HomeHungary-StartupsMore smart money in the CEE region!

More smart money in the CEE region!

Most people that are familiar with the startup ecosystems in the eastern part of Europe agree that it’s developing fast, access to money is also not an issue any more, however there is still something hard to find – smart money. But how can these ecosystems achieve more smart money on their markets?

I feel very lucky to have had the chance for this interview with Ákos and Bálint, not only because their incredible journey makes them true role-models for the up and coming entrepreneurs in the CEE region (and beyond), but also as they showcase the way how it’s possible to make that next step possible in our ecosystems.

Starting a little development agency called Distinction as students back in 2010, acquired by Skyscanner just 4 years later, making their Budapest office the global mobile development competence center of Skyscanner sounds just incredible. Last year they decided to quit their jobs and together with their former investor, Zsolt, founded A3 Ventures to give their experience back to the community as angel investors.

So Ladies and Gents, let me introduce you the story of these guys.

What is your personal story? Where do you come from? Where does the idea come from?

Ákos: I met Bálint at the university where we both strived to find great challenges beyond visiting classes. Maybe it was the education that didn’t excite us enough, or the fact that we both have had great ambition and sense for competitive spirit; we ended up participating in competitions and worked together on numerous freelancer projects. These freelancer projects ended up quickly growing, and as Bálint was mainly frontend focused while I enjoyed backend development the most we’ve quickly seen how we can complement each other eventually leading to founding Distinction. Distinction was a hybrid company we’ve generated cash flow from agency type of work, and re-invested the proceeds from those in our own ideas/projects. This was at around 2010, at the time mobile apps were something very new and very exciting. Zsolt, who just came back to Hungary after finishing an Executive Master Program at the Stanford Business School joined us as an angel investor/business advisor. Fast forward 4 years, and Distinction grew to a 30+ person organisation and apps built by us were downloaded 35 million+ times. In 2014 Skyscanner, a long time partner of ours acquired Distinction, and our role became to develop and execute the native mobile strategy for one of Europe’s top unicorn a challenge where we’ve learnt a lot about various aspects of business, leadership and product development. We’ve felt that the access to this knowledge is something relatively unique in this region, and wanted to understand how we can best pass it over in the ecosystem hence A3 ventures was born.

How did you get the idea to start up at Distinction? What did inspire you? How did you manage to break through the, I assume, prejudgements being relatively very young?

Bálint: It was pretty natural at the point. As mentioned we’ve been freelancing before, and as projects grew we’ve started helping each other in these projects quite a lot. We’ve enjoyed working together, and naturally decided the best platform for shared commitments would be shared ownership of a company. At the time when Distinction was founded startups as we know them today didn’t really exist in Hungary, nor was there easily accessible venture capital. We didn’t even found a startup, we founded a company. Our goals were always to create word class products things we can be proud of , learn a lot, work hard and have a lot of fun during these. We didn’t found Distinction to build something particular but to work together with friends and learn as much as possible while earning money that would allow us to live and learn even more. The funny thing is though that we’ve never though of Distinction of an agency we’ve looked at the agency work as something that both brings in revenue which is required to fund our own projects as well as a strong platform to gain experience for building our own products. 

Ákos: Interestingly we encountered prejudgments in multiple occasions especially early in Distinctions lifecycle while working with local companies something that was noexistent with international organizations. The working culture and unconditional respect regardless of age (sex and race) was refreshing for us when we first started to interact with Skyscanner, Red Bull and other western companies. Apart from this, as Bálint mentioned with every project we didn’t just want to make money, but actually both learn and create products we can be proud of. This naturally led us in a position where we’ve only worked with international partners who had the same values, and avoided the typical Hungarian companies who judge based on age or appearance

How did you see Zsolt in the beginning? Why did you decide to trust him as an investor and partner?

Bálint: The startup ecosystem at the time we’ve met Zsolt was very immature, and lots of people who started investing or giving advice were clearly unqualified, and/or lacked the understanding of how small, high velocity organisations work. Zsolt stood out both as of his experience in managing teams, and the understanding of the startup ecosystem which he gained during his tenure at Stanford. He made a good impression, was honest, and we felt we could work together really well his primary asset was not his money, but rather his experience and network. We also had the shared values of continuously learning, and felt he could complement our team very well. 

You had a third co-founder, László, but you got separated earlier. May I ask what happened?

Ákos: László worked with us very hard for over 4 years in Distinction, and it is unquestionable that he had just as much impact in growing Distinction as any one of us. 4 years however is a lot of time when you are in your twenties, and the organisation itself also grew a lot as we’ve evolved as both individuals and as an organisation it’s natural that the previously shared vision deviates with each person. As of myself and László having a shared personal background as well didn’t make any conflict easier either it’s safe to say that we’ve had different views on how both Distinction and our roles inside Distinction should evolve which led to elevated tensions and ultimately separating our paths. We’ve bought back part of László’s shares, but he remained shareholder up until the Skyscanner acquisition, so we believe everybody got a fair deal at the end.

