How did the idea of four friends, college students, turned into business of over 50 million Euros
Bogdan Padiu is part of a group of four friends who, while they were college students, bet on the card of IT entrepreneurship. A decade later, he is leading a business with a turnover of tens of millions of Euros. Nevertheless it is not the turnover which is important, but other sides of the business: Teamnet is the company that automated the 112 system, the Labour Inspection or the consulates of Romania, and is currently working on an advanced technology: a drone project. And it aims to become a regional leadr.
At a first look, he strikes through his basketball player height, 2.01 and he smiles largely, without hesitation. At 35, he resembles a young programmer, but answers questions with the diplomacy of a businessman toughened in more than a decade of activity and with the certainty given by successes. He started as an IT Olympic, during high school, after that, in the ’90 or ’91, while he was a sixth grader, he saw a computer for the first time and he found it extremely interesting. Two years later, he took the first prize with honours and was rewarded with a CIP, a Romanian produced microcomputer manufactured until 1994.
“I used to program like 10% of the time and played for the remaining, I must admit it”, says Padiu today. At the high school in Ploiesti where he studied Informatics, he found out that he likes to do other things with the computer, not just play, he discovered programming languages and databases and from there things went on at a very high speed. He worked for a company in Ploiesti, and in 2001, when he graduated college, he started Teamnet, together with three friends: George Stan, Ovidiu Trașcu and Bogdan Nedelcu. He chose to be the manager of the company, determined by the question of a friend: “Do you want to be a programmer all your life?”. “I thought about it and I said to myself that I’d rather not. I love it now, but on the long term I think I’d like to do other things too.”
He turned to management and got to ASE in 1997. He graduated it in 2001, a difficult period for the economy, when it was said Romania would enter into cessation of payments. During college he worked as a programmer at Asesoft, a company created by the entrepreneur Sebastian Ghiță, who was Padiu’s former high school colleague.
How did Teamnet appear? ”We were thinking at a software company for a long time. I knew that we would do it at a certain point in time. In 2001, this opportunity arose; a software company was needed in Asesoft, I had a discussion, I got some financing and started the company”. The financing, amounting to $100,000, it was also from Sebastian Ghiță, who received in return 80% of the company shares. Over time, the shareholders structure changed: Sebastian Ghiță stepped out of the company, and Padiu took over the former’s shares, getting to hold now over 65% of the shares.
Passing from balcony to balcony
“We started in a flat in Bucharest, just across Unirea shop, with a rent of about $600. The first expansion came the next year when I got another flat. We were getting from one to another on the balcony, they were located in neighbouring blocks of flats, but the balconies were united and the passage was easy”, smiles Padiu. They even had a business plan which was not exacly done by the book.” It was an Excel in which we inserted data according to our knowingness. It wasn’t very good, now it would make me smile, but it was a plan. In the income column, there were some hypothetical clients, who provided us with some hypothetical income, and as expenses we had some pretty concrete ones-rent, salaries…”
At 23, he was the General Manager, because he was a management graduate, while his colleagues were Polytechnic graduates. In the first year they developed a document management application, which they sold “with some success”. They started other contracts too, particularly in outsourcing. “We looked for external customers, but things didn’t go phenomenally; we had a client from France with whom we negotiated for a time that seemed to us tremendously long, for about three weeks. At that time, it seemed a complex contract, with high objectives, but he didn’t know what he wanted, actually. In time, we realized that the project was about be complicate because he was coming monthly and kept saying «I want something else», «you haven’t done what I asked, I won’t pay you». That moment was the first time when the company got into serious difficulties, we overcame the moment, but we learnt the lesson”.
In 2004, they were ISO9001 certified and invested in project management; he says that for an entrepreneur the first two years are critical, because this is the period during which he learns a lot.”You think that the world works in a way, and you realize that there is a difference, sometimes significant, between theory and practice”.
