a natural, a a natural thing I guess that, that you guys were able to do. Um, and then, so talking a bit about that process and then a bit about you finding, I guess it's such a pivotal moment for you to find your successor as a chair. I, I, I, I saw his CV as is is super impressive, but how do you get that sort of level of trust to find it, to find the chair?
Speaker 2 00:16:46 I mean, David joined our board a couple years ago, and so I think we've had, uh, we've had a pleasure of, of working with him for a while and realized that it just, it makes all of sense also, like what is specific to the uk to the UK London Stock Exchange and the governance rules. Like they don't really love non-independent chair per chairpersons. So that's a big, uh, you know, we just, uh, we feel that we're making it, um, a better company by having, uh, a much more independent and professional group of people on the board too, you know? And I think also like, in some ways, like, I'm not sure that, uh, providing, uh, governance services brings, brings out, uh, the best of me in that sense. Yeah, I think, uh, I enjoy, I enjoy much more building. So, uh, I think it's, uh, like I look at it as a, as a win-win win for, for everyone. The company is, you know, probably better served from a governance point of view. Uh, you know, I get to spend my time on things that I have more impact. So I'm, I'm very, very happy about the way it's ending up
Speaker 1 00:17:54 On Golden Shares. So remind me, do you guys have Golden shares? And what do you think of, of, of that?
Speaker 2 00:18:02 We don't have a golden share as such. We have dual class, so all the existing investors, uh, were able to choose, um, a certain part of their shared tool class. I think it makes a lot of sense to kind of pro to protect the company and to protect its mission during the transition from private company to a public company. So our dual class is, is set to expire after a set amount of years. So I think as such that construct, construct makes good sense and it just provides for a smoother journey into public life. Yeah.
Speaker 1 00:18:43 Now I, I think the expiring of it does make a lot of sense.
Speaker 2 00:18:47 I mean, I think, you know, we, there's another company which is in the press this week, uh, for an IPO called WeWork. And you know, I think, you know, I be, I may misremember, but I think SAR Dwell class was extended to the founder's grand grandchildren, so, you know, and, you know, never to expire. That was in the first butched I p o. So like, I think I was, uh, you know, I was taking, taking the piss on it in my mind.
Speaker 1 00:19:14 Other things that you are working on now, so I, I'm not sure if we've got time for all of them, but there's a lot. Um, I know that sort of, I mean, you could just maybe delve into what you're most passionate about and why. So obviously we've got certificate that I know well because we are happy users. This is, um, COVID authentic testing, authentication, um, and at home testing, which has been brilliant. So thank you for, um, as I say, we're a happy customer. Um, you've also got your coding school in Estonia, and again, we're on similar paths as we have found the same partner as you have. And I, I have launched one in London as well, but we're a few months behind you. Um, so we're keen to learn to learn more about that. And obviously you are, I think, one of Europe's most prolific angel investors. So, um, you've teamed up with, uh, I guess he must be an old friend Stan. Um, and so thinking about, there'll be also other people who are also thinking about the angel investing journey and how you decided to do that sort of structure, do that strategy. So there's quite a lot there, but I'll let you dive into which you think is, is best.
Speaker 2 00:20:15 So on, on the investing side, you know, I just kind of realized, and this has been, you know, this is realization didn't come to me three years ago, waking up on morning, but, but now I've realized that it took me 10 years to build one iconic company. So with the next 10 years of my life, I would love to help a hundred or a thousand companies get to this iconic level in Europe. So that's, that's what's gonna be the focus on my investing side, invest very long term patient capital, you know, mostly early stage, but in some ways, what I do with Stan is quite stage agnostic. Uh, but, you know, look for companies that are really gonna have a dent on the universe. You know, we're mostly focusing on, on companies coming out of Europe, but there is so much opportunity, you know, whether it's sings in synthetic biology, whether it's talking about what we need to do to, to help climate, you know, I think even probably more exciting opportunities in the, in the kind of frontier areas compared to what's been done already.
Speaker 2 00:21:26 Like, you know, FinTech is far from being over, but, you know, I joke about does the world need another neobank? You know, very hard, very hard for me to get excited about a new neobank as such. But if someone comes to me saying like, you know, we're building, uh, we're building something that will, that will help help climate or like areas that I know much less about, I'll happily see if it's there, there, the chance to build something really impactful, really iconic, and happily partner with entrepreneur. So that's, say investing side, uh, besides that, you know, it's a certificate is I think, you know, it's a, once an entrepreneur, always an entrepreneur, at some point you see the world needs something and the certificate was born at the beginning of the pandemic, and we realize that the way that medical testing happens is so last century and someone needs to do something about it.
