Despite initially resisting the call of entrepreneurship, Patrick de Nonneville has since built a fast-growing fintech startup that has raised over $50M in equity. He has also raised almost $1B in credit facilities to fund other small and medium-sized businesses. Patricks’s venture, October, has raised funding from top-tier investors like The Caisse des Depots, Intesa Sanpaolo, Idinvest Partners, and Matmut.
In this episode you will learn:
- Strategically building up your investor base and funding
- How October works
- How October is fighting financial fraud
- The benefits of committing to extreme and rapid transparency
- Patrick’s top advice when starting a business
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
The Ultimate Guide To Pitch Decks
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Patrick De Nonneville:
Patrick is Chief Operating Officer of October. As a Partner at Goldman Sachs in London (2007 to 2014), Patrick was co-head of the European rates business and a member of the Global Operating Committee for Rates. He began his career at JPMorgan in Paris and London (1997-2003) as a “market-maker” on Treasuries, before joining Deutsche Bank (2003-2007)where he led the complex products trading activities and Inflation products. Patrick is a graduate of Ecole Polytechnique.
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Read the Full Transcription of the Interview:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Very exciting, the story of our guest today that he’s going to be sharing. It is incredible what’s going on now in Europe, and especially in this area that has to do more on the Fintech side of things, but definitely, a lot to learn around risk-taking and calculating the risks, and also around the building, scaling, financing, and a little bit of everything when it comes to the cycle of building a hypergrowth business. So without further ado, let’s welcome our guest today. Patrick De Nonneville, welcome to the show.
Patrick De Nonneville: Hi, Alejandro. Thank you very much for having me. This is actually my very first podcast, so I’m looking forward to it.
Alejandro: Amazing, Patrick. Well, let’s make it count. Let’s do so by doing a walk-through memory lane. So originally born and raised in Paris, France. So how was life growing up?
Patrick De Nonneville: It was an interesting time because it was very peaceful, but also, I think, a time when you were looking for opportunities and things to do around Paris, a very cultural city, etc. One of the experiences that I had a chance to do very early one, like a work experience, I was invited to spend a week at the Paris Stock Exchange. I was like 14 or 15. It was incredible. We were in the middle of a time when it was actual people doing the business. After a few days, they would give me an AutoBook, and I would work around and talk to those traders, passing orders, and establish quotations, etc., and I found it very stimulating to be given that kind of responsibility so quickly. That set my mind up for what I wanted to do, maybe not for my full life, but over the following two years.
Alejandro: Now, you have it in your blood, being an entrepreneur. You have your father and your grandfather, so you were just waiting for the right time, and we’ll talk about what you guys are doing now with October, but before doing that, what did you learn, and how did you get that inspiration going with seeing your father and then also your grandfather executing on their own initiatives?
Patrick De Nonneville: There are really two sides to this because, obviously, when you’re an entrepreneur, you take a huge amount of risks, and the amount of success that you get depends on your work, depends on the amount you’ve done on your market, and it also depends on luck. My grandfather created several companies, which still exist today in certain shapes or forms, usually successful. My father, after spending time at IBM, also started companies, and some of them did well for a while, and some of them didn’t. So I was exposed to the fact that he was putting a huge amount of work into these things and hope and excitement, and sometimes, things didn’t work out the way he was hoping or deserved. So it did put that seed in of the entrepreneur, but it also shoved me against it. I don’t know how you pronounce that word in English, but I guess people get it. It really put me off it for quite a while. I think as I grew up, I was looking more at classic opportunities than at launching a company myself. Interesting, all of my brothers have their own companies, almost immediately after their school. Yeah, there is something going on there.
Alejandro: That’s amazing. In your case, what you did, it sounds like problem-solving, has been very much present in your life, and that’s why you perhaps studied math and science, and you went in that direction. But one of the things that you did is rather than going at it, perhaps after having seen how tough it is to build and scale a company, you took more like the calculated-risk approach of taking a look at what the world of corporate would look like, and you did a great career in the financial services sector working at some of the biggest banks in the world. Why don’t we touch on that, and more importantly, what you learned from each one of the institutions that you worked at? Let’s start with JP Morgan. What did you learn at JP Morgan?
