On lessons learned and raising money

11.03.2019

On lessons learned and raising money.
A discussion with Tiberiu Lupu (RO4, Evertoys), Alina Marian (RO4, Evertoys), Bogdan Aron (RO4, 2Performant), and Dorin Boerescu (2Performant).

Topic 1: Lessons learned. Dorin, Bogdan, Alina and Tibi shared the lessons they have learned from doing business, how these lessons impact their decision-making, and how can these lessons be adapted for you. The discussion was nudged by Radu Atanasiu.

„After 10 years in the corporate environment, switching for an entrepreneurial pathway sounded like „Dorothy, you’re not in Kansas anymore”. Tiberiu Lupu, one of the Evertoys founders recalls the first months as an entrepreneur. It was a shock – everything was different from corporate world, incredibly fast and incredibly difficult. I had to learn to do everything, and I had to learn fast, but it was amazing!

2Performant, one of the affiliate marketing leading companies in Romania is quite far from the startup years, but at its core keeps its „startup energy”.  „2Performant is in a way the AirBNB of marketing. We charge a cost per sale and our affiliates receive a percentage of the sales they generate. Even though the company was started 10 years ago and we are the third agency in Romania when considering the turnover, we somehow still feel we are a startup at our core”. What is interesting is that neither Dorin nor Bogdan consider 2Performant to be „an agency”, because of their focus on technology development. Also, regarding their growth strategy, they decided to address a different sector, that of influencer marketing. Following an initial investment of 250 k, this new area is becoming a secondary focus in their business strategy.

Topic 2: Raising money. Both companies are looking for a round of financing in 2019. Many MsM alumni have manifested their interest to do some angel investing. We explore the synergy of these two phenomena by showcasing Evertoys and 2Performant, companies where several members of the community have already invested. At the end, both companies will present a short pitch. 

Evertoys is an upscale platform for toys-as-a-service. The three founders have initially drawn the business plan during their Executive MBA, as an exercise for the Entrepreneurship class, taught by Andreas Antonopoulos. After graduation, they thought „why not?” and really started the company. The first two investors were the aforementioned Andreas and Radu. Meanwhile, they have raised (2018) a second round from Sparking Capital.

2Performant (former 2Parale) is the local leader in affiliate marketing, currently expanding overseas. Aside from Bogdan Aron, the Chief Product Officer (currently co-CEO of the company), being a MSM EMBA alumnus, several members of the community (Dora & Istvan, Sergiu, Radu) have invested in various rounds, along other investors and seed funds.

Dorin Boerescu

„ You may think that 1M lei means a lot of money. In reality, it’s just the salaries, benefits & overhead for 3-4 seniors.” – Bogdan Aron. We’re competing against large outsourcing companies for programmers and this makes our business sector very challenging. 1M lei/RON means almost nothing in our field, and this can get scary…When discussing financing rounds, Dorin Boerescu recalls the first stages –„ most of the times we would try to top up the budget with passion and personal work, because most of the times, especially in the early years, it was impossible to actually cover all the work and development effort only from the financing rounds. That’s why passion is so important, it moves people beyond budgets”

How was your growth strategy and what did actually happen from what you expected?

„Well, excel can take anything, as they say. Happily for us, we came pretty close to what we forcasted in the initial financing round” – Tiberiu Lupu . We wanted the gather some service awareness and we pumped money in social media marketing while doing some events and a little bit of influencer marketing. We gave discounts and free months to persuade some families to become early adopters.

„We are getting better and better in estimating the actual reality of our plans” – Bogdan Aron .

