Neil Patel

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Federico Travella went from turning his childhood hobbies into businesses to launching a fintech start that has transacted well over a billion dollars. The company, Novicap, has attracted funding from top-tier investors like Fasanara Capital, Techstars, and Partech.

In this episode, you will learn:

  • Working capital for your business
  • The differences between startups in Europe and the USA
  • Market timing
  • Startups as a career


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About Federico Travella:

Federico Travella is a Belgian-Italian technology entrepreneur and Founder & Executive Chairman of Novicap, the OS for Working Capital.

Prior to founding Novicap, he was Managing Director of Rocket Internet for which he headed the rapid expansion of Internet ventures throughout Asia Pacific.

Federico’s most recent success at Rocket internet is thesuccessful scaling of e-commerce marketplace Lazada with a combined funding of millions of USD and successful exit to Alibaba Group.

He holds a BSc and MSc in Geology from Ghent University and is a Young Talent Fellow at IESE Business School.

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Connect with Federico Travella:

Read the Full Transcription of the Interview:

Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today. We have a really exciting founder. You know like yeah, we love to talk about building scaling financing and all of that good stuff. So again, you know the episode today is gonna be very inspiring. We’re going to be listening. You know about you know the good side of things you know about? perhaps you know like providing companies with money and and you know the fintic side of things and some of the restrictions you know also growing up. You know they’re Europe ah, and and again you know like everything that has led him to really build what he is doing. Right now which is a rocket ship so without further Ado Federico Trabella welcome to the show.

Federico Travella: Thank you like I know happy to be here today. Yeah.

Alejandro Cremades: So Federico walk give us a walkthrough memory lane. How was live growing up in a middle class family in Belgium.

Federico Travella: I indeed grew up in Belgium in ah in a small town called Bruche which is pretty much this open air museum and rightfully a prominent unesco world heritage site and it’s also ducked the venice of the north it receives. Hundred times more tourist than the amount of people actually living there and as you can imagine is the poor opposite of a tech hub say like San Francisco and so growing up consequently I didn’t really know many entrepreneurs there. Let alone tech or or internet businesses are entrepreneurs. There are not much inspiration and I think. We all know we need inspiration and and role models and so success in in my family and the families um around me really meant being a strong student um doing to study the great masters at a top university and securing a stable job. And it’s in many ways that quintessential middle-class recipe. We know for success in Europe and while I don’t really know if it’s future proof. It is what it is today and so growing up there I think there’s also a lot of of risk aversion for instance, um, just to name one. Example there was this recurrent story at family dinners about failure at 2 uncles tried to build some company. They both failed and this came up over and over again and I think that risk aversion is a very strong impediment to entrepreneurship. Um, perhaps this is because.

Federico Travella: The worst that really can happen to you or to to a middle class family is sliding down into that lower class and once again, there’s nothing really wrong with this malt but it becomes what I would call a little bit the middle class trap and if you add to that first job out of union mortgage. You really much kill entrepreneurship and so I do think that’s the mold that works for most people. It’s ah it’s this middle class. Um and path that forces a certain discipline provides stability but I also now in hindsight realize how much luggage we all carry. Ss founders or entrepreneurs because of our upbringing or our childhoods and this can really limit us in life and sometimes we need to let go of our luggage in order to succeed and and become successful.

Alejandro Cremades: Now 1 thing that I find really interesting in your journey is how you started to really be press into strategy and how you like strategy and you know from from something so so random like magic cards I mean I played magic cards too. So ah. So what what? What kind of exposure did that give you or what triggering points that perhaps you know, served you well later.

Federico Travella: So my interest in entrepreneurship as as it wasn’t really inspired. Let’s say by by by my albu upringing was was really it was gradual pivot. Um, and as spark was indeed training card games First address you know. Pokemon and then eventually magically gathering which was was a more serious version. Let’s say of of pokemon as well. Elementary schools I I realized that um you know kids were starting to play Pokemon and and they wanted to be up to date about the latest Pokemon News wanted to know about their charries are their peach sho and I was lucky enough to have access to to a computer with a dial up internet back then a printer and so I started as selling this this weekly paper based newsletter for what is today probably like fifty Euro cents or so. And you could also place orders for cars which you know I would know where to find by trading and that was very much the upsell if if you like to to visualize it as as a pitch deck and so essentially I was taking auto kids lunch money and to no surprise. School shut down my little business and I went to look for something new and in 9095 um I I learned about this this trading card game called magic gathering. They had just released a new set of cards called ice age and I would.

