Michael Mueller is the cofounder and CEO of Form3 which is a cloud-native connectivity, payment processing, clearing and settlement services to Financial Institutions and Fintechs globally. His company, Form3 has raised $60M from top-tier investors like Mastercard, 83North, Draper Esprit, and Nationwide Building Society.
In this episode, you will learn:
- The keys to effective remote working
- Making and avoiding major pivots
- How to reach out and find out about new job openings
- His top advice for new entrepreneurs
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About Michael Mueller:
Michael set up Form3 after spending more than 25 years in executive positions with Deutsche Bank, Royal Bank of Scotland and Barclays. Most recently, he was Global Head of Cash Management and a Member of the Corporate Banking Executive at Barclays, where he had responsibility for the product management and distribution of the bank’s payment, corporate deposit and customer access products.
For many years Michael has been passionate about driving digital change and innovation in global banks and has sponsored many key initiatives in this area, including white-labeling, biometric security, and mobile payment/banking technology.
Re-engineering payment back-office systems in response to industry developments, customers demand, capacity constraints, cyber threats or cost challenges has been a strong focus of Michael’s work during his time in financial services and as the CEO of Form3.
Michael holds a degree in Organisational Psychology and a Master of Business Administration from INSEAD.
Connect with Michael Mueller:
Read the Full Transcription of the Interview:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we’re going to be talking a lot about payments and fintech, so I hope you’re all excited about this segment because there’s a lot going on here, from scaling to raising to moving from one country to another. It’s going to be filled with great stories, too. So without further ado, let me welcome our guest today. Michael Mueller, welcome to the show.
Michael Mueller: Thank you. It’s great to be on the show.
Alejandro: Originally born and raised in Germany, more specifically, western Germany, so how was life growing up there?
Michael Mueller: Oh, it was great. It was fantastic – small-town Germany, so a very protected upbringing in that respect. Yes, fantastic.
Alejandro: Was there any influence, perhaps like in your family? Did you have anyone in business or having their own business, or what would you say ended up motivating you to become an entrepreneur? Was there any influence there, or you perhaps developed that later on?
Michael Mueller: Much later on. After school, I actually started working for a bank, Deutsche Bank, at the time. In Germany, we have that apprenticeship system, so vocational training that you can do in the banks. I actually wanted to become a banker, and I did become a banker, and I was a banker for many years before I became an entrepreneur.
Alejandro: Let’s talk about that because your first gig was in Deutsche Bank, and you were there for quite a bit, even moving from London to Frankfurt, then back to London. It’s been quite a ride there, so how was it working for a bank as big as Deutsche. What did you learn there?
Michael Mueller: It was a great time, and I’m immensely grateful for the time that I could spend there, and I learned a lot. I also learned a lot of skills and background that is still relevant to this day. Obviously, like any of these big banks, it doesn’t feel like you’ve been there in a single job or a single environment for more than 20 years. You move around a lot. I did move around a lot. I spent some time in Germany. I worked with them in Singapore and Sidney, came back to Germany, and worked for them in London. So they could give you a lot of opportunities. But very early on, I gravitated toward one particular area, and that was transaction banking and payments. I thought it was really interesting. I think many of the listeners will probably think there’s not much in it as a low-payments point of view. What could possibly be interesting about payments? But when you look a bit closer, you find out that it’s a very interesting crossroads between banking and business, on the one hand, and technology on the other. I think that always fascinated me, and it’s still fascinating me to this day.
Alejandro: In this case, while you were in Deutsche, many, many things happened. Obviously, one of them was getting your NBA, and I’m sure that experience for you was quite unique because you were a little bit older than perhaps your classmates. Is that right?
Michael Mueller: [Laughter] Well, I wasn’t so much older than my classmates, but I was still older than probably most people who get their NBAs. It was an Executive MBA. I got the opportunity to spend some time at INSEAD after almost 20 years in banking. And that was fantastic. You really appreciate the opportunity to listen to interesting lectures, to meet people from other industries, and spend some time to think about the business, think about trends, and also get the take on the challenge of sitting through exams and see if you can still do it. So it was a fantastic time. Deutsche Bank allowed me to take a bit of time off to achieve that, so I basically called it a half sabbatical where I was basically working part-time. At Deutsche, I was on campus in France and in Singapore and in Abu Dhabi – so a really, really good time, and I learned a lot.
Alejandro: Would you say that this was perhaps one of the key factors in planting that seed as an entrepreneur later?
