To talk about numbers, how many inquiries do you receive per day?
We close a few hundred million per day. Even while we are recording this podcast, many real estate financings have already been concluded on Europace today. Exactly.
How much profit did you make during the peak years?
At the peak, it was 48 million EBIT in 2021. The company was worth several billion on the stock market at that time.
Yes. Yes. At the peak it was worth nearly 4 billion. Yes.
You are the largest shareholder. You were a billionaire.
But better than nothing, I always say.
Yes, exactly. It's not bad.
Exactly.
Mittelstars, the podcast for medium-sized businesses and entrepreneurs. Honest, direct, and unfiltered. By and with Markus Seidel.
Hello and welcome to a new episode of Mittelstars. My name is Markus Seidel and today's guest is Ronald Slabke from Hypoport SE, the CEO and largest shareholder of this listed company. He didn't start as an entrepreneur but came into this industry through a management buyout at Dr. Klein and revolutionized it with his technology. Here are some numbers: 100 billion in brokered loan volume, over 2,000 employees, over 20 acquisitions, and he tells us the wild story of Hypoport and especially how AI could change loan brokering in the future.
Welcome, Ronald. Nice that you are here.
You are very welcome. Have you worked on it yourself? Can you briefly tell us about yourself?
Of course. I'm a family man. Yes. I'm extremely happy, it gives me a lot of joy.
I would say I'm a full-blooded entrepreneur, been at it for 30 years, now married. Recently I've been doing more sports again.
Okay. Are you from Berlin?
I'm not a native Berliner, but effectively a Berliner by choice. I think the city is great and I've been living here for 15 years. Yes, it's my city.
Nice to have you here, also as an employer. What does Hypoport SE actually do? How would you describe it yourself?
Yes, we are a company that specializes in something quite specific. We build platforms in the B2B environment, often between the banking sector and the real estate sector, but the insurance sector also plays a role. So it's a mix of fintech, insurtech, and poptech. And all of this is in a network of about 20 individual companies, each addressing specific markets and bringing the respective parties together on a digital platform.
So to put it very simply, you broker loans. But on one side are the banks, and on the other side is not necessarily the end customer, it can sometimes be, but very often it's loan brokers or other banks. So a financing request appears and you have managed to translate it incredibly quickly and route it.
Exactly. Often on one side is distribution, on the other side is product providers, and then many loans, a bit of insurance, and other financial intermediation products that are needed in this interaction between the two parties.
Okay. In that area you are probably one of the largest, it's a relatively B2B-heavy product. We have over 2,000 employees, listed on the stock exchange, currently worth almost a billion. So you are really big. That means the banks like you.
Yes, I think so. We create enormous value with what we do in the efficiency of these markets. And we are unique, at least in Germany and elsewhere worldwide, in this specialization it is quite unusual what we do. And so the elevator pitch, or how I explain to my grandmother where I work, is quite challenging for us.
I was just going to say, it's not so easy to describe. It's not like, I have a factory, I make hats.
No, unfortunately not. So we have to talk about it more. It's also logical, attracting employees and getting them excited about the topic is not so easy given this complexity.
Yes, the individual Hypoport company can be more specific. You just said, loans, real estate financing in Germany, every third real estate financing now runs through our platform. So you are close to it as a person. You can convey that and explain to your grandmother: look, if you need a loan again, if you want to move out of your house into an apartment, the advisor who advises you will use technology.
Uses exactly, they use your technology to find the best loan. Okay, exactly. Correct. Crazy.
Are you a banker, computer scientist?
Yes, yes, yes, yes. Exactly, exactly, exactly. I am absolutely both. I think that's how it developed. I was interested in money very early on. I was already a banker before I could read and write. Monopoly was such a popular game for me that my parents forbade me from playing it because I played too much Monopoly.
And at the same time, through mathematics, I stumbled into computer science and fell in love with it very early on, and so I started developing software very early. Those were my two passions: money and IT.
Okay, so you really developed software early, meaning at 14, 15, 16 you actively developed and created products.
Exactly. I invested my confirmation money in a small computer while others bought mopeds, and then...
What kind of computer was that back then?
A KC854. That was the last small computer from the GDR, bought in 1988 for 4,500 GDR marks.
So a year and a half later, for the same money I could have bought quite a few C64s and Ataris.
I was just about to say you could buy a C64. I come from C64, Atari 500, 600. So that's my background. They were much better than what you bought in terms of performance, right?
