Anyone in Slovenia, who has explored the start-up world or entrepreneurship in general, recognizes Branko Drobnak’s name. He knows how to turn situations that others might consider negative into triumphant ones.
To the general public he is perhaps best known as an entrepreneur who, during the crisis, lost millions when his brokerage house Poteza collapsed. However, he emerged stronger and better, despite the deep personal and professional crisis this caused. Today he is primarily engaged in advising and directing aspiring start-ups. In 2007, Branko founded the Club Business Angels Slovenia. As he likes to tell, he got the idea for a club, that will bring together successful entrepreneurs investing in young businesses, while visiting England. Around € 2M was invested during the conference he attended there. He was so excited about this fact, that he founded Business Angels Slovenia soon after returning home.
He considers the current state of the Slovenian ecosystem to be good, with some room for improvement. On the one hand, thanks to the Slovenian ministries, we have a well-developed start-up environment that is comparable to the Austrian one, except for the lack of »old money«. The maturity of the ecosystem is also evidenced by events such as the Next Round Investment Conference, which brings together investors with a combined pool of more than € 1 billion. He sees this as proof that there are startups in Slovenia that know how to succeed in the market.
On the other hand, he points out that the late seed round and the first VC round investors are still lacking. He emphasizes that Slovenia has not yet accepted the initiative of the startup community to introduce a tax relief of 200k € for investments in start-ups. In his opinion that could provide between 15 and 20M € of fresh private capital for investments annually. This would make Slovenia’s legislation closer to countries like England, which is flourishing also thanks to its investor-stimulating system. Nevertheless, there are currently two initiatives underway to establish Slovenian VCs, that would invest between € 500k and € 1.5M. He also estimates that a hi-tech investment fund, i.e. investing into ideas that come from a research environment (e.g. universities and institutes) would further help develop the ecosystem.
Branko says investors are looking for good start-ups. They should provide a real solution to the real problem of a large enough number of people who are willing to pay a large enough price for it. He also notes that there are some young people in the start-up scene who are thinking only about getting money in the form of an investment without having a positive response of the market. Such start-ups are created because it is currently modern and cool to have a start-up, but in the long run they have no chance of success.
He points out that start-up entrepreneurship is a lifestyle that requires a 24/7 commitment and also includes a moral stance towards investors. This means that sometimes it’s better to end a company with bankruptcy rather than prolonging the failure. This is a fair attitude towards both clients and investors. He goes on to say that a lot of entrepreneurial success stories were paved with failures, where someone succeeded in their second or third attempt, or only after joining another, well-established team. He points out that nothing is lost in the process, because even through issues and failure, there remains a trace that can be positive. Even when a start-up is in trouble, it is important to communicate with the investor, as he can help with finding the solution. Sometimes it is enough to make some phone calls. In America, investors monitor the performance of a start-up by checking the progress within a certain timeframe and the costs involved. This allows them to easily review the transition through stages that each start-up goes through. It is important to have a good team that will find a way – through gradual adaptation – to make a good product. In other words, entrepreneurs, not businesses, need to be taught. He points to the example of a Slovenian startup Double Recall, that raised more than € 1 million of investment in America and participated in Y Combinator, but still did not find customers for its product. The team eventually fell apart, and the founders succeeded in other projects.
It is also often the case that young entrepreneurs do not understand the difference between loan and equity financing, which he relates to living in socialism. Start-ups should thus be taught that an investor expects to multiply his investment. Therefore, as a rule, an investor only invests in companies that will grow rapidly and increase sales all the time, thus constantly increasing the value of the company. Due to the cost connected to market expansion, this phase may also be subject to initial business losses, as we have seen with Amazon. We are currently following a similar story with Uber. There are quite a few Slovenian startups, e.g. Hooray Heroes, Mebius and DS Meritve, that have designed their business model as growth oriented and are of interest to investors as well. The decision to accept an investment is also linked to taking responsibility for the growth of the company. He gives the example of a wrong attitude from the beginning of the path of the Business Angels – they invested in a company, which informed them about ending their path with a »Happy New Year« card.
Branko therefore says that in the start-up world one must risk his own skin, but also reach out to investors at the right time. Business angels, in principle, invest at the point where a company already has an MVP, a two-year vision and a plan. The plan should make it clear how many products will they sell, at what price, and what distribution channels they will use. All this is possible only if the company solves a real problem, such as Sleepy Bottle.
Branko also says that he likes start-ups that come from R&D. He mentions the remarkable story of Mebius, that is a result of the work done at the Institute of Chemistry. It is taking on a completely new way of production of hydrogen fuel cell catalysts. Branko says that he will do his best to monetize this story, since such knowledge and this patent could put Slovenia on the map of Europe or even the world.
He ends the conversation with tips for aspiring startups to follow. Firstly, the company should solve a real problem. Secondly, that the life of a startup and that of a family with young children is not compatible, as there will only be time for one of the two. Thirdly, it requires a great team to succeed. Finally, one must always take the market response into account.
You can watch the recording of the conversation at http://mikrobiz.net/video-content. We recommend the video to anyone who is considering an entreprenurial path or is interested in how investors think.