00:34:00 · Nik Storonsky, David Senra
[00:34:00] S1: Well, for example, you're into B2B business, right? And then you kind of, you know, set up a company, you have your first sales first, say, 1,000,000 ARR. And then you decide to scale it. And then suddenly decide to hire expensive VP of sales who will who will hire, you know, like, you know, 50 salespeople to sell your product. You need to find a way to start selling a product cheaply, build the system, and then simply feed additional employees into the system. So you always have, you know, great payback. Starting big, hiring in a very expensive VP of sales who will hire also very expensive team is is [00:34:40] S0: the wrong Okay. So essentially, like, they remove the constraint for money. Therefore, they're not developing the skill set that constraints make you. If you're gonna survive under the sub constraints, you actually have to be good. You actually have to be talent. You actually have to be resourceful. And they're essentially papering that with money. And it might work for the short term, but long term, they're gonna get beaten by somebody like you. [00:34:59] S1: I mean, if we are in the same industry, then yes. But I mean, in many cases in US, it's not that competitive. Right? [00:35:05] S0: Wait. That's a wild statement. Why would you say in The US, it's not that competitive? I feel other people would feel it's the most competitive environment. What do you see as a European?
00:35:05 · David Senra, Nik Storonsky
[00:35:05] S0: Wait. That's a wild statement. Why would you say in The US, it's not that competitive? I feel other people would feel it's the most competitive environment. What do you see as a European? [00:35:13] S1: I mean, Europe is even less competitive. Yeah. So you're saying China China is competitive. Yeah. So China is nine nine six. Right? And then even if you are good in Europe or even if you are good in US, I mean, how can you outcompete the people who work nine to 10, six days a week? Right? Plus, have very good education, technical education. So it's very hot. When I started I started in the co working space with a 140 companies. Within five years' time, only three companies survived. They all worked on the weekends. Within ten years, only two companies survived out of 140. So I think working on weekends is the best if you want to survive. [00:35:52] S0: Purely statistically. Okay. So working seven days a week is one thing, but working nine to nine or ten to ten, like, what what is it... What is the actual culture? [00:36:00] S1: Well, I work like that. Right? [00:36:02] S0: You're the founder of that. I don't know a single founder that's like, no. No. I'm gonna... I'm I'm on PTO. Like, I understand that. I'm talking about you.
00:36:02 · David Senra, Nik Storonsky
[00:36:02] S0: You're the founder of that. I don't know a single founder that's like, no. No. I'm gonna... I'm I'm on PTO. Like, I understand that. I'm talking about you. [00:36:09] S1: Yeah. My direct reports, like, absolute majority of them, they work like that. Right? They might be like a bit less alignment in, you know, for direct reports or my direct reports. But still, I think out of all European companies were probably one of the hardest working. And I think we also one of the hardest working companies if you include The US as well. [00:36:31] S0: I wanna know what you think, like, the people... The entrepreneurs that are... That have this, like, calif... California tech, like, culture and operating system, what do you think they're doing wrong? You said there's just too much money. They're not that competitive. [00:36:46] S1: No. Every... Everything else seems there is there. Right? There is an ecosystem. Mhmm. The only thing that they're good, you go to, you know, great universities plus or, Like a lot of expats, you know, coming to study in these universities. People are rather hardworking. But the the culture when, you know, there's, you know, too much money and then people spend... Choose to spend a lot of money on the problems, I think it's wrong culture. [00:37:10] S0: Because they're not so... Actually solving the problem, the underlying problem?
00:37:10 · David Senra, Nik Storonsky
[00:37:10] S0: Because they're not so... Actually solving the problem, the underlying problem? [00:37:13] S1: I think it's just it's a lot of waste, number one, and then, like, you're not really developing yourself as an entrepreneur. It's so easy to kind of, you know, close the problem with the money. If you got unlimited number or unlimited amount of money, I mean, you just, you know, throw money here, here, here. But then you're not prepared for the future when, you know, for some reason money can disappear. [00:37:33] S0: That's a very interesting take. You're not developing yourself as an entrepreneur. Yeah. Give me examples of how you developed yourself. [00:37:40] S1: Well, what we started, if you look at the unit economics of the business, we started with a negative gross margin. And the negative gross margin continued for next three, four, five years until we optimize it to up to 80% of positive gross margin. And then if you look at why is that, right? So in our business, if you look at Europe, everything is extremely kept and regulated compared to US. For example, interchange is 20 basis points versus one half percent in US. Credit card rates are kept in majority of countries. Credit is very limited. Right? You cannot really freely give credit to many people. It's very difficult to actually set up a bank in Europe, going country by country. Because even if you have a bank license in Europe, you cannot be a primary bank because with the regulation doesn't allow you to stop issuing local accounts unless you stop a local branch of the bank
00:37:40 · Nik Storonsky, David Senra
[00:37:40] S1: Well, what we started, if you look at the unit economics of the business, we started with a negative gross margin. And the negative gross margin continued for next three, four, five years until we optimize it to up to 80% of positive gross margin. And then if you look at why is that, right? So in our business, if you look at Europe, everything is extremely kept and regulated compared to US. For example, interchange is 20 basis points versus one half percent in US. Credit card rates are kept in majority of countries. Credit is very limited. Right? You cannot really freely give credit to many people. It's very difficult to actually set up a bank in Europe, going country by country. Because even if you have a bank license in Europe, you cannot be a primary bank because with the regulation doesn't allow you to stop issuing local accounts unless you stop a local branch of the bank [00:38:32] S0: in You had a physical location. [00:38:34] S1: I mean, let's say you need to have an office, you need to have local connectivity, local regulation. And so also, you go country by country and takes a lot of time, a lot of resources as well. So different languages as well. [00:38:45] S0: And you had to do all of this?
00:38:45 · David Senra, Nik Storonsky
[00:38:45] S0: And you had to do all of this? [00:38:46] S1: Yes. Plus very tough employment laws in many countries. And yes, it's very easy, right? I mean, it's like employment as well. In Europe, it's not like that. So you need be very careful how you hire, who you hire. So all all this together is actually produced environment which is not very profitable. Right? And very difficult to build a company. And then even in that environment, we kind of succeeded. Right? But then we succeeded because we spent a lot of time and a lot of energy and a lot of kind of, you know, brainpower to optimize on every single problem. If I will start the same business in Brazil or like in The US or maybe in other countries in Mexico, certain aspects would be much easier if you look at unit economics. Credit is so much easier to give. Interchange is not kept. Technically, this difficult environment in Europe actually taught us how to build business in a very competitive landscape. You see what I mean? [00:39:45] S0: Okay. So if you were surviving in this very difficult environment, now you have a skill set that people that did not have to go through that, and now you have to compete head to head with them in, let's say, America, they're gonna be very hard to compete with. You're gonna be very hard to compete with because they haven't developed the same skill sets and [00:39:59] S1: they didn't go through