When it comes to strategy, actually our focus is to formulate hypotheses and to invalidate as many of them, as fast as possible, otherwise we’d get lost in the process of choosing our fights. It’s a special relationship you develop with failure, and unless you learn from it fast and move on, you lose. – Bogdan Aron on strategy

„At first what I thought  the market needed and what it actually needed were two complete different stories. I started 2parale thinking that the market would absorb my 10years experience and knowledge about advertising. In reality, I realised I was just a facilitator, developing efficient infrastructure to bring brands together with talents. In fact, we were lucky enough to have on our team a guy who was actually passionate about the concept of the platform, and that’s how we overcame budget constraints and we were able to develop the technology behind the platform. We wouldn’t have made it without passion and without quickly dropping the initial strategy. – Dorin

Investors & financing rounds

How did you build up your company? Attracting investors was in your initial business plan? Did you prepare the company for the financing rounds in any way?

Tiberiu – „we knew from the very beginning that we needed investors Our model is intended to be a high/fast growth model. This means that our only focus is customer acquisition in order to make up the numbers that would allow us to reach new financing rounds. The model relies needs constant marketing and inventory investments in order to grow, money that we are not able to generate from the existing revenues. For the first few years at least.

We are growing, almost 600 customers have tried Evertoys in 2 years. I’m pretty sure that what convinced our first investors to finance our business was the team. Of course, we were pretty accurate in our promises and we managed to follow our predictions, and that’s how you actually build trust and gain momentum. It was a grueling process to understand how to deliver our concept to consumers. We spent hundreds of hours on getting feedback from clients and improving our product, our platform and our ecosystem. We are now in the stage where, having solved all the initial difficulties, we are ready to take Evertoys to the next step – an integrated service for families, kindergartens and children’s club. We intend to develop the existing platform into a cloud based one that would allow us to expand regionally.

Tiberiu Lupu

Dorin – „it’s a very honest trade between entrepreneurs and investors. You put together expertise, time and competency from the entrepreneur’s part and money and expertise from the investors. All that matters are to create a bigger impact with those shared resources, to grow faster together.

We need to work a little bit on our mentality in Romania, but we’re getting there. More and more people understand that obtaining financing rounds is actually healthy for the company. From the very beginning of the company, we knew we needed investors’ money to grow. Because of the demands of the tech area, starting the company as „fit for investments” is crucial. Transparency, predictability and a certain financial and legal structure are essential for business growth.

Also, the biggest danger when rising a financing round is to become comfortable with burning money. The process must always be about generating income, otherwise it’s very difficult to change the team’s mentality once you start losing focus. Also, the process of planning is more important than the plan itself. It’s the gedanken experiment of „ what are we going to be doing in 2025” that’s more important than the actual budget sheet. And once you put together the passion you hold for your company and the exercise of actually planning the future, that’s when you can win investors. “

Pitching is always about sharing your dream with a bunch of different people. By mentally going over the „why will people buy from you” and „how will you do that” you manage to ground your dream into what we call a business strategy. Preparing for a pitch is often the most valuable part of the process, because it makes you look at your business from a very different perspective – the outside, realistic and often cynical perspective is useful when you evaluate your work.

Of course, a successful pitch is a combination of data-driven presentation, personal involvement, good reputation and a powerful networking system, but without a good product is very difficult to win over investors in the long term. The unsaid statement was that in order to raise financing rounds, you should first, as an entrepreneur, make sure you have the right contacts.

“Participate in as many pitching sessions, go meet investors and funds, start being proactive in developing your network and of course make sure you have a good product to sell “, Radu concluded.

MSM Community members

„ Passion is very important, because there are always reasons to quit. Even when things are going well you easily find reasons to quit, imagine what happens when you’re struggling. But if you have passion, this creates resilience, and resilience is truly important when you’re an entrepreneur. – for me, doing what I love and actually making a living out of this is an enormous luxury. Dorin

„These two years were incredibly intense and difficult, I never imagined how grueling the process would be. And yet, thinking about this period, I wouldn’t change a thing (I’ve lost weight J) I’ve struggled and sometimes I felt devastated, but looking back, it was the most intense and beautiful time of my life. I never imagined before that I could learn so much, so fast and I would become so resilient in my mentality. „ – Tiberiu

 

 

 

 

 

 

 

 

 

 

 

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