The Story of GreenFolio

Entering the office, Mikkel knew this would be a tough day. He hadn’t gotten much sleep last night, previewing in his mind the upcoming meeting with his two co-founder Xenia and Pao. Their sustainable investment platform GreenFolio was just about to take off. Yet, their potential investors pointed out that the team needed to figure out how to split equity, agree on salaries and align expectations.

Last night, Mikkel had sent out an email suggesting terms he thought were fair and balanced for everyone. Yet, he was still nervous. How would Xenia and Pao react to his proposal? Would they find a solution that suits everyone? Or would this conversation blow up and sink the startup they had sacrificed so much for?

An idea is born: The sustainable investment maze

“Why is it so damn hard?” Mikkel stared at the screen in frustration. For hours he had been scrolling the internet looking for information on sustainable investments. From his Oxford studies in history and politics, he knew that investors had immense power in shaping the global capitalist system, for better or worse. “Wasn’t it obvious what that meant?” A strong movement toward sustainable investments, Mikkel was convinced, could really make an impact on the future of the economy, and help prevent climate catastrophe. Mikkel had saved some money from working after his undergraduate but finding sustainable investment opportunities was anything but easy.

Now that he had returned to his hometown, Copenhagen, to study for a master’s degree in Entrepreneurship and Innovation, his expenses were low, and he could start investing some of the money he had saved. Once when asked by a classmate about his take on investing he had said:

“It’s all about sustainability. For me, investments are not primarily about making money. Obviously, the goal is to realize some return but if my money helps fight the climate catastrophe and contributes to a more just and sustainable economy, it is also an opportunity for all of us. If we all invest our money sustainably, that will make a huge difference!”

Easier said than done! Mikkel first opened an account at an online bank. The interface was ghastly, but the bigger issue was finding out what to invest in. Dozens of websites claimed to provide information about sustainable and social investments, but many of them recommended companies that others explicitly warned against. In addition, it was never clear to Mikkel which criteria the websites used to evaluate investments. “Wow, finding information on sustainable investments is a complete mess.”

What to do about this? It wasn’t hard for Mikkel to see that his personal frustrations were an entrepreneurial opportunity. He believed wholeheartedly that creating a compelling and comprehensive website with information on sustainable financial products could make a difference and help many people invest in the right funds, stocks, and bonds. He did some customer discovery among his classmates, set up a small website, and started researching different evaluation systems to rank and rate opportunities. It was a side-hustle at first; he didn’t think very hard about a business model. “Once the website got some traction, there will be time to explore opportunities to monetize it.”

For Mikkel, this was not just about money but about being the change towards a sustainable economy he wanted to see.

Mikkel’s story

An Entrepreneurial Spirit:

Mikkel was born and raised in Denmark. When he was in primary school, he sold self-made postcards in Nørrebro, Copenhagen, outside of his father’s candy store. While his dad, an immigrant from Nigeria, appreciated his drive, he urged him to focus on school. Mikkel turned out to be an excellent student and completed high school with outstanding grades. He won a prestigious fellowship, which allowed him to study history and politics at Oxford University. He felt that the subject combination would allow him to really understand the world he was living in. At Oxford, Mikkel developed a strong interest in climate change and how the economic system contributed to it ever since industrialization. For him, averting climate catastrophe required a concentrated effort of all parts of society.

Working for Sustainability:

Mikkel graduated with distinction from Oxford. Following his passion for sustainability, he landed his first job at a sustainable fashion brand in Amsterdam. Starting as an intern in the Communications Department, his manager recognized his strong ability to build relationships with different stakeholders. The experienced manager had never seen someone coming just out of university with such strong skills in storytelling, presenting, and convincing people. Mikkel worked as a communications manager at the company for two years. Eventually, he left to return to Copenhagen to be closer to his family and friends. He found a new job at a local consultancy specialized in building sustainable business models for different companies. Even though Mikkel learned a lot about venture building and created a strong network in the Danish Startup scene, he also experienced first-hand how often sustainability had to take a backseat to profit. He wanted it to be a win-win but more often than not it was a tradeoff in the short-term, and people simply didn’t want to realize the long-term potential.

