How did the Zurich and Berlin based startup Knip grow into one of the biggest Fintech players in Europe? To find out, I met with Dennis Just, founder and CEO.
This interview marks the start of my new series “The Stefan Vetter Show”, in which I meet entrepreneurs who have successfully scaled a startup.
Stefan Vetter: Today I’m very honoured to have Dennis Just with me. Dennis is a founder and the CEO of Knip, a digital insurance broker. Welcome.
Dennis Just: Welcome to our office. Pleasure to meet you and I’m happy to talk about anything and everything to do with scaling.
How are you today? How was your day?
Quite busy and packed, as always if you have 120 employees at three locations. There are a lot of people that approach you, not only the employees but the investors as well. Meeting expectations is at the core of the business with scaling. Therefore, I think it’s enjoyment and job satisfaction that drives you through the pain and through the packed schedule. That’s essentially it. I think every day is packed; the focus of your life is on the business; that’s the way it is.
Okay. How does a typical day of Dennis Just look like?
I think there is no real typical day. Each day is different; each week and each month is different too. It really depends on what’s on the agenda at the time; the focus topics that you have on your list and those the investors put to you that the board decided on.
From the beginning of this year our focus was on marketing, customer acquisition and growth. We were out of the country for two months; in the US visiting all the VC. This year we’ve been on more conceptual stuff; how to scale the business, optimising efficiency; bringing in revenue.
We really focus on cooperation; optimizing conversions in the sales funnel, digitalizing this, as opposed to just pushing growth. Each stage is different and each day is different. It really depends on where you are; financing; legal stuff in-between. That’s the day. So I think a typical day for Dennis would see me working out from 7-8am, then going to work until 8-9pm; driving home, enjoying dinner, then bed.
You talked about user acquisition and growth. Where do you stand now? I think I read somewhere that Knip is now the largest digital insurance manager in German-speaking Europe?
I think we don’t have a frame of reference internationally plus it’s hard to compare active customers because nobody puts the numbers out. We estimate that we have two to three times more users than the competition has.
How did you get two or three times more sign-ups than the competition in your field?
It’s tricky to put your finger on it. I think there are a lot of reasons. One being we have the most financial backing. If you spend more, if you spend efficiently, you should have more customers or downloads than the competition. Another thing, when we started in Switzerland, a stable small country that enjoys a protected, high-margin economy, we didn’t face any competition here. There’s Finance Fox, but that’s a slightly different model. And the first thing we saw after about a year is that there are three players starting up at the same time in Germany 6 months after we launched in Switzerland. So what could we do?
You have a series A, you’re spending quite a lot of amount of money in Switzerland and Germany as well as having an international outlook. The only chance for us was to go all out in Germany and try to succeed in other markets through efficiency and prudent investment in marketing. The intention always is, if you are high in these high competition phases, you have to have a USP (Unique Selling Point) and we do. Something that marks you out in terms of usability, which is challenging in the insurance phase because essentially you rely on the back-end of the insurance carriers. Everybody has the same basis.
What about products?
The core product for Knip is the back-end, it’s not the front-end. We care about the front-end and it’s important to have a proper user experience; to have good flows and proper processes. But essentially, it’s the back-end because that’s where the automation is. And you don’t see this. But in this high competition phase, we decided to go all in. We had funding, I think half a year before the others. We decided to really force our way in the market and to outperform the others and position us as a clear number 1. In this position, we wanted to raise the Series B, which is way higher and bigger than the others had been because we felt comfortable with that. And I think these are the leverage points of a start-up where you are either number 1 and you get two to three times the valuation of the number 2 and lock into three times the money and you can scale, go on scaling or you fail. And we decided to go all in.
In the beginning, did you set up in Switzerland only or did you start in more than one country?
We started in Switzerland. I’ve been living here now for five years. We’ve decided to start in Switzerland because we felt comfortable here. It’s a country with great quality of life. There was no competition; venture capital, both from family and professional investors helped us get going; we used some family offices locally. It was a warm start in a setting where you can experience and where you feel you can make mistakes and you still have a high margin on the customer. In one year, we really focused on Switzerland, getting the product right, and then we moved to Germany as a second market. We operate now in two countries, namely Germany and Switzerland.
So when you started from scratch in Switzerland what did you do to get your first users on the app?