Michael Mueller: It’s very hard to tell. I think my fellow students will probably say no because all I was talking about at the time was banking and my career in Deutsche Bank. I had a career in Deutsche Bank. We should also not forget this was in 2010, so that was just after the financial crisis, and we had gone through some really interesting times. So, at that stage, I think I would describe myself still as a career banker.
Alejandro: Got it. Still, while at Deutsche, once you go back, there was one of the moments that you were living there – it was the 2008 crash, and I believe this was one of the most tense moments that perhaps you experienced. So, how was that for you?
Michael Mueller: It was, indeed, very tense. At that stage, I was responsible for non-bank financial institutions, and that included a lot of hedge funds and a lot of the vehicles that were used for securitization, a lot of interbank payments, and all the rest of it. I think the interesting thing at that stage – well, at the time, it wasn’t so interesting; it was just tense. But the payments work when there’s liquidity and money is going around. In a crisis situation like that, liquidity dries up. Credit lines dry up between financial institutions. So we were frequently in situations where you had to make decisions about releasing payments that were sort of life-threatening either for your customer or for the bank because the amounts involved were big enough, and if it had gone wrong, it would have added to the worries of the time, and it certainly could have had the potential to bring some parts of the industry down. So, every afternoon, we were sitting with our risk teams, with our senior management teams, with our technologists just before the cut-off times, and we were scrambling to basically find the liquidity to make those payments, and from a payment’s perspective, probably the most exciting, but also a tense time that I’ve lived through in my banking career.
Alejandro: In this case, talking about your banking career, obviously, a very extensive banking career, we’re talking about 20 years or more where you went from Deutsche, then you did Barclays, RBS, and a little bit of everything, and jumping around. So that gave you a great perspective on the space, and perhaps the problems and how to bring a solution. Now, when we’re talking about a solution, bringing a solution, at what point would you say that your baby, Form3, started to really incubate, and what was that process like until you said, “You know what? I need to take action; I need to take the leap of faith. I’m leaving this career of decades that I put all my life into, and I’m going to start something that is completely the unknown.”?
Michael Mueller: I was at Barclays, at the time, and at Barclays, I was responsible for cash management, which is basically all of Barclays’ payments, online banking channels in the corporate space, and a lot of corporate liquidity, so a fairly big business. Our products were generating revenues of about 2 billion pounds, and I had a lot of product responsibility and a rather big team of about 500 people in the UK and Europe and Africa with [09:56] in the U.S. and in Asia. What I also had was what we called Change the Bank Budget, which is basically the money that you put aside for investments in technology. That was quite sizeable in Barclays and as it is in most major banks. The frustration that I had over many years is basically that such a large part of that budget did not actually go into innovation; it went into keeping the lights on; it went into regulatory and mandatory initiatives; it went into software upgrades and similar things. Really, investments that did nothing for the inclines that banks needed to make to ensure that there is resilience in the system and stability and all that. But it was really frustrating that so much money went into this, and that led to the conclusion on my part that most of the technology that you could actually buy is not very good if it requires that amount of investment to just keep the lights on. There must be a better way. That coincided with the fact that cloud-native computing became a thing, and it was about four-and-a-half to five years ago where I think a lot of the technologies around that reached the level of maturity that you could actually consider using them for mission-critical services in the financial industry. So a few things did come together, and that sparked my interest in trying to find an answer to the question, how could you apply these new technologies, component-based architecture, microservices, APIs, and all of that in a payments back-office, which is not a natural starting point for any of that? That’s where the idea came from. When I came across a few investors who were working on a similar idea, there was a meeting of minds, and that was really the birthplace of Form3.
Alejandro: So, then, what were the next steps?
Michael Mueller: You kind of slip into this. It was, obviously, working with those investors to form a company, trying to find like-minded people, and the most important ones for me, at the time, were I needed to find a Chief Product Officer, and I needed to find a Chief Technology Officer, and also a Chief Customer Officer, so people who were willing to come with me on that journey. I think it was the 15th of August, 2016, when the four of us walked up in the region office, somewhere nears King’s Cross in London. We had a company and a few hundred pounds of seed capital.
Alejandro: Interesting. For the people that are listening to really get Form3, what ended up being the business model?
