Huddlestock – My view – The Overview

What is My view?

“My view” is my way of expressing my own personal opinion of things that engages me. It gives me the opportunity to be candid, transparent and open. I am a person who likes to focus on things and if I get engaged in something as an entrepreneur I will always give it my all. Currently my absolute largest engagement is Huddlestock!

I love to share and talk about what I am doing to keep as many stakeholders as possible engaged and to stay open to feedback and suggestions. I will always have an opinion on things but I can also change my view on a dime if someone suggests something better.

People are reaching out to me with questions regarding my various posts in social media and this is where I will post my longer answers.

I have spent most of my adult life learning the ins and outs of the financial markets. First as an analyst, trader and money manager at my own fund and later as a creator of financial administrative systems. After creating numerous fintech applications between 2004 – 2009, way too early 😂, I came to the conclusion that I wanted to create a core platform that others could use as a base when creating their fintech initiatives. I found some old images of services that we created between 2004 and 2009 😊, enjoy!

I also wanted to help traditional financial institutions to join the new era of APIs and real time communication as opposed to file transfers and batching to create a better experience for consumers of financial services.

Because of this I founded the company Bricknode to create the core platform and offer it as Software as a Service. Before Bricknode I created a company which offered real time trading on global financial markets where a lot of focus was on the front ends to support online trading without latency. With Bricknode the challenge was instead to deal with the logistical problems with administering financial transactions, accounts and financial instruments.

What is Huddlestock to me?

When I and my fellow shareholders in Bricknode decided to join Huddlestock and combine our two companies into something that would complement each other, there were two things that attracted us.

1. Cash generating consultancy operations
2. Regulatory permissions

We viewed Huddlestock as an investment company within fintech with a diversified portfolio of fintech related companies that could explore synergies together.

I have always liked the story of the Swedish investment company Kinnevik which used stable cash flow from traditional industries to invest in new technologies and making bold bets for the future.

Even the name, Huddlestock Fintech suggested to me that this was a company where a powerhouse investment company could be built with diverse Fintech holdings in its portfolio. It would be able to leverage the synergies between the portfolio companies and invest in the future while generating positive cash flow along the way.

As an investment company, Huddlestock Fintech can offer a lot more than just financial help to its portfolio companies. Managerial tasks can be centralized like for example financial reporting and accounting, market communication, Human Relations activities and much more.

Assets like technology, regulatory permissions, operational knowledge and domain know-how could also be shared between the portfolio holdings. Mistakes and detours can be avoided by sharing “lessons learned” and experiences across the group.

The image below illustrates how I view Huddlestock Fintech AS.

Visigon

Visigon is a great financial consultancy firm with awesome possibilities to expand its business while contributing with positive cash flow for the Huddlestock-group. As a shareholder of Huddlestock Fintech I hope to see a lot of focus on Visigon which I think can grow into a leading specialty financial technology consulting firm based in the Nordic region and then expand into the rest of Europe and maybe US in due course.

There are a lot of complex financial software out there and highly specialized consultants will continue to be in great demand. I hope to see a lot of focus on building an awesome team environment within Visigon and a growing number of team members.

Investments as a Service

Like Kinnevik built Tele2 with cash flow from Korsnäs, Huddlestock is taking a bet that Investments as a Service will be big. There are very few players in this field. Why? Because it is very complex and requires a lot of capital to get started.

We founded Bricknode 14 years ago with this long term goal in mind. Through bootstrapping and some capital raises we have arrived where we are today, with a great platform that can be scaled up!

Investments as a Service is a new word for combining institutional brokerage with technology and within this service you can provide both pure software and software bundled with brokerage services. This can be both a B2B offering, where Huddlestock takes care of all the “boring” stuff under the hood, and a B2C offering, where Huddlestock can use its own technology in B2C brands.

When pure software is provided then Huddlestock is providing the core software platform, applications for tax reporting, government transaction reporting, white label front ends, portfolio management features etc.

When the software is bundled with the brokerage service, Huddlestock acts as a broker to the B2B customer and the B2B customer uses the various software tools to manage their end clients and onboard more end customers who open accounts with Huddlestock as the underlying broker. Huddlestock is the one legally carrying the end customer accounts and work in its own software to provide the brokerage service to its B2B customers.

What then are the pros and cons of the two services?

Software

Pros

• Requires no regulatory permissions
• New tenants of the software can be created instantly
• As long as What-You-See-Is-What-You-Get is sold to the customer nothing new has to be built
• No capital requirements and no balance sheet impact
• Almost 100% recurring revenues
• Sticky business with long term customers
• A Marketplace (“App Store”) with applications from 3rd parties generates income without Huddlestock being responsible for maintenance and support

Cons

• Complex enterprise software requires a lot of education for customers to use properly even if an extensive wiki with guides and best practices are available
• Even if the software can be launched instantly the sales cycles are long and discussions can be ongoing for 6 – 12 months before closing
• Generates support and maintenance (more if not enough quality is delivered)

Brokerage

Pros

• Customers are basically just opening an institutional brokerage account and does not have to learn how to use the full administrative software to operate their business
• Instead of discussing features and functionality, discussions are usually centered around what types of financial instruments that will be available
• Sales cycles are typically much shorter than the long enterprise software cycles
• Each new end customer that the B2B customer onboards means a new customer account is opened with Huddlestock
• Income can grow fast if B2B customers onboards many end customers

Cons

• Almost no guaranteed income, income is dependent on the B2B customer finding enough end customers
• Each new country where Huddlestock wants to be able to onboard end customers requires adding government reporting capabilities to the software for that country
• Capital requirement increases when the business grows so the balance sheet is important
• The income is not as “recurring” as software income

?

In the box labeled ? new companies within the fintech space could be acquired, wholly or in part, to gain new synergies and income opportunities.

Summary

As a shareholder of Huddlestock I would like to see a clear focus on the parent company as the investment company that I assumed that it was and a complete focus for each subsidiary initiative as a silo while exploring synergies through partnerships within the portfolio companies of Huddlestock Fintech.

The way I see it right now there are two subsidiary initiatives which are high end financial technology consultancy services and Investments as a Service.

The parent company, Huddlestock Fintech AS, has to work on allocating available capital and cash flow between the portfolio holdings to create the best possible return for its shareholders.