Rafal Styczen: The Next Chapter in The History of Ecommerce (S2 Ep2)

Podcast Details:

Guest: Rafał Styczeń

Date Added: 10th Mar 2016

Length: 70 min, 10 sec

Summary:

Rafał Styczeń is a legend in the tech startup scene in Kraków. He helped build a hugely successful telecommunication application when he was a student of computer science at Kraków Technical University. He’s now growing Meble.pl, a furniture ecommerce store that’s proving nothing is safe from software domination, not even our sofas. Rafał brings a unique wisdom to the table that comes from a combination of innate entrepreneurial passion and the hard-graft hustle of building multiple large businesses in the modern ecosystem.

Mentions and links:


Table of contents:
  • 08:08 Intro
  • 08:45 Richard introduces Rafał
  • 10:20 Rafał’s entrepreneurial background


The Era of Disruption
  • 18:46 What Uber has proven to the world
  • 19:47 What is stopping financial services from blowing up like Uber
  • 23:18 The role Bitcoin might play
  • 24:42 The opportunity in Poland for digital banking
  • 26:23 How to create great products
  • 27:21 Skype for banks


How Ecommerce is Evolving Today
  • 29:04 How Meble.pl is challenging the furniture sector
  • 32:08 Why furniture is one of the easiest things to sell online
  • 33:18 The World is Flat
  • 34:32 Meble.pl is just too good to sell
  • 41:31 Amazon. Their strength, and their weakness.


How to Do Business Well
  • 44:40 How global swings affect your business
  • 46:00 You should not care about what which you cannot affect
  • 46:25 The value of grit and speed in business
  • 48:09 If you are solving real needs, money comes after that
  • 48:51 What Poland needs right now to be successful
  • 51:38 Is there a lack of optimism in Poland?


Life After Initial Success
  • 53:13 Rafał’s thoughts on investing
  • 56:09 Why integrity is more attractive for investors than intelligence
  • 56:52 Rafał’s ambition to never become a corporation
  • 59:28 Culture is something that’s the most difficult to change
  • 59:52 Strategy
  • 1:01:38 Outro

Transcript:

08:08
sam cook:
Hello again, Project Kazimierz listener, my name is Sam Cook and I’m here again as always with my co-host – Richard, how are you, Richard?
08:14
richard lucas:
Very well, good morning, good evening. Whatever time of the day it’s when you’re listening.
08:18
Sam:
Richard’s always aware of people being in different time zones everywhere, so welcome back to another episode of Project Kazimierz, we’re here with, well, I’m going to let Richard do the formal introduction of our guest, Rafał Styczeń, who is pretty legendary in the Polish and especially Kraków technology community, so, Richard, go ahead and give our intro here.
08:45
Richard:
I won’t give Rafał’s whole business biography, because he should do that himself, but I remember when I think I first saw Rafał at the first Tuesday conference in Warsaw in 2000 or 2001. I remember thinking to myself, I didn’t know intelligent, talented people in Poland existed, like Rafał, because he was at that stage younger than he is today speaking excellent English, talking the same language, that I was used to in Cambridge, London and in the US. He’s an extremely successful businessman. We’re not only in business, we work together on different projects to promote entrepreneurship, I believe at one stage his daughter was very interested in my son, althought I don’t know if that’s still, I’m pretty sure that’s…
09:28
Rafał Styczeń:
Or vice versa.
09:29
Richard:
Or vice versa.
09:31
Sam:
Deeper the ties here…
09:33
Richard:
Over the years we’ve corporated in different ways and I invited Rafał to speak at the first ever TEDxKraków meeting, back in 2010, where he gave a very interesting talk, which I recommend, called The Rules of the Game and we stay in touch. Rafał’s very successful on an international scale, as you’ll hear. Basically I’ll say it’s great to have him as part of our business ecosystem, not just in Kraków, but in Poland and in Europe.
10:05
Sam:
So, Rafał, let’s start with… going all the way back, how did you get started in technology, tell us about your first foray into the brave new world of technology in Poland.