Michael Mueller: The business model is actually quite simple. That is, we take care of payment processing in banks’ back-offices. So, what does that mean? I think all of your listeners will have a bank account somewhere, and everyone will have a way to access that bank account, either through a mobile application, or through an online banking system, or through ATMs, or whatever you use. And we’re not dealing with that, so we don’t build any technology that customers can use to initiate payments. But then the next question is, what happens once you have initiated that payment, and that’s where we come in. So we pick up the payment. We validate the payment content. We convert formats. We take it through a whole range of different processes, and we hand it over to what we call a gateway, which effectively connects that bank to the clearing and settlement. The clearing and settlement in most countries is a centralized infrastructure that deals with the exchange of value between the banks more and more in real-time, which means that payment message goes to the clearing system, arrives on the other side, and becomes an inbound payment. We also process inbound payments; we take it through workflows and then hand it over to the ledger in the front end. No end customer will ever see our technology, so it is something that runs deep in the bowels of the bank, but it’s quite crucial and quite an important part of a bank’s infrastructure because it really means that banks can actually execute payments 24/7, 365 in real-time. And when I say real-time, it is, obviously, very fast, so the average payment that goes through our platform takes about 500 milliseconds to process end-to-end.
Alejandro: And, in your case, going from banker to a tech entrepreneur. That’s quite a transition. Was it that hard for you?
Michael Mueller: Yes, and no. When you start that journey, you don’t really know what that would actually look like. As I said earlier, I did have a decent amount of interaction with technologists, and I was, in my product role, responsible for a lot of technological innovation in banks, and that means I did interface with software engineers and project managers and all that. However, running a tech company is quite different from working in a larger bank. First of all, the company size is, obviously, a lot smaller. We’re about 180 people at the moment – growing quite fast. But, also, I’m working with engineers and product managers a lot more directly, and that’s really exciting if you can bring together deep product expertise with some of the best engineering that is available in the market in a very agile format. It’s fantastic and really exciting, but it required me to adapt. The biggest requirement there was to move from what is still a prevalent project methodology and in large banks or from a waterfall-type methodology onto something that’s a lot more agile and a lot more flexible, a lot more effective when it comes to building high-end technology. I learned so much on the way, but I’m also very grateful for the people who came on the journey with me to help me build that organization of that company culture that delivers these results to customers on a daily basis.
Alejandro: As we’re talking about learnings, there was a major pivot that you guys went through. So what happened there?
Michael Mueller: When we started the company, the idea was to make a payments environment available to customers on an interim basis. The idea was, if it’s hard and expensive for Barclays to maintain that environment, it must be so much harder for smaller to bank service providers who don’t have the same kind of budget. The idea was to go into the market and find those technologies, deploy them in the cloud, make them work end-to-end, and make the product more outcome-based in terms of providing a payment service that digital banking providers and payment service providers could use. So we started off on that journey, and we went around the marketplace and looked at various technologies that we wanted to deploy. Every single time that we came back from any of those meetings with the big software vendors, who were all quite happy to sell it to us, we had a conversation internally, and the view was that none of that was actually built for the cloud, and none of that would actually be effective in the cloud and would give us any of the benefits that we were trying to achieve. So after six or seven months, we had that conversation about what do we do? Where do we go from here? We decided to build it ourselves, so not rely on third-party technology at that stage, but build it from the ground up. In hindsight, that was a brave move. It wasn’t an easy move to fully invest in IP, but it was the best decision we made. It took us about a year from that decision before we went live with the first product for a bank. But even that, I think, was an amazing achievement, so to build weapons-grade, fully scalable, highly secure technology that a bank can actually use in that timeframe with that budget that we had available was a big revelation. That’s when I thought, “If that is possible, there’s so much more you can do with that technology.” That’s the path that we’re on.
Alejandro: Got it. One of the things that is true here is that you embarked on this path, and you were pushing along, but then there was a breaking moment in 2019 with Tier banks moving into cloud-native technologies. Tell us about this.
Michael Mueller: We always thought that large banks and small banks would all move to a platform-based architecture at some stage. Though, from my own experience as a banker, I knew that the cost space of legacy architecture will no longer be sustainable, that there are security issues with legacy architecture that you can’t necessarily fix within the environments that banks are running. But also, and most importantly, that legacy architecture does not give you the agility that you need to bring new products to the market. So increasingly, the Tier 1 banks were falling behind in terms of the technology choices that they made in comparison to the digital challenges, the N26s, and the revolutes of the world. So we knew that at some stage, the big banks would wake up and look at this technology and come to the same conclusions that the challenger banks would actually come to. But we didn’t know when, so it was really interesting when at some stage, we received that phone call from a Tier 1 bank to request the quote for all of their call volume that they wanted to transfer to our platform. That was bigger by order of magnitude compared to anything we had seen previously. We thought that this is really an interesting sort of exercise that we would go through, but not necessarily. We didn’t necessarily think that it would actually happen at that stage because we were a company with maybe 100-120 people on the payroll, and processing these kinds of volumes, we thought, might be a bit of a stretch. Now, we worked through that. We worked through the RFPs. We entered those workshops with these banks, and I’m very happy to say now, they have made the decision to transfer these volumes over to us, that they fully buy-into our vision of the fully cloud-native technologies stack. The Tier 1 banks sacrament at the moment is the one that is growing the fastest and also a customer portfolio. We’re also dealing with smaller banks, digital banking providers, and payment service providers, but increasingly, we’re working with some of the largest banks on the planet who are all very keen to take the benefits of this technology and make that available to their customers.