It was not from scratch because I did Numbrs before and we founded another company right before Numbrs. There was some money in the company which I financed by myself. The first thing that you need to do to demonstrate that your model works is to prove conversion points; people being interested in your product; get user registrations. People being interested in signing an agreement which is the core business of us having a full mandate to win customers. Progressing step by step with the website and making sure that there are customers out there that like what you do. So we bought some email addresses in Switzerland; we put newsletters out which lead to several hundred registrations. We logged email addresses on our website and then we contacted them and tried to convert them into mandates. We sent the mandates out to the carriers, we got the policies in. It was the proof point that the funnel works on a low scale. Problems and challenges come afterwards when you start to scale. But at least we knew what the trigger is. Till now the trigger has been for the customer to be able to keep track of things with simplicity; digital support; having a broker at hand; feeling that the people and the broker care about you and that they optimise your portfolio constantly. So this is what we advertised. We said: “We have a good ap. Just enter your email address and we will notify you as soon as it’s ready.” And we had a phone number which we called. A warm lead call we tried to convert. That was the start.
At which point did you realise that the product worked and there is demand for it in terms of product/ market fit?
I think there are different stages of product market fit. When the first email comes in, I think it was in SendGrid at that point, you are hopeful that there is a product / market fit; people are registering. This was cool because if you send out newsletters, you normally have an immediate response. So usually 10-15mins after you send out the newsletter, either you have ten registered guys or you may as well forget it. I think this was the first very positive vibe about the demand being there. Although you don’t have the product, you can say you can have product / market fit, but essentially you have, I would say, an interest fit. There is no product and there is no market because you have not yet monetised. And this is where you go the next step where you build the product and try to advertise the product and on the funnels because the funnels are even more important than realising you have interest fit. Specifically in e-commerce, as well in that business, the funnels differ quite clearly. So putting trust elements there, having all the suggestions for certain points is key. We have a signature in our funnel so it’s a quite high dropping screen because you have to have a lot of trust in Knip to make the signature. Knip can go to carriers and ask for policies and I would put it into the application. These are all the things that we figured out on the way. But I think the first point where we felt like this might be a good idea was when we got the first email addresses and we played around with ideas. The funny thing is when we ask potential customers about what we had in mind they said, “this is a cool idea”; they liked having all the policies on the phone and not needing a broker anymore. When we asked insurance carriers it was like, “What the fuck are you doing? It doesn’t make any sense! Why should the customer want to have policies on his phone?” We have to reflect properly on the opinions that we get. We are constantly in the phase of proving our product market / fit. It has not stopped; expectations just go up.
Interesting point. You mentioned that you did a lot of email marketing in the beginning. What other things did you do to get more users, more growth?
I think it’s really a process and the channels change. That’s the thing; the process is interesting. The challenges change because of the channel matrix and the channels are used more or less or convert more or less too, or you want to have a higher leverage in the end. You are using TV because you want to scale fast because you have a product that you assume is suitable for a broad target audience and then you just force it through and try to make it happen. In the beginning, we focused really on the personalised channels, which are Twitter and Facebook. I think it was the beginning of 2015 when it performed amazingly. Customer acquisition cost below 50 euros, you could scale it to some 10,000 users a day and it would perform the same way.
Using advertising on social media.
But it’s different now. It changed completely because the big brands are all pushing on Instagram and Facebook. The prices are up and it doesn’t make any sense today for us to do social media advertising because we have a 5x or 10x multiple in the acquisition cost because it just got so expensive. That was the case at the beginning as well. SEM (Search Engine Marketing) is not really important for us in itself; it makes sense more from a branding perspective because if we advertise on “health insurance”, the click cost would be so high that it doesn’t make sense and we sell a solution. So being a solution, you don’t advertise on transactions, you advertise on the solution. Therefore, display, affiliates, these were other channels that we used. The main medium of scale, when we had a very tough phase in which we scaled from September last year to March this year, was TV.
Okay. What is your conclusion on that for the future, when you say that TV did work and SEM did not? Do you plan to grow more using TV ads or maybe more online video?
We tried online video, it didn’t work for us. There are multiple reasons for things not working out. I think we tried two ads and neither worked. TV is a channel where, when you can afford high acquisition costs and/or want to differentiate, I would definitely go for that. But be aware that it takes a lot of budget to do this effectively. To be efficient you need to analyse closely where you are putting your money; into which channels; which times; which slots best optimize conversion and so on. I think it took us half a million to get an understanding of that. And after that point, the half a million is gone. So it’s expensive. You need the experience and data points to make it perform. What you can come across in TV is the same as with Facebook and SEM. I think you can scale up to a point where you then see the customer acquisition cost goes up exponentially so you don’t want to scale over that point. With the same message, the same ad, then the efficiency overtime drops. You have a high kicker which you shouldn’t over kick and then you have to find the time where to stop the running the ad. Just go off. You always need these peaks in TV to make a difference and to have a performance spot.