Federico Travella: Start playing this game for 10 years straight and country to pokemon um magic the gathering was and and still is played by primarily adults. Um, you need a big balance sheet eventually to be successful at the game and I quickly learned that adults are of course a lot more easier to monetize. Then than school kids and so being a very capitalless card game. You need you need a lot of cars to to to become successful in it. Um, as a teenager I was trying to play the game competitively as I was competing with Ls with those. Bigger balance sheets and consequently I really want to trade as many cars as possible to fund my own game now this hobby became very much. You know this sort of informal business and I must trade it ten thousands of of cars during a decade or so and during that that. Experience I think unconsciously um I learned some really interesting business concepts um, one of them was obviously information symmetry because I had access to to data I was training so actively, um, especially ah online I knew better than anyone else. What the cars were worth Another um, let’s say business. Um concept that I learned was was pricing arbitrage. For instance, the the magic cards were a lot cheaper in the us and so I was eventually buying them and reselling them in europe sometimes even making a profit and because of foreign exchange and there’s obviously all with my mother’s credit card.

Federico Travella: Um, and for instance also in terms of of business models back then something I found out was drop shipping. Um, which was essentially buying goods in my case and trading cars and shipping them directly to my end customer in Europe pocketing again. Um, an additional margin on on the on the shipping.

Alejandro Cremades: That’s amazing Now you know, even though you had that they had developed already that love early on for business. You went on and you studied Marine geology. So why.

Federico Travella: Yeah, it wasn’t an easy choice Ali Handra because I remember being very jealous of my high school friends who they knew exactly what they wanted to study at uni. They knew they wanted to become a surgeon they knew they wanted to become a biology teacher or or ah or a vet. So myself I had truly no clue I had very diverse interest and eventually I take that box off of geology on the enrollment form of of ghent university in Belgium and people keep asking me. Why did you study geology just like you just did and. So I felt back then somewhat attracted to this international career exploring the world. The adventure of searching for say gold in some jungle you know, ah Indiana Jones style the opposite of a desk job very much and so you know. You see people here making up all sorts of reasons why they take a certain path in life and for me was really about the tri the adventure. That’s it and if something like the thial fellowship will have existed back then I would definitely have ticked that box. Um and probably as entrepreneurs. Career paths are a lot less and linear you have to figure out a lot of things in your life your business as an entrepreneur and you need to find pretty much your own product market fit and I realized this. Um, when only much later of course after you know having build businesses but also.

Federico Travella: The appeal of of um of geology I read this this fantastic quote in a book called the um matthouse at the end of the earth. It’s it’s an incredible account of um, the Nineteenth century belgian Antarctic Expedition Speaks of the obvious dangers of such exploration such as mutiny, a diet of raw seal meat and it’s it’s a hell of a story and and the quote that caught my attention was of George Mallory the british evereste explorer and and he said sometimes science. Is the excuse for exploration I think it is rarely the reason.

Alejandro Cremades: That’s incredible Now you know, even you know with all this going On. You know you ended up obviously getting the degrees and you ended up you know in the startup world in the venture World. You know with Rocket Internet. You know and obviously that took you in different directions. You know until you know what? you’re doing you know nowadays but Rocket internet. How does the opportunity come knocking.

Federico Travella: It was 2011 I had graduated with my masters in in Marine geology and remember sitting down with someone really senior of a big oil company and he was showing me this chart with a typical career pad of a geologist. And I can’t write it. It was a beautiful chart I can still see it in front of my eyes. Um it set out how you could go from Junior geologist to senior to Geology Manager. Um, and then probably obtaining some some sort of director position.

