How to survive and thrive without Venture Capital Investment w/Nikola Jakic

Welcome to another episode of the Whole Human Podcast. Today we're gonna speak with an experienced founder and operator, a guy who dabbles in software and in agency building, because today I have Nikola Jakic with me. Welcome on the show.

Thanks, Peter. Nice to be here.

So when you and I first started chatting, we bonded over sort of the transition between having an agency to doing product development, and you've launched a couple of different things. To set the scene, could you tell people what it is that you actually do today and how you got there? Oof.

Yeah, that's, that can be a long answer. So yeah, I can start with. How I started. So basically, so I'm from Croatia, live in Zagreb, and 11 years ago, just fresh out of university, me and my co-founder Ivan, we started a, a product development and design company here called Ars Futura. And now 11 years later, we have a big team. We have been working with different kind of clients, building really challenging and cool products for them, but also we started working on our internal projects. So now we have 2 of them, one that launched last year, and it's an employee lifecycle tool called Along, and another one that's launching in, let's say, 2 weeks. So probably it'll be launched in private beta when this podcast episode goes out. It's called Compass, and it's AI-powered fintech tool for SMBs.

So, so basically at this point you're managing a development studio. with a bunch of employees doing great work for clients, and you're managing also launching not one, but 2 separate services.

Yeah.

Why would you do that? Why would you launch these things? What led you to start Along, for example? Where, where did that idea come from and, and how did you get started?

Yeah. Yeah. So 10 years ago, like ago when we started the company, we had a lot of ideas what we wanna do. And we also dabbled like thinking about building products, et cetera. But it wasn't easy here in Croatia to start with that. First of all, as a young, weak, and still developing country, you don't have much initial investments. And our like scene in like VC capital or angel capital was really young then. It's still young, I would say, but in better state now. So we didn't have too much. Options to start. We didn't have any like crazy ideas. And then we thought we were still green, so we thought like an idea is everything, right? So we understood that later, that no, it isn't. It's just a start. Product is the thing to do. So we, our thought was, okay, let's start a product development agency in design and collect, start working with different clients, grow our business from there. And then at some point we'll start doing our own products. That's the goal we actually are now succeeding in. But it took some time, right? It took some time and like 11 years, to be honest. And we did it in a way, so we define a structure in a way. So our studio is like a hub where we still wanna do and work with our clients and work on different kind of projects. end products in different kind of industries. I think it helps with our expertise and also it broadens our understanding of product building. We learn also, we provide value to our clients, but we also learn from them. That's, that was the idea. So we wanted to do that.

And out of that came Along because you saw a need in the market for a full end-to-end employee lifecycle tool, or, or how did that come about? Yeah.

Yeah. So that come about when we talked about building our internal projects, like it was like, okay, so what do we wanna build? Like, and we realized quite soon that we wanna build stuff that we need as a business. And when we were like looking at like employee lifecycle tools, we never found one that we wanna use, or you would need multiple ones. So we decided, okay, let's try to build something on our own. And That's how we released it. Of course, it's still in its infancy as a tool and doesn't have all the modules that we want to have there, but it's growing. It's attracting interest. It's going good.

Good. Good to hear. So an interesting point here for those listening along, right? When you have a company, oftentimes, obviously, if you're a developer, software developers, that's where new companies come out of, right? Because you see a need either with your customers or in your case, within your own firm, and then you build what you need, and then it turns out that maybe that thing actually is going to be bigger than the original company. We've seen several examples of company builders ending up in that situation. I want to ask you about, you said it was early days in Croatia in terms of getting professional investment, right? So venture capital or angel funding. So have you been bootstrapped all this while for the last 11 years?

Yeah. Yeah. Agency-wise, you need to be bootstrapped so you don't have, no one will invest as a VC or angel into agency. So Ars Futura has been always bootstrapped and to be honest, it's easier because you, you grow organic, more organically. Products can of course grow organically, but investments help to grow faster. So Ars Futura has been bootstrapped and our other products, both Long and Compass, have been also bootstrapped, but with our investments from Ars Futura. So that's the idea, like that we as a, uh, invest into it as owners instead of paying ourselves profits, we invest into our own products. So, um, that was, that's the goal.

And how did you, did, how did you manage with the employees? 'Cause I imagine some of the Ars Futura employees either are gonna be asked to work on, let's say, Along as an example, or as Compass as an example. And then do you section them off or do they do a little bit of both, or how do you?

Yeah, we sectioned them up.

Practically speaking. Oh, you sectioned them up. Okay. So they work just on that.

Yes, that was, yeah, we, we know that it wouldn't help if they are like split on different things.

Mm-hmm.

And in general, like we, when we work on products as a company on, on our clients' products, people who are working on them are working just on them. So they are not like split between them because we had that approach from the beginning where we like Want to work long-term relationships with our clients. We wanna work for the product. We are loyal to it. We wanna provide feedback. It was almost like we are part of that product. And, and I think that helped in, uh, with us setting up the company. We never, never wanted to be a shop where you go and just build something. We wanted to help you build the best product you can have. So from there it was easy to also split up. And have a dedicated team just for Along and dedicated team just for Commerce.

