Brand Embassy Story Through the Eyes of an Investor (by Ondrej Fryc)

Reflex CapitalBlogBrand Embassy Story Through the Eyes of an Investor (by Ondrej Fryc)

24. 5. 2019

Brand Embassy is now part of NICE. We sold our stake, the money is in the bank and everyone, including the buyer (NICE stock performance post announcement jumped considerably), is celebrating. We were the largest investor in Brand Embassy since the beginning and we experienced the whole journey first hand. All’s well that ends well?

I met them for the first time in 2013. I was visiting my friends Nikola and Petra in their new StartupYard offices. I came around half past five in the evening and the offices were almost empty. Of the dozens of startups, only two worked late that evening. Petra told me, “Yeah, that’s Vítek and Damian. They’re always working.” This was one of the important moments for us to give the boys the first investment. They weren’t like many other “startup founders”, enjoying the startup lifestyle. They really worked hard. They also complemented each other perfectly. Damian was dealing with operations and Vítek was able to travel around the world and ink contracts with huge corporations. He was bold and phenomenally successful. This led to us investing in two more rounds.

Brand Embassy grew. But as it usually is with B2B, the costs were always ahead of revenues. Developers need to be paid now, but invoices are only issued on delivery and with long maturity. Cash was burning at alarming rate. But there were parties on the deck, dancing, catering et al. Everyone was happy and every other month a new photo of the excited team was published on the website. We started to get concerned (by the way, the “jumping team photo” then became our internal codename for exorbitant spending). Along with our co-investor Rockaway, we started to push the guys to greater efficiency and we didn’t want to increase our investment exposure. Yet Vítek disagreed with the cost-cutting and was able to raise the money anyway. He had amazing growth rate, great contracts and great persuasion skills, so he took money from angel investors, and more of them. Over the course of few years, perhaps 50 individual investors have invested on convertible notes. This is absolutely unique and a record that will last for years.

At the end of 2017, the guys understood that this was not going to last forever and the business model was not sustainable. They had to save hard. I admit I did not trust completely, that it was not just a calm down talk. I didn’t believe they could change their style and cut it to the bones. However, at the end of March 2018, Vítek and I were looking at his monthly expenses, and I had to give him a huge compliment. They did it. Within three months, they cut off everything they could from the company. A lot of people were dismissed, some had their salaries lowered, overhead costs went to a minimum. At that moment I knew the boys will eventually succeed. That they can not only dance, but also live through a crisis.

And now, a year later, we are in a situation where the efforts have paid off. In hindsight, I also see our mistakes. I wonder if our “jump photos” judgments were fair. Maybe if they didn’t dance, it would change the culture in the company so that it would have attracted different talent. I wonder if our costs pressure did not come too early. Maybe those parties helped Vítek to address more angels. They were simply part of his journey. And I wonder, why we actually questioned Brand Embassy success internally. After all, “never give up” is both my life and business motto. I guess this wisdom just applies everywhere: give more praise, less criticism.

Vítek and Damian, thanks a lot. Thanks for the exit. But most of all, thanks for the privilege to be part of your journey.

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