0 to 60: Choice Lessons from the Kolektiva Experience

Treći post nam dolazi od Jeffreya Treichela, ko-osnivača i CEOa svima nam dobro poznate Kolektive. Jeffrey nas je svojevremeno oduševio predavanjem na biZbuZZu 2010 i još tada u Nišu vrlo spremno pristao da napiše nešto o svojim iskustvima za našu publiku. Na ovome mu zahvaljujemo i nadamo se da ćete u ovom epskom postu uživati kao i da ćete izvući korisne informacije i pouke, svakako ima zaista vrednih.

Starting up

Sounds like a cliché, but be passionate about the service or product.

For example: when I tried my first group coupon, I had been out of work for six months, was a new father and didn’t have much cash to treat my wife to the things I wanted to give her in life.

When I saw that with a group coupon I could afford to take her to the new neighborhood restaurant she wanted to try, I pulled the trigger and bought it. We had a great experience, and I remember being thrilled and thankful for the opportunity to treat my wife to a nice evening out for the first time in many, many months.

 If you asked my wife, though, she would say I wasn’t paying any attention to her that evening , and that by the time the appetizers arrived, my wheels were already spinning and I was putting together my plan to launch group buying in Europe.

No matter. Every time I’m back in Chicago I try and take my wife back to that restaurant.

I drink the cool aid, as we say: I truly believe that group buying can deliver new, loyal customers to local businesses and that couponing should be part of any consumer-oriented business’ marketing mix. I knew this win-win concept for consumers and local businesses could be successful in Croatia and Serbia as well (where I had spent over seven years living and working with Dukat and Nestlé) and I was energized to give it a try.

It takes unlimited energy and will to succeed, in my opinion. If you don’t like what you are selling, and going to work is a chore for you, you will never muster the energy needed to get out of bed and work 17 hours a day.

Be Rich or be King

If you want the opportunity to grow your concept, you will need to surround yourself with people that are smarter than you. If they are smarter than you, they probably won’t work for free. Be prepared to give up some degree of equity, and therefore control (not necessarily majority). Have an upfront plan and a vision for bringing investors into the company. My vision was simple: build it and they will come. Be ready when they come.

Build it and they will come

VCs and angels receive hundreds if not thousands of business plans per year.  

An easy way to convince investors that your plan is more than a fancy powerpoint presentation is to actually build a business that earns revenues.

This shows 1) you are emotionally and financially invested in the concept, 2) you are capable of building a product/service and 3) the product/service is meeting a demonstrated need. It’s all about the credibility of You, your team, and your idea.

My co-founders Martina, Dalibor and I bootstrapped Kolektiva in the beginning. We had a business plan in place, and within just a few weeks of launching, were contacted by our current investors, Rebate Networks. They ended up providing us with the financing to launch Kolektiva in five additional countries.

Also, another good strategy particularly in Croatia or Serbia, where many investors are simply scared to come due to fear of getting burned, is to get an appropriate chairman or board member into your company. This can help reassure investors.

There are many foreign professionals living and working in ex-Yugoslavia, returnees from abroad or highly regarded locals who speak the investors’ language, and can provide meaningful references either through past experience abroad or mutual contacts. Pay them a retainer or give them a percentage of equity in return for their services marketing your startup to financial backers.

Take smart money, not dumb money

If you have a proven concept that people are talking about, you will likely have a choice of options for financing your company. Kolektiva’s Founders could have kept a higher ownership percentage of Kolektiva had we sought to continue raising capital from friends and family or from local businessmen who wanted to invest.

If we had done so, I believe we would be dead in the water today.

Our sophisticated financial backers are successful e-commerce entrepreneurs who are able to easily raise more funds for us as we continue to outperform in our markets. They also provide invaluable advice and guidance, keeping Kolektiva at the forefront of group buying companies in Southeastern Europe.

Work 17 hours a day

Just do it.

Come in at 8 or 9am and leave at 1am. Saturdays too. Caffeine helps for this.

Dealing with hard times

It’s important to have a sparring partner, someone who pushes and challenges you to be better, but also is there to offer moral support during tough times. Believe me, there are a lot more downs than ups, and a lot of people that will tell you to get a real job or wisen up.

So having back-up support is essential. Otherwise you will be a paranoid wreck the whole time.

I would strongly recommend networking with or befriending other entrepreneurs, who know what it’s like to be in the hot seat and who can give you advice or support when you need it.

I have been lucky to have a couple different people in the company who I would trust my entire business with.