Alejandro: So, to enable this, it requires money. So, how much money, Michael, have you guys raised to date?
Michael Mueller: We went through four funding rounds so far. I think we’ve raised; if we exclude the secondary, we’ve already given some money back to our very early investors. If we exclude that, we’ve raised about 45 million pounds to date.
Alejandro: What if we include the secondary?
Michael Mueller: The secondary, that would take us to about 50 million pounds.
Alejandro: Got it. Very cool.
Michael Mueller: Yeah. That’s also been an interesting journey, obviously. Not being a serial entrepreneur, many of these funding rounds were a first for me – all of them, actually. All of them were different, but all of them had a good outcome in the end. So a seed round with angel investors, an A round with early institutional investors, a B round with first proper VC engagement, and a strategic funding round that we announced in the summer with some very large financial institutions coming in plus more VC money.
Alejandro: Which one would you say, Michael, was the most challenging for you guys?
Michael Mueller: The strategic investment round, by far. We were talking about three strategic investors who were driving this. One of them has yet to be announced. That will come in the next couple of weeks or so. But the challenging part of that was basically that we had to land major commercial contracts, which are the precondition for the investment, and the investment, all at the same time with three different counterparties. So you’re talking about three major enterprise contracts, plus three major investment documentations to lend all on the sixpence at the same time was complicated and probably the most complex one that we’ve done to date.
Alejandro: I can imagine. When you’re doing a round, and for something so specific, like around financial technology, I’m sure that you were looking for, perhaps, past experiences, and how you were able to leverage some of that institutional knowhow or even network of those investors. What were you really looking for in those people that you were bringing on board?
Michael Mueller: For me, the most important thing is that they really buy into the vision for the business. Again, the angel investors gave us the benefit of the doubt. The funds – we were working with Draper Esprit and 83North. They’ve been believers in the business from very early on, and that’s important to me. Then the strategic investors, obviously, they’re buying our product. I think that’s probably the best endorsement you can get for your strategy that they are willing to enter into five or ten-year contracts for the provision of core technology to the bank. So that’s a massive endorsement for our technology, and also the trust that they place in the company. That is a very important thing for me that they become part of the team. I look at this as really a team exercise; the board, the strategic advisory board, the investors, and staff. They all need to pull in the same direction. So to have investors who believe in what you’re doing and are willing to back it, either through those commercial contracts or the investment that they make in the business is really important to me.
Alejandro: Absolutely. In this case, there’s a lot going on around fintech, a lot going on around payments. Where do you think that your space is heading as a whole?
Michael Mueller: I think, for me, the whole notion of fintech as a sector is a bit of a difficult one, to be honest. I would not even necessarily think that we are a fintech company because we’re not a regulated financial service provider. So I think we’re lacking the fin in that, so we’re a tech company.
Michael Mueller: We’re basically providing high-end technology to regulated financial institutions, which is not exactly new. So, banks have always bought technology, and they’ve always tried to buy the best technology. From my perspective, I think we are in a very interesting space, where, on the one hand, we’re using cutting-edge technology, all the very latest tools, fully cloud-native infrastructure, hybrid cloud, and multi-cloud deployments, APIs, [28:30], and all these wonderful things. On the other hand, we’re able to deliver that to very large organizations who are a lot more used to buying on-premise technology and licensed-based products that they can fully control. I think we have a team in Form3 that is able to get us through those vendor onboarding processes, security reviews, assurance processes, testing, and everything that the very large banks would actually do to ensure that we are safe on the one hand, but we’re doing this by using 21st Century technology. That is a very exciting prospect for me because that is exactly what the industry needs, so better technology across all banks to provide better end-customer outcomes. Whether you call that fintech or just technology, I’m not so sure. I would probably always describe us as a technology provider as opposed to a fintech company.