10:20
Rafał:
Hello, everybody, thank you for having me here. I don’t want to talk about history, because that’s not what we do here, we talk about the future, but briefly – I started in ’93, when I was a student of the last or before last year of computer science in the Krakow Technical University, where we founded together with my professor back then Janusz Filipiak a telecommunication company, here the project to deliver some new IT system for the Polish telecom back then, today Orange, and we started to develop application. Then we founded a company on the side of the university to start the project. We were 4 back then. The company grew very quickly, within 7 years it became 1000 people, today it’s close to 4000 people – Comarch, IPO we did in ’97, by the year ’99, when the hype arised, the dotcom reached it’s height, it was worth more than a billion złoty. Back then in Poland, it was more, because I was selling my shares. So I became, I would say spoiled rich pretty fast in my life, but then I sold the shares and started investing. I thought I knew what was needed. what is to be done and I thought investing is easy, so I learned the very hard way, that knowing what’s good was the most important issue, but knowing how to invest money is always very important. I was doing VC investing for the next 10 years, when I came to a conclusion, that being on the passive side is not really drives me. Seeing how much money is chasing a few good projects in this country and seeing this great project that we had on our hands, I decided to work on an opearational level in IT companies and today I’ve merged 2 of my companies I had in the portfolio. I manage them today. I believe successfully, so within this short story, that spans almost 20 years, we have founded dozen or so companies, 5 of them became very successful, today they’re employing more than 5000 people, nice valuations, 3 of them are public, quoted on the stock exchange, all of them are international. Our aim from the very beginning is bringing companies as fast as possible to the international market, not looking to the less developed market, as many people thought in IT in Poland – if I’m successful, I should go to the neighbouring countries, the Eastern countries. We always had the perspective that we need to go the West, the US, because if you’re not able to compete over there, those companies will come here and you will be dead at the end. It turned out, that we are fast, more eager, more hungry than most of the companies, as we considered them back then – spoiled societies of the Western world countries – an it’s still true today. We still have price arbitrage in IT, of course the workforce gap is lowering and it will disappear, I believe, in the future, but still, this is the case, so it means we’re more effective. Back in ’93 the only way to buy an apartment was to found a company. There were no laws, no mortgages, nothing. And we we’re working for a future, where you could finish your work at 5 o’clock, close your notebook, afford everything and have a good life… it was not possible back then. Today, we’re employing people that live this life, so one side is great. Second, back then 9 people out of 10 wanted to make a car. Today it’s hard to find 1/10, so that’s the difference. But it’s been quite a journey and then really, really interesting. Of course, all the projects we did were in the IT, the Internet, consumer, finance. After Comarch we founded the company called BillBird, which was initially in the electronic payment field, then it turned out to be a huge network of billed payment network in the regular stores. It was very successful, grew to a network of 6000 points, we sold it to GTECH, an American lottery company, Then I founded Software Mind, which was a software house for the banking and Telco industry. Then we founded Wind Mobile, which was a company doing services for the mobile industry. Very interesting model were we were leveraging on the customers the Telco operators to actually access themselves with our services having a subscription fee. Successful IPO for Wind Mobile, which bought later Software Mind and we merged them together. It’s fascinating how it’s developing today. We funded also Meble.pl, which is the biggest Polish e-commerce in furnitures. It also produces on demand custom-designed furniture on the Polish market. This is a very disruptive model, it will be rolling out in the neighbouring countries this year already and it’s growing also very fast. So many interesting things and I would rather not focus on the past.
15:53
Richard:
That’s absolutely fine. I remember when it was BillBird, one of my businesses, SKK, sold several thousand bucketscanners to scan the bills, so we did have some business relationship and I think we gave you a phantastic deal. Cause I remember you told me: Richard, just because you know me doesn’t mean that it’s allowed t be high. So that was one business benefit. Looking to the future, there’s a lot of buzz words around mobile, internet of things, context-based computing, but if you think of the trends that are going on in the world at the moment, which of do you think the most are relevant to your businesses? Are there some particular ones that you’ve noticed that drive the strategy of your businesses?
16:43
Rafał:
Well, there’s so many things going on in the world right now. I have the impression that we are really living in the extremely interesting times. There’s a lot of innovation happening right now. The disruption is coming. Of course, everybody is talking about the autonomous cars, about the technology. Again we are in a race with not only States or Russians, but also private companies, like SpaceX, to put the first man on the Mars. And this is really unbelievable, because most of the development that we today consume is coming from the moon race. So again, I think this is a race that will develop a huge advantages for the civilization and for the way we use technology. Richard, honestly, on every aspect of our life you look, you will see the huge development that is only just today starting to affect us. What happened with the mobile industry – we started in the ‘90s, carrying a break and today, if you look at people – they’re not human anymore. They sit together and are looking at the world through this small screen. These mobile companies were so stupid, the whole live is going through us and they don’t know how to make money. The world is changing dramatically. We are starting to see the world through technology. I believe, that within 10 years, 80% of the population will be living at home on the couch with a kind of an Oculus Rift and this is the way they will be travelling, doing sex and whatever. It’s sad from one side, but I would say, what we’re today touching in technology is just the beginning. Imagine autonomous cars. You see today traffic, most of the cars going with one driver, most of the cars staying idle, everthing will change… With Tesla parking, it’s just the beginning.