Federico Travella: But what I was much more intrigued about was that the x-axis which set out the time which was extending up to 25 years and then it hit me hi Koramba I’m not going to study um dead animals and and rocks for the next twenty five years um don’t get me wrong I have so much respect for for scientists. First of all I my my university peers that have built up fantastic careers in the field but I was no longer that career pad and in industry I was very much looking for and instead I I’ll learn about this rather controversial venture builder called rockettra internet. Startup clone factory of the the german zamra brothers and I was intrigued. They had built this ebay clone. Um and they sold back to ebay for 50000000 in a hundred days I mean this this was exciting and and so I was I was very much thinking this this can be my Mba in entrepreneurship. And I sought an introduction to rocket and following a 15 minute conversation and I can’t really called an interview especially because I still remember that the person on the other side of the line was slurping noodles throughout the call. Um I accepted an offer I packed my backs and I pretty much lived out of suitcase for the coming years first out of Sydney and then eventually out of Singapore and we built ecommercetir leaders in emerging markets including laada in in Saudi as and so looking back on the experience I think um.

Federico Travella: Europe would would never have offered me such personal growth opportunities and back then europe and especially tech was a slacker Silicon Valley was obviously exciting perhaps China but it was a much much much less accessible to me.

Alejandro Cremades: And obviously you know for those that are listening. You know that are interested to dive deep into the story of La Salta we had Maximilian Bitdner you know as well. You know in the past as a guest but 1 thing that I want to ask you here if they is you know as part of seeing all these different businesses rolling out those. Maybe like those replicas or those say you know ah e-commerce a businesses. What were some of the patterns that you saw that differentiated the ones that would eventually succeed from the ones that would eventually fail.

Federico Travella: I think market timing was was a very important one. Um, if if I draw a page from from the Lazada Success story I think market we we. really got market timing right? um. And I was actually discussing ah with with a former colleague. Not not too too long ago and and he summarized that we we just showed up that we showed up at the at the right time we obviously had a capital advantage having raised a lot more venture capital than than local players but we also really got. Um, market timing right? and so in in Saudi Asia specifically um you have to think that thanks to the introduction of cheap Android smartphones that this nascent consumer base could adopt mobile commerce a lot more rapidly. And so eventually that market leapfrocked from. Um, you know, largely offline commerce to mobile commerce skipping all the legacy in between that. For instance, we have in the west and this meant this this this led to incredible growth rates which were um, not not possible in in more ah developed markets and so. You had to show up with the right team at the right time and I think that that is that is what what we managed successfully to do and I think auto businesses that that rocket start um, perhaps in other markets.

Federico Travella: Um, took a lot longer to to obtain that product market fit I’m I’m thinking about know juma or or Lio um that those markets were were just moving much slower than than than we had in in Southeast Asia but still I think in many ways rocket you know, generate this. This mafia right of this network of of entrepreneurs and I think that that is something they really you know create and and we can be thankful for I don’t think creating’ network was necessarily the purpose of the zaamres but they except accidentally. Hand up with one of the biggest startup mafias.

Alejandro Cremades: I mean I gotta tell you I’ve had so many people on the show that they are now building unbelievable companies that also you know all of them came out of rocket. So I totally agree with you is just unbelievable. The. The the universe of founders that they you know have come out of that. so so yeah you’re absolutely right now in your case moving to London you know and and and obviously you know branching out of la sala moving you know to London and really you know that will lead you to no wakeup you know. How was that day transition. You know at what point do you realize hey I think that you know I’m I’m kind of like ready to to for change.

Federico Travella: It’s a great question and and I’m one of the rare entrepreneurs who resisted for almost three years a rocket and many did how but I really started to feel the itch to package all those learnings and leverage them to build my own business. From scratch outside that rocket internet umbrella and eventually I think being a successful entrepreneur is about the ability to track resources and I felt that I could now finally track the necessary resources like the financial capital. The the human capital that you need to the team you have to build and and and venture out of lazada to start my own business and naturally and you know a huntra you’ve spoken with many entrepreneurs here on the podcast podcast um you and so this will resonate with you the best. Way to build a business is to start with a problem and then build a solution around it. The opposite way is is very hard and so one of the problems I had witnessed at at Lazada is some of the struggles those small businesses go through when it comes to managing financing the working capital. We were providing the platform to sell. Um, goods online in the southeast asian market and nonetheless long payment terms for instance on on the supply or an immersion site led to problems for them and so that is when I decided to to to leave us out I wanted to redress those struggles that those small businesses go through with a b two b.

Federico Travella: Working Capital Fintech um with the goal to provide and to end working Capital solutions to ases Market corporates and public administrations and that became very much No vcap.

Alejandro Cremades: So I guess hey just for the people that are listening. You know to really get it. What ended up being there the business model. How do you guys make money.