What were the main stumbling blocks for Distinction, especially during the first year, and are the main learnings? What was the inside drive that made you still go further? How did you experience your successes?

Bálint: Looking back we very inexperienced, and is some ways lucky that didn’t have venture capital hence accelerated growth at the time, as we could grow organically and learn slowly on the go. In the first 3 years we’ve almost went bankrupt 3 times, we had a non-existing approach to leadership, no real effective decision making system, and an unsustainable work culture. It’s safe to say that looking back at us there was no rational reason for us to succeed, except for one our persistence. No matter how hard it was, we’ve either cut pay checks, or worked 16+ hours, but we wanted and had to keep going and as our learnings accumulated we’ve became better and better at what we were doing. The success I’d say where the domaine hits the validators that we are learning, improving and are on the track of creating something better and better. That said, I still believe we are only at the very start of our professional journey and are looking to continue with this approach.

Ákos: I think we always enjoyed the journey more than the success itself. It took a while for me to realize how much value and impact we created and how many careers and people were effected by our decisions from the very beginning. What makes me smile is the 40+ (ex)colleagues sitting in the office in Budapest I personally hired, mentored and stretched throughout the years, seeing the early employees of Distinction stepping up and taking on leadership positions in an internet economy unicorn and knowing that the products that we designed and built are being used by millions of people every day.

How did your partnership develop through the years?

Bálint: It’s an interesting question, one I didn’t think too much about. I think with Ákos the main inflection point of our partnership has been the transition into the work setup at Skyscanner previously we’ve made all decisions together, and had a shared, deep understanding of each others work in other words we were mostly replaceable, which led to a very similar understanding of questions and answers. In Skyscanner as I’ve moved mostly in the product org, and Ákos mostly in the engineering org, we’ve started to have a lot less time spent together, and have been working on different problems. We’ve started respecting our boundaries much more, and developed a deeper trust in the other’s decisions even without fully understanding the context surrounding it. With Zsolt obviously after the Skyscanner acquisition the frequency of communication dropped, but the trust and mutual respect which has been developed previously didn’t – which made the setup of A3 ventures very easy.

Ákos, Bálint: What made you make the decision to leave Skyscanner behind, full of amazing career opportunities, and start this new lifestyle, together again?

There are multiple reasons that led us to this decision. When we said yes to the Skyscanner acquisition in 2014, one of the key driver for the decision was our personal motivation and career development, one which we believe did work out very well for us. In the first few years we’ve had exponential professional growth through the help of mentors and professionals inside of Skyscanner however as time passed by we’ve felt the velocity of this is (naturally) dropping. On the flip side of this, we are both engineers and we enjoy making great products. In Skyscanner our role responsibilities have evolved and we ended up leading an organization of 100+ people which means you work all of your time with people building the product, rather than working on the product itself something that we’ve been missing. Still the main reason for us was fatigue it’s been over 8 years ago since we’ve started Distinction we haven’t really stopped for a single moment ever since we felt we needed some time back to recharge and to get some boost and inspiration from personal life.

What is your main vision for your future as A3? Where are you going?

Bálint: The funny thing that this is constantly evolving, as we learn more about the ecosystem and what kind of support entrepreneurs need the most. Our goal is to contribute to (primarily) the Hungarian ecosystem at the means we can provide, and we are very flexible with the methods. 

Right now access to pre-seed cash is easy, however many startups lack the experience of scaling a team or business something we can help with, and right now seems to be most of value to them. We than can use our funds to solidify our shared commitment rather than the initiation of this.

In the next 5 years if we can have 10 success stories to which we’ve significantly contributed in some form I’d be really happy with our performance.

How do you see the CEE region for startups?

Bálint: There is lot of heat and noise present at the same time. Lot of artificial money is flowing in which is great and probably necessary but this could easily make the world look somewhat distorted. When people believe they are winning just because of they got founded doesn’t help important attributes like endurance, humbleness and passion to naturally develop. At the same time there are increasingly mature startups being built by founders with previous experience at either other startups or agile organisations. These startups have the basics right, and if they can keep their open minded approach while scaling I believe there is space for many strong companies being built.

Anything else you may give back to the readers?

Ákos: Due to history or other unknown reasons, people in this region are more frustrated compared to western part of Europe. Frustration can be a source of inspiration and with enough level of endurance, competence and passion it can be transformed into innovation or invention. Converting anger, frustration or a failure into a solution is probably the easiest and most successful way to become an entrepreneur.

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Peter Kovacs
Peter Kovacs
Peter Kovacs is the Co-Founder of Global Startup Awards, xLabs and IseeQ . He contributes to EU-Startups with founder interviews and stories, mostly from the CEE region.

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