The first employees came from the circle of friends and, in the first two years, the circle got larger and larger, and the first standard recruitment was done for administrative positions. They were talking to the employees about big and ambitious projects and attracted through high-speed internet or generously sized monitors. The number of flats rented increased to three, and then, in 2004, the company relocated to an office building. In the first year the turnover was about 70,000 EUR, and they made the first million in 2006.
“We felt then that we went from offhand entrepreneurship towards an established business, with departments, with a management structure. It was the level at which we started doing business”. It is the period when Padiu received an EMBA scholarship from the Wirtschafts University in Vienna, course that he graduated in 2008. Moreover, besides the skills gained, Teamnet benefited also from the increasing economic growth that Romania was recording at that time. Consequently, in 2009 the company’s revenues exceeded ten million Euros. The economic crisis did not slow the growth of the turnover, which reached 52 millions in 2012.”Till 100 millions there are some more years”, says Padiu, “because, at the moment, the growth is increasingly difficult in a market ever more competitive. Prolonged crisis leaves its mark on the market at all levels “.
A continuous growth period, spectacular but somewhat linear, influenced by the collaboration with large software companies from which they learnt important business lessons. And the number of employees increased from one year to the other, at the same pace with the evolution of the turnover; currently, of the 600 people employed by the company, 60% work in production, while the rest – in quality assurance or project management. Programmers are recruited from Polytechnic or Business students after an internship program, but talented professionals already active on the market are also sought after. He doesn’t agree with many of the criticisms brought to the Romanian educational system, but he thinks many aspects could be improved. “The people are intelligent and passionate and we find very good candidates. All the awards that we bring home from international School Olympics are not accidents; those aren’t lucky people. The results are constantly good, so it’s obvious that this system produces value, it produces good people. The problem is that school doesn’t provide students with enough practical experience; many students are never engaged in practical activities.”
About entrepreneurship, he says that it involves a lot of work and a lot of responsibility. “There isn’t anybody that you can go to and say “that’s it, I’m tired, I’m done.” You know you have to keep going and, if you want to do something real, you must find the energy that enables you to make the next important step. And you have to take such steps every year. If you don’t progress, you don’t stay where you are, but fall back.” For Teamnet, the next important step is to expand the company regionally. “We are already present in Turkey, Serbia, The Republic of Moldavia and we access projects on other markets, on an individual basis. We also have an office in Brussels.“
The fact that Romanians do not have the necessary experience in order to expand to other markets is an important hindrance, with implications pertaining to local culture. “There are other cultures with a tradition in expeditions of winning over other markets. Unfortunately, we don’t have this experience.” Teamnet’s international experience began in 2006, when it won a place in a European consortium contracted by Brussels for a smart-vehicle research project, and where it joined efforts with important names such as Philips, BMW, other important automotive and IT producers. “In order to enter the consortium we knocked on doors; we were very perseverant, because very many doors closed in our faces before any of them opened wide.” After the first few projects, as they gained experience, things became slightly easier.
Were there also troublesome periods? The hardest moment was with the client from France. After that, just not at the same scale, we faced problems in 2009, “when we realized that the company grew and we had to restructure, because we couldn’t continue otherwise. At the time we performed a major restructuring, in terms of business, and we created a system that would allow us to have knowledge of how the client works. I thought, for a long time, that it is important for us to be the best programmers on the market, to create the best code. Around 2008 – 2009 we realized that we have to understand our clients and that they are expecting this from us. To realize what needs they have and to come up with solutions that address those needs“.
A feature of Teamnet is that it doesn’t have a sales team in the classic sense of the word, people specialized in selling. At Teamnet there are technically capable people who can imagine solutions, and who also have sales abilities. “It is a sale which has to do with persuasion, but also with understanding the highly complex products you are selling. We tried various times to form a classical sales team, taken from the market, but it didn’t work because people didn’t understand what they were selling”.
