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At Lightbird we have long been convinced that payroll will be the next big thing, the next frontier, for open finance and fintech in general. And when we first met Max, we knew that we finally found someone who, like us, was obsessed with this topic.

The information contained in payroll data, e.g., one’s earnings, employment status, identity, retirement and savings contributions, tax withholding, etc. is critical to access essential financial services such as credit, mortgage applications and insurances as it provides a more holistic view of a consumer’s financial situation. Yet, payroll systems are one of the last business systems without a modern API infrastructure: for lenders, verifying payroll information still relies on phone calls and other manual processes vulnerable to fraudulent actions (costly and inefficient) — for instance, more than 1 in 10 adults in the UK still think it is “reasonable” to exaggerate income on a mortgage application; for users and loan applicants, accessing their payroll data requires to individually log into their payroll accounts, download and share relevant information electronically or to even sometimes physically bring the documents to the next local credit branch (inconvenient and unsafe). Ultimately, these archaic processes defer and deter objective lending, renting and insurance decisions and represent great barriers to universal financial access.

Mistho, as one of the first European players enabling access to employee payroll information via a standard API, contributes to, not one, but two revolutionary movements:

• First, it implements and drives the idea of open payroll in Europe, which allows consumers to regain full control over their HR and financial data and to share it directly with third parties. Just as open banking solutions improved consumer access to their personal account data, mistho wants to do the same with HR and payroll.
• Second, it simplifies access to financial services and redefines individual credit-worthiness by ensuring access to real-time, reliable and consumer-permissioned data independently of the payroll systems in which they are hosted.

And so, we could not be more excited to accompany Max and Shervin on their mission towards more financial inclusion.

Here are a few other reasons why we decided to lead the €3M seed investment in mistho alongside Flash Ventures, GFC, FinVC and Nauta Capital:

🌊Open payroll or an ocean of opportunities: We talked about achieving more financial fairness for consumers, but by digitizing and facilitating the access to payroll data, mistho also provides immediate value to lenders, landlords, insurers and banks — think of processes such as identify, income and employment verifications, or also more generally of more precise KYC and risk profile definitions. Beyond this initial use case, we also believe that mistho’s solution and built integrations to payroll providers could be applicable in a variety of other exciting areas — think for instance of direct deposit account switching for neobanks.

💎First mover in Europe: Mistho is one of the pioneers providing a simple, easy-to-implement solution for income and employment verification in Europe. While players like Atomic (2019, $69M), Argyle (2018, $78M) and even Plaid (2013, $734M) are betting on open payroll in the US, we believe that the payroll market remains a massive opportunity still largely underserved by European startups.

🏆A “go and get-it” mindset: Shervin and Max are not at their first venture. And as they met to work on mistho, their respective roles just came naturally: Max = the Why (we told you, he is obsessed with the problem), Shervin = the How (you should once quiz him about History, the guy is a walking encyclopaedia!). Not only are they complimentary in their roles as founders, Max and Shervin also share a love for home-made oven-backed pizzas and more importantly an unbeatable work ethic, execution power and commitment. Proof is, in the past 9 months only, the mistho team was able to build a product able to cover more than 70% of UK employees.

We are incredibly proud to be backing mistho leading the way to new standards in dealing with payroll data in Europe and universal financial access, and look forward to continue working closely with the team as they expand in the UK and other European markets.

Find out more about mistho on their website, or read here and here for more information on the funding round.

Our journey towards more financial inclusion with mistho was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

Following up on our previous piece, this second article draws closer on CFOs’ relationship to tech. Read on to find out more about the digital adoption in finance, key buying criteria and what we consider as key success factors for players in the CFO tech stack space.

📈 The incremental digital adoption of finance teams

The COVID pandemic has been the catalyst for the acceleration of digitization in many industries. Yet, when speaking with CFOs and finance teams working in startups, scale-ups and enterprises alike, no one seems to have experienced an accelerated digital adoption in their respective teams or department: “not much changed really… I would see digital adoption as rather incremental in finance” said Niklaus, Lead Business Controller at Swisscom. And indeed, digitization in finance has been rather progressive and slower compared to other industries, leading some observers to advise CFOs to better adopt digital in finance or ”get left back”.

