Aspire Conference May 2016: Polish Startups & Their Place in The World
This May, Wojtek Burkot hosted a discussion about Polish startups at the Aspire Conference, in front of a live audience. Join Richard, John Straw, Tim Jackson, Andrzej Targosz, Paulina Mazurek and Joanna Chwastowska as they break apart the challenges facing young Polish companies, and how these hurdles can be overcome. Make sure you don’t fall into the typical traps of Polish startups.
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Table of contents:
- 00:49 Intro
- 04:07 What does it take for a start-up to start here and not only here and go global?
- 05:55 Are you sure you want to go global?
- 10:03 Why do startups tend to set up in two continents?
- 15:06 What motivated some successful startups to stay in Poland?
- 17:42 Working from anywhere in the world.
- 20:00 The education system.
- 21:20 A 7-year-old’s perfect answer to “What is a business?”
- 23:56 How Google+ survived its difficult birth.
- 26:23 The origins of Entrepreneurship
- 28:20 Is it an opportunity or a danger for start-ups that the centers are getting involved?
- 31:01 Does Google let its employees quit to try a start-up, only buy them back later?
- 32:11 Thanks & Outro
Good evening Project Kazimierz listener if indeed it’s evening when you are listening. I’m Richard Lucas I’d like to welcome you for this episode of our season 2 podcast, recorded at the Aspire Conference in May 2016 in Krakow, Poland. The Aspire Conference is the main event for the Redhawk Global Business Services BPO in shared services sector in Cracow. Cracow is the number one city in Europe, and in the top 10 in the world for this type of business and already 60,000 people work in the sector here and the number is growing by 20% yearly. With new office blocks seeming to spring up on almost every street. This episode is a recording of a discussion moderated by Wojtek Burkot in front of a live audience – meaning the sound quality is slightly less good than usual, but the content is well worth listening to. Wojtek hosts a discussion about Polish start-ups and their place in the world. With myself, John Straw, Tim Jackson, Andrzej Targosz, Paulina Mazurek and Joanna Chwastowska from the audience. Wojtek’s first question was “what does it take for a start-up from Cracow to succeed here and to go global?” and it was first answered by Tim Jackson, stay tuned for his answer after the short break and enjoy the show.
What does it take for a start-up to start here and not only here and go global?
I would say that the things that are likely to make a Cracow start-up succesfull are not that different from those that would make start-up somewhere else succesfull. And from my perspective, as an investor and I this means four things: team, traction, market and barriers. Team is obvious and market is obvious I’ll just add one sentence each about traction and barriers. The laziest kind of entrepenour is the one that puts together a beautiful slide deck and goes to an investor and says “if you give me the money I will build this” and most investors tend to respond cynically by saying “well since I have the money anyway I can just pay somebody to build this” and in short, the way that you demonstrate that you’ve got the ability to make things happen is to show what you can do with little or no money rather than with lots. And on barriers, I would say simply this – many of us investors have the experience of getting lots and lots of pitches from different companies. Where the companies are surprisingly unaware of how many competitors they have. If you’re in an industry with lots of competitors the common result is that prices are driven down almost to marginal cost. Which in the case of Internet businesses is almost zero. And what that therefore means is, it’s incredibly important to think from the very earliest stages about how can you build a business with what Warren Buffett would call a moat, with something that will prevent other people from stealing your market.
“As an investor, I look at four things: team, traction, market and barriers.”
Thank you very much.
And my question would be, do you really want to go global? And the reason’s being that my personal experiences, I just sold a start-up, I started five years ago. And we used a B-round watching movement to the United States market and it wasn’t easy at all. And in retro perspective what we should’ve done is put some of that money in our R&D to make the product a lot better, so somebody would buy us for the product rather than sole geographic reach or revenues. Because let’s face it, the revenues that most start-ups actually get are trivial around what they are going to be bought for, which is their technology and their product. So I would really question whether or not you’d be better off investing small marketplace to prove that you really, really can work, and then plan an exit.
Richard do you wanna answer this?
Yes. But by the way I’d like to welcome Project Kazimierz podcast listener’s. This thing that looks strangely reminiscent of a sex-toy on a table is a microphone. I see some people are laughing, other people understand. I would say the barrier is deciedly psychological in terms of local entrepreneurs. There actually is no barrier to reaching a global market over the Internet if you’ve got the technology, the product market-fit but often Polish entrepreneurs who aren’t in this sector – ’cause you guys know about the internationalisation of business but the people who haven’t experienced that don’t realize that they are just as capable of putting a team together to address the global market as people anywhere else. Obviously there is slightly less talent here than in New York or London but as citizen UK like Exitor where there’s crowd cube or many small or Edinburgh, probably too big, where there’s Skyscanner. Anyone can put a team together, including Polish entreprenours, you have to sometimes overcome your lack of self-belief.