In 2010 the company started the international expansion, and this is the second turning point. “It took place in stages, major investments in this field were made since January 1 2012, when we created a dedicated unit, we opened our offices in Serbia and Turkey, with significant investments”. Why Turkey? “Because it is a large market, under development, it is similar to that in Romania, it is a market that is modernized in the public area, and that wants to join the EU”. It is also a market that moves slowly: Teamnet submitted tenders for many projects, but even after nine months the authorities have not reached a decision. “We’re optimistic”, smiles Padiu. In Serbia the company won a contract last year, regarding border security; the delivery date is set by the end of this year.
Also another one of the company’s most important projects is related to customs: granting visas, e-visa, installed in all the consulates of Romania in the entire world, a system at Schengen standards, project that received congratulations in the European Parliament. The value of the contract was of approximately 7 million euro and must be completed in seven months, instead of a normal development of years.
In the top of systems created is also the one from Labour inspection, the electronic register of employees, known to companies through the Revisal application. “It is an integrated system, which processes the data sent by companies and does much, much more”, says Bogdan Padiu.
Another important system, but less known, is the GIS system (Geographic Information System) through which all the countries in the European Union report data pertaining to environmental protection and protected areas. “We are also proud of the system from 112, it is an integrated system with the Police and Firefighters for the management of emergency situations, where operators can see, also through a GIS system, where the call came from, where the problem is, where there are units and how they can be optimally allocated, which units are free”.
A fifth project is the one with UAVs (unmanned aerial vehicles, known as drones); it is a research project. “We want to see the most useful uses of this type of device”. They are not remote controlled aircrafts, but aircrafts with their own control system, their own pilot, which receive a flight plan and execute it autonomously. “They fly by themselves and hence the great advantage of having 10 – 20 aircrafts coordinated by a team of only one-two people”, says Padiu.
The largest contract is with the City of Bucharest, for the management of emergency situations, multiannual, with a value of over 20 million euro.
In all, over 70% of the Teamnet turnover comes from the public sector, “the niche we approached, the client who, at the moment, due to European funds, runs the most IT projects”. Another aspect is that, because of the crisis, the private sector has greatly reduced costs.
The five-year party
Remaining in the area of product development, Teamnet has become mature enough to develop its own products, says Padiu. “The Ymens Solution, cloud, launched last year, it develops, grows in the number of users and we will bring to the platform other products that are not developed by us, to have a more comprehensive offer. We hope to break-even in December, at the moment we exceeded two million euro invested”. Teamnet Chief says that the IT industry in Romania is a strong point and that he will try, in the near future, to coagulate the local IT, to come up with some sort of national business plan. “We, as an industry, did not ask for facilities and had no such claims, but we offer competitive advantages, value, jobs or exports”.
Another unique aspect of the company is the management structure itself, so the question comes naturally: how do you run a company of with four owners? “By consensus. If there is no consensus, it depends on the type of the decision. There are some operational ones, where I, as President of the group, say “let’s do it that way”, there are strategic decisions, where I want to have consensus, and we discuss until we have that consensus”. However, the four partners deal with different things in the company: the solutions part, the medical area, strategic projects, each specialized in a specific area.
And the relationship with the employees has its specificity: it is invested in the professional training or certification of the people, but are also organized a sort of small events when a collaborator reaches five years with Teamnet. “It is an achievement for him/her and for us, it means we had a good run and that we created a team that has the necessary chemistry”. Part of the chemistry is also represented by the salaries of the programmers, which in some cases reach even 3,000 euro. “Money is a hygiene factor, if a person doesn’t earn enough, at one point he/she will become dissatisfied and leave, that’s why we have to follow the market. But people are more motivated by passion, by the interesting projects in which they participate and by professional development”.
He believes that a secret for the successful development of a product, in the technological field, is its testing, its success on the local market. “I think it is very hard if you start a product from the beginning addressed to the foreign market. Here you know the people, how they think, the culture: if you aim for the American market, it think it’s complicated, I wouldn’t believe in such a project”.
The future? Cloud technologies, for instance, and, in 10 years, a company of 500 million euro, may worth even a billion. “We’re on course. It is a reality that, looking back, looks like a dream. Knowing what I know today and looking at the entire course, I wouldn’t have had the courage to dream about where we are now”.
Author: Dorin Oancea