I believe in
the imperative
of continuous
innovation
This week we go Up-Close with Yorick Naeff, CEO & Co-founder at BUX. Join us as we discuss Yorick’s journey to co-founding BUX, how the organisation has remained disruptive and what Yorick is most proud of during his last 10 years with the company.
First of all, can you please give us a whistlestop tour of your career to date and how you came to Co-found BUX?
Well to reminisce a little bit, after college, I started to work in retail investment banking in a large Dutch bank. It was a lot of fun. I was a management trainee and was moving through the ranks quite well. I was basically responsible for all kinds of projects around the world from a pure strategic perspective and I became essentially a strategy consultant in that role. Then at some point I joined the management team of the corporate strategy department of ING and got to be a part of some exciting and meaningful work, so it was a great ride. However, after almost five years, I started looking around and wondering if I should do something different as I was still relatively young. At that moment I thought, well, I don't want to be stuck in a banking environment for the rest of my life, so I started looking and having conversations with all kinds of people. How I found my way into BUX is quite interesting as while I was working at ING, there were two McKinsey partners who were servicing ING at the time. They went out and started their own venture firm which was Orange Growth Capital back then and it's now called Finch Capital. I'm lucky enough that I had and have a good connection and relationship with them and one day they said "we are looking at certain investments and there is one company we would like to do something with. It's very, very early stage, there's nothing really there yet and it's just an idea, but we know the founder and want to see if we can connect you to him and maybe we can make something work." So, they connected me to the founder, and he tried to convince me of the business idea with a nice PowerPoint presentation and a Word document that he sent through, and as I was reading through, I thought "I really like the idea of it". It still is the idea behind BUX today as the vision of BUX has never really changed. That vision is still to make retail investing accessible, intuitive, and affordable for everyone. As I said, I really liked the idea from the get-go and I said, "well let's just start building and let's just do it!" and so I joined the small founding team and we just started building, hiring people, and trying to ramp up things. On the back of me joining, the guys from Orange Growth Capital also invested some seed funding in the company, and from there we were able to kick things off and begin the whole process. This was 10 years ago, and we never looked back. I guess that was the moment when we started the firm and I joined as COO, so I was responsible for everything not client facing which at that point involved setting up all the processes, procedures etc. We've grown quite a bit ever since, but that is basically the background story of us and starting with BUX.
“However, after almost five years, I started looking around and wondering if I should do something different as I was still relatively young”
You briefly mentioned the vision of BUX, but can you tell us a bit more about that vision and the product that you have developed and are developing?
We did pivot quite a bit. To take you on a trip down memory lane, we started in early 2014, initiating the building process and launching our first application, an MVP (minimum viable product) in September 2014. During that period, navigating the investment space, especially for retail customers, proved challenging due to accessibility issues. While smartphones were prevalent, the infrastructure for accessing the stock market was still cumbersome, slow, and expensive.
In response, we took a different approach and chose to launch with a derivative product exclusively, specifically an over-the-counter (OTC) traded product. OTC products don't go to the actual exchange but instead transact with the broker as the counter party. This decision alleviated the burden of exchange fees, clearing fees, and settlement fees, resulting in significant cost savings. We utilized a product known as a contract for difference (CFD), applicable to various assets such as stocks, indices, currencies, and commodities. However, the speculative nature of CFDs, allowing users to employ leverage, led to a product that leaned heavily towards speculation because if you give people the choice to invest with leverage, 80% of people will use the maximum leverage that they can.
We realised at some point that this was not fulfilling the full mission of the company because we also wanted to help people build wealth for the future. Around this time, regulations also evolved, notably with the introduction of MiFID II in 2018, which drastically reduced execution prices for real ETFs and stocks, so we pivoted. Responding to changing dynamics, we developed a new mobile application, BUX Zero, and our initial mobile application re-branded into BUX X. All of a sudden, BUX Zero quickly became our flagship product and in a short amount of time hundreds of thousands of customers were coming on board and there were hundreds of millions of euros in assets under management. So, we re-branded the CFD application to “Stryk” so it doesn't contain the BUX name anymore, and we re-branded the BUX Zero application back to BUX to finalize the pivot, changing our strategy tremendously. Now, the BUX applications are much more sophisticated mid to long term wealth building applications where people can invest in individual stocks and set up investment plans focused on building their longer-term future wealth.