How do you measure success of TV campaigns?
I couldn’t have imagined it a year ago, but there are ways to measure how TV campaigns lead to installs. There are two ways. Essentially what you do is you put your TV plan into a tool. And there are multiple tools that like Spoteffects and TVSquared. I think there was another one which ProSieben bought and then cancelled the whole project because they felt they didn’t want to have transparency. What you do is you put in your advertising plan into an algorithm. On the other hand, you have all the install data points and interaction data points of your customer base, including all the Organics, the Paids, the Facebooks and so on. And the algorithm matches the ads with a program, and the reach of this program, with the interaction that the customer has within your database. So it’s not a guaranteed 1:1 match, but at least it’s a high probability correlation because you are essentially having a baseline which peaks when an ad launches and the peak usually lasts 5-10mins. You cut off the peak and match it to the TV channel. From my understanding, from the numbers I’ve seen, you can say there’s 80-90% accuracy on tracking on TV.
So your product is a digital insurance manager. Which formats or which shows on TV have been most successful, if you can say that?
Sure. I think everything that is male orientated or has a male target group will work for us. Sky, DMAX, everything to do with cars – that kind of stuff. What didn’t work out at all were the golden channels like Sat.1 Gold or Kabel 1; everything that older people tend to watch because I assume they have no interest in having a digital insurance broker. They’re more interested in fancy clothes or whatever! But there is a huge difference on the good channels where you can buy media for 90-95% discount as opposed to buying media on the Sat.1 Gold where you can buy for 85% discount. There’s a customer acquisition difference of 6 x to 7x. Huge difference.
Is that target group the same than in online media?
For us it is. We have a product for men. Male, 35, city based – that is our target group. It works the best. Easily our target group number 1.
Why?
I think because men care more about the financial security and about the financial level of the family. So if you look at the person that is the average Knip person, it’s either a young professional being five to six years in a job, starting to think about buying a home, house, flat, getting risk-averse at this point, or a young family, having their first kids, thinking about how to secure the future for their children, “I want to have everything ordered; that is around protection.” That’s our assumption how Knip works and what the perfect target group is.
Okay. A lot of media stations are giving away air time for equity. Is that something that you would recommend to start-ups to do?
I think what you have to be aware of is that publishing houses have very different incentives to start-ups. If they participate in equity in your start-up, usually they are not incentivized, internally at least, on the high valuation kicker that you can reach in an exit. They are more incentivized on getting the money back. Usually they come in at a series A and they sell at a series C. Their incentive is cash from media and media is so cheap currently that they can just win in the end. Media deals work the way in TV usually that you get 70-75% discount on the gross media that you are getting. So 75% off is the net that you convert into stock. Let’s take 70% discount, 30% is left that is converted into equity or at least it’s the portion that is equity-related. They want to have 50% in cash. So anyway paid out and 50% in equity. As you are anyway paying half of the price of the 30%, and usually if you go over an agency, you can get it for 80% discount. The question is why you do it. I think there’s no real reason behind it. If you can get a deal, take Zalando. Zalando’s success was made out of an amazing media equity deal they did with ProSieben and they really fucked up ProSieben with a deal and ProSieben learned they could never do this deal again. But it was at over 90% discount and full equity. And with that it just blazed a trail in TV and they got the brand that they have now. So it worked out. But they learned and you will not get the deal that really helps you in the current state of the media industry. If you take Switzerland, around about the same 70-75% discount and all in TKP media, what do you want to do with it. TKP is nothing that you can relate to any performance at all. Usually the channels don’t perform so we did a test, I think on 20mins. Even with CPC it was a ridiculously low performance. I have a friend that did a test on NZZ; same result. You don’t want to do that.
What would be a deal that you would do?
Revshare. Everything that you can track, properly track and where the incentive on both sides is leveraging your business, not just giving away cheap cash and cheap media and ideally you get cash for it. Revenue share, even leads makes sense in certain models, depending on what you have. If you have a moving platform or something, a lead model would be fine. But you have to have value on your platform, on your product, on your model so that a deal makes sense. Otherwise, I wouldn’t engage. Another way could be more or less the Zalando way if the terms are fine. If you see competition coming in, try the same model like we had with the Clarks and the GetSafes. You really want to differentiate by building a brand, by pushing into media. I would think about media equity with a TV station, but only with a proper deal.