Patrick De Nonneville: First of all, if I step back a little bit, is how I got there. After that experience on the stock market, I knew I wanted to become a trader. At that time, it was becoming more technical, more mathematical, so people said you should probably study that. So I did this induction in school, which is quite well-known in France, very engineer-driven, which suited me very well. It’s really my mentality. Usually, after you leave that school, what you do is you go on to serve the state for ten years, or you do further studies for another couple of years, or you can actually quit, and that’s how it’s called and go straight into the workplace. But for foreign students, every year it’s a small [6:45] school, maybe five to six people do that. I was one of these because I knew what I wanted to do. The diploma gave me access to the job I wanted. I went straight into it in ’98, and it was an interesting sign because you have ‘97, ’98, ’99 small crises happening. You had the crisis in Asia; you had the crisis in Russia, and then you had the 2000 implosion of the stock bubble. I was like, “Okay. This is interesting.” However, I had never heard of any of these crises before when in trading myself, and they seemed to happen actually all the time. That was quite an indication. This [7:31] as I had booked, I was given a lot of responsibility very quickly after two months on the desk, you’re supposed to take risks, you’re supposed to quote prices for customers, and you have to live with those decisions, which is something that I absolutely love. You make a decision; it’s yours. You make one; you lose money. There are no ifs or buts. If somebody asks for whatever, it’s your responsibility. You learn the cost of too much risk in certain markets and not in others. And you have an attachment with the clients, as well, which is a really rich thing in terms of information, in terms of responsibility to the people on your team as well. A very collaborative environment, frankly, and very caring for the people, [8:14], getting us better, and spending time in New York. They had an investor training program. It was a really good time. Then there was the merger with Chase, which I think happened in 2000. Things started to change a bit, and then I moved on to another bank, and then Goldman.
Alejandro: In Goldman, you became a partner. Goldman is, without a doubt, the segue into October. Goldman is an amazing place. I know many former Goldman folks, and the training that you get from Goldman, also, and the type of culture that they have is really remarkable. So tell us about this culture because I’m sure that you’ve learned a lot from that type of culture that perhaps you’re also applying to October. What makes Goldman so special when it comes to the culture?
Patrick De Nonneville: The risk mindset, I think, is quite unique. I think at many banks, even the ones who do well, there’s an understanding that you have a career. You can have part of the big organization, and some of the decisions get very diluted. I went through an organization where my bosses did not want to understand the way I was making money. As long as I was making money, it was fine by them. The government was a complete opposite. There was a culture of ownership. Especially when I was making money, the people wanted to understand the way I was making money in order to make sure they were fine with the way I was making money, which was very surprising and very rich in terms of the discussions that we were having. I think during the crisis in 2007, 2008, that made quite a huge amount of difference. Of course, there were also some [9:58] taken then, which, to a point, the organization paid for, but it was a reflection of the richness of a culture of risk decision-making that allowed Goldman to go through this period, avoiding some of the things that killed quite a number of very respectable, very old institutions. Going through that risk at Goldman created something which carried me forward in the years after the crisis and making partner. That was really special. We all suffer, up to a point, from imposter syndrome, but when you have the CEO of Goldman who calls you on the desk and says, “Hi, Patrick. I’d like to offer you to become a partner of Goldman Sachs.” That was an unreal moment. Very unreal. I’m sure you see what I mean.
Alejandro: Definitely, something that you would tell your grandchildren, that’s for sure.
Patrick De Nonneville: I’m not sure. Hopefully, life is long, and there are other stories, but it was definitely an interesting moment.
Alejandro: That’s amazing. Now you did get your feet wet in the startup world, first by doing investments. You made a bunch of them—one of them on Kantox, which are great folks, also from Spain. You also passed on others that were good such as Revolut, which is one of the unicorns now in Europe. Obviously, this was new territory for you, but this was giving you that exposure and access to the venture world and what was happening in fintech. Tell us about that stage of phase for you.