A New Chapter at CBS:

After two years working for the company, Mikkel quit his job and enrolled in a master’s program focused on entrepreneurship at Copenhagen Business School (CBS). The program was an ideal complement for his broad humanities background and his work experience and would allow him to strengthen his business competencies. He knew that the program actively encouraged students to create their own businesses, which was still one of his big dreams. However, he envisioned a business that contributed to the green transition not by accident but by design.

GreenFolio is Born:

“This looks horrible!” Xenia looked at the WordPress nightmare presented to her. A friend of Xenia’s went to school with a guy building a sustainable investment platform. When he asked her for feedback, she was happy to oblige. But where do you begin? The website was quite good at telling a story about why sustainable investments mattered and how it could help make the world a better place. The story touched her, even though investing was not her thing at all. Thinking about her two small kids, it felt really important to make sure they inherited a livable planet. However, UI [user interface design] and UX [user experience] of the website were just a disaster. In her first meeting with Mikkel, Xenia didn’t sugarcoat it:

“You have a great story Mikkel, but you really try everything to ruin it with a poor design. The set-up is atrocious; the fonts and colors you use don’t support your message. You use pictures that give an unprofessional vibe to a website that is about an important issue. The usability is horrible. But the thing I get the least is, why only provide information here and then let the users buy the products elsewhere? I mean, wouldn’t it be much easier for me as a user to have a one-stop solution and buy the financial products right here?”

Mikkel was stunned. Her critique was quite harsh, but he knew she was right. The design of the website wasn’t the best. The friend that connected them had shown him Xenia’s work, which he found impressive. She really was an artist when it came to website creation. And her suggestion to create not only an information website but more of a sustainable trading platform was intriguing. Mikkel had been thinking about this earlier but discarded the idea because it was far beyond what he could design. Amazed by Xenia’s creative personality, her unquestionable design expertise, programming skills, and her good ideas, he asked her to join him on the project.

Xenia was caught off guard. Bad design aside, the project sounded fascinating. Even though there was not much money in it (at least not in the beginning), she agreed to contribute – mainly because she liked the challenge of building an investment platform that looked beautiful. She thought that with an amateur like Mikkel she had full creative freedom, and a digital startup like this one would allow her to travel and work from wherever she wanted. She also liked Mikkel and his passion for sustainability. Over the last few years Xenia had started to question her work. She was craving a bit more purpose. Fighting climate change through sustainable investments certainly fit the bill. In that spirit she suggested they name the company “GreenFolio.” Mikkel loved the name instantly.

Xenia agreed to create a first prototype over the upcoming months. She was new to Copenhagen and had just broken up with her husband. She was now alone with her two kids, which was quite difficult. This situation did not allow her to work fulltime on GreenFolio. She needed to do freelance work to sustain herself and her family. She agreed with Mikkel that she would work fulltime on the project if it gained momentum and Mikkel pursued the project after completing his study in about six months. She made it very clear that fulltime to her meant 8 hours per day. Over the next months, Xenia spent all her free time creating a first prototype. She registered at a couple of online banks to understand the state of the art. What she saw convinced her that it was relatively easy to do better, both in terms of UI and UX. In the meantime, Mikkel researched financial products and developed different metrics to estimate sustainability scores. In addition, he conducted a survey, which he circulated among all CBS students to figure out how many of them would be willing to invest sustainably and on a platform like GreenFolio. The results were encouraging, considering how little money students had for investments.

Xenia’s story

An Autonomous Artist:

Xenia had lived most of her early life in the Netherlands. After finishing school, she lived together with a bunch of artists and other creatives in a collective in Amsterdam. She enrolled to study digital design at the University of Amsterdam but quit without a degree. She hated university because she felt that it killed her creativity. She preferred choosing what to learn for herself rather than letting other people decide on her behalf. To fund her lifestyle, she began to develop beautifully designed webpages for small companies. For her, what mattered was the aesthetics of the design. Her websites were little pieces of art.

