October 5, 2021

Holvi plans credit card launch, fundraise and IPO after split with BBVA

Holvi lost a big chunk of customers and 50% of its staff after buying itself out from BBVA. But the SME banking startup is making more money.

Maija Palmer

6 min read

Holvi lost a big chunk of customers and 50% of its staff after buying itself out from BBVA earlier this year. But according to founder Tuomas Toivonen, the small business banking startup is now making more money than ever.

The recent success is a reminder that operating as an offshoot of a large company is not always a good thing for startups, and indeed can often make them weighed down with bureaucracy and slow decision making.

“When you're an independent company, you of course have more flexibility. And when you're team-owned and run there is no inertia in decision making. You can make big decisions fast,” Toivonen told Sifted.


Troubled two years

Founded in Helsinki in 2011, Holvi was acquired by Spanish bank BBVA in 2016. It had built up a client base of more than 150k micro-businesses in Germany, Austria and Finland and was planning expansion across Europe.

But then in 2020 the company made an ill-timed push into the UK market and was forced to pull out of the country only six months later citing Covid-19 and Brexit.

At that point, BBVA was rethinking its own neobank strategy as well and in January it shut down Simple, its US neobank. At the same time, it also sold Holvi, in this case selling it back to Toivonen.

A shock

This was a shock to Holvi, which has since gone through a brutal transformation. Toivonen took over the CEO role from Antti-Jussi Suominen, who stepped down. It halved the workforce from 150 to 75, reduced its cash burn by two thirds and increased monthly revenues by 40%.

We're half the size of the team that we were in January.

“We're half the size of the team that we were in January,” said Toivonen.

But he says that as a smaller company and without BBVA in charge, Holvi has been able to be more nimble. "It is amazing to be able to grow revenue by over 40% with way less marketing spend. This is a much more efficient company,” he said.

The rise in revenues came because Holvi stopped allowing customers to open bank accounts for free. You now have to pay €6 to €12 a month for the Holvi service.

60% of people closed their accounts. But the ones that remained were 20x more valuable.

“Not all customers are super excited about us putting a price on a service that was free before,” admits Toivonen. But he says churn wasn’t as bad as the team had been expecting. “We were prepared for a much stronger negative response, and we were positively surprised.”

Some of 17% of people on free accounts opted to close them rather than pay.  But, says Toivonen, the customers who decided to stay tended to be more valuable. In fact, they were 20x more valuable overall, so doubling down on these engaged users was worth the gamble.

Newfound freedom

Now the company is planning to use its newfound freedom to launch a number of new products, such as a credit card in addition to the debit card it already offers users.

Holvi has focused on banking services for freelancers and small businesses, providing them with tools like cash management and expense claims. Being able to offer credit to freelancers and sole traders was a missing part of the service offering, says Toivonen.


After that, the company is looking at offering receivables financing for small businesses. Some 20% of small traders’ invoices are paid late, causing cash flow problems, so financing options are something this customer base needs.

Are you looking to just stay for 18 months to get your earn-out or are you still interested in building the business?

Toivonen is reluctant to criticise his former parent company BBVA. But reading between the lines and observing the pace of change at Holvi since the split, corporate bureaucracy had slowed down many projects.

He said that being able to make big decisions fast “of course helps” now.  “That's not to say that BBVA would be particularly slow in decision making but all big companies are. It's just completely unavoidable,” he said.

People close to the company told Sifted there had also been tension over BBVA spending too much on marketing and not enough on developing the technology and product offering.

Toivonen would not comment on internal matters. But he told Sifted that founders should be clear about what level of involvement they would continue to have with their startup after selling it to a corporate buyer.

“Are you looking to just stay for 18 months to get your earn-out — 'rest and vest' — or are you still interested in building the business? If it is the latter, then you may find corporate life too frustrating,” he says.

No regrets

That said, Toivonen says he doesn’t regret the deal with BBVA.

​​“The fintech world in 2015 was very different from what it is today,” he says, pointing out that Holvi was one of the very early pioneers in fintech, founded at a time when fintech wasn’t yet commonly used as a term. (People used to think Toivonen was talking about Finn-tech, in reference to Holvi’s Finnish heritage). It wasn’t clear in 2015 that neobanks could mount such a strong challenge to incumbents.

“You make the decisions with the information you have at the time. So in that sense, there are no regrets,” he says.

In some ways, being part of a large corporation did help the startup.

“Maybe something that not many startups think about, but being part of a multinational financial institution we had to build a very strong culture of compliance and governance. We are closer to being a full credit institution in terms of our governance and regulatory maturity. It’s that we were able to leverage directly now in rolling out credit products — all the required risk frameworks were already in place,” Toivonen says.

Big new plans

There are no immediate plans to launch into new markets, with Toivonen preferring to double down on the German and Finnish business. But a return to the UK market may be on the cards sometime in the future. Toivonen is clear that his ambition is still to make Holvi a top-3 player in small business banking in Europe.

Our ambition is to build a leading player in small business banking in Europe.

“It is not mission accomplished for small business financial management. It is still a puzzle, and there is so much to do still. We have a nice presence in the German market and I would say we are the leading business neobank here in Finland. Our ambition is to build a leading player in small business banking in Europe and effectively be the leader in a number of key markets.”

For this, “indie Holvi”, as Toivonen likes to call the company, will need to raise some VC money again, and talks on this are already underway. When a company has been bought and re-spun out, it’s hard to know what one would call the next round — a Series A again? The company is currently solely owned by Toivonen’s holding company Keru Fintech Investments.

And if they bring VCs in, those investors will have their eyes on a future exit. But it won’t be another sale to a corporation, says Toivonen. This time they will aim for an IPO, most likely within five years.

This article has been amended. We previously wrote that Holvi lost 60% of its customers when it ended free accounts. What Holvi actually meant was that of the people who contacted them after the announcement about terminating free bank accounts, 60% opted to leave.  The number of lost customers was17% of overall free account holders.