He has changed several countries in his corporate career as an accounting advisor in PricewaterhouseCoopers and finally landed in Brazil. Entrepreneurial life is familiar to him as well – he has managed to create two working businesses alongside and gained a lots of insights into the Brazilian startup ecosystem. Today he shares his knowledge in the interview for SlovakSTARTUP. Juraj Vajda.
Into the Brazil
You have been living in Brazil for several years now. Could you describe the steps that led you from Slovakia to South America?
I joined PricewaterhouseCoopers (PwC) in Slovakia in December 2000. After about 4 years I was eager to see some major change in my life. I explained to the partner responsible for PwC in Slovakia at the time that I was either changing the firm or the country. He made sure I was changing the country, not the firm.
So they probably gave you an offer.
He offered me a position in PwC Mexico and PwC Spain. I chose Barcelona at the time, but I did not run away from Mexico, as today I am married to a Mexican. Moving to Barcelona was planned as a 2 years secondment, but after that time Spanish partners asked me to stay and offered me to subsidy an ESADE MBA for me, which I accepted.
And then you came to Brazil?
Brazil was a slightly different story. In 2007 I was kitesurfing in Salvador de Bahia, northeast of Brazil. I looked up the address of PwC there and knocked on the door. They explained me that Salvador was too small for me, but they helped me to arrange meetings with responsible partners in São Paulo and Rio de Janeiro. I charmed them (laughs) and they hired me for the Rio de Janeiro office, mostly to help big international clients and public companies to implement international financial reporting standards that were new at the time. One of the good things about PwC is that it really gives young people an option to move around the globe working in different cultures.
Projects & Time Management
In addition to your career in accounting in an international corporation, you have also managed to create two working businesses – happymoto and Lisetonga hostel. How do you manage your time? I would assume that all the projects are relatively time-consuming.
One of the partners working with me in Spain explained me that we cannot say ‘yes’ to all requests. When you are younger it is difficult to understand and follow, but he actually is right. Everyone is responsible for his/her time management. If you speak to your clients, peers and bosses, they are normally very understanding. Do not get me wrong. I do work long hours sometimes and it is quite late now, but what is possible, is to organize your days the way it fits your needs. Especially once you are on a more senior position.
So what is the “secret” of your time management?
The thing is that taking care of my micro-businesses is not work to me. It is mostly pure pleasure, something I really enjoy. When I am not involved in that, I go with my girlfriend on a motorbike trip to inland Brazil or sponsor a quite big artistic project called Mural Babilonia. It essentially changes one part of the neighbourhood close to where I live into a very visually attractive place.
How do you do that?
We make mosaics, construct benches, paint and design. Artists from Czech Republic came to Rio to help me with it and they have their next visit planned for November 2016. I really do not think a lot in terms like ‘this is work’ and ‘this is leisure’ as I focus on doing things that bring genuine pleasure to my life, be it micro-businesses or other activities.
One would wonder what a reaction of PwC management on me investing time and energy into something as demanding would be, but I haven´t had any negative feedback from partners so far. They even helped me with some legal advice.
In the overview of your LinkedIn profile we read „entrepreneur and investor with experience with business planning and development, from blank worksheet to functional companies.“ What do you see as the key ingredients when trying to get a business „from blank worksheet to a functional company“?
Start moving now – not tomorrow and not the day after. Spend too much time making the perfect project and you will never actually launch. If you want that experience on your CV, plan fast but also start moving fast.
Almost simultaneously try to run cheap tests to see if there really is a product and fix bugs that clients will see and you will not. Do not wait for a perfect prototype, as it does not exist. Unless you work in parachute business, I would suggest you to launch a ‘good enough’ prototype and improve it on the go.
People are often scared to share their big idea because “what if someone will copy it?”. Do not be afraid of that. Copying your idea means hard work and most people are not ready to work hard, they will just dream of how it could be.
Anything else that comes to your mind?
Get surrounded with the best people you can find. Ideally someone who is not your clone but has complementary qualities.
Do not be stiff about your plans, as they are more of a guidance than rules written in stone. Before you get on some more formal investors, you are quite free. Be ready for change.