Exploring (Offline and Online) Worlds:

After a few years in Amsterdam, Xenia moved to Berlin. The German capital seemed to be the right place for someone who worked in art and design. She continued her freelance work for small companies, even though most of them were now tech startups. Many of her new clients not only struggled with the design, but also had problems with the functionality of their websites. Fascinated by this unknown world, she began learning different coding languages. The new tasks were quite different from her usual visual designs but developing the functionality of websites turned out to be great fun and she could work for days and nights on those projects. Over the years she became one of the most wanted IT freelancers in Berlin. During that time, she fell in love with Matthias, a Dane who also worked as an IT freelancer in Berlin. The two started travelling the world together while generating a decent income and learned to enjoy their freedom. At the time, this setup felt just right for her as she could work creatively, whenever and wherever she wanted.

New Challenges:

Two years later Xenia and Matthias moved to Copenhagen. Xenia was pregnant with twins and she knew having Matthias’ family around for support would be helpful. However, things did not turn out as expected. After the birth of their twins, the relationship between Xenia and Matthias became increasingly difficult. Eventually, they decided to break up. They agreed that the twins would live with Xenia, but that she would stay in Copenhagen so they could see their father and grandparents. She continued her work as a freelancer but the more she thought about the future of her children, the more meaningless her job seemed. She was ready for something that mattered, for her, for her children, and for society. Yet, she knew herself well enough to admit that whatever this was, it also had to provide her with some freedom to travel and work from where she wanted, a regular working schedule as well as a stable income to sustain her family.

Completing the Team:

When Pao had completed a survey on sustainable investments circulated among CBS students, she was impressed: “Wow that is THE opportunity!”. Pao, an MBA student at CBS, knew that sustainable investments were the next big thing in the financial industry. She had seen some market forecasts and analyses at the bank she worked for, which really transformed her way of looking at sustainable investments. This was a great financial opportunity. From the survey, she gathered that the team behind GreenFolio already had some idea of how to approach the issue, but she hoped that they still needed someone with knowledge and network in the financial industry. She emailed Mikkel and found the co-founders very open to her ideas.

When Pao met Mikkel and Xenia, she was amazed by their team dynamics. It seemed almost too perfect. Mikkel was clearly the entrepreneurial guy, he had a strong passion for creating change and had great skills in telling and selling their story. Xenia was more artistic. She was into coding and design. The prototype she had developed looked very professional, even though all the products they showcased were fake. It was quite clear that the team was lacking someone who understood the financial system and had the network to research actual financial products. She explained that finance, especially as it concerned private investors, was a heavily regulated industry, and that they would need a partner bank to make trading on GreenFolio possible. In addition, Pao thought that they needed many more products than they currently had to be attractive to users. In the meeting with Mikkel and Xenia she said:

“If we do this right, this is a one-billion-dollar opportunity. It is much bigger than you think. We can build a platform that attracts millions of users around the globe. Sustainable investment is a massively growing market with extreme upside potential. We should get investors on board and scale-up, to become the market-leading platform for sustainable investments.”

In a split second, Mikkel and Xenia decided that they wanted Pao on board. She was exactly the person that GreenFolio needed. She knew a lot about financial products and had a great network in the financial industry. The team members agreed quickly. And they were not disappointed. Already in her first weeks, Pao convinced an international bank to become their partner. With this partnership, GreenFolio could onboard real products. Yet, Pao urged the team to consider outside finance before doing that. While Xenia was tentatively open to this idea, Mikkel had concerns about conceding control. Yes, they would need money to finance the growth and cover expenditures. However, was venture capital the best way to go? He understood that the other two would need to receive some compensation for their work to sustain themselves. Pao would finish her MBA while Mikkel got his degree, and all three agreed to work full-time over the coming summer to get GreenFolio off the ground. Pao decided this opportunity was worth pursuing and quit her job at the bank. Now that they were all on board, they also decided that everyone should get 1/3 of the company they soon wanted to register. Considering that each of them brought essential skills, networks, and experiences to the table this just seemed fair at this point.

