The Hungarian startup ecosystem has been developing intensively in the past few years. Many successful startups started here, like Prezi, Ustream or LogMeln. All these companies have their development center still in Budapest. Along with the internationally known Hungarian startups, there are others who are also having great potential, however, they are not yet internationally recognized. They are the Hungarian startup hopes of the future.
In this interview we talk with Gabor Koncz, who is the founder of a Budapest based startup, Automizy. This startup started as an email marketing solution. After that, it developed into a new marketing automation platform that can be used without a black belt marketer. Gabor tells us about how his startup is planning to enter the U.S. market, their primary focus for international expansion.
Automizy has been active only in the Hungarian market. Now you are directing your operations towards international markets, mainly the U.S. Why?
Gabor Koncz: In the past few years we were able to grow close to 100% in each year. It means that our income as well as the amount of emails sent increased tenfold in last 4 years. This can’t continue for so long due to the limitation of the Hungarian market. Moving out from our country, we’d like to target the biggest market, the U.S.A., more precisely, the whole English speaking market.
Our Hungarian customers on average send out around 35 million emails in a month. This is expected to increase only to 50 million emails monthly by the end of the year. Our competitors are at the pace of 2-3 billion emails in a month. This shows that the growth potential is still huge, without mentioning the low prevalence of similar kind of software in the market.
How does the global market for marketing automation platforms look like?
G.K.: For global marketing automation leaders is about 5%-10% of companies. These have already the knowledge to use these kind of complicated softwares. Our aim is to win the remaining 90-95% of the market. Namely, all those companies who don’t have a black belt marketer, but would like to enjoy the marketing automation advantages.
According to the IDC the marketing software space is expected to grow to more than $32 billion by 2018. International media outlets have been posting articles lately about how the IT leader won’t be the one spending the most for IT, it rather will be marketing directors. And this new situation is what we are preparing for with Automizy.
Isn’t it too difficult to enter the global market from Hungary? Especially with a product that already exists and have plenty of supply in the current market?
G.K.: The sales process does not happen face to face, it takes place online. So, acquiring and handling clients is not more complicated than expanding into a neighbour market.
What kind of strategy did you start the market acquisition with? What kind of tools and channels were you using?
G.K.: The whole strategy has been built up and based on our current clients’ problems. Of course, we analyzed the competitors as well. However, this spring I spent a week in the U.S.A. This gave me the most useful information for product development.
During the week I was in New York, Philadelphia and Washington, I talked with about 100 marketers from the SME sector. These were just short and rapid conversations and although they looked like only a chat, the scenario was well prepared in advance. My goal was to test our hypothesis.
We learnt a lot from these conversations. We based our acquisition strategy and changed the product concept because of this experience.
Let’s get back to the second part of the first question. After deciding the strategy what kind of tools and channels you picked for client acquisition?
G.K.: The center of our client acquisition is based on content marketing. We created content in English on marketing automation for marketers new to the topic. We built a base of returning visitors and later on created advanced, behaviour based content thanks to our technology.
If someone signed up for Automizy, that was when the on-boarding process started. This is not made only of an automized, behavioural based part. There is also a real person, our Customer Success Manager, that has the duty to help our customers.
This means that potential clients can meet Automizy for the first time on your English blog. What kind of tools have you been using to get visitors to the blog? For example have you been using paid channels as well?
G.K.: For the time being, we are at the client acquisition testing and “fine-tuning”stage. Until we don’t have a final “answer”, we don’t want to invest too much money for visitor acquisition. We tested social media. Surprisingly, Twitter is the absolute winner in the U.S.A.. This is where we were able to make the most with fewer resources. We run paid ads in these channels and the effort we put was not free either. However, the result was quite great! We managed to sign up more than 500 companies from 15 different countries, with no serious investment.
If I understand correctly, there is no venture capital behind the company. It is interesting because it’s not a typical startup feature. Wouldn’t you like to involve any extra capital to grow your company?
K.G.: That’s right. Our growing was organic and we financed it from our incomes. In Hungary nobody knew what startup meant when we started. Moreover, the Hungarian startup community didn’t really exist. We called ourselves a startup but we never thought of involving external fundings.
Right now, we are faced with a rather interesting situation. We are already out from the “startup stage” here in Hungary. So it wouldn’t be worth to involve any Hungarian investor. Our domestic growth is already self-sustainable, but at the same time our 100% rate of growth cannot last for long.
We cannot yet prove to have a lot of paying customers globally. Therefore no international fund would invest in Automizy to speed up our growth. Looking at it from the U.S. perspective, we are just a new startup that has a product tested in one market. Our American activities are still far behind compared to the Hungarian’s growth.
Considering this, an American investor would only participate with a very low valuation. This would be pointless for us at this stage. A small investment of 2-300.000 USD wouldn’t have any significant impact on our operations. What we would be able to do with that money is something we are able to do with our present revenue.
This amount could be pushed higher if we assigned more resources to this activity. However, we are not trying to win startup competitions, we want users. We don’t want to pitch investors, we want to talk to potential customers. We rather put all our effort into customer acquisition. If we had enough customers and our growth would be quick enough, investors would come. Otherwise we will carry on with our activites and grow at a speed that our income can afford.
Obviously I’m not against any investment! Each company has a different situation. But for us, this is not our primary concern, as we are able to grow in this way.
In your opinion, do startups need marketing or can they wait until the growth phase after raising capital?
G.K.: One cannot start with marketing early enough. Once you have the idea, the first thing to do is to talk with potential customers. Sell the product or service, even if it’s not there yet. If it turns out your idea cannot raise any awareness, then nobody would pay for it and it wouldn’t be worth investing any effort.
I feel like most startups have the wrong attitude. They would rather focus on product development instead of finding out scenarios for product sales. They develop their “super thing” first and after that beg for money from investors. They think spending money for marketing will lead to hyper speed growth.
Startups rarely fail because of their imperfect or non-existent product. Without marketing, however, they almost always do.
My advice is unequivocal: once you have the idea and the team decides to start working on the product, then it’s also time to begin with marketing. Put the same passion and amount of energy as you do in product development. The result of marketing won’t come in the following day and neither the product will be developed in a few days. Both activities are a marathon, not a 100m sprint.
Ideally, by the time the product’s first version comes out, there is sizeable waiting list who wants to try it out already.