18:46
Richard:
You mentioned the autonomous cars and the inefficiency of driving, I know at one stage you were involved in peer-to-peer lending platform and I’m very, very actively investing in some peer-to-peer business and certainly that makes so much more sense. Sam ordered some Uber this evening, I have my car at work, so I drove. Do you see those kind of trends being important? You obviously invested a while back, it was Moneta, right? But, do you see that as being distractive as some people do?
19:21
Rafał:
When I was investing in Moneta, it was pretty too early for the P2P business models. What is the problem? Uber is the first really big business model, that’s showing that true social recommendation or social platforms you can get financial benefit and a high quality service. If you compare this to financial systems, so far the recommendation, or that kind of acquiring customers turned out to be fraudulent, yes? So, Uber is one of the first services, AirBnB is one of the first, that today are educating people, that through recommendation from Facebook, through social services you can a high quality service cheaper. This is a big, dramatic shift, which is starting to enable right now financial services, that are peer based. It was way too early for the social lending service. If you look at social lending all over the world – US or UK markets you see Xapo or Prosper, they’re perceived as successes, but they’re not. In terms of the financial markets, something that’s hugely successful should have trillions of dollars and not hundreds of millions. This is not success in terms of lending money, it shows, that social lending is not a success. I have several thoughts about this, but I don’t want to go too deep into social lending. In general social or peer services can change a lot of things and can move out some inefficiency with the distribution of goods, but I believe that’s still a service, that’s hardly applicable.
21:24
Richard:
An I certaily, I would agree. I don’t actually think, that financial has failed, I just think it hasn’t succeeded yet, that I lend money through Bonduro, which is the largest Europe platform, lending in euro and it’s growing by 5-10% a month – it’s growth is fast, but still not big, it’s coming up, but the market is enormous.
21:49
Rafał:
That’s why it should be bigger, if it would be successful. Look at AirBnB, Uber, look how fast it’s growing. If the financial services aren’t growing as fast and the market is so huge it means that there is something’s not working. And the problem with borrowing through peer services is a problem of coming up with the supply of money, that’s the issue. On time, this is the problem. Not that there’s not enough money in the society to be lended, the problem is the smooth running of the process, that the money is available the moment you need it. Either you need to automate the whole process and people don’t want to have a machine investing their money, they want to react and if they need to react, there’s not enough supply to fullfil and there’s an issue… very different societies – the Germans, they are honest, Italians are thieves, Polish people are also something in between – lazy thieves. This is a problem of coping with it, scoring your stuff up. I agree, that we’ll come finally to this solution, but today I could put a statement, that it’s not successful. Way too small for the size of the market. We didn’t figure out the model yet.
23:18
Sam:
You’re talking about financial transactions, lending, money flows and, Richard, one of our future guests will be TechCrunch editor John Biggs with his app and his solution or idea is that Bitcoin is not nearly as viable as a currency, although it does have value as TCP/IP packets on the internet, as a secure, uncorruptable ledger for transfering money quickly, instantly, with almost no transaction cost. Will be interesting as fintech is behind and everyone keeps waiting for that financial revolution, because basically, we’re doing banking the way we used to do it in the last 50 years.
24:11
Rafał:
John, I wish you all the best, but keep in mind that several US presidents have been killed for trying to nationalize the federal reserve.
24:24
Sam:
He’s taking on the federal reserve.
24:26
Rafał:
Currency is big issue now, if you want to introduce another currency in the monetary market, you may be killed.
24:35
Richard:
It’s an interesting prediction. And you also mentioned you do some work with the banking sector.
