Faces of Finance

Riding Germany’s Startup Wave, with Thomas Dumlich of LOVOO & Zalando

Benjamin Romberg Spendesk

Thomas Dumlich is the CFO of LOVOO, a leading European dating app with offices in Berlin and Dresden. He started his career in corporate finance, before witnessing the rise of the German startup scene first-hand at Zalando and LOVOO.

We recently sat down (virtually, of course) with Thomas to discuss the challenges for mobile app businesses, the perks of working in finance at a fast-growing startup, and how storytelling comes into play during the M&A process.

Let’s jump right into a timely topic – how has the crisis affected business at LOVOO? One would imagine that dating apps become more popular with singles looking for connection during lockdown?

We definitely saw an uptick in terms of engagement, which then of course had a positive impact on our revenue as well. Especially our video chat function has become much more popular: the time spent there in all of TMG’s (The Meet Group) apps increased by 20% in the first month after the beginning of the pandemic, and the video chats per day have increased by 25%.

We also quickly implemented new features in the app, like NextDate and one-on-one video chats to offer more virtual dating opportunities to our users, and to make dating possible in these crazy times.

What are some of the main challenges in your industry (mobile apps), and which trends do you see emerging in the future?

In our space particularly, the dating industry, I see a huge trend towards consolidation. In the future, there will only be a few big players dividing the market between them. The dating market, especially for mobile apps, is changing as well. Simple swiping mechanisms are becoming a thing of the past, video will play a much bigger role. We can already see that happening on Instagram and at tech conferences, that’s why LOVOO introduced the feature already as early as May of 2018.

You’ve worked in different industries, like E-commerce and real estate – how does the finance role at LOVOO differ from your previous experiences?

Finance is always about numbers, and I think the dating industry isn't any different to other sectors there. But being in the mobile app business makes a bigger difference. Everything is faster and you’re handling a lot more information than in other businesses.

Accounts receivable is also easier to handle, as you have only two major revenue streams with Google and Apple. We have been working with the app stores for a long time and our relationship with them is important to us.

Specifically at LOVOO, it was a challenge for me to adjust to working with our mother company in the US, implementing SOX for example. But I like being challenged, and it helps me to learn and grow, so I’m actually happy about this.

Which aspects do you find interesting about the finance role in a startup compared to more traditional companies?

I started working at LEONI AG, a really huge company, mid-cap listed. It was a great experience to see how everything works, and you learn a lot about processes – but you don't have the power to change anything. You have the processes, and you work through them. In startups you can really make a difference and change things up, that’s what I like about it. When you have new projects, there's often nothing to build on, no legacy, so you can just do it from scratch the way you want it to be.

The teams you’re working with are also more open-minded. If you have an idea you can just make it happen. In a big corporate company, you first have to talk to 10 different people and it can take months to even make the tiniest changes. In a startup you can develop new skills every day, implement new tools easily, and you need to be very hands-on and still be in the details of projects.

At Zalando, you had the chance to witness the rise of the German startup scene first-hand. How do you see the development since you started?

Zalando's growth is really extraordinary, and they're doing a great job there showing how startups can succeed in Germany. I'm also quite happy about Delivery Hero becoming DAX (blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange) listed as the first startup in Germany. This really shows the development in the ecosystem.

In the first years, I remember when you were talking to somebody from the old economy they would always say: "These young guys, what do they know?" But now you’re really accepted if you’re part of a startup. And I really enjoy that there is much more networking possible now with a great amount of startups that have the same challenges, and there's more possibility to help each other.

In the first years, I remember when you were talking to somebody from the old economy they would always say: “These young guys, what do they know?” But now you’re really accepted if you’re part of a startup.

On the other hand, I still see the European, and the German startup scene way behind compared to the US or Asia. So there's a long way to go still. Some laws and regulations, especially in German, aren’t really suited for startups. Think of equity participation for employees for instance. If you have to pay 50% taxes, then it's not really worth it. But I think there are some changes to come – and I hope it’s going to be soon.

Both at Zalando and at LOVOO you’ve built the finance function from scratch. Can you share some learnings from this experience? What is most important when scaling your team?

At LOVOO, I'm really the one in charge of everything. At Zalando, I was in charge of the Controlling part and other finance functions. The most important thing is always to get your basics running efficiently. It’s not easy to get all the data right, in accounting for example, but once it’s done, you don't have to struggle with it again, everything else gets much easier, and you can focus on more important things.

I was really lucky to have great advisors and people to talk to. It helps to have someone challenging you and pushing you forward. So I’d recommend to always look for great advisors, either in your company, or also outside. And then you have to hire a great team, of course. Don’t be afraid of hiring really great people that might even be able to overtake you in time.

Since joining LOVOO in 2016, you’ve already worked on two M&A processes (2017 LOVOO was acquired by The Meet Group and the Parship Group acquired The Meet Group only recently). Do you have any tips for other finance leaders how to create a smooth and efficient M&A process?

Also here you need to get the basics right. You need solid and reliable data and efficient processes, so you have time to really create your investor story. You want to be in the driver's seat here and have the investor focus on the things that are most important for the decision. You need to guide them, as they often don't know your business as well as you do yet. So it’s essential to prepare everything in an easy, understandable way.

You need solid and reliable data and efficient processes, so you have time to really create your investor story. You want to be in the driver's seat here and have the investor focus on the things that are most important for the decision.

And it’s important to anticipate possible challenges along the way and questions that could come up. Ideally, you answer things proactively before, so investors don’t have to ask. Transparency and trust are essential.

Finally, you can’t do everything on your own. So don't be afraid to get help from other parts of the company, discuss and work closely together with your finance team, with C-levels, and with the legal team. It’s more fun, and you need to be aligned and tell the same story.

How do you make sure to keep up with the latest tools & trends in the finance world? Any books, podcasts or other resources to recommend?

I regularly exchange with other experts in my finance network. I enjoy going for dinner to discuss with others. And the CFO Connect community is very helpful with the Slack group, especially now, during the pandemic when physical exchange is more difficult.

And I want to be able to discuss at eye level with experts from other departments, so I like to read books that are not finance-related: “Multipliers” by Liz Wiseman for example, or “Hooked” by Nir Eyal. And I really like to listen to the OMR Podcast to hear the latest from the marketing world.

What are your favorite tools at work? What are THE tools all finance teams should have?

I have to say it's still Excel, and I guess that’s the same for most finance leaders. I like to have a solid database and tools that allow me to change things really fast. Excel is really flexible, and I also like the Google Workspace, even if you don't have the full functionality of Excel, but you can smoothly collaborate with your team.

I also really like to work with Spendesk now. Many finance tools still look like they did 20 years ago, so it’s nice to add something that looks actually new and can make a change. It’s nice to see that technology for finance is becoming more of a focus now.

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