Why venture building?
Arkadiusz Seńko: Venture building is a process of creating businesses from the ideation stage and MVP to scaling and exit, executed by an experienced organisation. To really excel you need skills that can be acquired mostly when you get your hands dirty. My way to gain the necessary knowledge was to walk this path myself many times. I started to create my own projects quite early on. After cutting my teeth on dozens of them and gaining relevant experience, I realised that this know-how might be what many other entrepreneurs might be looking for – and I decided to share it. I also have to admit that developing new concepts and launching new projects gives me great joy and satisfaction. I just like to build businesses.
So, tell us about the first business you built.
AS: I’ve always been into IT. I was lucky to have been provided with resources to grow that passion early on in my life – my parents bought the first PC when I was 8 years old. The Internet appeared in homes soon after, accessible via dial-up connection. Since then, I was spending most of my time doing two things: figuring out ways to make money to pay for the Internet connection and learning to code. The first project I launched to support that first goal was… a mobile phone ringtones website.
Was it thanks to you then that we could change Nokia’s iconic ringtone to something more imaginative?
AS: There was a number of such websites, but indeed some people used mine. The earnings were sufficient to pay the dial-up bills [laughs]. As I developed my programming skills and met like-minded entrepreneurial teenagers – usually online – ideas for new potentially profitable websites started appearing. And so, at the age of 16, I co-founded Fotosik.pl.
An online photo-storage website?
AS: Yes. It was a photo-storage service, a combination of two popular websites: Flickr and ImageShack. At that time, the quality of photos taken with cameras was growing rapidly, and the popularity of Fotosik along with it. At a certain point it was one of the top 20 most popular websites in Poland. This aroused the interest of investors, specifically the MCI Investments fund, which decided to buy Fotosik.
And what happened next?
AS: In 2006, I founded Red Sky – an organisation that has been building technology businesses ever since. One of the first major projects that was created within Red Sky was Filestube – a multimedia search engine that was included in the list of the 40 most popular websites globally according to the Alexa ranking. At the peak of its activity, it had a 300 million user-base.
This sounds impressive even from today’s perspective, let alone at a time when the Internet in Poland was just taking its first steps.
AS: That’s a fair assessment. We were definitely achieving the KPIs that we had set for ourselves and became the leader in our category. No other Polish company has achieved such global reach since. Still, we felt that we could monetise Filestube even better. We started looking for a partner who, in addition to financing, would be able to offer knowledge and experience that would help us accelerate even more. This is when we crossed paths with Xevin Investments. The fund invested not only in Filestube, but also in Red Sky itself, which allowed us to shift into the next gear.
What was the destination? What was the idea for Red Sky?
AS: The plan was simple: to build around Red Sky more online platforms that would create value for customers and would quickly become profitable companies. We had a lot of ideas and not all of them went through the whole business process. Some have been cancelled at various stages of development, but quite a few went on to perform really well, like RemoteMyApp (“RMA”) and ChallengeMe, which have definitely gone our way. ChallengeMe, after two years, got into the hands of an American industry investor, and RMA last year was bought by Intel Corporation.
Did you expect such an ending to this story?
AS: Yes, although I did not expect that the buyer would be Intel. RMA was in a state of constant and steady growth, attracting more and more investors. We created great technology that tempted not just one, but two global giants: Deutsche Telekom, which invested in the company in 2020 and Intel. In the end, all investors involved in the company left satisfied, so we can say that it was a success. Next time we are hopefully going to go even further.
We work on building global champions, leaders in their categories. I believe that a story like Spotify or Netflix is within our reach.
When you received the offer from Intel, did you ever consider backing out and keeping on building instead?
AS: No. At that moment, sale was the optimal solution from the perspective of everyone involved in the project. We are very happy that we have managed to do something that we have not had the opportunity to see on the Polish market for almost a decade: a successful exit from a tech start-up going into hands of a global player. For Intel, it was the first acquisition of this type in Poland.
RMA was a project jointly developed by Red Sky and Tar Heel Capital Pathfinder. How did the latter venture come about?
AS: Red Sky was profitable even before Xevin invested in it. We worked closely with the fund and completed several investment projects together. This was quite a unique situation, because it is not often that a fund starts investing together with the company that invested in. In 2017, after several years of cooperation with Xevin, we realised that our visions regarding investing in early stage projects did not line up anymore. At that time, I bought out all the shareholders of Red Sky and began to look for partners for further development. While cooperating with the fund, I met Radek Czyrko. We enjoyed working together on the Xevin’s and Red Sky’s investments, and we decided to continue in a new formula. While organising subsequent investment rounds for Red Sky projects I also met Grzegorz Bielowicki and Andrzej Różycki, who run the private equity fund Tar Heel Capital. We had convergent views on many aspects of investing in projects at early stage of development and decided to join forces and skills as Tar Heel Capital Pathfinder.