And I think that's a very important second learning for the people listening along, that separating things out and treating it as a company and not as a project, but saying this is something that you guys as a group are going to do and you're gonna get the, the funding, the resources that you need to do it from the other side of, of the office, of, if you will. But that helps, right? Because otherwise. The requests from a client or the demands from an existing project over in the, let's call it the main business, can impede on your ability to develop a new company and a new service.

Yeah.

But it wasn't always easy, right? When you were starting out, I seem to remember that you said you almost went into bankruptcy.

Yeah. Yeah. I think everyone has that kind of story, no matter what kind of company they have. So yeah, I think it was like in our second year of company. So we have had some like clients and trying, we were searching still for new ones, but we had 10 people on the payroll, including us. And while we were looking for new clients, we were slowly finishing up some projects. And like me and Ivan, we sat down at one point and realized like, hey, we have one, maybe one more month. To pay our salaries and pay all the expenses, et cetera. And I think we decided, we decided, okay, so let's postpone paying ourselves and put money back in the company and to have some extra runway. So we, we were able to pull out 2 months of runway. And in the meantime, we were able to lock our like first big client with who we are now working for more than 8 years. Activision Blizzard, and they have been acquired by Microsoft recently. So I think sometimes you need some luck, of course, but you need to be prepared to be more resilient and adapt to situation.

So, so that's now almost 9 years ago. Yeah. How has that, can you point to things that have affected your mindset in, in that happening? Are you doing things differently now? Are you more cautious around cash flow management, for example?

Yeah.

Or hiring, that kind of thing. How, how has it shaped your mind going Through that experience?

Yeah, that definitely impacted us for sure, because of course we are still young and it's early stage, et cetera. But like we started to talk more about starting to think more about our products, even though we thought about that initially when we started the company. But when you start the company, you're more focused on the, like to be profitable, to slowly grow, et cetera, et cetera. So then we started to think, okay, we need to diversify more. So we, that means diversifying with our clients, diversifying and building our own products. That's one thing. Other thing is being really careful with hiring. So starting from that point on, we always tried to hire when people, when we needed them instead of overhiring just for purpose to cover something. And I think even we're able to do that in the last few years when the, when everything was crazy and everyone is, was looking. Uh, overhire because there was a lot of work out there. So we were still like calm and collected in that, uh, case. That's one thing. And the third one is definitely cash flow. We realized, okay, we wanna, and this is connected to hiring, of course, we wanna have some cash flow on the side in case of something happening. So we have more time to react and adapt to the situation that's coming and save the business.

Yeah. So, and then million dollar question is how do we, how do we teach people that who haven't almost gone bankrupt, right? How do we get people to, as they're starting out with their companies, be more mindful of diversification of client base when they're busy serving that big client that they got, right? How do we get them to actually seek other clients? How do we get them to think about building a cash buffer? buffer, so to speak, so they have room for 2, 3, 4, 6, 12 months, not a lot of activity. What are some mental tricks? What are some, what's some advice that we can give them?

Hmm. Yeah. So I think you still need to learn it by yourself. I think listening to podcasts like this, reading some books from more experienced entrepreneurs than myself, trying to absorb as much knowledge as you can from other people, usually through ex— through examples. To be honest, that always worked for me. But always, I always got an aha moment when I read or listened to an example that's closer to mine and see, okay, this sounds interesting and this sounds similar to my situation. And even then it doesn't need to work, but still listening to other people to absorb stuff and then trying stuff by yourself, you'll still fail. That's for sure. But you just need to have that initial mental mindset that you don't give up. So I think that's, that resilience will grow with you. It's like a boxing match, right? So you are fight, but you are fight, not fighting against the system. You are fighting against yourself. Like you're fighting against your inexperience, you're fighting against your complacency, you're fighting against your ignorance and Whenever like that hit takes you down, you just, you have those 10 seconds to think about what to do and how to do it, how, what you learn from that hit. And when you go up, you just, when, when it tries to punch you again, you block it and go until the next one. And you do that until you really give up or you retire and win on your terms.

I, I read something that some ultramarathon sports person wrote, and I forget who it was, but he wrote something along the lines of, as long as I'm breathing, I'm not dead.

Yep.

Which factually is true. But I think sometimes when we're struggling with our companies and what's the worst that can happen, even in your case, the worst that could happen is you would've had to shut down the company and gone. To become a developer for somewhere else, for somebody else perhaps, right? It's not, and yes, sometimes of course people lose some money, but in most cases that money is recoupable, right? If you haven't raised external money, if you've just spent your own money or a little bit of your savings, you can regain that over the rest of your career. So actually the main issue with failing or going bankrupt is your ego. Right? It's, I can't show my face because I was the one who didn't succeed with my business. But as you pointed out, the vast majority of entrepreneurs have one experience or two in the bag of almost going bankrupt or actually going bankrupt. And those who can manage to, to put their ego aside and keep going are often the ones that actually end up building tremendous businesses. Yeah.

