May 13

Degordian: Steps to the first million

Daniel Ackermann (right) and Tomislav Grubišić, Degordian: “
We knew we have a good story, but we didn’t have anyone to present it to. When we came to a meeting, they were looking at us and seeing two brats, no references, sitting there and explaining that Facebook is really great.”

Five years ago Daniel, at 22, founded iSTUDIO with his classmate Tomislav – it was the first social media agency in Croatia. Before, they had already been making websites and programming in high school and, more seriously, during their university days. They were amongst the first in Croatia to realize that Facebook and social media are revolutionizing digital advertising and communication, and built their success story on this fact. They transformed iSTUDIO into a full service digital agency, named it Degordian and then signed the first investment of venture capital in the amount of one million euros last summer. The investment was provided by RSG Capital and was intended for further growth, product development and conquering new markets in the region and Western Europe. Today, Degordian has offices in Croatia, Serbia and Bosnia and Herzegovina as well as the plans for a few new offices in Western Europe. They have also grown from 2 employees to a group with 70 colleagues who work for respected clients from all across the world. Before his appearance at the PODIM conference 2014, we talked to Daniel about the first steps, the journey through entrepreneurial ups and downs and the dilemmas they faced when searching for investors. 
From where originated the idea to focus on social media, or rather Facebook? Did you have a personal interest in Facebook or did you mostly recognize its business potential? 
Tomislav and I already spent our high school and university years making websites and programming for clients. Then we asked ourselves: why should we only do it for others? One of our first projects was thus a portal where students exchanged notes, information about exams and other content. The idea was good, but nobody knew about it. We started handing out fliers at the faculty, putting up posters, introducing ourselves in student newspapers... we spent a lot of time and money, but without any real results. Then we discovered Facebook and groups that brought together our target users. We made one post there and managed to attract so many users in a matter of minutes that our server broke down. It was revolutionary! We realized that social media is brilliant – that it has an incredible power, reach and market potential. At that time, we hadn’t found anyone working on this in Croatia or even globally, neither did anyone talk about it. We started to edit and manage Facebook pages, exploit Facebook groups, develop Facebook applications and similar. We set other projects aside.