So is there no way to accelerate the rate of digital adoption in finance? For our interviewees, much has to do with the overall company’s strategy. In startups or scale-ups, the pandemic did not have much of an impact “because we were anyway already digital-first!” as stated by Bernhard, CFO at Carvolution. In large enterprises, where it usually takes time for new technologies to make their way through the corporate bureaucracy, the willingness to digitize finance and necessary support for CFOs to lead the digital transformation has to come from the top. There are also other drivers than the pandemic, such as the advances in technologies like AI / ML, that could accelerate the rate of digital adoption in finance in the upcoming years. One of these drivers repeatedly mentioned in our interviews was simply the change in the finance workforce with the arrival of younger, more tech-affine talent.

✔️ CFOs’ buying criteria — The must-have’s of every tech tool

With respect to trying out new tools, the finance professionals we spoke to are generally open, but do not want to spend too much time optimizing their tech stack. Here’s a short list of key criteria they will look out for when considering a new tool:

• Integration with existing stack: Data that do not reconcile, totals that do not add up and numbers that seem to “just pop up” out of nowhere is a great source of frustration for financial professionals. When adopting a new tool, the number one priority is that it does not disrupt the existing work and data flows within the finance team and its systems. Hence a seamless integration with the current stack is essential to any buying decision.
• UX / UI: In finance departments, Excel is still the go-to tool, despite all its limitations, just because it is too convenient, flexible and everybody knows how to use it — “If you’re going to build something to replace Excel, it better be 100X better than Excel because 10X ain’t gonna cut it” tweets Siqi Chen who is building Runway (USA, 2021, $4.5M)* to rethink the role of financial data in any organization. While finance teams would be open to try better tools, they don’t have the time to learn new user skills. For Boris, CFO at SMG “we just really cannot lose time with new technology”: intuitive, no-code interfaces that are fun to work with are key.
• Speed of implementation & customer service: linked to the above, adoption must be as easy as 1,2,3. This includes a seamless and rapid implementation and high-quality customer service when required.
• Return on Investment / Price: this is especially true for SMBs with limited budget to spend on different tools. The costs of a new tool must be justified by the value it brings (e.g., through faster, more reliable processes).
• References / user community: The CFO is a large and active community, often underrated by startups in their go-to-market strategies. Yet, many interviewees cited their community as the go-to source for new tools (hint: cold LinkedIn outreaches from providers are not well received!). References from peers and the user community are an important factor in the final buying decision.

*(Country, Founding year, Funds raised)

Medha Agarwal and Urvashi Barooah wrote a compelling article on buyer personas in the finance tech stack if you want to dig deeper in this topic.

🚀 Success factors for players in the CFO tech stack space

We summarized the key findings and highlights of our conversations with CFOs on their relationship to tech. Based on those conversations and additional research, we want to conclude this article with what we at Lightbird believe could be key differentiative and success factors for players willing to create true value for finance teams and potentially win in a crowded market.

Often cited characteristics of future winning finance tools will ensure to fill the common gaps of existing ones, e.g.:

• ensure seamless integration with other systems and apps, potentially allowing for real-time features
• come in a user-friendly, intuitive interface allowing and offering best-in-class customer support when required
• facilitate collaboration across teams beyond the finance department (e.g., cloud-based solutions for data collection and reconciliation)

All the above are critical, however in our opinion not necessarily differentiative in a highly competitive environment. We consider that true value-creating tools would also be able to:

• allow for true customization — as complex areas such as forecasting, scenario and risk modelling where tech can better support CFOs are fundamentally specific to each business, features that allow flexibility and customization over standardization are preferred.
• make complex things seem simple — tools should come with a neat and intuitive user-interface, yet are based on very nitty-gritty details (that can be viewed if necessary) and able to reliably process, integrate and reconcile complex data.
• ensure more data governance & transparency: data is the core of every finance activity and so ensuring that it is processed securely, reliably, transparently and in compliance with any obligations is key. Ultimately, it comes down to helping finance professionals better trust the technology and data they work with — so “I can sleep better at night” concludes Fabian from The Creative Club.

As a final note, we would like to thank all CFOs and finance professionals who accepted to spend some time with us to share insights and reflexions about their work, challenges and tech habits. We hope we were able to give you a glimpse into those great, honest conversations through these articles.

Thank you for reading and as always, we welcome any comments and questions on the topic. Are you a founder building something or just generally interested in this space? We’d love to have a chat with you, feel free to get in touch with us via Email. Also, sign up to our newsletter to stay updated on everything happening at Lightbird 🙂

Finance 2.0: A Conversation with CFOs on their Relationship to Tech (II/II) was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.