Our Happy Moto business is a rather big lateral jump that today serves many of the accommodation providers we compete with. When we started there were 140 hostels, and now there are close to 600, not to mention Airbnb which offers approximately 20 thousand beds in Rio de Janeiro. So we needed something that would allow us to stop competing with other accommodations and start to cooperate with them. Now many of them are part of our sales network for scooter rentals and tours.
Do not think of work/life balance. Your startup is your life, your dream coming true, everything you want. It is not ‘only work’, right? So what is there to balance?
Startups in Brazil
What is the story of your startup beginnings?
We saw our first opportunity after about 2 years of living in Rio and renting an apartment in Copacabana. We had to think what to do after the rental agreement would finish. By then it was clear that Brazil will host FIFA World Cup in 2014 and Olympic Games in 2016 and that started to push up prices of properties for both renting and purchasing. We compared few numbers and observed that it seemed cheaper at the time to buy a property. We also observed that it was cheaper to buy a bigger old building than an apartment. We only needed to find someone to pay for it.
So you founded Lisetonga Hostel …
Right. For the first round of financing, we went to FFFs – Family, Friends and Fools. It is often the first source of finance for many startups. We did not have to reach out to Fools and we were able to payback to Family, so round success. My brother and my parents pledged their assets to a bank and we obtained a loan to buy the property. Today the loan is essentially paid out, but at the time it was quite stressful. Lisetonga has 40 beds and ranks 11 out of 588 hostels (today) in Rio de Janeiro, according to TripAdvisor.
What came afterwards?
Becoming an entrepreneur, on any scale, is addictive. It is one very addictive, great and yet legal drug. Once you start, it’s unlikely you would want to stop. I surely don’t. When we got Lisetonga up and running, we looked around for next idea. Often when something bothers you, you should look around if it bothers more people. If the group of people is big enough, you may well have a business opportunity.
Rio de Janeiro is not ready for big events. Public transport has huge space to improve; bicycles can only help so much in a city with more than 80km radius and hilly terrain. We observed that in many similar places renting scooters was very common, yet in Rio there was no such service. We saw it as opportunity and started Happy Moto that offers quite traditional scooter rental to locals and tourists.
Is there any unsuccessful project you worked on?
We actually tried one more thing, which did not go so well. Rio Limobike was planned to offer fast and comfortable transport from A to B on fancy BMW motorbikes with an experienced rider. It is not written anywhere that a limo must have four wheels; we thought and believed it was a relevant offer for always-rushed managers. We failed to understand that motorbike in Rio de Janeiro, no matter how flashy, is not associated with business yet and after 2 years of trying we stopped.
Just recently, I observed that Uber launched motorbike service in Asia and I am watching closely.
How does the startup ecosystem in Brazil look like?
I believe Brazilians are right when they say that Brazil is the country of the future. There are numerous opportunities. Many things are missing here, and many things work with lower standards than in EU or US which means that matters common in other markets can be breakthrough news in Brazil. Being a copycat is also an honorable business, if you do it ethically.
From 180 countries, Brazil ranks around 120 in simplicity of opening a business. Small companies can opt for a simpler tax regime called ‘simples nacional’, i.e. “simple national”, and it really is simple. The only problem is that it is only applicable to companies with less than 1 million EUR in sales, which is quite a small number. This means that we have a lot of Peter Pan companies around willingly deciding not to grow because then the compliance becomes very tricky.
The legislation is not ready for digital age here and for example an internet store selling from Rio de Janeiro to São Paulo must file several additional tax returns only because of making an interstate sale. This change is recent but it made many Peter Pans reconsider their internet businesses.
Having said all that, there is venture capital present in Rio de Janeiro and São Paulo with a solid list of incubators and accelerators, often trying to explore USA – Brazil bridge, building on success of Brazilians in Silicon Valley. One of Facebook co-founders is a Brazilian, you may have heard about boo-box advertising engine, or Endless computer. There are some very relevant copycats – Easytaxy, Peixe Urbano, different education platforms. Part of the new generation of Brazilians is technologically very savvy and are willing to make a real change on the country level and even globally.
What do you mean by “Peter Pan” companies?