Kolektiva’s CTO, Antonio Meić, is an example. He is the smartest guy I know, a born leader and entrepreneur, and has a talent for building high performing and innovative teams. And he’s great to kick back with and have a beer on Friday nights, when we strategize how we will take over the world again starting on Monday. We share successes and failures together, which makes the whole experience more meaningful at the end of the day.

Otherwise, during hard moments I’ve always taken the approach that what doesn’t kill you makes you stronger. I do the best I can, and I try and motivate my team by reminding them of the unbelievable job we have done so far.

A year ago Kolektiva was two people running a one city, one deal, one day business. Now we have 120 employees in over seventeen cities in six countries, and are running dozens of deals per day.

It’s been the craziest year of my life, but I’m very proud of Kolektiva, the team and what we have accomplished.

I think one has to stay positive and really believe in the end game. The process of building my company has been very different from what I envisioned it would look like, but despite that I am also freakishly close to achieving the original business plan I proposed to my investors.

Got cojones?

Leaving my wife and newborn daughter in Chicago to go and start an e-commerce company in Croatia and Serbia in the middle of a global recession, when you put it like that, does sound insane.

But I was motivated for the same reasons that so many Serbs left their native country and came to my hometown Chicago.

It was a mix of fear, belief in myself and belief in an opportunity that pushed me to take the plunge. I saw a chance to retake control over my life and have a shot at providing for my family.

When I started Kolektiva, I had a mortgage, student loans, a new family and costs of living to take care of, and I had only landed three or four job interviews in the space of nine months. I was hungry as hell for a chance to make it, and it simply didn’t matter where the opportunity was anymore.

Moreover, I believe there is a LOT of opportunity in the former Yugoslavia. While the region presents many challenges, which I will speak about later, there are just so many ideas coming from the West and the East that can be adapted and implemented in Serbia very lucratively.

Take a look at Vladimir and Nenad from Limundo and Kupindo. Their internet auction site is growing double digits month on month in all metrics, after more than five years in business. They are talking about launching in Croatia because a viable local competitor still doesn’t exist. These guys don’t care that eBay has lost its sexiness in the USA, and they shouldn’t, because they know in Croatia internet auctions will be the story of 2012.

What it really comes down to is overcoming a mindset that something can’t be done. For instance, when I was told that there were only an estimated 5,000 domestic online transactions a month in Croatia, in December 2009, I said “well, we’ll just have to double the market to have a shot at creating a viable company.”

Then we did just that. We had 60,000 online transactions in Croatia in 2010, which was double the online market in 2009. We did it through proving the concept, raising funds, hiring the best team we could, and relentless execution and development of expertise in web 2.0 marketing.

Secrets to success

Location is probably the number one, most under-appreciated factor in the success of a company. There have been Harvard studies on the impact of location on the success of an entrepreneurial venture.

The idea is that most successful tech companies are clustered in Silicon Valley for instance, or Boston’s Route 128, and this is probably due to a clustering of venture capital financiers ready to deploy capital, as well as a clustering of engineering talent in these regions. VCs can often be more hands on with a portfolio company if it is located 7 kms down the road, and not 700kms away.

In my experience, location has been important for more reasons as well. I knew Croatia, for instance, was the perfect place to start a group buying company, precisely because of the many locational DISADVANTAGES of starting a company there:

• Illiquid capital markets make it an impossible place to raise smart capital (see above)

• Small, challenging market that is not a priority for larger multinational players

• Non-existent startup culture. E.g. most internet related “startups” are never conceived as businesses from the start, but as “projects”. People still refer to Kolektiva as a “project”, like it’s my hobby during lunch break or something.

+ There are lots of great ideas, concepts and projects floating around in Croatia and Serbia, but no EXECUTION of ideas and turning them into BUSINESSES: sourcing capital, hiring an all-star team, online marketing execution, creating strategic partnerships, selling. All within a few short months.

• Recessionary environment with high costs of living leverages the group buying concept

• Talented young engineers, at reasonable costs

So what’s the punchline? In a business like Kolektiva where competitive advantage is derived from capital, scale, and speed and quality of execution in the short term, and ability to innovate quickly in the long term, anyone that can secure these advantages first is likely to succeed, especially when potential local players are disadvantaged and are delayed because of illiquid capital markets or inexperience in scaling an organization very rapidly.

Also, imagine how MUCH money it takes to compete against Groupon in Australia or England. On the other hand, Kolektiva has just raised another several million Euros in both Bulgaria and Romania to compete against global players. We are currently winning the game.

