Divizend | X-Europe Startup Interview
Welcome to our X-Europe startup interview series. We have virtually sat down with a number of our founders from past cohorts to hear all about their solutions, vision for the future, and what made them tick during our X Europe programme. So whether you are a deep tech founder looking for startup support, an eagle-eyed investor, or simply interested in the possibilities that technology can bring to society, then we welcome you to take a read. Please meet Divizend, the leading international wealth-tax FinTech platform for the fastest way to reclaim foreign dividend withholding taxes.
Can you briefly explain what your solution is all about? What’s unique about it?
Private customers of brokerage/investment accounts are currently facing the problem of applying for foreign withholding tax refunds, they have to familiarize themselves with complex forms in the respective national language. For many people holding foreign shares, this is far too time-consuming, complicated, and often infeasible due to language barriers. At the same time, the fees for commissioning specialized tax consultants are generally disproportionate to the final reimbursement amount. Our software now helps private and institutional investors to reclaim their taxes by automating the withholding tax refund process. Divizend is the first FinTech worldwide to work on digitizing such a service in a novel and user-friendly way. Using these fully digital and intelligent methods and by integrating our steadily growing securities database. We will be able to offer our service to end consumers at a uniquely competitive price. No other such automated solution exists on the market right now.
What led you to start or join your company? What is the key motivation and mission behind the startup?
As investors, we were already very interested in international dividend stocks even before Divizend, in order to build portfolios with long-term second incomes. But in doing so, we kept running into the problem of withholding taxes that make you pay taxes twice when you receive dividends from countries like Switzerland, Austria, Norway, and many more. These double taxes are refundable from abroad, but the process to get a successful refund currently requires a lot of international tax expertise that private investors simply don't have. In addition, each country has its own hard-to-understand form, mostly exclusively in paper form.
As we got more and more involved with the issue step by step, we realized that millions of other investors have the same problem as we do, and often don't even know about it. Yet the market is huge: the international volume of withholding taxes paid on dividends is about $100 billion annually, of which about $20 billion is not refunded each year. This means that investors lose real money and thus a considerable part of the dividend yield. So it made sense for us to start a FinTech that solves this problem by offering easy-to-understand, intuitive web service. Divizend was born. It was an advantage that we had extensive technological, tax, and securities know-how in our team to successfully develop our platform.
In the short term, our ambition is to democratize the refund of foreign withholding taxes on dividends and make it easily accessible to everyone. This should, for the first time, give private investors the opportunity to maximize their dividend yield by reclaiming it, just as larger institutions already have service providers do.
But that's not all: with central banks continuing to pursue zero interest rate policies, savers and investors are looking for alternatives to make their money work for them. We are convinced that dividend stocks are a great tool for this. In this context, dividends are also becoming more and more popular from the corporate side: the dividend market has an annual volume of about $1.5 trillion and is growing at rates of 5-10% per year. Consequently, our motto is "Find, Act, Maximize." By continuously expanding our platform, we will provide investors with a comprehensive solution portfolio of dividend information and services. This is already manifested in the company name Divizend: We bring the "Zen" into dividends.
What’s the biggest milestone your startup has achieved so far, and what has surprised you most on this journey?
In general, the realization of our platform is a technologically exceedingly complex task, as we have to bring together expertise in several major areas, in particular banking APIs, taxes, and securities data. In addition, we placed great emphasis on a comfortable user experience from the very beginning in order to differentiate ourselves from traditional tax software.
Specifically, our first step was to implement a securities aggregation interface that would allow our users to conveniently import their securities accounts with us. In doing so, we had to standardize the currently largely unstandardized APIs for accessing securities data from many different banks. In addition, it was necessary for us to set up our own securities and dividend database, as conventional data providers usually supply dividend data in particular without taking tax details into account. Finally, we created an abstracted layer ourselves with our refund platform, which is very modular and thus easily expandable, so that we can continuously integrate new source and refund countries.
After almost three years of development, we finally released our platform in December 2021 and were immediately met with an extremely positive response. This was of course a major milestone for us. Since the beginning of our company, we have been completely bootstrapped and have worked without external investors so far.
How has X-Europe helped you during the past few months?
The exchange with Antonio from Growth Tribe has helped us enormously. Antonio was able to offer us new perspectives that we had not thought of ourselves. This also made us realize that we are sometimes in a kind of bubble and should ask an external person for advice every now and then. Through Antonio's comments we have changed our claim on the website so that visitors know within seconds what Divizend is about. We are already looking forward to our next conversation with Antonio about HR and employee empowerment.