Was your quick growth a planned process or was everything happening more spontaneously, organically? 
After transforming into the first social media agency in Croatia, we did start to grow really fast and this growth was organic. Before, we used to make websites for small companies. Afterwards, we obtained 20 big clients in a year. We started to open offices in Serbia and Bosnia and Herzegovina. We worked for the largest and most reputed clients of every industry. In the first four years, we approximately doubled our earnings each year, as well as increased the number of our employees every six months. We always wanted to do more, to be better; we were curious to see if we can push our limits even further. That’s why we transformed into a full time service digital agency and started to develop our own products, such as Mediatoolkit content discovery, Mediatoolkit Media Monitoring and Socialpuzzle.
How did you adapt to this fast, dynamic environment? Do you perhaps come from an entrepreneurial family and had this sort of experience before? 
We don’t come from an entrepreneurial family, so we hadn’t had this experience before. When we created the company, we did dream of great success, but we didn’t think for a moment that we would grow to the magnitude that we couldn’t even imagine at the beginning. Our imagination stretched to about 10 employees and a couple of good clients. Today, however, 70 people are employed in the company Degordian and we work for esteemed clients from all over the world.
From where originated the idea to search for the capital for growth and market expansion with a risk capital fund?
The founders of ShoutEm start-up, who received an investment years ago, recommended RSG capital to us and we have really had a good experience with them. We didn’t doubt that they are the right choice for us, we were just trying to figure out if the investment is the right choice for us. We were already a fast growing and profitable company.
What were the hesitations, problems or obstacles you faced in the process of obtaining the investment?
The process of negotiations with RSG took 2 years. We kept hesitating if we should do it or not. But this was our problem, as we didn’t doubt RSG Capital at all. Our key problem was the fact that we are not financiers. We didn’t know the terminology, calculations or other demands that investors usually have. You get papers, projections, demands on the table and you don’t even know whether it’s realistic, whether it’s doable or not. The process that took place last spring was very hard on us, especially because summer was approaching and we knew that if we didn’t hurry up, this would drag until the end of the year, when it would already be too late. At the end, we put everything in order just in time and signed the contract mid-July last year. 
How is your collaboration with RSG Capital now and where do you see the fundamental value added of the investor? 
Our relationship is really great! We have regular weekly meetings with Jure Mikuž, CEO of RSG Capital. We talk about everything that’s going on in the company and he gives us advice and guides us. His knowledge and experience are priceless. The fact that it’s an investor from the region also turned out to be an advantage, even though we had been thinking about an American or UK investor at first. That probably would have been great as well, but fact remains that they don’t know our region, mentality and problems we face that well. 
Any advice for start-ups that are searching for an investment?
Nowadays I think it would have been better if we obtained the investment sooner. We would have received the capital faster, performed more aggressively and maybe now we would already be talking about the next expansion wave with a new investment. We delayed a bit because we weren’t sure it was the right course of action, the right solution for us. I think in our region, entrepreneurs lack aggression and ambition. Very often, we postpone the expansion and the search for an investment, we are not ready to take risks, etc. In the West, if you had a good thing, you would search for seed capital ASAP and start expanding fast rather than wait.
How did you and Tomislav overcome beginners’ problems, face failures and hard moments?
At the beginning, we didn’t know anyone and nobody knew us. In addition to that, we were also very young, 22 years old, looking like high schoolers. It was a really big problem for us. We knew we have a good story, but we didn’t have anyone to present it to. When we came to a meeting, they were looking at us and seeing two brats, no references, sitting there and explaining that Facebook is really great. Later on, things started to develop, we had first projects that were really brilliant and achieved great results. At conferences, they would talk about them and list them as good examples, but nobody mentioned our company when doing so. And so other, big agencies often got business on our account.
What problems have you faced, besides the underdeveloped market and ignorant clients?
Because we were inexperienced and regarded our business as a hobby at first, we didn’t have our client contracts arranged, for example. We had problems with non-payers, which brought along financial difficulties…We didn’t have the knowledge nor the experience to avoid such mistakes.
What motivated you to persist, even in these hard moments, and what pushed you forward?
You simply have to face hard moments, persevere and at the same time have enough determination and will. Entrepreneurship truly is a rollercoaster – everything is great one day, but can be a catastrophe the next. It will always be this way. You need energy as well as believe in your idea and yourself so strongly that you are able to overcome all difficulties.
What do you find the most exciting about entrepreneurship, what is your favourite thing to do now that you have an established team and divided roles? 
I find it most exciting to develop the company, new teams, enter foreign markets and employ new people, especially nowadays, when there are plenty of lay-offs and the climate in the economy is truly bad. I don’t like to deal with administration, the state and its requirements, as well as negotiations and client relations, especially when the latter don’t pay us (laugh). But you have to learn to live with this as well.
Do you follow the principles of lean entrepreneurship? 
Yes, we read the book The Lean Start-up. Among other things, our agency is also developing typical IT products such as Socialpuzzle, Social Numbers and Mediatoolkit and we follow lean principles through it. We are even trying to implement this methodology elsewhere – not only in product management, but also in all other aspects of our company.
How do you manage to coordinate personal and professional life on the entrepreneurship rollercoaster?
A difficult question. Both Tomislav and I love this business, which is why we still regard it as a hobby more than anything. I believe that a lot of other entrepreneurs share this opinion. Even before founding the company, we didn’t waste time by watching TV series, playing games… we preferred to do something. This was our game and it was normal for us. With more serious entrepreneurship, bigger responsibilities arrived. We had to do everything ourselves, we didn’t know our way around finances, we didn’t have a lawyer, we had to solve everything that happened promptly. There was no procrastination, we couldn’t leave at five in the afternoon and leave the matter unresolved. Our personal life suffered. We can be grateful that our friends, family and girlfriends understood us. Now we have a well-tuned team and it’s a bit easier, but we still aren’t home at five in the afternoon.
Is partnership with Tomislav one of the factors of success of Degordian?
That’s a good question. Degordian certainly wouldn’t be even close to what it is today if one of us didn’t join. We have known each other from high school, then we were together at university. In high school, we were even serious competitors – he was doing the website for his class and me for my own (laugh). When we started our entrepreneurship path, it was definitely easier that we were doing this together. When there were difficult moments we talked, we pulled each other forward. You motivate yourself more easily, you find the vision or path more easily. We were also able to divide our focuses which helped us be more effective, develop company faster as well to get more expertise in less time. But I am sure that even if Tomislav and I weren’t partners both of us would still have a successful business of some sort.
Stanislava Vabšek
On Sunday, Degordian published that they have received a prestigious award for the design of their new website - Awwwards Website Of The Day. Last month, CSS Design Awards also gave them the recognition for the Website Of The Day.