So and at passion and network at my lowest surplus and for trying to sell an idea to me. And if you see real passion you easily believe that this project will be delivered and that people and project managers and owners are truly behind that and will do whatever they can to deliver it. And the other thing, just network, I think is important to build network and network is crucial. And a nice way to compliment work and how many people can help if you just talk to them. We’re at an early stage in terms of building a network that when we’ll have more and more people.
First of the most important question we should ask here is does it really depends from the start-ups and it depends from the things from when to go to because we know the Polish history and I think that the biggest issue for start-ups are that we do not have enough bussiness skills. When I think about companies trying to reach global market I think of companies which also think about high quality business developers – the people who can help us to understand how we can grow.
We’ll get to that later, I would just frankly turn the tables and said – not necessarily go global and I would take a question from the audience! Patrycja, where is your start-up located?
So the start-up is here in Cracow, my headquarters is in New York.
It’s hard to say, I think that it is similar like others just trying to be the same, same time in Europe.
All right, the representatives of the other start-ups – there is Base, Estimote and others are conversing. There is something which leads to these start-ups being called between the continents. And its not optimal for the business kind of brochure but there must be reasons… but what Andrzej said leaves us with round of questions and answers. Most of us here represents large companies, is there anything between the power of like thirty thousand …. in those companies, in this country and the start-ups, can we actually do something one community to the other?
I’ll take that. Probably in opposition to previous answer, a decent work from McKinsey and we spent a lot of time talking to major corporations about start-ups and there is a really big cultural issue and that is – boards of major corporations are continually looking for the next situation, something and you know talk and stuff like that. And they call and make it scale around creativity. They actually want to put numbers against that creativity it is quite hard for them, some do very well. They are mostly tech businesses, the others find it a bit more challenging.
Perhaps I could add something about Wojtek’s semi-rhetorical question. About why there are so many successful start-ups that have headquarters in the US and development here in Poland. I say there’s three straightforward reasons, one is that for most businesses its tremendously valuable to be close to your customer, because it helps you understand better the customers, it helps you iterate faster your product to match their needs and in many cases the largest market that those start-ups are addressing is in the US and that’s why they need to be there. The second point is, a straightforward talent labor cost arbitrage point, which is that if you can get a smarter person for less money in Kraków than you can in Soho if you operate in San Francisco, then you’ll do it. And the third point is, that if you are a Polish entrepreneur who’s built a company here and you go and see a lawyer and an investment banker and ask them how do I maximize my chance of a billion-dollar exit, one of the things they will advise you to do is the flip, in which case you turn the company into a Delaware corporation which makes it easier to raise funding and easier to IP it later.
I want to add to what I was talking about before. We didn’t have any experience in Poland, and we were from large companies even in start-ups at all, because we didn’t have full labour but its worth for job to become a start-up
I would add this really important question of what does it mean to be a Polish company I think that you asking to incorporate is just one issue. The key question is whether leadership is and where we were hoping Vale from Brazil a hundred billion dollar – it was a hundred billion dollar revenue company mining conglomerate acquire mining machinery from Serbia, but people working on the team in Cracow were not Polish. I am the co-founder of the business … American and British guy, you know, we were legally in Poland but there was nothing Polish about the project. Not the people, not the client, not the thing we were dealing with. So what is a Polish company is an important question, in terms of what these international people and because Shell Services send or whatever Global Business Services units here can bring. I think you need to look at this both as individuals, you know, is this a future career path for you as angel investors because if you work for Cisco you can easily save fifty or a hundred thousands zloty and investment start-up. I’m not saying you should but you can or you bring that network and experience to your start-up. So are you an individual or a company and I would say that just as you get really badly run small companies and really brilliant culture small companies – the same is true for big companies, there are great big companies and there are terrible, small companies. I think you just have to be open to diversity and what these big companies bring is very nasty aggressive, badly run international companies possibly even members, dare I say it, of Aspire. There might be really nasty companies to work for and great companies the Saints Drew start-ups. So, I can bring that wealth of experience which we otherwise wouldn’t haven’t in turn.
And that was for the network, right? Because if you’re multinational company and you have friends all over the world which is crucial at some point for a startup or any business.
I really like to stress on that a senior tech division in the tech companies which are brought with the technology to Krakow and that was missing from most of the start-ups. that decided to stay behind. Just another thing we’ve got just, unfortunately, highly competitive tech market, job market in the Valley, despite this there were a couple of guys who decided to stay behind and actually keep on things. Anyone would like to answer to that? Joanna?
