January 20, 2023

Three top European founders talk profitability

Bolt, Refurbed and Babbel share how they are thinking about growth versus profitability

Estonian mobility giant Bolt are one of the CEE startups the IFC has invested in. Credit: Bolt

As markets continue to squeeze tech companies, and with VCs less willing to dish out cash, Europe’s biggest private tech companies have abandoned the "growth at all costs mentality" in favour of working toward profitability.

One of Europe’s best-known private tech companies, Swedish buy now, pay later unicorn Klarna, told Sifted in November that, despite mounting losses and a hefty slash to its valuation, it had begun to make “huge progress” towards profitability, which it expects to reach in the second half of 2023. 

Meanwhile, listed online food delivery giant Delivery Hero, which suffered a 30% plunge in its stock price in February 2022, reported in August that the decisions it made last year to reach profitability are slowly paying off. 


Startups have also had a change of heart. With news of fresh layoffs being announced every other week, startups big and small are stalling growth, spending frugally and focusing on making their business models more sustainable to prove to investors that they can survive the downturn.

Given that profitability is also front of mind now for VCs, we asked three scaleups how they’re approaching profitability this year and the steps they’re taking to get there. 

Markus Villig, founder and CEO of mobility company Bolt

Estonia’s Bolt has 3,000 employees, has raised $2bn to date and was valued at €7.4bn at its last funding round. The company was bootstrapped for its first four years, which Villig said helped it be more frugal and spend money cautiously.

Markus Villig, Bolt cofounder and CEO

With marketplaces like ours, you cannot decouple growth from profitability until you reach a massive scale, as each of our products requires upfront investment on two levels. 

Firstly, it takes hundreds of engineers to build out the technology for customers, partners and marketplace management, which means you need to do billions of euros of volume to cover your global fixed costs. Secondly, you need to build up a high density of drivers, restaurants or scooters in each city from scratch. Some metropolises require over €100m of investment before you reach that critical mass and the economics become sustainable.

As Bolt has become one of the largest European mobility companies over the last year — we have five products across 45 markets — we now finally have the scale to become profitable. [Bolt did not respond when Sifted asked how many of these markets are profitable.]

Bolt's strategy

The hard tradeoff in becoming profitable is expansion versus growing market share. We generally double down on cities where we are already the leader, rather than launch new ones. Likewise, we prioritise launching new products in cities where our existing ones are already doing well — for example, bringing scooters to a market where we're already the leading ride-hailing player and vice versa.

Unlike most companies, market size is, surprisingly, a less important factor for our decision-making. Mobility and food are the largest categories of consumer spending in most countries, so we believe that similar to ecommerce, these massive categories can keep compounding at strong growth rates for the next two decades.

Building a sustainable organisation

We bootstrapped Bolt for the first four years which forced us to be extremely frugal. Counting every euro has turned out to be a strength, as we didn’t have to lay anyone off during the pandemic. We also raised our largest funding round yet at the start of 2022, which means we have cash in the bank to reach profitability.

For founders switching their strategy to focus on profitability, who need to implement large changes, I would advise them to make them quickly. Most founders make the mistake of postponing hard decisions like downsizing — or not doing them to the extent needed, putting the whole company at risk. When markets change, the companies that adapt quickly will survive.


Peter Windischhofer, cofounder of refurbished electronics marketplace Refurbed

Austrian startup Refurbed is the DACH region’s fastest-growing marketplace for refurbished electronics like phones, laptops and tablets. It last raised in 2021, when it bagged $54m in Series B funding led by Finnish VC Evli Growth Partners and US-based Almaz Capital. 

In May 2022, the company made a decision to focus more on profitability than growth by cutting marketing spend (Windischhofer declined to say how much). And while Refurbed is still not profitable, he says more price — and planet — conscious consumers put the company in a strong position to raise capital again.

Peter Windischhofer, cofounder of Refurbed

The shift from investors focusing on growth to profitability 

For five years, not a single investor asked me when or how we would be profitable. I think that’s concerning, right? It's characteristic of the craziness that happened in the last few years in VC investments. Now it's turned completely and everybody only asks about when will you be profitable. 

From my point of view, it was irrational to only look at growth [in 2021], but it's also very irrational to only look at profitability now. 

The company took the decision to prioritise profitability days after leadership meetings

[We] quickly took the decision because we have a very good understanding of our business and we thought that we would know what would happen if we actually reduce marketing spend. 

Interestingly, we hit exactly what we projected [we would] if we changed marketing spend, which is great. But it's also the fruits of the work over the last few years to build a very good understanding of the dynamics of our market. 

However, it wasn’t the macroeconomic environment that made the company shift, but investor sentiment 

We sell products that will always be in high demand because people simply cannot live without smartphones. 

So the change we made [to thinking more about profitability] was purely based on investor sentiment. We're on the best track to becoming profitable, but we’ll require additional investment and so we have to adapt our planning to show them what they want to see.

We're going to raise another round of capital, and we think we're in a very good spot because the macro trends of affordability and sustainability are very strong tailwinds. That's very attractive for a lot of investors. I think we're a very good candidate for a strong growth round. 

Arne Schepker, CEO of language learning app Babbel

Germany’s Babbel was due to IPO last year, a prospect which ended up getting scrapped, and while the company still wants to go public, it isn’t exactly the best time to do so. This doesn’t mean that Babbel is stuck in a rut, however. The 1,000-person company says that it’s growing double-digits in revenue and is still hiring. To date, Babbel has raised $33m in VC capital and was valued at €1.2bn in September 2021.

Arne Schepker, CEO of German language learning app Babbel

Babbel is one of Berlin’s very early tech startups — it was founded before the big funding hype of 2015 — which meant the company only took funding when strategically needed. Our Series B allowed us to expand and scale internationally, and our Series C allowed us to invest in cracking the US market, which is now our largest one globally. 

Babbel is generally a cash-generating or cashflow-positive business. That’s not technically IFRS [International Financial Reporting Standards] profitable but it allows us to fund our investments into innovation and growth without external capital. We have more cash on our balance sheet than we raised in our funding rounds. That’s a very strong and sustainable position to be in, especially right now.

Optimising for growth 

We invested tens of millions into cracking the US market, scaling our B2B business and growing quickly during the first Covid lockdowns when online language learning boomed. Those investments have all paid off or will still pay out over time. But those investments don’t mean that we prioritise profitability over growth in our mature markets. We are a growth company so that’s what we optimise for.

At the same time, we are very disciplined in our customer acquisition costs, never overspending on any single new customer. That discipline automatically makes a digital subscription business more profitable over time as it scales. 

Language learning is not a winner-takes-all market — this is not grocery delivery or food delivery, this is a massively fragmented education market. So we see no need to pay more for any new customer than their expected lifetime value, or to go deep into our cash balance and crowd out the market. 

This sustainable growth focus seems to get more appreciation these days than it used to as investors seem to be looking for sustainability, rather than growth at all costs, in the businesses they back.

Miriam Partington is Sifted’s DACH correspondent. She also covers future of work, coauthors Sifted’s Startup Life newsletter and tweets from @mparts_

Eleanor Warnock

Eleanor Warnock was Sifted’s deputy editor and cohost of Startup Europe — The Sifted Podcast. Find her on X and LinkedIn

Miriam Partington

Miriam Partington is a reporter at Sifted. She covers the DACH region and the future of work, and coauthors Startup Life , a weekly newsletter on what it takes to build a startup. Follow her on X and LinkedIn