Once upon a time there was a start-up that came to the bank in search for funding …


During 2020, some important equity puchase of traditional financial institutions (i.e. banks) into dynamic (and sometimes quite young) start-ups / fintechs took place not only in the Czech Republic but also worldwide. As this seems to be an interesting trend nowadays we decided to take a closer perspective on it. We would like to know not only how it actually works and in what conditions, but also where is it heading, how could the current products and services be improved this way or what could have been done differently. 

Therefore, we have decided to prepare for you a mini-series of interviews on this topic – talking with both counterparties of cooperation mentioned. Today we are going to talk about it with Patrik Nový, Director of KB SmartSolutions – a subsidiary of Czech bank Komerční banka. Its aim is to make investments into financial and technological start-ups, i.e. fintechs, and to create an ecosystem of partnerships between these two worlds. KB SmartSolutions pursues to connect the best of both seemingly inhomogeneous worlds – corporate and start-up and to build mutually beneficial cooperation between them. The main goal is to bring services and products of the digital age to clients in a way that they can use in a comfortable, simple, and smart way.

KB SmartSolutions, established in early 2019, quickly marked its place on the market, made itself known, and defined itself in relation to various seed starters, accelerators, and venture capital fund. In the second half of 2020, we can talk about three successful equity assets into start-ups of Komerční banka in the Czech Republic – Upvest, Roger, and Lemonero. Also not forgetting partnerships with Fakturoid, Trivi, BudgetBakers, Receeve, and many more.

Why would you even think of cooperation with start-ups? 

The effort to enter into conversation with start-ups leads to a single goal and that is to create a great offer for our clients – not only the current ones but also the potential ones for example the new generation. Simply we can say that we are trying to develop innovative products and services – that perfectly meet the needs of clients and that is, in an ideal case, not offered by anyone else on the banking market.

At the same time, start-ups in large corporations are a way to systematically innovate, accelerate development and avoid the often binding rules of the corporation. We are building the bank of the future and we simply cannot discover all the smart solutions by ourselves.

How do you select the field/specialization of start-ups in the first place? And subsequently, how do you choose individual start-ups already suitable for collaboration?

At the very beginning, we meet people from the bank and talk to them about their pain points and what is holding them back in achieving their goals or simply what do they lack to be able to meet the clients’ needs. Based on these discussions, we then look for partners suitable for cooperation. When we manage to find such a partner and there is interest on the other side as well, we think about how to help this start-up to develop its business model so that it becomes mature enough for the bank and mainly for our clients – that is, if we are talking about equity purchase. We can also work together through a distribution partnership or in another way – the possibilities are quite broad.

Why did you choose Upvest, Roger and Lemonero? Why are they interesting for Komerční banka and what is their true value?

First of all, all three companies have a unique solution that directly meets some of the current needs of our clients. They created their solutions in areas that Komerční banka itself has been focusing on for some time and has been thinking about how to move forward. And also all three companies operate in segments that have been operating in other parts of the world for years. During their existence, these companies have proven that they know how to do it – they have a functional business model and great client value proposition, which in the scaling phase can benefit extremely from a partnership with a bank in the Czech Republic and also abroad. At the same time, we can say about all the founders of these three companies that they truly believe in their solution and fight for it by all means and do not easily give up  – just like we at KB SmartSolutions and Komerční banka.

When we compare the way start-ups and corporations work and their culture, do you think that this connection will also be reflected in the fact that these partners tend to adapt to each other – more or less? Do you think that the start-up on one hand will adapt to some corporate rules and the bank, on the other hand, will learn to be more dynamic? What does Komerční banka want to learn from these start-ups?