Think hard about location, what the advantages and disadvantages are of launching a startup for your concept in Belgrade or Zagreb, and try to turn locational disadvantages into your competitive advantage.

Other keys to success

• Implement the scientific method in your online marketing campaigns: hypothesize, test, observe and measure, analyze and conclude. We are constantly optimizing our website and our online campaigns – testing different banners, newsletters, keywords, landing pages, colors, positions, placements. We seed channels widely and then pump the ones that deliver great conversions. We measure success in terms of percentages and yield improvements.

• Learn how to run Google AdWords campaigns. It’s marketing that delivers ROI. Dragan Varagić is spot on with his presentation at BizBuzz in October, 2010.

• Have a flexible IT platform. I would recommend customizing open source solutions as opposed to developing a proprietary platform. We have tried both approaches.

• The money you think you are going to need to operate your business. Double it. Then double it again. Without it, you could be dead in the water.

The Kolektiva experience

From the very beginning, I wanted to launch Kolektiva throughout all Republics of the former-Yugoslavia.

Having lived and worked in both Zagreb and Belgrade in late 90s the early 2000s, I was responsible together with my Serbian co-founder of Kolektiva.rs, Dalibor Vukobrat, for rolling out the initial product launches of Croatian dairy firm Dukat in Serbia, in what was one of the first high-profile and highly controversial economic rapprochements between the two countries after the war.

The experience was invaluable for me – it showed me that high quality products and services can overcome both economic and ethnic barriers, and that there was actually a high demand among younger, urban professionals in both countries for products and experiences that would provide either a sense of nostalgia or exoticism evoked by the other country.

Today, even though Croatia, Serbia and Slovenia are much more closely tied than they were ten years ago, I still get the feeling that many younger generation Croats are fascinated by a Belgrade they have never seen or been to, but which they have read offers a culinary paradise for lovers of all thing grilled, a fantastic nightlife, and a hip urban scene blended with café culture.

Take a look at tourism stats, and you see that Serbs account for a growing contribution toward coastal visits in Croatia.

Without any pretention, our goal with Kolektiva from the beginning was to enable people not only to explore their own cities at a fantastic price, but also to facilitate cross-country exploration and provide people incentives to get off their butts and take a drive to Slovenia or Serbia and experience the pleasures of both countries. And vice versa.

Travel and seoski turizam was always on our radar, and therefore we launched one of the first travel deals on a group buying site in Europe back in April, as well as one of the first (if not the first) multi-market deals with luxury hotel suite deal for Hotel Klass in Kranjska Gora, Slovenia, placed in three countries simultaneously.

We sold out of the allotted capacity in 10 minutes, earning more than €1.000 per minute. We believe we can replicate this incredible performance, both for us and our merchant partners, many times over in the future.

Long story short, the people of the former-Yugoslavia are eager to travel both domestically and abroad to their neighboring countries, and we have seen an explosion in demand in all of our companies because we are positioned to offer great deals in Croatia, Macedonia, Serbia and Slovenia.

Our investors picked up on the potential of multi-market deals very quickly, and have used our model to launch multi-market deals throughout the rest of their 30 country network. Multi-market deals have become phenomenally popular in Asia.

Even Groupon and Living Social now boast travel-specific sections of their websites in Europe.

Working hard

When I interview people, I often ask them to describe the hardest they have ever worked.

I come from a world where college graduates just get creamed on their first job. Investment banking analysts are typically in the office from 9 to 3 or 4 in the morning, six days a week, for two-three years, before they get promoted to associates.

Associates have much better hours. They work from 8 in the morning till midnight, six days a week, for two-three years. And everyone is exhausted, but happy with the opportunity.

That’s what I mean by hard work. It’s because of a similar work ethic that Kolektiva succeeded in expanding to six countries in year one, something that even Groupon wasn’t able to achieve.

It’s tough to find people in Croatia and Serbia that will work 17 hours a day, but it is possible, and I’m really impressed with the team that Antonio is helping me build.

I believe we have now gotten to a stage where we can hone our expertise in web 2.0 marketing excellence and really get the business humming. This is exciting, because it means moving beyond basics and starting to innovate.

Also, major respect to the tech and new media scene in Serbia. It’s a really passionate community, with dedicated advocates of innovation and progress. I want to get much more involved with groups like Krokodili, and I really have to stop making excuses and get over there for one of the next meetings.

Reading reccommendations

• http://www.avc.com/ (especially this one.)

• Employee Equity: The Typical Dilution Path For Founders And Other Holders Of Employee Equity

• Startup Tools: equity and investment (cap table) model