Patrick De Nonneville: There were a number of things that played into that. The first was an interesting technology on the engineering side that always has been there. The other was—you remember that internship I did on the stock exchange where, by the time I started working, all these guys were gone and replaced by computers. I could see that happening more and more in business. In the equities business, for example, there used to be 150 traders, and by the time I left the business, there were only two. Everybody was replaced by a computer to a point. I could see these waves of changes were happening, and I could either stay on the beach and wait until the water was coming to me, or I could go and try to see how the water felt and swim in it. So one of the things that happened was one of my best friends, [12:39], who is partner at [12:41], who is a VC in Europe. It was the beginning of fintechs in Europe, and obviously, he knows a lot about tech. They didn’t know as much as they do now about finance, and for me, it was kind of the opposite. They were, from time to time, asking me to have a chat with some funders that they were looking at, and we would sometimes co-invest, as we did with Kantox, for example. Sometimes, I would tell them, “I think it’s a bad idea.” On Revolut, I was, at the time, very focused on compliance, etc., and I thought there was a real danger in the business of not handling the [EQYC and the AML 13:19] thing properly. So you know your customer and doing all these things, which, by the way, is hurting quite a few of the banks in Europe at the moment, and in Germany, etc. It’s a real risk, but, obviously, I completely missed the impressive growth potential of those businesses. So, yeah, as you say, you have to miss some to enjoy the ones as you go.
Alejandro: Absolutely. You can’t win them all. That’s for sure. Patrick, in this case, for you, what would you say was the trigger. Obviously, you were here a partner in Goldman. You were making it happen. You were very successful in your career, so what was that trigger that made you want to leave everything and start something from nothing?
Patrick De Nonneville: There was a combination to be good as a trader, and especially in a really demanding organization as Goldman Sachs, you really need to be 100% passionate and involved in what you’re doing. In my case, it was in rockets, and it was something I really loved for a long time. But I don’t know if it grew tired, or old, or the market changed. The period of 2013, 2014 was a bit boring, or that’s the way I felt about it. So I lost interest and became detached from it. The other aspect was this interest in technology. And the third and final piece of the puzzle is admitting, which was arranged by Partech with a guy called [14:55]. I had seen what was happening with the lending marketplaces in the U.S. and the UK, and I asked the Partech guys, “What do you see in Europe?” They said, “We know this guy. He’s thinking of doing something. You should meet.” So we meet. I go into the meeting thinking maybe this is going to be a good investment opportunity. I come out of the meeting, I call my wife, and I tell her, “We might need to change things a little bit if you’re okay with that.” I’m blessed that she was okay with that, which actually wasn’t a change, but what an adventure.
Alejandro: Yeah, no kidding. So then what happened next?
Patrick De Nonneville: We started the company in the late period of 2014. I officially left Goldman and started working full-time with October as soon as the year starts. The problem with the lending marketplaces in Europe is in some countries, and it was forbidden to lend to an SME if you were an auto bank. So they couldn’t emerge because they couldn’t exist, or not legally. At the end of 2014, the regulations changed, so all of a sudden, retail lenders could potentially finance companies. This is how we started, basically. We started by opening French SMEs to retail investors. But from the start, we knew two things. We knew that in order to scale this business, you also need institutional money, so not just retail investors, and that required both from regulatory experimentation because it was not exactly allowed at that time, and we needed to raise those funds. Also, that needed to happen across Europe. So, very quickly, we raised money from institutional investors. Very quickly, we went into Spain. Then into Italy, then into the Netherlands, then into Germany, which we opened with our first loans in 2020, which was a really interesting time, as you can imagine, was COVID.
Alejandro: Yeah, no kidding. We’ll talk about the fundraising in just a little bit, but for the people that are listening to really get it, what ended up being the business model of October. How do you guys make money?