Sure, so for me. For, you know, programmers or whatever you call it – engineers. It’s never local market, so we are all in the global market, it’s super easy to have your job done somewhere else. The question is whether you want to start your life again where for the money even here you can have pretty decent quality life versus a risky one so, the more reach you have the more risky it is. But We have a great pool of fresh people from universities in here, and if that junior engineers started company it’s all perfect for the first year to do what I think is important to say – from more senior engineers to more junior engineers and that’s how you grow. That’s what I really hope to happen in Kraków. With more and more people staying and really growing andd people having here and they come every year and they grow exponentialy because they have no reason to go somewhere else.
Can I just jump in and add something about what I said? I got out my phone, not because I was checking my friends do on Facebook, but because it just reminded me your point was very insightful about the choice that talented engineers can make such as ex-Googlers about where they want to live and can I just ask if you know the about website Nomad List, can you raise your hand? So the answer’s not very many but for the rest of you in the room it’s nomadlist.com and it’s a incredibly simple website that helps you as a globally mobile talented person to choose where you want to live and the answer is that there are sliders that show cost of living and flight in hours from Kraków, temperature – cold, mild or warm, and buttons for good internet, clean air and safe. And so if you think about it, actually you truly have the choice and anywhere in the world and pick your criteria.
Is there a really good thing that asked some question and not rhetorical this time so that I really like your answer. We go beyond necessary culture we had and go anywhere. But actually we do not have the environment of Silicon Valley, we don’t have to copy that and we do have thirty thousand people bringing in the best practices from their parent companies. So I think there’s a chance that we can build something grand new here.
Yeah, let’s just give a couple of examples here. Luxemburg is positioning itself around cyber security, because obviously it’s the financial centre and they are starting to go the more people that get’s you cyber-security experts to come into that can engender start-up community there. And Kiev has rapidly become an AI development centre mostly because the mathematical education is very, very good in Kiev and the engineers get paid vey well and therefore they can live very nicely in Kiev. But you do need that network, in fact normally it’s good place to start to actually do it vertically around specific niches.
I’d like to challenge what we had about the quality of life being so important, because although it’s necessary to have a reasonable quality of life it’s not sufficient when I’m investing, I’m looking for somebody. Of course they’re want to be successful, they want to make money, but making money is a by product of doing something significant and I think, if there’s a big challenge it’s actually the schooling in the university that although Polish people are patriotic and ambitious and I think that’s great even patriotism is important, you’re doing it not just for yourself but for your community, for your country. There’s a lack of appreciation of entrepreneurs success, that’s hardwired into the schooling and unfortunately into the university system and so, I would say that one of the things we have to do is is to start earlier, there is some positive initiatives and if I can talk at length about what we can do to change that.
What are the symptoms in universities?
The symptoms at university – you’re going to give a workshop as a volunteer and you say “who here wants to start a business?” no one puts their hand up. “Who doesn’t want to start a business?” No one puts their hand up. And I say quite impressive in Polish. This is incredibly rude, this is totally unacceptable that a foreign business guy here is a volunteer you don’t even have the respect to answer my question and I think – why the fuck didn’t you answer my question? Don’t actually, because I’ve been nicer but I think here. And to give another example, I went to some Elementary School and I said in Polish to a group 300 6 to 8-year olds “does anyone here know what a business is?” and a 7-year old stuck his hand up and said you know, this was obviously in Polish, he said “it’s a place where you make something, maybe a product, maybe a service and you have to sell it for a way more money that it costs to make it. And most important is that the person who buys has to be so happy with it that they don’t think that’s expensive.” And the director of the school who didn’t believe I should be there, was stunned. That’s a better answer than most adults can give.
Did you hire him?
Unfortunately, in Poland there are laws against hiring children.
There’s a thing about the education system. And as John said the further that we experience that thing just because of the further east, the stronger daisies and that’s what people care about. The foundations were very strong.
Ok, coming back to the – I’m getting my answers but it’s possible or at least influencing each other in different start-ups. All right, so let me ask the question to the audience, and again just to see in a show of hands. How many of you had 20% program in their job, in their place?
Is the 20% still running at google?
Is it a sunday afternoon.
Sunday afternoon was original idea. And it was a conference, originally I was part of that. Then we sat back.
Would it be fair to say that Google+ was actually this 20% time project?
All right. OK. Anybody else wants to answer that question? Ok I’ll do that then.
Google+ was a crazy promise, like a crazy start-up in the company it started one day when Google decided it needs a social network behind all their services and a couple guys simultaneously were charted to build the social product at Google and essentially the office take any people they wanted. And they’ve got their own team for that. And it started in a few months after some time they launched together and they sort of stopped on the other projects. So there were no more than three different branches. Finally, it started working under a single roof in Mountain View and that was actually where they all moved when he wanted to strengthen their needs do the essential product. Partitioning of G+ and photos was cleared after a lot around that time, that the original idea was.