Speaker 2 00:22:24 So excited to, to be building set and, you know, have, have designed set to be a journey where while I'm one of the founders, it was never designed that I spent all of my times are. So I think it's, uh, we're, we're in a good, in a very good place are, uh, and Sani Coding School, which we do in Estonia, like, I guess there's two ways to look at it. One is, uh, one is that Estonia needs more talent. So, you know, we can, we can sit all day and complain about it or we can do something about it. So it's a bunch of Estonian entrepreneurs who all have companies in Estonia. We just teamed up and said, we're just gonna see what we can do to fix this problem. You know, we started with 200 people a year, we're gonna do 400 next year and go get to a thousand, uh, within five years.
Speaker 2 00:23:13 And at that point we're gonna be comparable to the output of the universities in Estonia, and I have no doubt we're gonna, we're gonna get sir and then see, you know, what, what more we can do. And then the other way, like it is just, you know, it's about just looking at high impact ways where, where you can give something back. So super, super excited about Chapton. You know, going to the school opening about a month ago was, was so exciting to see these 200 people who are like, Hey, yeah, we're gonna ditch our previous careers and we're gonna learn coding and tech skills because we think that's gonna give us as humans a better chance.
Speaker 1 00:23:51 Right. F fantastic. Now there's a great, great summary to all those questions. Um, and one last, if I may sort of before we go to the, the quickfire round, but, um, sin of mission, if we don't mention crypto, because you will have thought a lot more than most people about crypto, and I'm really curious to know what your thinking is. I mean, obviously a sort of what, what is y doing or not do or, or what is wise doing about it or have chosen not to do about it? And personally, is it one of your investment themes,
Speaker 2 00:24:20 Sir, is less at y is this doing around it, like we've been keeping our eyes open in terms of can it enable what wise stars in a cheaper, faster way? And I think the short answer is not yet, but, uh, why is this being open about it? Um, but on, on my personal side and together with stem, I do believe that, you know, there is a lot of excitement happening at our end and a lot of things coming from Zara, which will shapes the way the internet works over the next decade. You know, whether you call it Web 3.0, uh, you know, defi and you looking at NFTs and, you know, not such shape bags that are being sold, but we're talking about an open register of ownership with, uh, with certain rules around it. Uh, very, very excited about what's comings are. You know, you can look at Bitcoin, I, I I look at it as digital gold now, you know, similarly, we could argue that gold is worthless, so with Bitcoin, but somehow both have a value. Like I'm, I'm, I'm quite excited about what's, what's the future will bring around that. You know, uh, my partner Sten has spent way more time than me thinking about it, but it's definitely one area that we are keeping, uh, keeping our eyes open about and engaging with teams on a, on a constant basis.
Speaker 1 00:25:49 So, rapid fire, round five questions, um, which we used to kick off each episode. Um, so what's the best book you read this year?
Speaker 2 00:25:56 I really enjoyed a book called Breast by James Nester. Uh, it's about breathing, you know, something that seems entirely trivial, yet under researched and has very big implications on all of our personal health. What
Speaker 1 00:26:12 Do you enjoy doing when you're not working?
Speaker 2 00:26:15 I love nature skiing or hiking. I'm excited that, uh, winter season is coming and hopefully more skiing this year than last year. Uh, and also anything on water, sailing, boat, wakeboarding, kite surfing, so anything outdoors?
Speaker 1 00:26:31 Favorite place when you're in London?
Speaker 2 00:26:33 Hamstead Heat in London. I live not too far from Zhi, so that's, I think it's a, it's a not so hidden treasure of London.
Speaker 1 00:26:41 Favorite place in Estonia,
Speaker 2 00:26:42 Anywhere in the forest.
Speaker 1 00:26:44 What advice would you give to your younger self when you were just starting out?
Speaker 2 00:26:48 I got a job when I was 16. I took charge of my future. My advice would be, I think to, to be curious, you know, find your calling, and this probably means at the age of 12, of just experimenting with lots of different things. Play computer games, go play soccer. You know, just try to enjoy getting bored and figuring out what you can do to keep yourself entertained. But I think curiosity is really important. Like to, to grow up. To grow up and have like a rounded view of the world. Brilliant.
Speaker 1 00:27:21 <unk> Thank you so much for joining us today. Thank you for so many wise insights, pun, I think intended. And it was great to have you on this afternoon.
Speaker 2 00:27:30 Fantastic. Thank you so much for having me.