In general, our goal is not to overwhelm start-ups with rules and restrictions. Rather than that, we want to find them the best fit within the bank and provide them with what they lack and what can push them further. Both the bank and the start-ups are, of course, aware that financial services are a regulated industry and reputation is absolutely crucial for the bank (actually for any financial service provider). What we strive for a lot is also to transfer part of the culture from the start-up to the bank, especially; flexibility, speed, and the desire to constantly innovate. We also want to infect the bank with so-called start-up enthusiasm😊

When you think back about the negotiation process, is there anything you think you could improve and do differently in future negotiations?  

I believe that one of the important parts of creating strategic partnerships is to get to know each other really well. Our investments are the beginning of a relationship for many years. So my lesson from negotiating process is to actually devote enough time to build a strong relationship the right way from the beginning.

Equity purchases of Upvest, Roger, and Lemonero vary. Komerční banka acquired a share of 18.9% in Upvest, 24.9% in Roger, and 10.9% in Lemonero. What is the reason behind and do you plan to increase the equity in the future?

The amount of the acquired share always depends on a mutual agreement with the owners of the fintech. The final share amount is, of course, preceded by numerous discussions. For Upvest and Roger, it is planned to increase the ownership share in the coming years with the possibility of acquiring a majority, while at Lemonero we are still discussing this possibility.

What is Komerční banka’s goal for acquired shares?

In any of our equity purchases, we do not plan on a fundamental change of the business model. We aim to help them in their further development, growth, find other business opportunities together, and scale the business as much as possible. We want start-ups and the bank to live side by side in symbiosis, enrich each other and build new products, services, and business models together. For start-ups, we want to find within the bank what they currently lack and can move them forward, i.e. specific expertise – for example in international payments, risk scoring, operation, distribution, help negotiate with suppliers, address security, etc. We just know a lot of things over the years that the young innovative parties, great in product design, still need to figure out.

How is actually going with these cooperations? How about their connection in the form of Open banking?

For all equity purchases, the aim is to link the product/service they offer with the services offered by the bank – in other words, to find and maximize synergies and integrate them into the bank. The longest time has passed since the signing with Upvest in July 2020 and the cooperation has been moving forward by huge steps. This only proves that crowdfunding is a functioning business model. Komerční banka is already actively offering developers funding through the Upvest platform. The goal of Upvest and Komerční banka is to ensure that this crowdfunding platform not only serves to finance development projects but also can have a usage in socially beneficial projects as, for example, construction of photovoltaic, wind or biogas power plants.

At Roger, we also work on interconnections in several areas and joint strategic development of other products and services. The first jointly launched product is Roger Factoring, which we offer to our small-business clients. We are currently preparing an offer in the area of supply chain financing and other segments are in discussion.

At Lemonero, the entire amount invested by Komerční banka goes straight to the development and further growth of this fintech. The main area of cooperation is the financing of small and medium-sized e-shops in a modern and fully digital way. We also want to cooperate on foreign expansion and significant joint growth.

What is the role of KB SmartSolutions after the equity entry?

KB SmartSolutions remains an important part of the cooperation between fintech and the bank even after the signing. Both before and after the signature itself, we try to improve the model of mutual functioning and scale the business as much as possible. Right from the beginning, each of our partnerships is taken care of by a Company Developer of KB SmartSolutions, who, as an experienced manager, helps the founder of fintech to further build the company’s relationship with the bank and help the company to grow. KB SmartSolutions works de facto as a representative of KB to fintech and fintech to KB. Even in the post-transaction phases, we work on the implementation of joint ventures in all areas and we also support our own performance and sales of services and products. All these aspects remain equally important even after the actual signing.

What does KB SmartSolutions plan to focus on after such a challenging season?

We are convinced that there are many great projects in the Czech Republic with which we can imagine cooperation in the future, whatever the form of this cooperation. We will now focus primarily on making our current partnership commercially successful. However, this does not mean that we do not have other areas and acquisitions in mind that we would like to focus on. In the near future, we would like to add one investment in retail fintech. And in the next round we already count on moving beyond the borders of the Czech Republic within our cooperations.


You can find more information on www.kbsmart.cz.