Alejandro: Understood. Michael, for the folks that are right now tuning in to get an understanding of the size of Form3, is there anything that you can share around perhaps the number of employees or anything else in terms of numbers?
Michael Mueller: We are about 180 people in the company; about half of those are software engineers. We have a fair number of product managers and analysts, a sales team and ops team, a relatively small ops team actually, finance, HR, and a few other functions. We are in 14 countries, interesting. We have a fully remote model, so all of our staff can work from home 100%, all the time. We’ve had that from day one, which obviously positions us quite nicely, especially at this point in time. We didn’t have to make much of an adjustment to our operating model when COVID hit. We have an office in London. We have another office in Amsterdam. As I said, we’re hiring people, in particular, software developers in 14 countries in Europe, which gives us really good access to a much wider talent pool. We’re growing very fast, so we’re hiring between 10 and 15 people a month. We’re also looking at going into new territories and new geographies in 2021. So, at the moment, we are servicing customers in the UK and in Europe, and we’re getting ready for [stepping 31:36] me on that and also building connectivity to clearing settlement systems in other geographies.
Alejandro: So to follow-up on this, Michael, you were touching on how fast you guys are onboarding people and the fact that everyone is remote, and that is the new normal that we’re living in. So what have you learned around effective remote work because, for you, you were used to the banking old days, which is, everyone is in an office. I’m sure that this, for you, has been also an adjustment, and just wondering what has been that lesson for you around this; and I think that it could also be very inspiring and very telling for some of the folks that are listening right now and figuring things out around remote work.
Michael Mueller: What we realized very early on is remote working is a lot more than just telling people to stay at home and use Zoom. You need to build a culture around remote working. And, to be honest, it’s actually easier if everybody is remote, as opposed to just some people being remote and the rest of the team in the office. You need to build a culture around engineering. We do a lot of air-programming, which we’ve done from day one. You need to put in place an operating model that ensures that there’s a good communication flow. You need to put in effort to also build and maintain company culture, which required, again, a lot of communication and a lot of creativity around getting everyone involved in the company to ensure people are not just switching off or not bringing themselves and their creativity into the company. It requires effort, and it requires effort to sustain it. I think many of the companies, and we’re talking to a lot of them because they like what we’re doing and they want to learn from it. So, I think many in the business who haven’t had that are probably now getting to a point where the initial excitement of everybody working from home is kind of gone, and it’s a lot harder now to sustain it, to sustain the momentum. You need to have onboarding procedures that are fit for purpose. And to be fair, that was a bit of a change for us because even though we’re fully remote, we used to bring in people when they started with the company for the first week or so to meet other people, get to know colleagues and stuff, and we can’t do this right now. So we have that strange situation where a good number of people in the company have actually never met anyone else from the company in person. That means we really need to keep the communication going. You need to organize events. As we speak, the team would be on virtual, first in our [34:41], quizzes, townhalls. We have a standing all-hands meeting every Monday morning where we talk about all aspects of the business. Yeah, you do need to put the effort into basically keep everyone involved.
Alejandro: One of the questions, Michael, that I typically ask the folks that come on the show is if you had the opportunity to go in a time machine and go back to perhaps 2016 when Form3 was about to launch, and you had the opportunity to have a chat with your younger self, with that younger Michael that was thinking about launching something, what would be that one piece of business advice that you would give to your younger self before launching a business, and why knowing what you know now?
Michael Mueller: The obvious one is, I would have avoided that pivot that I was talking about earlier, and I would have invested a lot more time and effort in building IP and building an engineering team much earlier in the journey. So, I think in hindsight, it was required for us to go through that phase because it gave us a really good overview of where the market was. But knowing that now, I would probably tell my younger self to get on with it and just build interesting and exciting technologies all in the engineering, and it’s all in building an operating model around that that is best in class. I think that we could have avoided wasting a bit of time by using other people’s technology, and we should have built it from scratch ourselves from day one. That’s probably the biggest learning on the way.
Alejandro: Amazing. So, Michael, for the folks that are listening, what is the best way for them to reach out and say hi?
Michael Mueller: I’m on LinkedIn, as most people. We do have a website, of course: www.form3.tech. I look forward to talking to as many of you as possible. We do hire a lot of people, so if you’re interested in any of our open positions, please reach out. If you happen to work for a regulated financial institution and if you were in the market for a new payments system, please do reach out as well. And if you just want to have a chat about cloud-native technology, we’re very happy to do that as well.
Alejandro: Amazing. Well, Michael, thank you so much for being on the DealMakers show today.
Michael Mueller: Thank you for having me.
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