24:42
Rafał:
We do a lot of great things, you need to know, that the Polish banking system and the Polish internet banking and digital bank is one of the most developed in the world. Services that we developed here in Poland are very interesting and we’re able to export them very nice and fast. Our Livebank solution, where we developed a live agent, that can through technology talk to the customers, which is closing the gap between branches and digital banking. It’s extremely popular, we’re selling to banks all over the world – Singapore banks, Malaysia, United Emirates. We’re very successful in developing new services, using digital delivery for the banking industry. Not only this, also a lot of other automation. We developed a purely mobile banking here called Smart Bank, that we are now in the process of working on and rolling it out to pan-European countries and China. So this is really great that we have an opportunity here in the Polish market to develop something that’s really at the edge of customer demand worldwide and there are very few markets in Poland. I’ve always said that we have exellent IT people here, fortunately they can write exellent code, but they don’t know what to write, because they’re not exposed to the really demanding markets of the world. If we can close the gap and expose them to the needs of the modern markets, then we can develop great products and in banking this is the case here in Poland, but in another markets, we need first to enter those markets, understand the needs and then, if we learn it we can come up with great products. This is slowly happening, another product that we have build for the hotel industry – we were great, we were very successful in Poland and we enter Dubai and we learn we need to completely rewrite the software and we came to Germany and they have completely different needs. But today we’re coming up with great products, that will be fulfilling the needs for most markets, so it requires learning.
27:10
Richard:
It’s quite interesting what you feel about the way the bank branch opening in the UK, mature markets generally, the number of bank branches tend to shrink and close.
27:21
Rafał:
We have a product today that you can tell it’s like Skype for the banks, but the difference between Skype and our product is that it is very high quality, all recorded, it has all the needs for the security for the banks and you can also exchange documents and do all the transactions you could in a bank, today, through a video communication channel, also voice, chat, various channels. The bank can present you on the screen, they can calculate mortgages for you on the fly. But the most important issue is when you present your ID, while you’re talking it makes an HD photography and it’s accepted as the proof of signing a document/contract. So by means of introducing this technology, you can either roll out the bank without having branches, or close your branches, so it’s a very important issue.
28:19
Richard:
I was going to say that bringing together the branch experience and the online experience. In fact, the branch experience, even in a nice, modern bank is usually horrendous, you walk in, you have to wait and people are so much less patient now, than they used to be in Poland and everyone values their time. I was going to ask you to draw an analogy between what Meble.pl might do to the furniture market, in term of, perhaps to some extention removing the need for store displaying… better, cheaper way of displaying furniture, compared to what’s going in banking and I think the future of retail is very interesting and people in retail real estate might need worry just as much as people who’re own real estate rented to banks.
29:04
Rafał:
This is one thing, but I would compare more with what we’re doing with Meble.pl is more like what the cheap airlines did to the airline industry. Everyone wants to have custom tailored furniture at home, not the ready one. The problem is people either can’t afford it, or the time of waiting for it is too long. What we’re doing is we’re putting down the price of custom produced furniture to the price of retail furniture and the delivery time to 2 days. Instead of having a cabinet, that’s not fitting your walls, or a kitchen not fitting your walls, you can easily draw them or rescale them on the webpage and order them. They’re being produced within 24 hours and then shipped to you within 3 days. Then you can just assemble them as Ikea furniture, but you choose out of 200 colors, you choose out of whatever design you like to have and they’re fitting your room. Either they fit below your window if you want to order a cabinet, or they fit to your whole wall if you want to order a kitchen. To do this it took us more than 8 years of working on the service with our first small line, then we had to order a big line, because it immediately sold out. Now we have a big factory that makes everything automatically. You go on the page, you choose from various models, you rescale them, you choose different colors, details, you click order and the production starts automatically in our factory, robots move everything and it’s packed within 2 days and shipped to you. This is true now, if you look at furniture e-commerce, this is also another issue, that you have mentioned, Richard. To order furniture, you needed to see a lot of stores before. If you’re looking for an orange sofa, in an ordinary store you’d find one or 2, so now, if you wanted to see at least 10, to have choice or find that one, that you really wanted, you had to visit 10 stores. With e-commerce, we have like 60 000 furniture on display, you could really choose whatever you want. Now you’re not accustomed to this to order furniture and take it with you and go out of the store. It means that you’ve accepted, that delivery time can be a few days. So from that point of view, furniture is the ideal e-commerce product. Because you want to see how this furniture looks in your room together with furniture from another store, by using our virtual reality, you look through your phone, where the 3D images are displayed in your room, how it really looks. This is what you really want to know, because you pretty much know how leather feels or what the dimension and sizes are and in comparison to going to a store and sitting in a chair, it’s more important for you to see how your chair looks with your table and home and you click order and you don’t expect it to arrive now, you can wait a few days. From the point of view, really, the variety of choice and the experience of shopping online for furniture is way better. But building an ecommerce store for furniture was not ambitious enough for us. I didn’t want to be just a retailer. We wanted to do something different and we understood that the internet is not only one way, it’s two-way, so you can affect the way the furniture is built. We saw a lot of inefficiency in the tailor-made furnitures. It took so long. There were so many small factories that were building this, so if we were able to automate it and make it scalable, that the idea – that was famous 20 years ago – of mass-customization can be finally realised. Today we see it working.
