A conversation with Grégorie de Lestapis, October Spain CEO and member of the Executive Board.
We talked with Grégoire de Lestapis, former CEO at BBVA in France. Grégoire led the internationalization and directs the Spanish subsidiary of October, one of the cluster companies who will be present at the presentation of the “Madrid Capital Fintech” cluster, an initiative of the City Council and the Ecofin Forum that brings together about thirty startups and large companies, academic entities and sector or institutional associations to promote collaboration between all the agents involved to strengthen training, research, innovation and business development, and attract talent, employment and investment.
October (formerly Lendix) is a French crowdlending company, in which private and institutional investors lend money to SMEs in need of financing to grow. In just six years it has grown to more than 120 employees and has opened offices in Paris, Amsterdam, Milan, Munich and Madrid. Spain was the first country to which it expanded.
M.I.A .: October was born in France in 2014 and arrived in Spain in 2016, only two years later. Could you explain briefly what you do?
G.L: October is a business loan platform: a place where SMEs who want to grow come to ask for a loan. We analyze requests, assess whether they are valid, eliminate many and publish the approved ones so that institutional and private investors can lend. It is like being a bank without being a bank. Until 2014, the law in France prohibited you from lending money if you were not a bank. When it changed, the founder [Olivier Goy] decided to set this up.
I met Olivier in 2015, when I was still CEO of BBVA in France. The bank was interested in knowing what was happening in the fintech sector, with the loan markets. 58 platforms had been created and I visited the top ten. Olivier surprised me with his business model and his pan-European vision. He told me: I see a leading company, the first platform in Europe for loans to SMEs. I looked at him thinking: he’s crazy. He commented that you had to look at which markets were interesting, where there was a strong fabric of SMEs. This was 2015, after the crisis. The business-banking relationship was damaged, it was a good time to offer alternatives and the technology allowed it. I left BBVA and partnered with him.
M.I.A .: Why did you choose Spain as the first country for your internationalization and Madrid as the HQ?
G.L: There was a personal and a professional reason. My wife is Spanish and I have been here for years. But it’s not enough. We could have started with Germany. We did a study and Spain won the internal competition: for business reasons, because of the difficult relationships with banks… It is a kind of love-hate, Stockholm syndrome relationship that was stronger here than in other countries. We found it interesting to offer an alternative to banking, which was concentrated in very few banks after the crisis.
Then came the discussion: Madrid or Barcelona? Barcelona has a stronger reputation in the tech world than Madrid. But Madrid is the capital, where the economic power is, where there is a better connection with all institutional, banking, and business agents. Things happen here. In Barcelona there is a bigger pool of tech talent than in Madrid, but we already had the technology in Paris. Here we needed to be recognized as a trusted agent and that works on several fronts. One: the regulator. The CNMV is here. Two, market recognition. We also work with actors such as the ICO, with large banks, etc.
With hindsight, Madrid is more attractive and Barcelona has been hit by the political issue. Madrid has the opportunity to continue growing and take advantage of the country’s traction.
M.I.A.: How did the expansion go?
G.L: We went to a lacklustre workcenter. I came alone, took a room for six people and started recruiting. We knew well what we needed: first, the authorization of the CNMV; second, a team for everything related to customers (responsible for marketing, to identify investors…). And, third, a pleasant workspace. We took a 120 square meters office for 16 people, but in a year we didn’t fit and we had to change. It was a mistake not to think big from the start.
The average age of our workforce is 30 years. When recruiting, we notice that people are afraid. Is this serious enough? Can I start a career here? Spanish society is extremely conservative… and suddenly it goes crazy. That is why you have to attract people with the project and the mission: you will work on a beautiful project so that companies can obtain financing and grow.
M.I.A .: You already have 22 employees. Is it all local talent?
G.L: Yes, but here are two exceptions. There happens to be two French people. This has to be a Spanish venture. If you are based in Paris, why do you want an establishment in Spain? There are companies that stay in their country and open a small local office. We have said: we need to have everything that has to do with the client in the country. Marketing, sales, risk department, investments; people that are always in contact with the market. You can’t do this without a physical presence. You are not in the loop, you can’t understand the local subtleties, the Spanish company, their customs and operating criteria. Either you go with local people who can understand and interpret all this information, or you are bound to make mistakes.
The rest of the departments are deployed horizontally. Technology, compliance, data science. There are things that are done in Paris, others in Amsterdam…
M.I.A .: Do you carry out any of these transversal activities here?
G.L: We have tried with technology, but at the moment we have no transversal activity. We will have it. It is a matter of talent. At a European level, we are agnostic about where most of the functions are: technology allows you to work from anywhere and we believe that people have more interest in living here than in Stockholm. In Madrid there is a lot of talent, better prices, people are trained and innovative in their way of working.
Spain has a Germanic ability to innovate. They are the second Germans in Europe: very organized and capable of doing in 48 hours what other people do in two months.
M.I.A.: How do you see the fintech ecosystem in Madrid?
G.L: To set up a startup you need talent and capital. The talent is there, although Spain could improve. What makes people come to work here? Spain has a lot of motivating elements, but it doesn’t sell itself very well and doesn’t realize its full potential. Where it fails is on the issue of capital. There is a lot to do. Financial infrastructure in Spain is difficult. What makes a venture capital fund invest in you at the beginning and allow you to develop and go for a second and third round? You need a lot of actors for investors to bet on you. All this is weak in Spain.
In October we have completed three rounds of financing, we have searched for money everywhere and we have not found Spanish capital that would like to invest in us. In addition, we seek debt: we are a platform that gives loans, a part of that money comes from private investors and another from institutional investors. We have already created four investment funds, of 26, 95, 200 and 50 million euros. In the third one, in 2018, I went to see insurers, private banks and family offices. On that occasion we get four investors and rather small ones. They found the idea very novel and asked: who is putting money in? They were looking for a reference. I told them: the European Investment Fund. Yes, but in Spain? So far we have not got very many. I am hopeful, but it is not easy.
M.I.A.: Have you received support from the public administrations? How could they help you?
GL: In the financial world, the CNMV , the ICO and the SGR companies [Reciprocal Guarantee Companies] all have an impact on our activity. I don’t want to criticize the regulator, because they have an impossible task, but the law [which regulates crowdlending] was done quickly and could have been improved. Now there will be a European regulation. We have also wanted to work with the SGR companies, but it has not been possible. We have proposed to ICO to do things together: its mission is to facilitate financing for SMEs, so we suggested that they use us as a platform. They are interested in diversifying the sources of funding and their presidents we have met have welcomed the idea, but there is always something that does not allow it. I think we will get there in the end, but it’s been three years of meetings. It could have gone a little faster.
M.I.A.: And at a local level?
G.L: We are delighted to be part of the fintech circle and that the Madrid City Council is a sponsor. There is a real desire to create a cluster in Madrid and make an attractive city for this. I am not a politician, but if we look at the medium and long term, the future is about technology. Many things can be done in this area.