Interview: Ernit co-founder Mads Tagel on the Barclays Techstars experience
Ernit aims to teach children about money through the ingenious combination of a physical piggy bank and accompanying app. The app allows kids to save digital money and allocate amounts of their choosing to particular goals, while the piggy bank helps them to track the progress they make. The physical piggy bank component was designed by Kilo, and we are proud to be involved with a product that we believe can serve society for the better, by promoting financial literacy among kids and adults alike.
We are not the only ones who see the positive potential in Ernit. Techstars is a global ecosystem that, in association with Barclays bank, helps entrepreneurs build their business by offering accelerators, venture capital, community programs and an enormous network to the startups they deem worthy of attention and capable of success. The founders of Ernit are just back from a three-month stint in New York City, where they participated in a Barclays accelerator program run by Techstars. The application process for the program is highly competitive, so to be selected is a great honour for Ernit (and Kilo, by extension), so we sat down to speak to Mads Tagel, one of the co-founders of Ernit, to chat about being one of ten companies chosen from a thousand applicants, the Techstars experience, and the success of being one of the few who secured a contract with Barclays when it was all over.
Kilo: Hi, Mads. Can you introduce Ernit to our readers?
Mads Tagel: Almost 4 years ago, on New Year’s Eve, we (the co-founders) were sitting together and talking about kids and how they are supposed to learn about money, and more specifically, digital money. By this point we were already pretty much only using our phones and credit cards to pay for things.
I was explaining to Thomas and Søren how I was really bad at paying for chores. I always forgot, and then when my kids reminded me, I didn’t have any cash in my pockets to give them. At the same time Thomas and Søren (whose kids are a little younger than mine) were worrying about teaching kids the general stuff regarding digital money, which can be difficult when it’s so abstract.
Then, we spent a couple of years just talking about it and doing research. Søren is an educated journalist; he was editor-in-chief for the biggest financial magazine in Denmark, so he spent a lot of time talking to experts, schoolteachers and parents, and he found that we weren’t the only ones dealing with the challenge of teaching kids about digital money – grownups have a lot of difficulty grasping it as well.
Financial illiteracy is growing, not only in Denmark, but internationally too. Especially in the US. We were all referencing the way we were taught how to deal with money. With a traditional piggy bank, we could pour money out, count it and save it. We could have different amounts of money, where one big pile of coins is enough to buy something big and expensive, and a smaller amount of coins is for something smaller. That kind of physical learning about money is something that we don’t have any more. We have no way of passing this knowledge onto our kids, and that’s a problem. That’s how the idea of the physical piggy bank and the digital app to accompany it came about. And the secret to it working is of course the combination of these two factors.
Kilo: What’s your occupational background, and how does that fit with where you are now?
Mads Tagel: I was originally educated as an architect, at the Royal Academy of Fine Arts here in Denmark. When I finished school in 2000, I did a quick run of drawings on big projects, but realised then it wasn’t for me because the projects were way too long. So, I shifted into the gaming industry and made a lot of kids’ games, primarily for Lego. That’s really where the whole digital design thing started for me. I’ve always been into digital design, it’s just that eventually I switched from drawing houses to drawing universes and characters. I was lucky enough to get into a company where there was a lot of animation, so I learned everything from the ground up and ended up as a part of this whole web agency thing that was expanding here in Denmark at the time. Then I ended up opening my own agency, where I met Thomas [my co-founder at Ernit]. He was the first employee. Later we sold to an advertising agency, and then I spent a few years in this crazy ad-world, and then I went to a design firm. That’s where I was when I jumped to Ernit, about a year and a half ago.
But I’m also an educated coach. Usually when I tell people that, the whole thing comes together. Because I’ve got this gamification thing, teaching kids about being ambitious and setting goals, and that it’s ok to say ‘this is what I want’, and that the more verbal you are about these goals, the higher the chances of you achieving them.
Kilo: Do you think this background has impacted on the values of the company?
Mads Tagel: The vision that we have is that we want to empower kids with essential life skills. That came about when we talked about financial learning and what that’s all about. The way I see it, the app is essentially about goal-setting. The values within goal setting are perseverance, endurance, delayed gratification and empathy. We have this idea of creating a kid-to-kid donation system on top of Ernit as it is now, so the kids will not only be saving towards their own goals, but they can also see what other kids are saving up for. Not just in the wealthy Western world, but also in places that are worse off than where they live. So if a kid is saving up for a school book, my daughter can add money to that, instead of to the iPhone or whatever it is she is saving for. So this brings in a bit of global awareness to the kid’s experience of money too.
Kilo: Tell us a bit about Techstars.
Mads Tagel: Barclays is the fourth largest bank in the world, with 150,000 employees. It buys up property all over the world and some of those places are what we call ‘Rise’ buildings, and they serve as startup hotspots. They have 7 or 8 all over the world, one in Tel Aviv, one in London, one in NYC and so on. Banks are not great at facilitating innovation, so they buy it instead. This is where Techstar comes in, because Techstar are very good at running accelerators. They’ve done a lot in the past 8 years. They started in Boulder, Colorado, and now they’re running these accelerator programmes all over the world. So they couple up with Barclays, Barclays pays them, and together they do a 3 month fintech accelerator. For Barclays it’s a way of getting innovation closer to their company.
Kilo: And what was your experience like during those three months?