33:18
Richard:
If anyone’s read Tomas Friedman’s The World is Flat there’s that description of the process of what happens after you click the word buy when you buy a Dell computer. It describes how brilliant financial results of Dell in those days was based from they took the money and for the next few hours they put a computer together. The efficiency of the use of capital is phenomenal in this process, because you sell things before you build them, you have no wasted stock, right?
33:46
Rafał:
Yeah, exactly. But this is not the most important issue that you don’t have wasted stock. The problem is you don’t even make risk in producing stuff.
33:59
Richard:
Exactly, that’s what I mean. Stock that will never sell that is not just the size of a magazine, but you don’t build things that don’t sell. This is a huge area of waste and inefficiency. So build-to-order I think is a very interesting feature. Can you give any numbers about Meble.pl in terms of the number of items of furniture you’re making a day, a year or some financial numbers? Because I remember you told me some austrian company wanted to acquire it and you just said no, because the prostpects were too good.
34:32
Rafał:
That’s right. We had several offers already that we have declined. Right now we have started with the new automated assembly line this year. We hope that it will run full by the end of the year. Then we will be thinking about setting up the new one. And this is just for the Polish market and we believe by mid of this year we will be ready to ship also to the neighbouring countries. Now, the shipment prices are changing. The regulation in the EU that will be enforcing the same price in many countries will also help us very much. I don’t know the actual numbers, because I will be there next week, so I will see how it looks like, but we’re closing several thousand monthly.
35:21
Sam:
Several thousand pieces?
35:22
Rafał:
Pieces, yes
38:51
Sam:
So really the only thing you have to manage is raw material to build furniture, your main inventory, which in theory is a lot more efficient than having stock.
39:06
Rafał:
Yeah, not only inventory, but also accessories that we have really a great variety of. You can choose diffrent things that are used to assembly furniture, but also the outside elements that you see. There’s a lot of it. If you look at the kitchen, most value is inside, not outside. And people do not know it. So if you buy with us you have this transparency that you can order the Mercedes-like accesories or Jaguar-like accessories or you can go to the middle-level or you can buy the cheapest. It affects dramatically the price of the kitchen. But from the outside it looks the same. The only issue is, will it last for 10 years or will you have problems after 2 years? The way the door closes. This is the diffrence between Fiat and Mercedes – when you close the door you hear it. It’s exactly like this here. The idea of the founder was brilliant from the beginning, he said (he was a car racer before, I would like to do something like the Audi, that you order the standard model, but then you start customizing and it’s getting twice as much expensive. This is where you make the margin. This is happening today. It was not possible before with the furniture. You have 4 basic colors, but we can have 200. Now you have the choice of choosing so you prefer to have something slightly different than the four basic colors. You choose the metallic one and it goes 30% up. And you just start to customize. And finally you end up with something that is twice as expensive, but you bought in this idea from the very beginning, from he standard price. And we are not cheating people, this is how it works.
40:48
Richard:
This is what people want.
40:51
Rafał:
It’s stil way cheaper. For price sensitive people we are bringing the price to the Ikea level and you can customize. Now, for the western world again you have richer people, the price is not the issue, the problem is that you wait even 3 months for the furniture to be built if you want to have it customized. And this is the biggest problem that we can solve over there. Today we ship in 5 days, but we could do it in 2 days. So this is the beauty fo it also.
41:31
Richard:
Obviously the giant of e-commerce is Amazon.com. The Financial Times was reporting that what happend in the UK retail market, where people were shopping online on Christmas Day, Boxing Day and the day after Christmas. The online just continues to grow and grow. Do you see what you’re doing as something you’d like to expand into other areas as well, that the expertise in the build-to-order in furniture might be a competence that could stretch into other markets or do you think you’re busy enought eith the furniture? Cause Amazon seems to have the ambition to sell everyone, everything, everywhere. Maybe it’s best to focus on the furniture niche.
42:18
Rafał:
That’s Amazon. But they’re reseller. They are selling. The only thing that they are producing is the computing power.
42:26
Richard:
Ebooks.
42:27
Sam:
TV shows.
42:28
Rafał:
They are not producing content. They just have a platform for people to publish.
42:34
Richard:
But they are publishing, they are actually competing with the content publishers now.