Did you yet have a good revshare working relationship?
No, because media parties will not engage on a revshare in Switzerland.
Why?
Because they are getting paid for TKPs, so why would they? If you try to do an integration with one of the big media houses, they always ask for set-up fees, they always ask for TKP-related media buying. There is no interest. You specifically see this now in the alliance of Swisscom and Ringier, Admeira. They’re building a monopoly to hold their TKPs. That’s the only reason why they’re doing it. If you come to a point where they go from TKP to CPC, they have to bring performance and the channels don’t perform.
Fast forward, 2 or 5 years, will these media houses still have that comfortable situation that they can act like that?
I think they will try everything to be in that situation, which we see now in people grouping up in terms of advertising, pooling, however you want to call it. I hope not, but I am quite convinced that they will put in everything that they have to maintain the situation because they’ve seen in Germany how it turns out. Their argument is branding. But banner doesn’t brand. That’s total bullshit as well as sponsoring on a football shirt doesn’t brand. TV, if you really push that angle, has a branding effect, but branding gets less and less important. I think that’s the situation which you have. Branding is no argument for a start-up because a start-up needs to perform, it needs to bring revenue, and it needs to generate value. I think it doesn’t work with the structure that we have.
Did I understand you right that TV was a channel that drove most growth to Knip?
I think it drove half of the growth that we have now.
What about the other half?
That would be mixture of PR, organic and Facebook. I would say Facebook a quarter and then the other half is Organic and press.
Which kind of PR worked for Knip? What did you do? What was the most successful PR?
Anything in the mainstream media. You have to think out of the box. One example, we just released last week and which was a blast in the last two weeks for us, is Pokémon insurance. It’s ridiculous and in a way it’s an incentive insurance which we structure with one insurance carrier. Essentially it’s an accident insurance with some additional features that cover you when you’re playing Pokémon Go. And it was the first one released in Europe. We were on Bild, on 20min, on Spiegel TV, on RTL. This works. It’s not really close to your core business, but how do you want to market from the press point of you being a digital insurance broker? It’s not possible so you try to pick elements and build a big story around it. We did celebrity insurances, for example. I think it was one or two months ago.
Celebrity insurance?
The press release was about the most pricey celebrity insurances. Mariah Carrey insured, I think, her legs or her butt for 300 million euros. And you make a list of the Top10, publish it as a press release and everyone will feature you. That’s the sort of thing which is taken up in the mainstream media. Everything that is niche media or industry media doesn’t bring any value. No broker will register at Knip, no insurance carrier employee will register at Knip, and so that’s not our target audiences. Our target audience is the typical, guy, girl, family. And this is where I need to be, so I need to have the story for them around the topic that you are covering and then you’ll get the leads. If you take the Pokémon example, I think, from a reach point of view, we had 10x visitors every day since we started with the press up until today. There can be a huge effect, but you have to time it. There are a lot of press requests that are coming in, we call them to engage with the reporters, so they can write about you.
Do you play Pokémon Go?
No. I haven’t downloaded it because I think I’d get addicted. It was the reason I didn’t install that World of Warcraft, so I will not do Pokémon.
Same with me.
I’m a gamer, so it’s going to be tough.
What has been your favorite game?
Call of Duty. I was European champion with my team.
Nice. What channels do you plan with to grow Knip even faster in the future, which I suppose is your goal as the CEO?
I think when you reached the stage where you have the number 1 position, we have grown over channels that don’t have competitive differentiating effect, to be honest. Maybe we had the better ads on Facebook, maybe we had the ads that perform better, but essentially everybody can buy on TV or everybody can buy on Facebook and everybody can buy on Twitter. So there’s no differentiator except being better. And being better means 10%, but it’s not 200%. So the differentiator that makes a difference now in our industry is that you try to tackle acquisition places that other guys cannot attract, meaning integrations.
Special partnerships?
Going to banks, integrating into bank accounts and going to Telcos and integrating there, going into reach providers, integrating tools where you can get a dial code, for example. So it’s really placing yourself at points where no competition can go in and with this you have a long-term differentiator. So far, we tried really hard to be the number 1, we tried to be the clear front-runner in terms of product, in terms of growth and active customers. But to be honest, it’s semi-sustainable what we did. Now it’s really the margin between hyper growth vs. long-term revenue and sustainability of the business.
