Penzilla: why we invested.

Retirement is a thing: making German company pensions cool.

Sometimes a founder’s pitch addresses a problem that you have personally experienced. In enterprise software this isn’t always the case. But with Penzilla, the problem the founders are solving is visceral for me.

I worked at SAP in Germany for more about 14 years or so, across a couple of stints. SAP’s considered to be generous provider of employee benefits, witness the vast number well specced company Audis, BMWs and Mercedes in the Walldorf car park. The online portal is brim full with all sorts of benefits, including nifty lease a bicycle schemes, and probably the best stock purchase plan in Germany. While there I contributed to a company pension plan, and the company contributed too. Same while I was at Gartner. The company plans are called Betriebliche Altersvorsorge, or helpfully bAV for short.

Today I have a better idea of how many air-miles I have with Lufthansa than I have about what these schemes will provide me with when I stop work. If I’m lucky I receive a letter once in a blue moon which outlines in super complicated way what I might get when hit a given retirement age. If there is an online portal, it is hiding from me. I’m not sure who the pension provider thinks their customer is, but I’m not feeling the love. From what I can tell, the returns on the money are not exactly stellar either.

The German state pension is not going to support the wave of retirees that demographics tell us is on the way. Germans, and their employers, are going to need to save more, outside of the state pension. The government knows this, so it is encouraging employers, through ponderous regulatory reform, to offer company pension plans. Companies already have to offer some form of plan, should employees ask for one.

But today, because it is Germany, the bureaucratic effort for companies to set up and manage these is significant, and makes them pretty painful for HR departments. There is quite a lot of reporting, awkward payroll interfaces and more. Never mind the employee, ex-employee and pensioner facing side of things. Sometimes, even if companies set one up, employees don’t actually know what it can do for them. A benefit that employees don’t understand isn’t much of a benefit. It is a wasted opportunity to deliver something genuinely compelling.

Making this simple and value for money for both employers and employees is what gets Christoph and Catherine Leser excited. They both have deep experience in the space, having worked in the industry. They really understand the regulatory frameworks and rules, and how to navigate them. We share their deep commitment in destroying administrativa.

Chris has been around German pension most of his life.

He basically grew up with corporate pension (sounds like a tough childhood but he came out of it OK-ish 😉) as his mother founded her own company back in the ‘90s. His mother’s company acts as outsourcing provider for managing corporate pension SPVs (”Unterstützungskasse”). Since the company showed very attractive components of a business model (recurring service revenue, long customer lifetime, very very low churn),

Cathi and Chris decided to dig deeper. This how they describe the current state of affairs.

However, it became clear to us that the way to get to these corporate pension products is just way too cumbersome for everyone involved. Imagine you are placing an order for your stock trade and the order needs to be sent by fax, validated manually by a banking clerk before you receive your order confirmation two weeks later via a paper letter in your inbox. This is pretty much how corporate pension feels for most employees and HR departments.

It reflects my personal experience precisely.

They’ve built a product that makes it so much easier for companies to set up and manage their bAV, and actually market it as a significant benefit to their employees. It neatly integrates to SuccessFactors, Personio, and has a differentiated integration into DATEV, which is especially nifty. Penzilla works closely with Kombo, another Acadian Ventures portfolio company.

Pretty much every German employer could do a far better job of providing a competitive and well communicated pension plan than they do today. The larger employers that already have plans can automate their admin with Penzilla, and provide a far better employee experience. Mid-size companies that haven’t set one up because of the administrative hurdles can now do so easily.

Companies that have well adopted bAV actually save significantly on their own social insurance contribution costs, so it should be a no brainer.

When you do the maths, this is a massive, poorly served market, requiring the combination of innovative thinking and deep expertise to disrupt. To many investors this will seem too niche and boring, but we love boring niches. The place where regulation, significant financial implications and technological innovation collide is where we are happiest. bAV is one of those places. The challenges facing the German pension system are echoed in Italy, Spain, Austria and much of continental Europe. We think that Penzilla can build a massive business that will significantly improve the financial well-being of millions of people.

We are thrilled to be co-leading this round with Delin Ventures (Iskender). Robin Capital (Robin), WENVEST Capital (Christophe and Tom) and Motive Ventures (Michael and Anina) and Diana also participated. I’m doing the board thingy on this one.

I have several thank yous to make, beyond the thanks to the founders for choosing us.

Tom from Wenvest for the intro. Thanks so much.

I’d like to thank Robin, he was instrumental in pulling the round together, and we worked closely on building conviction for the deal. My massive thanks to him.

I’d also like to thank Jason, my partner, for dealing with the joys of notary processes and so on from the US. He has the patience of a saint. Come on Germany, we need to make this easier.

We have another deal in the benefits space that we will announce shortly, watch this space.

As I usually do, I add a tune or two.

As an immigrant to Germany, I picked up on NDW about 15 years late. This is one of those songs I’d heard in English first, and didn’t realise it was originally in done German. More background here. If you have been to a German football game, you would have heard this….

And another 80s great song. Dignity. From the Scottish band, Deacon Blue. I saved my money, isn’t she pretty….that ship called Dignity. I could picked wages day too, I suppose.