Ah, that was an exciting rivalry, I'd say. They were similar. But the graphics chips were better on the C64. However, I could directly program in machine code. That was fast. Despite similar clock speeds, through direct machine code programming you could achieve a lot, but same league.
Okay. And your career, you didn't found a company, but your relevant career, you were at Dr. Klein.
Exactly. Before that, I worked at a bank. I studied for a bank, and then my first real job was at a real estate bank that was just being founded, which was very exciting to experience a bank founding, but then quickly frustrating when the corporate culture takes over and you realize you're just a small cog in a big machine. And that brought me to Dr. Klein.
That was a family company, and the managing director had to hire an assistant because he had just sold the company to an insurance group. It was a crazy time. It was a brave leap out of the bank into a family company, but I was adopted, so to speak, I was well received. That helped.
That constellation sounds exciting. A family company sold 100% to an insurance group. Yes, that means no longer your own boss, but likely an employed managing director. And you came in young, full of drive.
And you probably turned the place upside down, right?
Yes, I couldn't prevent it. I had already rubbed people the wrong way at the banks because I wanted to change things, and now it was such that he had the expectation that things could change. He was out of risk, so to speak, and found it inspiring to experience those last years. So he let me do it. Yes, there was close performance control, he was a Hanseatic merchant, so something had to come out of it. He wouldn't have survived too long investment phases, but if the ideas and business models worked, he liked it.
He apparently liked it so much that a short time after the sale to the insurance group, I think one or two years later, you did a management buyout. That means the management buys the company back. It's also called an MBO.
And I think that's when you became an entrepreneur, right? Also legally, under company law, you became an entrepreneur.
Legally, yes, exactly. I had felt like one before, but logically someone else would have profited from the success. I brought the idea of using the internet to organize, structure, and efficiently process private customer real estate financing into the company and built it up. The old shareholder, who had just bought, didn't find it exciting. He saw no future in it. The insurance group saw no future in end customers with banks. No, no, online real estate financing with end customers, that doesn't work. Crazy. So we had very different visions of the future.
When was that? Approximately 1999.
Okay.
That was during the hype. Outside Germany, there was already hype. Yes, exactly. And here it was just arriving, slowly washing over to us. But from the traditional perspective of an insurance group, it was spooky.
What did that do to you? I mean, you are a banker and also a developer. I wouldn't say those are the most risk-taking. But you took on a lot of debt for that MBO, put everything on one card. Was it okay to become an entrepreneur?
I would say from today's perspective, the bigger risk was the move from the bank to the family company and then doing the MBO. Then I was my own boss, I could do it myself.
You wanted that too. You are the type for it.
Yes, to be fair, I didn't learn that in school or in a typical German university, entrepreneurship is not taught. I stumbled into the realization that it's a better way than being an employee. We can do a lot more in Germany to foster that spirit. I understood what it meant, but I didn't work towards it deliberately. I saw the chance to structure the MBO. I convinced the former owner to help me. I had a fatherly relationship with him at the time, and that helped us both to pull it off.
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So, I find the story crazy already, right? You sell your family company to a big corporation, probably a lot of money flowed, and a year and a half later you find your new assistant/co-managing director so cool that you take that money again and buy the company back. That's a bold step. I think it's great that it worked out. And then you both drove Dr. Klein forward with the idea of brokering loans over the internet and fueling it. That worked.
Absolutely. Exactly. We had the proof of concept. We started in January '99 and were profitable by March. We began discussions with the owner in the summer, and it took another half year, but we had the proof of concept every month. So it was low risk because we saw it moving positively upward. The surprise was that it suddenly became extremely hyped. That was due to the dot-com bubble in the US, where Elon was the comparison company, they had a $4 billion market cap, and they entered the German market with $100 million funding in early 2000. Suddenly we were surrounded by VC-funded competitors. That felt weird for a short time, but honestly, we couldn't take them seriously. We knew the market, we knew what we were doing. The idea that they could make life difficult for us with lots of money, we didn't have that fear.
But you got customers because you had a heavily visited website. That means you tried to rank high on Google when someone searched for loan brokerage, credit, etc. Did Google ads exist back then? I'm not sure if Google was even around, maybe it was Yahoo and old web directories and display ads, right?
Yes, we did it through content, very early on. Today it's called search engine marketing. We had an enormous amount of content and that's why we were found. We were actually overrun by customers who were interested in real estate financing and wanted to learn as much as possible. We didn't run ads until years later. We offered them all the information and said, if you put together all the documents and fill out a four-page questionnaire and send it to us, you'll get the best interest rate you can find in Germany. And that worked perfectly.