42:42
Rafał:
But I think this is their competence from like 20 years, their core-competence and I believe we should stick to it. I think this is the biggest problem in business right now. So I‘d say no, the furniture is enough.
42:59
Richard:
Ok, that’s good.
43:01
Rafał:
But there is a lot to be done. As I said, the beauty in cheap airlines that famous Richard Branson discovered when he founded Virgin is that finally he has a business where he gets money in advance, even months before he’s selling the ticket. That’s the beauty – you’re being paid when someone is ordering, before you even start producing it. This is the money flow. Second beauty is that you are vertically integratd, as you say, which means margins are pretty high. Now, if you are only a retailer, you are only in one part of the whole value chain, you need to go broad. But on the other hand in book they’re starting to do this vertical.
43:58
Sam:
They are also starting to build their own shipping company. On Amazon Prime they’ve launched 2 of the top 5 award winning television shows, produced by Amazon. The other 3 were I think by Netflix. It’s interesting that those businesses started as distribution chanells and now they are trying to go vertical.
44:23
Rafał:
The problem is you cannot do everything, you cannot be very horizontal and also very vertical, becuase then you take the whole market. Nobody…
44:32
Richard:
Did that yet.
44:34
Rafał:
Rockefeller tried it, but there was solution to this as well.
44:38
Sam:
The government broke up.
44:40
Richard:
And talking of Rockefeller, obviously, I think that today’s news was that oil is below 30 dollars a barrell. Again, do you, when you’re planning your busienss, worry about these big swings and global condition, whether it’s American interest rates finally starting to rise, oil and commodities being low or even these political problems that are happening in Europe?
45:01
Rafał:
They affect you. There is no way they wouldn’t. Because for example if you’re in the process of putting company to the stock exchange and IPO and the market is going dramatically down because of some disasters.. All the investment funds they are just behaving like people in the room where the light goes off. Nobody is taking decision whatsoever. So they are affecting you and you have to live with this. But on the other hand now, taking them into consideration would be a nightmare, because you cannot predict them. It’s like with the currencies. I mean, you don’t know how it’s really happening. There are people who are affecting those things and the crises don’t happen by coincidence, but there are big guys who are actually putting us in those elements. Now, I don’t have the knowledge when it’s happening. You can only read after that the Rotschields exchanged everything into gold before in 2004, when in 2007 we had the crisis. Of course it might be a coincidence, but I don’t think so. If you don’t have the knowledge or cannot influence those kind of things you should not care about them. And do whatever you do. Now, of course you can find yourself in trouble. We’ve been doing an IPO for a company last year, June was perfect. But unfortunately Polish Security Commission didn’t approve our prospectus, so we entered into July. July now vacation are starting, so we said ok, we might consider doing it. But then Greece problem arises, so the stocks were down, nobody was buying, so we said, ok, vacations, so now we went out. So we came after vacation, we said we might consider doing the IPO now, the China problem began. Finally I said screw it, we’re going anyhow, because if we’re waiting for a perfect window, it might never occur, like the perfect wave. So we went and we are one of the two IPOs that happened during this period. Most of the other guys cancelled and it was very difficult, because it was not an easy time to convince investors to buy shares, but we did it finally and I think this is what you have to do. Close your fist and go forward.
47:34
Richard:
Yeah, I think there are thing you can focus on, which is what your customers’ need or problems are, how to fix them and also how to optimise your operations, raise your productivity. These you can always do every year.
47:48
Rafał:
Focus on business.
47:49
Richard:
Benjamin Graham in his book “The Intelligent Investor” said that you have to imagine the stock market like a guy in the room, who will do business with you every day, he will buy your stuff, and you never know what Mr Market will say, but he’s there in the room, he’s available and you can’t let him decide what you do. It’s like and extra fact.
48:09
Rafał:
If you’re doing something that customers are buying, if you are solving the real needs, money is coming after that. Unless you’re stupid and cannot bring your product solving customer problems to massive scale. So if you’re clever enough you’re then clever enough to do it. Of course, people say don’t let yourself be put on the edge or pressed to the wall when you negotiate. It’s not true. Maintain big balls, that’s the issue. Have courage. People lack courage and then they are losing. It’s not lack of money, it’s the lack of courage makes you lose.
48:51
Sam:
Rafał, one of the great lessons from your business career and what all the Polish entrepreneurs are obsessed with these days is going to the West, going to the biggest, English-speaking market based in the US. Young Polish entrepreneur listening to this, you’ve been successful with this now, with multiple companies. What is your advice, what does Poland need more of, what are the toolkits that founding teams need more of to be successful?