Patrick De Nonneville: That’s a very good question that often people forget to ask because how you make money and start a plan is sometimes not the most interesting thing.
Alejandro: Or growth, crazy growth.
Patrick De Nonneville: Yeah, exactly. In our case, this model was known from the start. We actually have not changed it. Every time we make a loan, we make a loan of 100,000 euros, we take a fee of 3% from the borrower, and then as they repay their loan, we take a small fee for the repayment of the loan. We don’t take anything from the investors. Everything is cash to the borrower, which is tax efficient and quite inspiring for everyone as well. That’s how we made money, and that was the only way we made money until the beginning of this year when we launched a new thing, which we can talk about in more detail later, which [18:15].
Alejandro: In terms of the fundraising, you have two sides of the equation. You have the debt that you’re raising for, issuing those loans, and then you also have the equity side of the raises that you raise for the actual business, the corporate structure, and all of that stuff, and how you’re wrapping that up. How has the experience been of doing those dual raises, and how that works for the people that are listening to really understand it?
Patrick De Nonneville: When you’re in those fintech businesses, you need two kinds of money. You need the money which is going to be paying the salaries, paying for marketing, the offices, and all those things, which is usually equity and maybe some debt that the company is taking on. In our case, it’s been pretty much 100% equity. So we raised, in total, 52 million euros from a number of investors, and we can talk about the cap table a bit later if you want because we spent quite a lot of time thinking about who we wanted around that table. Then if you’re lending money to businesses, you need that [19:23 – 19:31]. The way we raised that is with retail investors and with the institutional investors. One of the things that we wanted to have from the start is alignment of interest between everybody. We have some fintech goals or platforms where some of the deals go to investors, some go to [19:50], and there’s skin in the game from [19:52], etc., and we thought that was a bit fortunate. If you want to do something different from the bank and something where transparency matters to have that kind of design. Every [20:05] on the platform is financed both by the retail investors and the institutional investors, and we, the funders and the managers of October put our money with the institutional investors so that automatically every single team was at work. Everybody is aligned on that. That’s a really rich driver of our culture. Transparency is one of the key things that differentiates us from traditional financial institutions. And structuring things this way physically forces us to be transparent. If you are retail investors, and you have a default, and for whatever messed-up reason you want to try to hide it, they’re not receiving the money on their accounts. They’ll all be upset, and they’ll ask why. You really need to be on top of things and to communicate with them in a very transparent manner because they’ll not follow you if you don’t do that. And they would be right, too.
Alejandro: Of course. Now on the debt side of things, how much have you guys raised?
Patrick De Nonneville: We’ve raised in total close to 850 million euros so far. When we say debt, it’s not debt that is taken on by October. It’s money that goes straight into lending to the SMEs.
Patrick De Nonneville: The people who invest in that debt, for example, insurance companies, don’t take a risk on October. They take a risk on the SMEs that October lends money to. We started this quite small. Our first fund was 25 million euros back in 2015. All of those 25 million euros, quite a bit of the money was coming from us, but we got our first external investors, an asset management company. Then we were very cautious in deploying this money, so that created a first-track record. Then we went to raise our second fund. We managed to attract insurance companies at the next stage of the investors’ side, and we closed that fund at 90 million. Then on the third fund, we managed to convince the people that were in the first and second for us, so that’s really important; it’s called re-up, something that investors are looking at. If you don’t have re-up from the existing investors, that’s usually a bad sign. But we got 99% of re-up, and that’s allowed us to then get the French Western Bank, which also helped us get the European Investment Fund, which helped us get most of the National Investment Banks of the countries we’re in. We closed our third fund at 190 million, and our fourth fund is now getting close to 250 million. We also raised a specific fund for Italy of 200 million in the middle of the COVID crisis, which was an interesting environment, but full of opportunities. A real increasing pace of raising money, but it’s also exciting to see that we will have the credibility and are really good at going through due diligence of the investors, of increasing sophistication, increasing requests, and also reporting requirements, which are getting more and more [23:19] in a way which is very appreciated by everyone.