You grew, both in number of employees and in profit and revenue, everything was pointing in one direction. Then you somehow bought a house for 300,000 to 400,000 euros, brokered the loan for it, and got a commission from the banks. Correct. That was the business back then. The commission was between 1 and 2 percent. So you processed many, many customers, and at some point you came across another company from Berlin that had something you liked, right?
Yes, exactly. For Dr. Klein, I developed the software to scale that business model myself. I programmed it. When I started, I digitalized the traditional business model, which was relationship management. The private customer business was actually just a byproduct of the digitalization strategy. But it was clear to me that this is not something every real estate financier or mortgage broker can build themselves. These are complex markets. In Germany, at that time, there were about 50 relevant lenders that had to be integrated with all documents. Today there are 1,000. So it was clear that this should be centralized. At the same time, I knew that from Dr. Klein and with the financial firepower we had, we couldn't do it ourselves. I met a company here in Berlin, not far from here, that had started as a spin-off from the University of Applied Sciences for Technology and Economics. They had a small, highly specialized team that built a platform for loan intermediation between banks. Technically, it was the same as what we needed. We needed some time to find each other, and then on January 1, 2002, we started as Hypoport AG.
That's incredible. I was at that university at exactly that time, and it's even funnier: one of your current co-managers, Thomas Heiserowski, was also in the student association like I was. I can really remember that the whole Hypoport topic became a part of the FHTW. I heard about the professor who had a company and had the young computer science students program it. That's probably one of the most successful spin-offs, like Aven Zarnox. It's a showcase company of the FHTW now, right?
Yes, yes. In the end, the universities of applied sciences were a good idea, and the FHTW was very modern at the time in building the bridge to the economy. The bridge worked excellently here.
Okay, so on one side we have your company Dr. Klein, people who are outgoing, who talk to end customers. And on the other side we had a group of about 20 or 30 people from the company called Europace, which the professor had started. You merged them. So you bought developer power and the tool you needed. Usually, when you build B2B tools and you have developers, not salespeople, you have a classic chicken-and-egg problem. You solved that because they needed you and you needed them. It was a perfect match.
Exactly, it was an absolute win-win situation. And from a cash flow perspective, one company was still cash flow negative, the other was positive. That was helpful to survive the time it took to break through the market, which took about two more years. So it was the best decision to merge the two companies.
Yes, even if it was a cultural clash at first. In the pre-discussion you said they built something that was perfect because it was new, the latest technology, and it was really hot stuff. But the banking industry wasn't waiting for hot stuff.
Correct. So the market presence and strength of Dr. Klein were needed to convince the banks. At the same time, we had to bring some reality to that academically developed platform, because they were too innovative for the industry. We had to roll back some innovation so it could start.
So you had been supplying the banks with loans through Dr. Klein before, and they wanted them. After the merger, you said, in six months, all loans submitted by us will go through this platform. So the banks had to integrate if they wanted your customers.
Correct. A lot of persuasion was needed, but otherwise the banks would have taken too long.
And a short time later you went public.
Exactly. About five years later, in 2007. We had been flirting with it since 2005, but there were always reasons why it wasn't the right time. At the end of 2007, I was fed up with the advisors saying it wasn't the right moment. I said, we can't structure the company around when you think it's the right moment. We'll just list without a capital increase, and everyone can decide whether to buy. The investment banks found it less exciting, but they understood that the alternative was to do nothing.
How big were you at the time of the IPO? Approximately.
I would say around 200 employees. Something like 5 to 10 million EBIT.
Okay, so already a nice profit.
And with what market capitalization did you start on the stock exchange?
We started at 100 million. If you took the share price seriously, there was very little trading. It was 100 million market cap. In 2007, that's a respectable start, but you're a small cap. You're not in the DAX. So only insiders and people very interested in the stock market trade you. You're not sold by banks. The IPO was mainly to create liquidity and tradability for the shares. After the merger, there were many different shareholders. You also do it to get money from the market or to buy other companies. But you didn't need money.
But you didn't need money, right?
Yes, we were profitable enough to finance our growth from our own strength. I was never a fan of dilution. So I was only limitedly motivated to do a capital increase for liquidity. Dilution means that existing shareholders can either participate or their shares become less valuable. But the idea was to use the stock as currency for acquisitions and to buy back shares when the market price was low.