Could I just offer an answer to your question in the formal question? Which is to ask people in the room, how many people here know somebody personally who has made more than a million zloty from stock options in a company that they’ve worked in? If you do then please raise your hand. So I count, apart from us here and the start-ups in front, I count about three people in the room. My thought would be, that one of the things that drive people to do so start-ups is a conviction that it is a plausible thing that might happen successfully. And if they see examples of other people near them, that makes them much more likely to try it.
Thank you very much. The question from the audience!
That’s for the sake of the podcast I’m repeating the question by Paweł Molenda. The question is: how much the local culture like in the Silicon Valley or New York start-up community plays into creating an environment like this?
Ok, I can answer that very clearly, possible wrongly. But I think not all that entrepreneurship is as old human beings, it goes back tens of thousands of years and there were British entrepreneurs in the nineteenth century, there were Scottish entrepreneurs in the nineteenth century, there were Korean entrepreneurs, Taiwanese entrepreneurs. Obviously if the government is anti-entrepreneurship and as Mao Zedong’s in China kills you, then that’s bad. But generally if you don’t, if you get the government out of the way and the environment is supportive, entrepreneurship can thrive everywhere. Of course there are issues of critical mass, but particularly now my children have a better access to education here in Cracow or anywhere with an Internet connection than I had at the Cambridge University in 1980’s. So it’s really a question of giving the access to the Internet.
“Entrepreneurship is as old as human beings, it goes back tens of thousands of years.”
I’m gonnna slightly disagree with that So the future work which I started was with an issue of employment flow to Luxemburg and we were talking in the lab – culture entrepreneurs to sack the course of the day the Americans started 2450 businesses employing more than one person, where the Europeans started 63 …. across Europe. And I actually think that you have country culture of entrepreneurs and there was a guy begging on the streets and what he’s done is he gone out found things like cigarette lighters and stuff like that on the street. And that, I think, typifies the whole thing, I think it is a country culture rather than necessarily a education.
Thank you very much. We have time for just one more question.
Ok, so the question from the representative of Akamai, is – is it an opportunity for the start-ups or even possibly a danger for them that the centers are getting interested in getting involved?
I think that this is a huge potential in the centers so you have to remember about how specific start-ups fare, how early they are, and the basic rule is not to compete and think always how we can help and this is what we did when we became global, when we started global and when we sat up, borrowed the office was design for start-ups and organizations within start-up community for them to meet and train and we train people from huge corporations too. So the rule number one was – no access protocol for recruiters and any adverts.
And this an old song from the eighties “It ain’t what you do, it’s the way you do it”. I run open coffee Cracow for the last two or three years, every Thursday morning we an hour-long session and I have to say in the hundred and thirty meetings once we had a representative of bank, I was amazed, and once a banking thought it was reasonable send an executive to attend a meeting for start-ups, we had two people from BPH, and I said to them that find out what are doing in the rest of the world and do a local version of that. But generally don’t do what the local government does or Bush and Marszałkowski – the regional government does, which is invite us to meetings at 12:30 in the Town Hall, where we listen for hour and half about what they think. Ok? What we have to do is to join a start-up community events that are going already, which means getting up early in the morning and going to it before work or going after work. Because that’s when the start-ups meet, they meet before and after work, you can’t expect to engage with a start-up community during working hours, ’cause we’re working too hard and we’re to busy. So it’s a free time activity, or you get overtime, come to our events and you’ll be very, very welcome, and you may make a fortune. But not as much as maybe together we may make some money.
But you need to be prepared that if your people will get inspired they will leave companies they work for.
I mean the situation, there is nothing wrong with people leaving your corporation and coming to start-up and vice-versa, it has to be win-win. And Google is very good at this, its people leave they buy the companies back. It’s true and it’s worked. And no-one’s complaining.
Sorry, I need to add this one. Actually it’s economically viable, it’s better to let the guys with a crazy idea go out, then when they have a product buy it back, rather than risk a chance like one in twenty, that you’ll pay the facilities and you will pay everything and all the support staff, and just one in twenty will succeed. Google went global, and come back if they’re good at something. So you outsource the risk factor.
And you have to, let’s say all large companies should do it in a proper way, which means they’ll just repeat it but just contributing and after that you can get something more from it.
And also if you allow your people to start something on their own try to make them feel safe because most of the start-ups fail and if they feel that they are actually welcome in your other companies if they fail, dismiss a lot and this will also impact a whole community.
So just one more thing, I wanted to praise the local government – Urząd Miasta Kraków and Urząd Marszałkowski, they sent people to open coffee, there come various people. So they actually have learned, it’s just – I didn’t want to end on a bad note. It’s great that they show up, and I always give them a round of applause when they show up. And when the guys from the corporations come, you will get a round of applause as well.
It depends on the scale I think, because from community experience but I can’t find anything right now. And I think people who have same expressions and the same experience will come there more often .
Thank you very much for coming.
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