Alejandro: What was the thought process? You were alluding to it before. What was the thought process of bringing the people that you did to the cap table as investors on the equity side?
Patrick De Nonneville: We wanted people who would help us on the debt funding, as well. It was important for us to have insurance companies in there because the asset we’re creating, those SME loans are well suited to the bank sheets of insurance companies. We got CNP on board. The name itself is super well-known because they don’t sell direct to customers but partners, but they are the fifth biggest insurance company in Europe. We also got Alliance on the [24:10] who are the [24:15] second-largest insurer in the world. That’s the first trend. Then because we were voicing ourselves as a tech company, fin and tech, but really a lot of investment in the tech, it was important for us to have these VCs, and the VCs that we have on our board are fintech; no surprise there. We knew each other. Olivier and I met through them. [24:40] was a very successful French VC. Then we have family offices. That’s a bit of maybe an unusual thing, but you know every time you go to an airport or anywhere, there’s one name you see everywhere, and that name is Decaux. They do all these billboards. They are the largest billboard company in the world, and they’re French, and it’s an amazing family story. You should do a podcast on them. It’s incredible. They joined our investors very early. They’re interested in helping us, and many of the customers [25:23], so there was an interesting angle there.
Alejandro: Nice. You were talking about the transparency of the culture. You guys have definitely taken that to another level when it came to either dealing with fraudsters or dealing, for example, with the illness of your co-founder, as well. Tell us what the fundamental building blocks are behind the culture of October.
Patrick De Nonneville: Some of it, to be honest, happened by accident. In this instance, in the moment, you have to take a decision that you don’t necessarily realize it’s going to be structural. But that is definitely what happened with transparency. It’s very easy to be transparent when things are going well, and you’re successful, and [26:10] fundraising you’ve done is. When it’s bad stuff, that’s when it becomes costly, and that’s also when you really have to do it. We had a first instance of that very early. In 2015 we made a loan of half a million euros to a company where we were feeling confident that the finances were good. We had conversations with the CEOs, etc. At that time, we had lent 12 million euros. So it was, seemingly, from exposure. In February of 2016, we realized that the company is almost a completely empty shell. We realized that because we see a request coming through that looks suspicious of that company, small details change. So we dug deeper, and it became very obvious that we got caught. We did three things. The first thing is we immediately involved the police. We also immediately informed our investors, equity, and the retail investors in the fund, and we informed everyone in the company, between the day that we fund and the day where absolutely everybody knew about it, was four or five days. Just the time [27:45], put everything together and put it out. We were also by luck, and because we were so fast, we managed to get the money back. The guys ended up in jail, and the end of the story was good. But it was a real baptism of fire for our culture to [28:05]. The funny thing is, those guys, now five years later, continue to try to fool us and many other financiers every week from jail. I don’t even know how they do it. They’re not supposed to have access to phones. We’ve built a tool that scans the deals that happen on all the platforms in order to avoid what is called layering. Layering is when people borrow from several platforms at the same time. We spotted one rolling under the platform, which was [28:42], and by digging deeper, we saw it was coming from the same guys. So we called the other platforms and told them what we had found, and it was a loss of 807 euros. On the back of it, we offered them to become one of our first customers of October. The technology was built to protect ourselves against fraud. We now offer to third parties. In the end, those guys were forced to help us.
Alejandro: There you go. A new model that comes out of that, so there’s always a positive and a negative, I guess.
Patrick De Nonneville: if you’re willing to learn. Yes.
Alejandro: [Laughter] No kidding. Now, in terms of now, for the people that are listening to really understand the size of October, is there anything that you can share in terms of maybe the number of employees or anything else?
