Felmo co-founder Philipp explains in the Royal GS Podcast why the startup relies on debt instead of new VC millions.
How does a healthcare startup with many veterinarians grow without immediately selling shares? In the Royal GS podcast, hosts Nikita Fahrenholz (co-founder of Delivery Hero & Fahrengold) and Martin Eyerer (ex-CEO Factory Berlin, entrepreneur, techno DJ) talk to Felmo co-founder Philip Trockels about an unusual financing move: Instead of the next VC round, the animal health startup relies on outside capital and swaps dilution for debt.
This is about everything that lies behind the model. From the question of why veterinarians suddenly make house calls to the Excel spreadsheets that are at the table at some point when there is outside capital.
In the podcast, Philip talks about his path out of the corporation and into entrepreneurship. The many rounds of coordination, hierarchies and processes at eBay Classifieds have, above all, increased his desire to do more himself. Felmo came about from that. He further explains: “We are now active in around 25 regions and reach 35 or 30 percent of households in Germany with the SIP codes in which we are active.”
From a mobile veterinarian to an integrated healthcare provider
Felmo is building a vertically integrated animal health brand, employing its own doctors and standardizing processes. From appointments to operational planning to treatment, everything for animals and people comes from a single source.
Felmo started with home visits. Cat owners in particular appreciate the service if they prefer to keep the transport basket in the closet. The team is now further expanding the model with stationary hubs for more complex cases such as diagnostics and operations as well as its own food and snack brands: “There is a lot of added value there, and so we can really offer care end-to-end,” says Trockels.
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Why Felmo deliberately does not follow marketplace logic
Why Felmo prefers to rely on its own doctors instead of a marketplace model is explained in the conversation: “Everything that has to do with animal health comes from a single source – a brand, vertically integrated, with employed veterinarians, no freelancers.” This contributes to Felmo’s goal of offering complete animal health from a single source. From prevention to diagnosis to surgery. The inpatient hubs bring more lucrative treatments into the model, while home visits remain the special unique selling point. “Customers love the offer – but if an appointment doesn’t go well, people tend to leave very quickly. You have a relatively low tolerance for errors in the service itself, because it’s about the health of your dog, which is the most emotional thing you can imagine. Quality assurance is therefore central,” says the co-founder.
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Cats, Hubs and Regulation: The Ins and Outs of the Veterinary Medicine Market
A look at the demand shows that Felmo’s home visits hit a nerve, especially with cat owners. While dogs wait in line in many traditional practices, cats prefer to stay at home and save themselves the stress of transport boxes, car rides and waiting rooms.
Trockels believes that the fee structure would allow for leeway in terms of factors depending on the complexity, but advertising based on prices is not permitted in Germany. That would make marketing challenging. This makes trust, a good reputation and recommendations all the more important. In the end, pet owners would ultimately decide who to entrust their family member to.
Why Felmo would rather take on debt than sell new shares
Trockels explains why Felmo prefers to take on debt by looking at the cap table: Instead of another round of financing with new investors, the company consciously chose a debt partner. This means more reporting and a stronger focus on KPIs, but it does not result in a further dilution of shares.
So instead of doing the next round with new investors, Felmo relies on outside capital. This means that costs are more predictable and the focus is more on cash flow and operating figures. The money flows primarily into the construction of stationary hubs, i.e. into specific locations. But bring other guests to the table, such as covenants, reporting and regular financial updates. The new sparring partner is not called an investor, but rather an Excel spreadsheet.
Borrowed capital increases operational pressure
With the borrowed capital, utilization, treatment values and operating times become the most important factors. Good processes not only ensure quality for animals, but also repayment. At the same time, a strong brand becomes a decisive advantage in the fight for veterinarians, “We now have 230 people. The majority are veterinarians, just under 130, 140.”
What other startups can learn from Felmo’s financing path
Debt capital is not a magical growth button that suddenly makes everything faster. But if processes are right, utilization is right and quality doesn’t fall by the wayside, debt can be an exciting lever, especially for personnel-intensive healthcare startups.
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