Federico Travella: Or our business as I mentioned we we want to be end to end when it comes to working capital management and financing which means that we have a number of credit products which are obviously um, fully digital. These products are not necessarily new. So they focus on receivers finance ables finance and working capital loans. These are projects that the banks have have been providing to their customers for many years nonetheless um what what we’ve seen is that especially in the s and me the s and b segment.

Federico Travella: Economics are very difficult for banks to get right? The cost income ratio there typically doesn’t doesn’t work and a such better technology can can can help to provide those those products in a in a profitable way and now we have a number of payments products which very much help the Cfo. To optimize our working capital in a holistic way and the way we make money is is at a very you know 50000 food level um is is twofold one we have an interest margin on our cost of capital and b we have a subscription revenue for for a platform.

Alejandro Cremades: And now in terms of the early days you know for this and dealing with regulatory restrictions. How do you guys? go about it.

Federico Travella: That that is where for instance also Europe is is more complex than the us market. So europe is a patchwork of different regulations and depending on the sort of of payment product or lending products you develop. You have to comply with different regulations. We were lucky enough that we came out of a accelerator program with Barkeley’s bank in London and so they managed to provide some of the early um payments and um, Imani. Um. Infrastructure that we needed for instance to saveguard client money and so that was a very important first step. So we we operate and we still operate under their umbrella for certain parts of the business. And then yes in in ah in the continent markets like like Holland and Spain are unregulated when it comes to for instance re receivers finance and as such we we did not need to prove apply for license there nonetheless one area where we’veinvested a lot is to ensure we have the same. Compliance standards such as banks. Um, and I would even say in many cases better when it comes to kyc so know your customer antimony laundering these are the areas also where again a lot of the margin for banks evaporates because they’re doing those things in in a more pedestrian way.

Federico Travella: And we’ve been throwing a lot of great technology at at that.

Alejandro Cremades: Now What about the capital racing side of things you know because ah component like this is is capital intensive too. So how much capital have you guys raised to date.

Federico Travella: Yeah I’ll I’ll split my answer in 2 parts one is the corporate equity is very much the equity raised at the no v kept level to pay salaries make make investments in technology and and so on. And then indeed given we have a number of credit products on our platform. We also need to raise that like instruments to to fuel those those products so on the equity side. Um, and here I think we’ve been a little bit of an outlier. Um. Thanks to smart pricing strong execution. Very strong financial discipline. We only erae 3,000,000 inquity we broke even very early in the journey and continued that profitable path since so that’s been a little bit peculiar during a few years especially during you know the last years that. Tech bull market but it’s a very strong position to be in today then on the side of the platform funding as I would call it there. We work with a number of institutional investors to fund those credit products so these are mostly pension funds. Ensures credit funds with which we typically sign long-term agreements which goes back obviously to our asset liability management. We cannot just provide funding to our clients if we don’t have the the funding in place and so typically there we sign what we call forward flow agreements.

Federico Travella: On Um, multi-year basis with certain eligibility criteria. So we know very well what sort of assets we can originate what sort of receivers or pays we we can finance.

Alejandro Cremades: Now in in that case I mean how is different. You know how how when when you go about racing it like process methodology Psychology How is it different. You know from one end to the other you know when you’re thinking about you know, getting that capital in place.

Federico Travella: Yeah, on on the on the equity side that that’s where you will you know? in our case, we targeted french capitalist. We raised 3000000 led led by part ventures here in Europe and that that’s a very different animal than what I would call credit investors. So. It’s a different due diligence. It’s a different obviously both both investors care about the the asset performance and and the business and the ipu build up but are looking for different um, different things. So venture catys as we know are are looking for that you know. 10 x one hundred x return on on the technology investment and so they’re the the ipu buildup the growth rates and so on are are are obviously clear clear drivers. Um for a investor that is funding or platform. Um, and for instance to. Just give an example fuzznora capital which which we have ah transacted um more than a billion with to date and we close the 200,000,000 forward flow agreement last year in q 4 they they’ve been working with us since 2017 so we we, they’re definitely satisfied with the track record they have with us and so they will be monitoring, especially the the performance of of the book of the portfolio that you originate so think about loss rates think about how do you collect.

Federico Travella: But also what is your reporting like and I see a lot of especially early and fintech lenders. They very often have difficulty to ensure that the reporting standards are are um, in line with with what ah a credit funder is is seeking for.