That is a question that many start-ups have. How to get into these special partnerships? What would you say are the pre-requisites to get into that position?
First, you always need a solid investor base. It’s usually the big companies that invest out of their financials into the funds. Therefore, you can lock them in where they have someone, a position that was a head or a C level at the big corporations, agents and VCs in a way. So it’s really your network that you build. This is for the position that you have so it’s easier being a N26 to get a corporation with a big Telco than being a small player in the market because you cannot leverage. As a big player you will always leverage. On the one hand, the position that you brought yourself in on as a start-up and on the other hand the reception from other people. If they know what you’re doing and if they have a positive view on it, that’s always the best perspective you can have. If they use your app at all, that’s perfect. They will not refuse.
Is it possible to skip this expensive, high-growth phase and go directly into partnerships?
For sure it’s possible. You have to be aware of the scale and the time it takes to enter in these huge partnerships. It’s not really partnership, but we worked on our AXA contract in Germany two years just to get the insurance broker contract with AXA Germany. If it’s a large corporation, you go three times to the legal and two times to the boards and twenty rounds. It is easier if they really want it. But if you have to incentivise them or they don’t approach you, you have to get them to a point where they feel the heat, where they feel the upside. It takes a lot of time. And it’s not only one person you have to convince because usually it’s not a family owned business, but it’s a stock listed business. There are a lot of stakeholders.
What is the most important thing you’ve learned since you’ve built Knip as a leader, as a person, as a CEO?
I think, as a person, you calm down and steadily move forwards. Specifically, in financing phases or high growth phases, you always face points where you think you cannot make it. Money is short and you have to pay one hundred salaries and the question is how to get to that point. These points are crucial and usually there are always solutions. If you are calm but focused and go step by step through it, you will make it. I think we did it several times as well through the tough times. Being an entrepreneur is a lot of fun, but you have to reflect upon your circumstances. We have now 70 million in the company now. I don’t own the majority anymore, but I can decide, I’m quite free in how to handle the business. I have the weight of expectations of six funds on me; to deliver ten times what was invested. How do you deal with that? They’ve been pushing you, squeezing you, sometimes nice, sometimes not so nice. That’s part of the game. Be aware of that.
How do you cope with that pressure? How do you handle that?
The easiest way how to handle it is to say to yourself that you can only do the maximum that you are able to do. At a certain point, we don’t deliver the numbers that we should deliver, when the board feels Dennis is not the right CEO anymore, as long as I did everything that I am happy with myself and I really performed 120%, you have to be fine with that. The situation sometimes overwhelms you. We had a situation with Christina [Kehl] and I know a lot of founders that lost their power under pressure because they got ground down and washed up in depression. If you have a solid foundation, take time to reflect and are self-confident – it’s enough. But know as well know that you’re not perfect; investors are not perfect. And sometimes you get a feeling of how a situation can turn out but you never really know how it will turn out and you cannot influence it 100%. I think you should be aware of that. Knip is big now but we are not profitable yet so we could still crash and burn and I think that’s the situation we have to be aware of. We have to do our best to not crash but to perform. Always saying this to yourself and having a solid foundation from family, girlfriend is what I think is the best basis that you can have, though it will never make your bad dreams at night go away. They’re part of the game.
What drives you to do what you do?
It’s freedom and the power as well to be able to do not just what I want but what I feel is the right thing to do, whatever that may be. I’m coming from e-commerce, I did Numbrs, which was banking, and now insurance. I really don’t care about the topic. It’s really about the opportunity. Let’s face up to it and let’s see what we can turn it into. As long as I have the pioneering spirit and the company – I think that’s the situation which I want to be in. If it turns into a purely corporate exercise, I would give up on it. Then I’m the wrong guy. That’s a thing that you have to consider too. If the company turns into an organisation which has to deliver profit, a corporation with investor relations based only on KPI, I think I wouldn’t enjoy it anymore. That’s the time I would say there are CEOs that can do better than I, because I really want to solve problems, fix things and ideally be involved in a big challenge. The challenge is the insurance industry by itself because it is so old-fashioned, unstructured. We can do a lot of good things for the customer.
Thanks a lot Dennis for your time. It was a pleasure, an honor for me to have you.
Thanks for your time. I enjoyed it as well.
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