Peter Pan is the boy that refuses to grow old and turn adult. I use this as a metaphor for small companies that refuse to go bigger, in our case over 1 million EUR in sales, because that would bring big additional regulatory burden, or stress on management’s resources, or need for more investors that would dilute ownership or controls. By no means is this pejorative. Some entrepreneurs may have valid reasons for staying small and it fits their needs.
What are some specifics of Brazilian market?
There are sharp cultural differences. I learned, in the hard way, that some words you really should avoid using. What `normal` means to your mother is probably very different to what it means to mine.
Now extrapolate that to two cultures so different as Slovakia and Brazil. Some of these `normal` things can be pretty annoying and some of them are just funny. As an example, in Spain it is uncommon to put information about opening hours in the front of the shop. Everybody knows, right? In Rio for instance you cannot say you do not go to a party you are invited to. That is a bad education. The expected thing is to confirm your presence and then not to show up.
First year I found most things too slow. Then a PwC partner approached me and gave me a beautiful and smart advice: “Juraj, we like the way you work, you have future here, but you must tropicalize yourself, it will help greatly in your relationships and to yourself”. She was right. Certain “tropicalization” is unavoidable when expatriates want to be successful here in Brazil, both on personal and professional level.
Even the simplest things can become unimaginably complex, because of some clerk or ridiculous regulation. Just accept that life here stops during the Carnival week. Everything still gets done, just at a different pace.
Fundraising and customers in Brazil
Any hints you could give to a Slovak startup that would like to approach Brazilian customers?
My first advice is not to go alone. It certainly will be difficult to find a reliable partner, but it is necessary to have someone who understands the complexities of Brazilian regulation and also, as mentioned before, the cultural differences.
You may think that your product or service is a `must`, a `clear necessity` and `everyone will love it`, but somehow you miss some subtle cultural difference that will make it undesired for local customers. You need someone that will make you aware of that.
Secondly, you will also need to spend some time thinking about your timeline. Most things may take longer than you initially planned for and push launch few months or even put in danger a delivery that is important to be there for, say, Christmas.
Lastly, Brazilians are quite polarized society in many ways, so it is hard to find `one for all` solution, but this really can be more opportunity than a threat.
If a startup would be looking for an investment, what are the odds of getting one in Brazil?
It is probably not a wise moment to look for Brazilian money and take it abroad. Now the trend has historically been the opposite. In 2015 we have seen Brazilian Real devaluate against US Dollar approx. 40% and that means that many Brazilian assets became cheaper for international money that look for longer term investments looking beyond our current crisis.
Brazil has a developed capital market but the real interest rates are among highest in the world what makes many companies look for money abroad and then hedge them against FX rates fluctuations.
Having so high real interest rates sounds nice, but I believe it is actually very bad, because that motivates people to do nothing with their money, not to be active, looking for opportunities. Doing nothing is the best option for many people, which really does not help us to get Brazil moving.
Your field of expertise is in early stage investments. What do you see as crucial for a startup trying to get investments in this stage?
First round of financing will most certainly be one’s pocket and second the FFFs. Some well succeeded Brazilian startups, today big respected companies, such as Beleza Natural, Easy Taxi, OLX or Localiza started like that. There is no shame in making FFFs listen to your idea.
Right after that you would look out for what we call smart money, i.e. investors that will not only come with money but also with mentor advice, strong network of contact and ask you all sorts of difficult questions.
Remember that most startups will actually never become unicorns and there is no shame in it. It still can be a very successful service or product with a relevant niche in the market that you can explore in a profitable way.
Any last piece of advice?
When investigating, people always look a lot at success stories and want to copy them. I find it very interesting to look at unsuccessful stories and learn from them about what should be avoided. Ask your mentor about his biggest mistakes, not about his biggest successes and make sure you do not repeat the same mistakes.
Look around a lot, not only at the same size companies. For example, with Happy Moto we inspired ourselves with big consumer product groups, who often create different brands to compete between themselves. There are more than 20 different brands offering scooters rental service now in Rio de Janeiro. At the end of the line they are all linked to us. When somebody searches for scooter rental on the internet, our different brands often sum up to 5-7 of 10 hits on first page. That complicates lives of new entrants and our existing competitors too.
Photos: Juraj Vajda