That is, a fund investing in early stage projects?
AS: Yes. There are a few investment formulas that we use. In addition to the “classic” venture capital we also operate in the venture building model in which we co-create projects from the very beginning, i.e., from the ideation stage. To that aim we work in close cooperation with Red Sky. Business ideas for those projects are sometimes generated by us and sometimes by the founders from outside of our organisation, such as entrepreneurial domain experts who have amazing specialist knowledge in their area but do not have the competence and knowledge necessary to build a business. We develop those ideas together. For the implementation of projects that have been created inside Pathfinder and Red Sky, we acquire talented and experienced managers, offering them full support of our venture building ecosystem.
What does it mean?
AS: We have structured the process of building and managing business projects. Both of our organisations have got all it takes to develop tech businesses: from strategic, financial, HR, administrative and legal competences, through proven and experienced development and product teams, to PR, marketing, scaling, and international expansion specialists. Over 16 years of experience, tested processes and proven experts make the products we create more likely to succeed.
So, you’re a serial business builder. What is the most difficult thing about starting and building a start-up?
AS: The success of a start-up consists of many different elements such as a correctly formulated thesis lying at the foundation of a project, a very good team, and so on… I believe that the most difficult thing is to coordinate all these elements holistically so that everything works well. Sometimes it is also a challenge to match the goals of the organisation with market needs, competencies and energy of the team, as well as the vision of investors. That alignment must be constant: when we look at the successes of Google or Facebook we see that these took years to build and were achieved with the use of various tools. Proper selection of these tools is also not an easy art to master.
Tell us about your first investment in a project that was not your own venture.
AS: A company that ran the online tea shop “Czas na herbatę”, the contact lenses shop “Bez okularów” and… Google during their stock market debut. As you can see, I have always had a fairly wide investment horizon [laughs]. One of the first projects in which we invested as an organisation was Woodpecker.co.
You get your hands on a new pitch deck. What’s the first thing you look at?
AS: First we try to understand what added value it might bring, what kind of needs the project wants to meet and who the target group is. We analyse the idea, including who is behind it, what stage of development it is at and what market it operates on. We’re trying to find out how unique this product or service is today, what type of market advantage it has and whether it is enough to scale to a size optimal for potentially bringing in profits.
And what would be a red flag for you?
AS: Based on what I observe, a lot of projects on the market focus on minor problems, i.e., problems that are not important or important for small target groups. These projects quickly hit the glass ceiling.
Which is more important: founder or product?
AS: The most important, of course, are people, although even the most qualified people will not achieve much with a weak product. Such a combination rarely occurs though.
In most projects, you are closer to the action than a typical VC fund. You see more. Have you ever lost faith in a founder as a result?
AS: Close cooperation with founders does not result from a lack of trust – to the contrary, I would say that our founders receive a lot of it from us. We try to be close and up to date with what is happening in companies in order to have the ability to react quickly in a situation when founders call for support. This is completely normal – none of us knows everything, and life can really surprise us. The problem appears when founders do not want to admit that they need support. This can lead to a loss of trust, and trust is one of the basic elements of any relationship – including the one between the start-up’s management and the investor.
What was the most important lesson learnt from being an entrepreneur?
AS: To build a business, you need to enjoy the process and be determined and persistent. The founder’s faith, courage in making visions and dreams a reality are often the key factor that makes these dreams come true.
How do you use your experience today to support young entrepreneurs in making that happen?
AS: It is not just my experience, but the experience and expertise of the entire organisation. Venture building by Tar Heel Capital Pathfinder and Red Sky is the work and commitment of several dozen people. We carry out projects side by side with the founders, accompanying them on their journey, which we have already gone through many times. Our goal and mission are to support founders and teams in achieving success. I am convinced that if I had received such support at the beginning of my professional career, there would be even more ground-breaking projects in Red Sky’s portfolio today. Therefore, I strongly encourage all entrepreneurs who want to follow this path, but do not want to do it alone, to reach out to us.
So why venture building?
AS: Because it’s the most interesting job in the world! If I had found something that could give me more joy or engage more of my attention, I would already be doing it.