Can you tell us about the challenges that you've faced and that you've overcome to arrive at where you are today?
There have been many challenges, especially in the earlier stages. These challenges differ somewhat. Finding the right team and the right people is crucial, particularly early on. At this point, delving deep to identify exceptional individuals is imperative. Joining an early-stage startup is a risk for every person involved, especially when the company relies heavily on external capital. In FinTech, dealing with regulatory hurdles is particularly challenging. Regulatory requirements demand a substantial capital level for running the business and making a meaningful impact.
Moreover, recruiting the right people willing to take the risk of reaching that regulatory compliance point is challenging. There are, of course, ways to do that, without the necessity to pay top notch salaries. We, for example, provided stock option plans to compensate people a little bit for the lower salary. However, you must find the right balance between the real capacity and the entrepreneurship of a person versus the actual skill set of a person. That's often very difficult because very knowledgeable people that have seen it all are very expensive and they know their worth and therefore they're less inclined to join a startup. At the same time, you of course still need a person that's entrepreneurial enough to still take a little bit of a leap of faith, and this is a significant challenge.
As I alluded to in FinTech, regulatory dealings, especially in the early stages, involve navigating policymakers and ensuring a division of roles across multiple people, all approved by the regulator to prove your legitimacy. The last major challenge at the beginning is raising capital. By itself it is a difficult thing as you only have an idea and maybe some product market fit which makes securing funding a formidable task.
Later on, challenges shift towards client interactions, reputation management, and brand building. Particularly during a pivot, transforming from a speculative application to one where people are comfortable entrusting a significant portion of their wealth involves building brand awareness. This becomes crucial, especially considering the application is on a mobile phone, and new users are not yet familiar with the brand. These later challenges are distinct and require a different set of strategies to overcome.
And going back to that early stage, at what point in time and what was it that cemented your conviction that you were onto something special with BUX and that it was actually something that was able to fulfil the needs of the masses?
I believe we were fortunate in a way. The moment we launched our flagship application coincided with the onset of the pandemic. People, confined to their homes, turned to investing en masse. The GME hype, centred around the GameStop situation with short squeezes and the surge in specific stocks, including AMC, gained significant popularity during that period. While there was a substantial demand for investment products, we already had product-market fit. Our offering was sophisticated, and we maintained healthy unit economics – a vital aspect I consider when evaluating a business. The pandemic, however, brought an unprecedented acceleration to our business. It felt like we were in a sweet spot.
So, when did we realize we had something unique? When that acceleration occurred would be the moment. However, I also acknowledge our luck in this. I believe it's cyclical. Historically, there have been periods like the dot-com bubble, where massive investments occurred, along with quieter times as well. Currently, it seems we're in a relatively subdued period. About three or four years ago, there was a significant boom, and I anticipate another run at some point. Predicting the future based on the past has its limitations, especially now as we're officially in a recession, the labor market is tight, and we're facing a unique economic situation with rising interest rates and persistently high inflation. We've never encountered such circumstances before. Despite the uncertainties, we were fortunate to be in a booming space.
“In contrast, we resemble a speedboat – nimble, agile, and capable of swift changes in direction.”
And if you look back, what are you most proud of in terms of what you have built and the impact that you've made with BUX?
It's twofold, actually. One aspect is more internal, focused on our own company. Throughout our growth, we've successfully maintained a vibrant and enjoyable culture. The word 'fun' has always been part of our company values because we believe it's crucial for people to have a positive experience when they come to work. Working for a company shouldn't just be about earning money; it should align with future ambitions and offer a good, enjoyable environment with social interactions. Despite the challenges that come with growth and professionalization, especially beyond 50 FTE, we've done a tremendous job in preserving this fun culture, and that's something I'm genuinely proud of even today.