The IPO for you, bringing a company to the stock exchange, is a bit different from a private company. You suddenly have shareholders, you have to hold annual general meetings, communicate. Was that all okay?
That was okay. The idea that the stock exchange involves a lot of administrative overhead is not entirely true. We were already big enough to need auditors and consolidated financial statements. That doesn't change much. The communication with the stock exchange is handled by about two people at our company. That's manageable for 2,200 employees. It's a very professional environment. The only disadvantage is that auditors and BaFin are becoming more strict, but the stock exchange is easier than private equity or venture capital.
I'm thinking, you don't actually handle customer money, right? Because you broker the loan to the bank, the bank pays out to the customer or the seller. The customer money doesn't flow through you. You get a commission or are paid for your software. That's good. Who regulates you? Your core business doesn't need to be regulated by BaFin, right?
Correct. Loan brokerage is not directly regulated by BaFin, but as a listed company, we are regulated by BaFin regarding the stock exchange.
Okay, understood. So after the IPO, the stock was relatively flat and you didn't get much movement, also because you are very entrepreneurial. You said, every euro I can invest smartly, I invest. If I start paying dividends, I've run out of ideas.
Absolutely. That is an admission of lack of ideas, dividend distribution. Back then, the stock was flat or even trending down. We saw share prices of 5 or 6 euros for a long time. We went public at 15 euros, so far below the initial listing, and the company valuation was 40 million. We started buying back shares. We were always aware of the intrinsic value. That's a disadvantage of the stock market: investors who are not close to the company don't know how it's doing. You can't always convey that one-to-one. Some investors expect dividends, but you want the company to grow and the stock to rise. Those can be diametrically opposed.
Definitely. You have a strong segmentation of investors. There are investors interested in growth companies, but they have to find you first. You can explain a lot, but you need to get their attention. That's a challenge for liquidity. We didn't manage that back then. We didn't communicate the story well enough, so the stock was cheap and we had to buy it ourselves.
And we grew, grew, grew in the background. We connected thousands of loan brokers. You said earlier, we have about 1,000 lenders on the other side, like Deutsche Bank, Volksbanken, Raiffeisenbanken, Sparkassen. We opened up these markets one by one.
In my world, I have a bank advisor. I go to a bank, want to buy a property for 500,000 euros, and the advisor should structure the loan. He can ask his own bank or use a tool like yours that has access to many hundreds or even thousands of other banks and gives a good market overview. Why does someone use it? Why are you so widely used?
The first reason is that through us, a whole industry of loan brokers emerged in Germany. Before, it was a bit shady. Since 2000, it's normal, like in other developed countries. They differentiate themselves from traditional banks by selecting the best from a variety of lenders. Today, we compare 1,000 lenders to find the best solution for each specific case. That's a high added value. Otherwise, the consumer would have to go to many individual banks and compare themselves. With interest rates changing daily, it's technically not possible anymore. So loan brokers now have a market share of 30% in Germany.
In Germany, they have grown big over the last 30 years and of course put pressure on the banks, the bank branches. So the bank branch has had an increasingly worse conversion rate since then because it competes against more and more credit intermediaries, and in this respect the banks have actually already started in small steps over the last 20 years to say: 'Hey, then we also have to compare, we have to offer the customer the best option and prove that our product is the best. And if it is not the best or if it is too far from the best product, then we have to broker the best product. In the end, it doesn't matter whether we generate a credit margin or whether we generate a commission once. It comes out the same. So you are basically the Idealo of loans. So the banker has his own product in you, maybe his own product, but the financial intermediary who wants to find the best offer for the customer has an incredible time saving with your product. Enter the customer data once, get many, many offers back, and you also segment, you say, here the credit probability is high, here the bank needs 10 days processing time, 3 days processing time, but you get data from the financial intermediary and throw it against what the banks have entered into your system. So you know exactly, we can do self-employed particularly well, we can do employees particularly well, we can do civil servants particularly well. That means you don't really care whether someone sends 1000 inquiries or 10 inquiries a day. Everything is thematically processed, everything highly automated. Exactly. So 100% digital. Correct. And also something that the banks before, most banks before, had not managed to digitize as a process at all. So often we are the first to completely digitize their business process in real estate financing. In installment loans, which we also offer, banks often still have their own technology, if you will. But in real estate financing, we are often the only digital representation, so an absolute speed gain in every direction.
Yes. Yes. Efficiency gain, speed.