Pao was quite impressed by Mikkel. Despite being busy writing his thesis, he was able to attract the interest of four different investors. One morning Mikkel had a meeting with some of these possible investors and the team was nervously awaiting his return. Would the investors like the business?

Pao’s story

An Investment Guru in the Making:

Pao Ling grew up in Shanghai, China. Graduating from high school with the highest average of her cohort, she went to study economics at Shanghai University. The program seemed to her a very rational choice. On the one hand, it leveraged her skills in math, on the other hand, it allowed her to maximize her income in the financial industry. Even though she completed three summer internships at international investment banks, she never got distracted from her studies and graduated among the top 5% of her cohort. After graduation, she was ready to make use of her degree and get herself into the competitive job market.

Practicing Skills:

Just months after her graduation, she got her dream job at an investment bank based in Hong Kong. The first two years at the bank went by in no time. She thrived in the competitive environment and invested almost all her time into the job. Her managers were impressed by her performance, and she received four promotions within the first three years. The promotions allowed her to work in many different parts of the bank, ranging from investment and corporate banking to asset management and trading. These were valuable years for her, and she was proud of her performance as a woman in this male-dominated industry. Yet to really maximize her income and accelerate her career she felt she needed experience in foreign markets.

Going Global:

Eventually, her manager offered her a position in Europe. She could freely choose any major European city where the bank had an office and she opted for Copenhagen because she knew a friend already lived there. Her friend could help her organize everything, which would also reduce the costs of moving. Pao was quite surprised by the work-life balance in Copenhagen. She even found the time for some social engagement and became an advisor to a women’s investment club at Copenhagen Business School. Once per semester she presented various investment options to young women and encouraged them to start a career in finance. Even though life was great, her career seemed a bit stuck. She realized that to move further ahead she needed an MBA. Eventually, she convinced her manager to pay for a part-time MBA at CBS which would help her make another step on her way to the top.

The Challenge:

When Mikkel returned from the investors’ meeting, he called for a brief get-together with his co-founders.  Both immediately asked: “How did it go”? Mikkel replied:

“Pretty well, I guess. The investors were very impressed with our platform, the market potential, and the consumer interest. They also liked our team composition and our complementary skillsets and experiences, but they voiced some concerns about our team. They said that we should talk about the equity split again and about salaries. They also said that they see some issues regarding the scalability of our business model. They specifically asked whether we would be willing to include products that are not super sustainable if that allows us to reach more customers. Finally, they asked how committed Xenia was to the project and how much flexibility she needed while working for GreenFolio. They said that if we solved these issues and made a deal, they would be ready to start the investment negotiations.”

Mikkel outlined the investors’ worries in more detail. He said that he agreed with the investors that the current equal split wasn’t ideal and did not reflect everybody’s contributions. More importantly, splitting equally created a vacuum of responsibility often related to an unclear decision-making capacity of a founding team. Another important issue was salary. The investors suggested four different salary schemes to choose between. Another major concern for the investors was the unclear focus of GreenFolio. They were wondering whether the business’ focus was on sustainability and its social impact over profitability and growth, or vice-versa. They said that this is a common struggle in social or sustainable businesses and that we should make a decision early on. Finally, the investors had some concerns about Xenia’s commitment. They understood that she had a need for more flexibility, yet they wondered about the impact that would have on team performance and cohesion. Mikkel ended the meeting by suggesting that he would work for the rest of the day on a proposal to resolve these issues. Then they could get together and discuss.

Later that day Mikkel wrote the following email:

Download the GreenFolio Case here