What are your goals over the next 3, 6, and 12 months?
In the next three months, we want to expand our platform to also address private investors from Austria and Switzerland. We chose these regions because we are already experiencing high demand from there, due to the similar language and similar structures regarding the organization of local tax offices. Over the next six months, we will work on expanding our platform with the capability to also be usable by tax advisors, bank advisors, asset managers, etc. For example, B2B customers can file refund claims for their customers. Even though on the B2B side, withholding tax refunds are rarely missed out right now, such customers still experience the pain of filing claims manually, which is time-consuming and error-prone. With our platform, this will be heavily automated and our traction on the B2B side is improved, as we can already show that our platform works and is generating real revenues on the B2C side.
Until the end of 2022, we want to continue working on expanding our overall dividend ecosystem. Eventually, our service for withholding tax refunds, with which we have started, will only be a single “app” in this much larger platform, which will be highly extensible and customizable.
What advice would you give to an entrepreneur trying to pave his/her way in the Fintech landscape?
In my opinion (Julian, CTO), having a co-founder like Thomas was highly beneficial due to his decade-long experience in financial topics, financial services, APIs, developing index products, and financial journalism. With this, the work between investor relations, sales and marketing, and the technical stuff was well split, while we both worked together on strategic decisions involving the entire company. Thus, my advice is to never start a FinTech (or any startup) without a co-founder, also so that you do not become trapped in your own mind.
Next, being the co-founder of an innovative startup does, logically, require you to do something innovative, something groundbreaking. In our case, delving into the topic of withholding taxes is a very specialized thing and by now, we can answer virtually every question on this topic. Thus, you need to be ready to always be curious, always be up-to-date and work hard to essentially become a world expert in your field. This also requires getting a lot of feedback from many different parties, e.g. individuals, other experts, accelerators, investors, etc. At some point, you will be able to answer every question that is thrown at you and when you have reached this point, you can act much more confidently when working with customers, investors, etc.
Finally, do not ignore “boring” topics! The topic of withholding taxes on dividends (taxes in general!) sounds quite uninteresting when you first hear of it, but when you get deeper into it, you realize the enormous potential that is behind it. As a startup, we are not tax advisors, we are architects building a platform and an organization. This means going unconventional ways, not immediately jumping onto hype trains (NFTs, crypto, BNPL, etc.), and always going the extra mile when it makes sense. In our case, we had to build a lot of underlying infrastructures (e.g. Securities Aggregation API, Securities Database) first to even be able to realize a platform like our Maximizer for withholding tax refunds. Do not be intimidated by such deep tech endeavors, but embrace their complexity and build something revolutionary.
What one piece of advice would you give your 21-year-old self?
Most importantly, every young person should be relentlessly curious about everything. While not yet being focused on a larger endeavor, this also means being open to exploring many different industries and styles of working and embracing all kinds of novelties. On the other hand, once you have found a long-term project, stay focused on it and refine it in every aspect so that you consistently have the inherent (!) desire to never give up. In my opinion, entrepreneurship and the unstoppable desire to build an organization that is solving important problems on a large or even global scale is a logical consequence of that. During all of this, you should not “live to work” or “work to live”, but find a good balance between the two, combine continuous inspiration and out-of-the-box thinking with a stable daily routine.
What’s unique about the X-Europe program?
With X-Europe, we wanted to establish the center of our future B2B operations in the Benelux region. After all, that region with its many pan-European and international banks as well as fund and asset management companies is the perfect starting point for our rapid international expansion and upscaling. We have recently successfully made the first step towards this by incorporating our subsidiary Divizend Luxembourg S.à r.l., which will be the center of our future B2B operations.
The Baltics are now the perfect synergetic counterpart from the technological side due to their heavy focus on the connection between Open Banking and eGovernment. In topics like digital identities, smart cards, and digital signatures, this region is an outstanding leader in Europe. Thus, we see the Baltics as our main future innovation lab, as well as a future technology and software development center, where new digital approaches for tax filing and eSignatures can be integrated rapidly into our solutions. With the focus on both Benelux and the Baltics, X-Europe is definitely unique among Europe’s accelerator and incubator landscape.
Beyond that, with its focus on matchmaking, training, and mentoring, X-Europe has already helped us by putting us more in the customer's perspective. It also made us realize how important the first few seconds of the user experience are for customer acquisition. If customers are not convinced within five seconds, it will be very difficult to change their minds even in the next five hours.