Externally, the pride stems from our ability to build a product where clients are genuinely doing well. Our application allows people to accumulate wealth effectively, maintaining a low-cost structure. For example, we provide the highest interest rate compensation among all Dutch financial services companies. Overall, I'm proud that we continue to disrupt this space, creating an opportunity for individuals to fare better with us than with other financial services companies. While investing isn't for everyone due to capital constraints, we serve as a great solution, particularly for those with even a bit of spare cash to embark on their (first) investment journey. Opening up this market for such individuals is something I take pride in.
“Overall, I'm proud that we continue to disrupt this space, creating an opportunity for individuals to fare better with us than with other financial services companies”
You mentioned being disruptive in your market, what is the most exciting thing happening in your market right now?
After February 2022, when Russia invaded Ukraine, the market underwent significant changes. Previously, there was a massive influx of capital into the market, almost as if there were unlimited funds for venture firms, especially in 2020 and 2021. We also benefited from this trend, conducting an extensive funding round in April 2021.
However, the market dynamics have completely shifted now, with a pronounced emphasis on pure profitability. Businesses are reevaluating their models to ensure sustainable profitability. This shift is a substantial difference in the market landscape because the era of unlimited cash seems to have ended. Now, companies need to focus on survival independently.
This transformation is applicable to us as well. As a scaled-up company, we were previously concentrated on aggressive growth, expanding to eight European countries. However, the current scenario demands a shift in focus. We need to concentrate on nurturing our existing customer base, optimizing marketing investments where they truly matter, and ensuring swift returns. This represents a substantial shift from our previous approach.
The second aspect, albeit less glamorous, pertains to regulatory changes. There are considerable shifts in European regulations aiming to create a more level playing field. Practices that were commonplace, like certain payments or inducements, especially prevalent in German companies, are now being scrutinized. Regulators are increasingly taking a firm stance to ban such practices, aligning with the goal of protecting retail investors more comprehensively. These changes mark a significant evolution in the investment space.
“We need to concentrate on nurturing our existing customer base, optimizing marketing investments where they truly matter, and ensuring swift returns.”
How do you keep up to date in your sector? What do you do to make sure that you know where you're going?
I believe in the imperative of continuous innovation to stay ahead, especially because we are compared to more established financial services behemoths. Envision them as massive oil tankers, chugging along in a set direction. They possess significant capital, ample cash reserves, and a substantial legacy. However, manoeuvring them in a new direction becomes an arduous task due to their colossal size. In contrast, we resemble a speedboat – nimble, agile, and capable of swift changes in direction. The advantage of a speedboat lies in its agility; it can outpace larger vessels in specific aspects. However, maintaining this agility is crucial, demanding a commitment to innovation and a constant challenge to the existing norms.
Allow me to illustrate with an example. Recently, recognizing the increased attractiveness of certain bonds as interest rates rose, we forged a strategic partnership with BlackRock. This collaboration resulted in the introduction of iBonds. Through an exchange-traded fund, users can invest in a selection of bonds, each with a fixed maturity date. This initiative exemplifies our commitment to providing our users with exposure to innovative financial products.
Our approach extends beyond launching new products; it involves continuously introducing features that subtly shift the paradigm for our clients. It's about consistently challenging ourselves, innovating, and adapting to evolving market dynamics. This ongoing commitment is our strategy to not just compete but to lead the game.
You mentioned the changing economic environments globally and in your sector. What would your advice be to a leader in your position going through such economic challenges in the market for the first time in terms of leadership and how to deal with these conditions?
From my standpoint, it demands a different leadership style. It might seem straightforward when the market is thriving, and there's surplus cash allowing limitless growth and autonomous decision-making. During such times, it's gratifying to delegate more, offer autonomy, and accommodate mistakes within the organization. However, this phase, while enjoyable, has its downside as it tends to make people complacent. This realization often dawns when the market undergoes a shift.