49:27
Rafał:
Nothing. You just have to believe you can do it and that’s it. We were raised here with the state always making problems to us, so you never expect any help from anybody. The best help would be if we were just left alone. That nobody would make problems to us. We don’t need anything, we have everything right now. If people are saying that we don’t have something, it’s not true. We speak English, we can learn Chinese, we have access to technology that has never ever been possible. I’ve been learning how to program out of box. Now all the knowledge is accessible. We can see what people need in other countries, so we can start developing products for them. Distribution is extremely easy. Travel is extremely cheap today, so we don’t need anything.
50:25
Sam:
Just to do it.
50:26
Rafał:
Just to do it. You need to have courage. Believe you can make it possible. This is the truth. We raise children saying that everything is possible, you can dream who you want to be, part of it is true. Believing is the most important issue. Of course you need to know what you believe in. Because sometimes you may believe in something that is now possible.
50:57
Richard:
Just recently, the majority of the Polish people voting chose a government that rather believes that the last 25 years has gone in the wrong way. They’re somehow not promoting this optimistic, positive “we can do it” feeling, but more a kind of sense that things went badly wrong. That’s not fair.
51:16
Rafał:
Well, I don’t want to go into politics. But I think we are a great country. We have really excellent people, hardworking people and still greedy people and clever people. We will be great. What is happening right now in Poland is just a positive cycle that is happening everywhere else. From time to time people need to be shaken up and that’s it.
51:38
Richard:
Good. I agree with you. We don’t want to talk about politics, I was talking more about what can we do to make sure people have this attitude in their mind so they can be successful, because the belief that you can succeed is, maybe not sufficient, but it’s certainly necessary for people to want to try. And not everyone in Poland is always being optimistic enough. I guess that’s what I was driving towards. Do you think it is a problem of optimism? A lack of optimism sometimes?
52:05
Rafał:
I don’t know if we have a problem with lack of optimism. You know, somebody is smiling more internally, somebody is smiling more externally. I would say that people are sometimes in Poland pretending no to be happy. It doesn’t mean they are not happy. If you look at the pools, we are considered to be one of the most happy societies worldwide. If you listen to people on the street, you have the perception that you’re in a great misery. So perception and the real situation is something completely different. I wouldn’t say that people in Poland aren’t optimistic. I would say that people in Poland are optimistic.
52:51
Sam:
They’re just good at hiding it, right?
52:52
Rafał:
Guys, imagine what we have been through. If we have been through all of this and people are stil optimistic then this is unbelievable. And we used to be optimistic in very bad times. Now we have very lucky times.
53:07
Richard:
You’re obviously very busy leading a large company right now…
53:12
Rafał:
I am unfortunately.
53:13
Richard:
But you had a time with the internet investment fund when you were investing in smaller businesses. Do you still make angel investments and if you do, what are your criteria, and if you don’t what would your criteria be were you still doing it?
53:25
Rafał:
No, I still want to invest and we are all the time looking at some issues. We are now considering an investment. If it is somewhere in the scope of our companies, we would like to make it a strategic investment, because I believe in the power of a well-managed organization, that we can be as effective as a startup. Because we have everything. We have people, money, access to market, everything. The only problem is to be managed cleverly. So if it’s strategic, within B2B in IT for example, we would like to take leverage out of the existing organization we have. But another fields, yes, we’re looking at investments. Angel not so much, more growth stage. Let’s invest smaller money first and figure out who is worse or not and then we would like to enter.
54:22
Richard:
But the core focus is B2B IT, mainly in financial services?
54:28
Rafał:
No, no. Also other areas. We are looking at some fintech investments, within the ecommerce field, around the competences of furniture. But we are not so eager to enter. We don’t have fund under management that we need to invest, so we don’t have to make 3 investments in a period. If there is something nice coming up that doesn’t want money only from us, but also our knowlegde how to scale businesses, how we can utilize the business knowledge. Then we are a partner for them, then we should invest. If not, we are not chasing projects.
55:13
Richard:
Okay, and if you look at the criteria. You’ve already mentioned some to do with the fit of your existing strategy, obviously. What about the human side, what sort of people do you like to – and if someone listening to this have a thought ‘I have a business, which seems to..’ – they go on your website, they check you out and they think ‘I fit” – what sort of person would be the right person to get in touch? Waht sort of characteristics are important for you?
55:37
Rafał:
First, energetic, driven, but also honest. You have a lot of clever people, but at the end it’s the intergity and honesty, which make the investor make money.