Alejandro Cremades: So fairly imagine you were to go to sleep tonight and you wake up in a world where the vision of noviup is fully realized what does that world look like.

Federico Travella: I Love this question. Um I I will be waking up to a world in which cfos and novi kept the keys to their business. Let us manage their working capital in a holistic. And automate way. This means novi kept dynamically optimizing your existing and nov kept credit products optimizing your receiverss and payables your dso your dpo and we needed injecting much needed working capital and so this will have a very strong impact. Naturally on those businesses. Um, but also public administrations and all their stakeholders.

Alejandro Cremades: Now when it comes to um you know also executing on that vision. You know you need people. So I know that you know you’re there, you know in Europe and you know Europe is obviously a different day I think that things are changing. You know a lot. Ah, but then when it comes to talent. You know it’s A.

Federico Travella: I think that this has indeed changed a lot as as you already hinted that when when when I start I still remember that that there’s a lot of pushback and and the successful career path just like I have seen a little bit growing up in Belgium. But also for instance in markets like Spain where we have offices and and and the Netherlands. Um I would think a lot of parents would want their children to go into a big corporate or into a law firm and so that was that was definitely different. Um. Um, when when I started and and restart hiring in in 2015? Um, so that’s that’s a positive I think people are really starting to see technology and especially startups as as a real career path. Um I also think that this is somewhat cyclical.

Federico Travella: We we may now also see a moment where for instance, think about I don’t know Mba graduates. Um, they may go back more to more secure employers like like corporates because eventually there is less startup funding is less Vc funding and as such it’s deemed more risky. Um, so there’s definitely there a and an effect at play which is related to to markets and and just you know where where people are able to find jobs. Um, for me I I obviously recognize the the importance of surrounding yourself of the best people possible. At any given stage to to build a business like novikep and and many others I’ve seen what I would say is that placing yourself, um in a great hub and and for instance sort of we we like Barna for that reason. Um, it’s it’s great hub to track talent. Especially on a product and and on the tech site we have so many nationalities here at novicap and we see that being based in one of those tech hubs is still something which people really appreciate even post pandemic even in the in the remote remote work world.

Alejandro Cremades: Now obviously we’re talking about here. You know where things are heading also towards the future but I like to ask you you know about the past but doing it with a lens of reflection you know because you’ve been involved too with so many different companies as well and and you’ve seen different business models different things that have faith. Taken off different things that didn’t so if I was to put you into a time machine forday and I bring you back in time I bring you back in time to that moment where you know you were now joining rocket and internet you know or you were being part of asalad you were seeing all these different friends of yours. Going at it on their own starting their own companies and those were the moments where you were starting to incubate the thought of doing something of your own one day if you could go back in time and have a chat with that younger self and give that younger. Federico 1 piece of advice before launching a business. What would that be and why given what you know now.

Federico Travella: That that that’s obviously a very a very tough 1 um I think 1 thing which which we got really right Um, in Saudi East Asia as I mentioned those market market timing that is something which. I didn’t get so so right when it comes to newbycap. Um, so started the business very much had the hide um of the Ecb’s quantitative easening program. There is a lot of liquidity in the market. So from that perspective in many ways. We were swimming against the tight for quite a few years because there’s a lot of credit in the market banks were passing it on um in in a very efficient way and so as such that Creditd gap when it comes to the demand know for for alternative finance for for fintech lending.

Federico Travella: Was a lot lot smaller than I initially expected and I I was doing this obviously because I thought there was an opportunity and and funnily enough when I was speaking with you know, a lot of consultants like you know from ah I won’t name them but many many big brands. Firms out there. Everyone was telling me the same. Yeah you you should go to Spain you should. You should start a business there and is a me lending the market is deprived of of of credit and there’s just great. Great need for that. Um, and so I I should have challenged that a lot more. And and trying to to also obtain feedback from on the ground um nonbank lenders because I think the data was was very different in in reality.

Alejandro Cremades: I Hear you so feday for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.

Federico Travella: Either Um, a warm introduction or a true Linkedin with a personalized note that always is also great. A great avenue.

Alejandro Cremades: They say enough. Well hey, thank you so much for being on the deal maker show today. It has been on on earth to have you with us.

Federico Travella: Thank you Hanna for having me. It was great. Fun.

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