Patrick De Nonneville: Today, we’ve got 110 employees in five countries, and more than a third of these are in tech-employed teams and also other teams. Instead of being a French company doing business abroad, we really try to have local teams as well. We’ve got 18 people in Amsterdam. That team is actually in Amsterdam. We’ve got 20 people in Milan. We’ve got a local in Madrid, which is a necessity in wealth, and an excuse to go and visit. And in Germany, as well, where we decided to be based in Munich. In each country, we have people doing this in the market, doing the credits, and all the ops, the recovery, all these we found need to be local. That’s our model. But all of them are using the same platform, and all of them are using the same tech tools, processes, and all that data is still advised and used in the same way. Every time you open a country, your professional leverage increases, and that’s how you scale up.
Alejandro: Nice. Now, imagine you go to sleep tonight, Patrick, and you wake up in a world where the mission and vision of October are fully realized. What does that world look like?
Patrick De Nonneville: That’s a fantastic question and something that we thought hard about before launching. It’s a world where getting finance is never top-of-mind in the mind of an entrepreneur because nobody dreams of taking on a loan. People dream of building companies. People dream of living in a nice house. They don’t want to take a mortgage. So if you manage to make that experience of getting the financing simple, fast, transparent for SMEs and etc., we think we free up a lot of possibilities for employment, for creation of general wealth and social wealth. That’s what that world will find. It’s a world where our business, our projects, the fact that I’m going to get funding for that project or not is a problem that I will solve fast, and it’s not going to be my main thing for two or three months, which is still to open the case as is the experience of many fundraisings both from the [32:14] and the liquidity side, but certainly on the debt side for small companies is something that is quite stressful and time-consuming.
Alejandro: Now, imagine if I put you into a time machine and I bring you back in time to that moment where you went into that Starbucks or a coffee shop or a restaurant where you met with Olivier, and you came out super ecstatic and calling your wife that there was a change of plans. Imagine you were able to say, “Patrick, come over here,” and you get that younger Patrick back in 2015, where you were starting to incubate the idea, and before bringing it to life, imagine you were able to give that younger Patrick one piece of advice before launching October. What would that be and why, given what you know now?
Patrick De Nonneville: I’ll try to think in two.
Alejandro: Go for it.
Patrick De Nonneville: The first one would be to print out that mission in big, bold characters and put it in front of myself every single day because it’s so easy to get into the business and lose sight of where you want to go. Sometimes, you can do that for surprisingly long amounts of time, and then it becomes very costly. There was a period in 2017, 2018 where we achieved our goals by doing bigger and bigger loans. It was very efficient. We were spending the same amount of time on loans, and we made more money because of fees or a portion of that, and we were growing nicely. But at the same time, we were making zero progress toward the mission because we were not making progress on our tech; we were not making progress on our data because we didn’t need it to grow by growing by just increasing the size. That would be number one. Number two, which is linked and is more personal, is that I should have done myself into the tech side of things much sooner than I did. Because of my past, because of my skill sets, etc. I was very focused on getting the money, getting all the [34:32] in order. But at the same time, to move toward that mission, you need not only good tech teams, which is what we had; we had good tech teams. But also knowledge. You need to know what that tech is going to be used for. You need to show every single step of progress you made, and your tech takes you toward that mission. That is sometimes difficult for people who have just a tech background. In order to really become a fintech to bridge those two things and make progress toward the mission, it became important for me, personally, to become a lot more involved, to start coding again, to do things myself that I saw a need for in order to bring the tech team level of knowledge and involvement into making our mission happen at the level of intensity and excitement that I think we now have achieved in no small part thanks to our fantastic CPO, CTO, and an excellent head of HR, as well. They have that mission in mind in a very strong way. I understand the fact that I need to be involved in that, especially more than I was.
Alejandro: I love it. Patrick, for the people that are listening, what is the best way for them to reach out and say hi?
Patrick De Nonneville: I’m on LinkedIn. I’m on Twitter. I love exchanging with people who are ambitious and realistic at the same time. It’s a tough balance even for me to have, but don’t hesitate. The European market is super exciting at the moment, so I’d be happy to exchange with people from the U.S. who are curious about what’s going on here.
Alejandro: Amazing. Patrick, thank you so much for being on the DealMakers show today.
Patrick De Nonneville: Thank you, Alejandro. It was a pleasure.
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