It affects both individuals and the organization significantly. Consequently, you need to adopt what I term a 'military approach'—a more top-down, direct leadership style that reduces autonomy and focuses on steering the ship in the right direction. Change is typically unwelcome, especially when, as part of strategic decisions, you're divesting a section of the business. It's a painful process as people have developed close relationships and have grown accustomed to a certain working environment.
However, for the long-term sustainability and focus of the firm, it's essential not to spread too thin. The decision to concentrate on what works well and eliminates distractions from smaller side businesses is crucial. Explaining this to the team becomes a challenge because you're dealing with emotions and ingrained work habits. As a leader, you must implement a more authoritative top-down approach, setting firmer KPIs and OKRs, ensuring accountability and responsibility.
When reflecting on 2020 and 2021, it's imperative to recognize that those were extraordinary times, not the norm. The current business landscape, emphasizing business fundamentals and economic principles, is more aligned with the standard way of doing business. While luck played a part in the past two years, the present serves as a reality check.
So, we have covered the journey of the organization but you yourself have had your own journey because as you mentioned, you started as the COO/Co-founder and then moved to the UK to set up the UK entity, and have now taken over the reins for the entire company. How has that journey been for you in terms of your own leadership and how has it changed given the roles that you've taken on?
It's interesting; it's easy to say, 'yeah, it has all been beautiful, massive changes’ but all this growth happened organically to a certain extent. When I moved to London, it was because we acquired a London-based investment firm. It was regulated, and the regulators wanted us to take control, ensuring there was a person on the ground responsible from the group's perspective. So, I moved to London to take on that role. Effectively, it didn't change my role in the Netherlands. I remained the COO as well. I effectively did two roles simultaneously.
What changed, obviously, was when I took over the reins of the entire group. But that was more of a long transition period. The announcement was made in April 2021, alongside our funding round, but the change already began in May 2020. We had almost a year as co-CEOs running the firm in the background before taking over full time. It grew a little bit naturally because, as a FinTech firm, a large part, especially being a D2C company, is client-facing. Yet, the bulk of the business was operations related to offering the investment service, so around 60-70% of the company was already under my responsibility. The previous CEO was, at some point, more responsible for the marketing side of things, and at some point, it became easier to handle.
I think it was also a natural transition and it wasn't disruptive. What I find impressive is that the founder and CEO back then noticed it made sense to pass the reins to someone else. He's a very creative person with great ideas that can take a company from zero to 100. After that, you need to professionalize, formalize things, establish management structures, layers, and governance. That's not what he likes or is really good at. He's more of a visionary person. It was a natural move towards me, having a significant banking background, having worked for a large corporate, understanding how to set up a professional structure ready for substantial scale from 100 to 1000. I still find it impressive that he recognized this need as a founder, dealing with his 'baby' up until today. So yes, it's pretty big from that perspective, but, as I mentioned, it grew organically to a large extent.
“He's a very creative person with great ideas that can take a company from zero to 100”
And on a more personal note, if you could choose a superpower, what would it be and why?
I have received this question a couple of times, and I have a very stupid answer but if I would be able to, I would like to be able to stop time. And the reason is that I've got so many things to do and sometimes I think to myself “I just wish I could stop the clock right now and get this whole thing done.” and then click a button to continue time again. That would be amazing so that would be my superpower!
Do you have any books, podcasts, or other content that you find valuable and draw your inspiration from that you can share with us?
I do have a few books, and I always update the list. There are a few books that I believe are really worth reading. I have 'Atomic Habits' by James Clear, a great book. Also, ‘ReWork’ by Jason Fried. I think these are the two that I would recommend people to read. They are largely about the mindset of getting things done and reshaping the way you work. It's about getting back to the foundation of what really matters. So, they are more of a mindset type of book than one providing specific tips on how to solve a particular situation, for example.
I also like Ben Horowitz's book, 'The Hard Thing About Hard Things.' It contains more specific tips to deal with certain situations. But in general, having a certain mindset works tremendously, at least for me. That's why I would always recommend books like these.