Yeah, I agree.

So I can imagine also now you, you've become a pretty big fish in the Zagreb, Croatia community within development. You have Activision Blizzard as a customer. You've been doing it for 11 years. Are there a lot of people coming to you with ideas that they want you to build on, like a, let's do a partnership and build this new service together, and you guys will invest your resources and your time. I, brilliant founder, have an idea. Does that happen to you?

From time to time, but doesn't happen too often. And that's more of the mentality here. I think still, like, we still need to grow as a country in that way. I, and entrepreneurship is really not that big here. And people like, maybe they have an idea, but they quickly drop out of it. And so I wish people came to us more often and asked us. We will probably say no because it's not just, you need to do more than just an idea. But it's not enough. Not people not asking too much.

I'm, I'm asking because I'm thinking if you now have Along and you have Compass, what other ideas are on their hopper? Do you imagine that you continue to develop new companies alongside building Ars Futura?

Yeah, so I would say we would probably try to solve our next problem with our next product. And if someone came to us that we find interesting, I would probably go there and say, we would invest in you and provide you some of our knowledge and mentorship. Instead of like us building that for you. So I will probably do it that way cuz it's the problem that you are trying to solve. I probably don't understand it, but I can, if I believe in you, then I could invest in you for you to build it.

So are we revealing, disclosing here that you're gonna become, uh, an angel investor or maybe one of the future VCs of, uh, of Zagreb?

I don't know, maybe not in near future. It's probably Down the road, but okay.

Yeah. No, but it's, I think that happens a lot, right? The people who've become somewhat successful, of course, start supporting their communities and helping out, as you said, through mentorship or maybe as a little bit of an angel investment over time. And that's how things get built. But as you are thinking about what's next, if you're looking into your crystal ball, where do you think the company will be in 10 years from now? So double its lifespan. Where is Ars Futura? What are you guys doing? What kind of stuff are you building?

Yeah, so I think Ars Futura will be a big agency here for product development and will probably be a staple of agencies, one of, of course, and that probably won't change. What will change probably is hopefully we'll have more than to products of our own that we will build and that will be profitable and successful. And we will probably just search for one more to build something else.

So you, so one day in many years when you no longer work for money, you're basically going to be retired as the CEO of Ausfertour. That was your life's work. That was your career.

Yeah, I would say maybe a, a, a Chairman or, or president, or I don't know, something honorary. Uh, someone else will probably be a CEO. Uh, and I hope, hopefully, Arcetura and a few other products will be behind me as successful businesses that can still continue to grow.

It's a really, it's a really good story that you guys have. It's, you see a lot of development companies come up and disappear. It's actually rare that you see somebody stick around for 10+ years in my experience, because they either get bought by somebody else or the, the founding team go on to one of the companies that they want to build and then they build a company and that's great too, but you don't really have longevity in the software development agency space as much. And maybe that's a geographical thing for you guys, but it's still good to see. If you were to part us or leave us with one piece of advice for somebody setting out to build their company, what would that be?

Yeah, I would say embrace your failures and mistakes. Definitely try to understand that you don't know everything and your initial idea will change. That will happen for sure. Like whatever you thought initially that you wanna build, it'll change. And that's good. That's really good. Try to make a smaller product that targets a specific niche. And build from there into something big. That doesn't mean that you cannot be a unicorn if you even want to be a unicorn. It just means that you need— everyone has to be the unicorn, of course, but that just means that you need to know your market. You, you need to become product market fit, and from there you, you will grow.

I, I actually think you gave us more than one, right? Embrace your failures. Start small. Grow from there, be focused on one idea, do that well. And the thing is, when I ask people this question, it's variation of the same theme from when you speak to somebody who's as experienced as you are, it's that, right? It is all those things and some others maybe. But when I speak to somebody just starting out with their company, they say that, they regurgitate that, right? They say, yeah, I'm going to be focused. I'm just going to do this one thing. I'm going to start small. And I know I'm gonna fail and it's gonna be okay. And then when you speak to them 6 months later or 18 months later and things haven't gone their way, they're still very upset about the fact that they haven't succeeded. And when I ask them, what are you doing? And then they show me that they've pivoted 2 or 3 times and done 3 or 4 things. So I think the thing I try to instill in, in, in people starting out is resilience. Right? It's set yourself up mentally and physically for this to actually be the marathon that we all talk about that it is. And don't be disappointed when things don't turn out as you expect them to, because they never do. So, so that's what I try to tell the folks coming up. Nikola, this was, this was super enlightening. I very much appreciate you coming on the show. Thanks for being with me today.

Thanks for having me.

And for those of you listening or watching this somewhere, this was another episode of the Whole Human Podcast. I'm your host, Peter Sorgenfrei. I do these talks with inspiring and amazing founders and CEOs from around the world. If there's somebody that you want me to talk to, I'd be happy if you would let me know. And similarly, if there's a topic or something in particular that you're interested in, let us know as well, and we'll try and cover that in an upcoming episode. Thank you so much. Thanks for listening, and I'll see you next time.