Mads Tagel: This was the second fintech accelerator Barclays have run in New York. Even though they are paying to make it all happen, which is of course very important, I felt like they should have been paying more attention to the participants during the program. We were lucky to get a contract with them in the end, but I think only 3 or 4 firms out of 10 were that lucky.
It was cool for us, because a thousand companies apply to the programme, then Techstar takes 50 or so of those and presents them to Barclays, and Barclays then pick the ones that they want. We were lucky that Barclays are working towards creating a family app at some point, although that’s in a bit of a flux right now. This meant that our product was a perfect match for them, and that they were for us too, so I think that’s why we came in. All the other firms were very b2b-heavy, and although we’re still b2b, we’re also b2c-focused. Our story is just different in that sense.
Kilo: Which other notable companies would you like to mention who were also at Techstars?
Mads Tagel: I guess they were all interesting, but the one that we ended up sitting next to was Morty, a mortgage broker platform. The thing about the mortgage industry in the US is that it’s very broken. There are a lot of middlemen, it’s all done on paper, and it takes a really long time. Morty can do it online in 7 minutes, and before they came in, it took 70 days. It’s crazy that nobody has done that before, that’s probably because it’s such a complicated process to streamline. But that’s what they did. They got their first customers when we were in the co-op, which was pretty cool, and I really think that could explode.
There was another company called Painless1099 who are doing stuff for freelancers, taking care of all their taxes. So when you invoice clients as a freelancer, the money goes straight to Painless1099, then they take all the taxes out and give you the money that you can actually go and spend. I could personally connect with that, having worked freelance in the past. Tax was the first thing they were working on, and then eventually they wanted to add insurance, health, everything like that, just the way you’d have it if you were in a regular job.
Kilo: Techstars offers mentorship, community and investment. What was the best thing about the experience for you?
Mads Tagel: We didn’t have much of a connection with Barclays. The people who selected us were available once or twice a week, which was cool, but we didn’t talk to them much. The Techstars alumni is pretty amazing. As I said, they’ve done it for eight years now, and they know everyone you could want to talk to. If you have a question, you just ask them and they will point you in the direction of who to speak to, and then set up a conversation for you. They also brought in a lot of mentors, and then it’s up to you to choose who you want. There were a lot of people just hanging around spending time, which can be kind of annoying, but there were a lot of people who could really help, and you just have to find your way through that crowd. The first month is all about mentoring. You have 6 to 8 meetings a day at 15 to 30 minutes each, and you just pitch and pitch and pitch, connecting with people, and then afterwards you try to figure how who you want to have as a mentor for the rest of the period.
We had a great connection with this guy at Microsoft. He was their expert on behavioural science and behavioural economics, which is perfect for us. He was very much into this whole physical thing that we’re doing. The pig is not only there to be a physical object and replace this tactile connection, which is quite an abstract thing to replace, we’re also trying to figure out how to re-introduce that remorse you have with spending physical cash.
For example, imagine you go to buy a coffee, and it costs $10. If you’re paying by card, you don’t really hear $10 and think about how that much is. You don’t care so much about the amount, because it’s the same thing you hand over every time. If you’re using physical cash and are asked for $10 for a coffee, you take the money from your wallet but as you’re handing it over you see it, and you have time to stop and be like, ‘What? That’s very expensive for coffee.’ That kind of remorse when you’re letting go of physical cash is what we’re also researching with this: How we can recreate that feeling that in the pig.
Kilo: What knowledge or experience did you gain from Techstars that you didn’t have before?
Mads Tagel: What they created for us was space to focus. I left my family behind, so it was only me. It didn’t feel hard, it was just very focused and directional. There were a lot of people around, always asking how they can help. Once you get used to that kind of US service thing, then that can be very useful too. And then a lot of people in the co-op were just great to talk to. But the main thing was the ability to focus really hard for that time period. I guess we could have got that by going to the North Pole, but all the other stuff around it was what made it so great.
The program consists of one month of mentoring, one month of product, and then one month of investing and pitching. Investing for us, since we’re hardware, is more difficult. Everything is harder because we require more money. Generally, investment-wise, we needed to be further ahead than we are, but we made a lot of connections that we can re-activate when we go back next month and are further ahead.
Kilo: What’s next for Ernit?
Mads Tagel: We’re pretty close to closing 10,000 units, but there’s still nothing on paper at this time, meaning technically it could go either way at this point. If the money is there, then definitely selling to banks. Money-wise, that would be fantastic, but it would also be great to prove that banks are actually going to buy this. We’re talked to a hundred banks and a lot of investors, and the feeling is that they’re all just looking at each other, waiting for someone to take the first step. It’s typically like that with funding. It was the same last year, and then suddenly when we got funding, everyone was offering money to us. Actually, when we went to the US this spring we said no to money, which now seems a little bit weird. But that was because once we got it, everyone wanted to be involved. And it’s going to be the same with the banks, so we just have to push really hard until we get one.
The app is live, and the last thing to finish is the hardware. It’s in prototype, and we’ve had a few delays with the firmware we chose, but now we’re finally getting there. The firmware updates are pretty stable, and the prototypes are pretty stable too. So very soon, we will make the decision to spend the last pot of money we have on moulds and make actual pigs.
For more information or to pre-order, visit http://www.ernit.com/.