55:54
Sam:
And optimistic, right?
55:56
Rafał:
No, optimistic a thief can be as well. I assume every businessman is optimistic, otherwise would be hard to do anything.
56:09
Richard:
I think integrity and honesty are word that aren’t always used enough in the world of tech startups, but of course it’s a pre-condition.
56:20
Rafał:
I think this is something that you learn at the very end. Becasue initially what you focus on is the business concept, then you understand it’s not enough yo also have to have great execution, and then after few years you learn that this is still not enough. At the end you have to have an honest person that you as a passionate investor will make money on, that they will not treat you as somebody that is not contributing to the company, that is only holding my scarce shares.
56:52
Richard:
Getting into the last few minutes of our interview, if you look forward into 5-10 years time, what do you think your biggest personal challenges in doing your job, cause you’ve achieved a lot in your life up until now, but the future is always the biggest challenge, because that’s what you can succeed or fail – in your future activities, you can’t change the past. So what do you think you’ll be dong in 5-10 years and what are the biggest challenges?
57:17
Rafał:
In terms of companies that I manage and have developed not to become corporations. So this is my biggest challenge, to be able to spring internal startups within those companies, not to be bureaucratic, to have the best quality of every service we do, not based on the positions of people, but the contribution of those people. Im fighting very much now with titles, with salaries. I don’t understand why someone on the higher level is making more money that someone on the lower level. We are now trying to put an algorithmn in our company valueing people, what is the value for the company. This is defining his salary and not the title. This is my biggest struggle. Because if you scale you need to organize the company, you need to organize processes and it’s very easy to turn into bad corporation. You see tons of bad corporations, you see very few agile and good corporations. So this is the biggest problem. On the other hand, to balance work and life. It’s another issue. You know, I don’t need to do more investments, from money perspective. So I want to do things that are challenging and nice. On the other hand, I have four kids.
58:52
Richard:
One more than me.
58:53
Rafał:
Balancing this is a tough issue. We are sitting here, it’s 6PM.
58:59
Richard:
Yeah. We are indeed. So from my point of view. The challenge of work-life balancing, making your work interesting, meaningful, avoiding bureaucracy and keeping the corporate culture the way you want it to be as you get bigger. These are the challenges which many of the people listening are in a startup world can’t imagine, but actually even in the small startup you can get the wrong culture – you have to get the culture right at each stage.
59:28
Rafał:
Culture is something you set at the very beginning and is something that is most difficult to change and it’s very easy to be destroyed. You need to be very careful about it. If you set the right culture in the very beginning, it can make the company fly, really.
59:50
Richard:
That’s a very good point.
59:52
Rafał:
And strategy is something extremely important and very often underestimated. Strategy is the right way. It’s not the issue of who is running faster, but who is running in the right direction. That’s the point. Not the fastest is winning, but the one that is closest to the right direction. Maybe not funning fast, but taking the shortest path. And this is strategy.
1:00:16
Richard:
Can you summarize your strategy in one or two sentences?
1:00:20
Rafał:
No. That would be too easy.
1:00:25
Sam:
Classified.
1:00:27
Rafał:
No, I just can’t do it in one sentence. It’s to move from one aim to another aim and you set the aims cleverly.
1:00:37
Sam:
Well, I guess the importance of having the strategy in the first place, then reviewing it periodically to reset. I think that’s a great summary of a starting point. Startegy. Well, Rafał, thank you very much for the insights. I think one of the point that really hit home with me is something I used to talk about when I though history is this idea of mass-customization. I think that’s definitely a way of the future that’s been coming for a while with a lot of our industries and to see it happen in something as complex as furniture, here in Poland and across Europe and hopefull in the US, I know interior designers would absolutely love that. Would be awesome to see the period of mass-customization being led out of Poland in that industry and hopefully many other.
1:01:33
Rafał:
And furniture is really easy.
1:01:35
Sam:
Let’s see the other industries that you bring it into.
1:00:38
Richard:
Just in case you’re listening to this episode in some time in the distant future, it’s the 14th of January 2016, it’s our first podcast of the year, so if we’re still measuring time in years at the time you’re listening, Happy New Year. Thank you very much for joing us for this interview.
1:01:58
Sam:
Thank you, finally, Project Kazimierz listener, for joing us in another episode of season 2. Many more to come. It’s great to kick it off with such a distinguished guest in the startup community, Rafał Styczeń. Thank you very much.
1:02:14
Rafał:
Thank you very much.