As usual, they’re the best-ranking in their year – they obtained the prize for “listing of the year on an alternative market” at the CEE Capital Markets Awards gala and they managed to attract funding of almost one million euros, by issuing corporate bonds. The AeRO brothers, Mihai and Cristian Logofatu are on their way to globalization with Bittnet.
Anca Doicin Redactor-sef Business Days Magazine
“As we promised our shareholders in the past two years, we are looking closely at great technological trends, so we can be ‘first movers’. At the moment, this means we are strongly focused on cloud – we have already implemented a few important cloud migration projects – and computer security. From an operational point of view, to go in these directions, we will keep investing in expanding our sales team and in marketing activities, aiming at continuously increasing our geographical coverage. As proof, this year we doubled our office in Cluj-Napoca and we recently opened a new office in Sibiu. Bond financing, characterized by a medium term for the timeframe, is more adequate for the implementation calendar that our development plans have”, explained Mihai Logofatu, CEO and co-founder of Bittnet.
Who is Bittlet and how does it manage to attract so much confidence only a year after its listing?
BY THE BOOK. They were good pupils. Then good students, so passionate about what they did that from a certain point onwards, they began to train others. Then they thought about building a business out of what they were doing. And, like true engineers, they managed their business by procedures. As the handbooks they used were American, the company’s listing at the Stock Exchange was a natural step.
“We thought we should do the good things that others did”, he adds. He doesn’t want to comment on the financial results of 2016, because December is a decisive month for their business, but also because he doesn’t want to “disclose to the market” before informing his shareholders. In 2015, Bittnet had a turnover of over four million euros. Is that little? Is that much?
KEEP IT SIMPLE. For two young men in their early 30s, one might say it’s not bad. Especially because it is money made of nothing, out of a business started from scratch. With a simple idea that anyone could have had. “The story started in 1999, when, together with other young people, we developed Credis Academy, which offered Cisco and Microsoft courses for pupils and students”, says Cristian Logofatu. In the Academy he dealt with the financial side of things, and Mihai, his younger brother, would become manager in 2004. “Until about 2007, we developed the team and the results of the Academy, but mostly the team, so we received many awards. Just an example: in 2007, Credis was the CISCO Academy of the year in EMEA. There were about 140 countries in competition. At the time, on average, an Academy had 40 students, to whom it delivered the technologies of the Internet. Well, we had 2,800. Besides, Credis Academy is, at the moment, as regards the number of trained students, the largest Academy in Europe”, he adds.
Still in 2007, the two brothers thought about starting a company which would use the Academy’s resources, but at a different level.“ We were surrounded by a team of smart, hard- working, young IT trainers. Their careers, in their academic field… In IT, when you say ‘academic’, you mean students, not professors, PhDs. So their careers stopped there. There was a certain number of classes and that was about it. There wasn’t more you could do”, explains Cristian Logofatu. Therefore, the two founded Bittnet, a company aimed to be an integrator, to identify and combine technological solutions from various producers, so as to reach clients’ goals. Thus, they offered a continuation of their career to their colleagues in the Academy. “This way they could learn IT, develop and go further. Because here IT courses are not theoretical, they are practical, by equipment or in virtual laboratories, they simulate precisely what happens in everyday life. Thus, trainers configure together with students and they learn new technologies before others, so that they can teach them.”
According to the two brothers, 2007 seemed a great moment to start doing business. “If you looked around, only great, interesting things seemed to come up”, remembers Cristian Logofatu. And, besides, the new company would be an answer to the Credis team and to the investment appetite of the two brothers. “We were going to do IT training and management, too. Which was good for us and for them alike. For the company, because it had better people, better prepared, more exposed to various technologies, for them, because knowing more, their skills and credentials would grow”, adds Cristian Logofatu. They started with Cisco and Microsoft because, they say, “they had the highest degree of penetration among clients”, because all computers work “based on” Microsoft, from computers to networks and servers. And they focused on the stop-shop idea. Namely a single place where clients could find solutions to their training and technical problems. Within Bittnet, the two keep the positions they had in the Academy: Mihai – CEO, Cristian – CFO.
YOU HAVE A GOOD PRODUCT. WHAT DO YOU DO WITH IT? The question “where did you want to take the company? Was it something scheduled?” was answered with laughter. “No, we focused on the product”, admits Cristian Logofatu. “We had a team around us, we knew how to do something, we identified an area where we thought we could make a difference and we went full speed ahead. And when we said it, we got to that mindset that I had read about – for a project to grow, it needs to start supporting itself, to…, to… And all our efforts were channeled towards getting there”, he says.
Therefore, the years 2008-2010 were years of growth, when Bittnet managed to do well on its own, not depending on the evolution of the market. Beyond the difficulties related to any beginning, they had a great advantage. They spoke IT. A language known by almost all companies, all computers, everywhere in the world. “Yes, we were small, we were fresh and we grew on our own. Yes, it was easy to make $300,000, when the market was $1 billion or $600 million. Although, as the studies say, the IT market suffered strong contraction, too. Gartner, which is one of the most respected IT consulting & research American companies, says that, while in 2008 the market was $1.5 billion, in 2010 it was just $600 million”, adds Cristian Logofatu. However, they experienced the crisis, a smaller one, but which almost took them out of the market. One of their most important hardware suppliers asked them to pay everything in advance, without taking into consideration Bittnet’s good payer behaviour. This, while their own clients expected to pay everything at the due date. “We were lucky because at the very moment when we wondered what to do, Banca Transilvania gave us a loan. It was right on time”, remembers Cristian.
Growing and selling, from client to client, the two brothers realised that the good product reasoning was good up to a certain point. Then it doesn’t help anymore. Because having a good product is not worth anything if no one has heard of it. To get the necessary money for a sales force, the two brothers thought about attracting funding. They took part in Venture Connect, an event organised for the entrepreneurs who want funding, where they managed to attract the jury’s attention, which Radu Georgescu, owner of Gecad, was a part of, yet without getting the money, as they hoped. “You’re not coming here to leave with a check”, said Cristian Logofatu for ZF at the end of the competition in 2011. “We received some great advice, we exchanged business cards, more people found out about us and this is how we’re getting closer to our target”, he added.
The funding came shortly afterwards, though, because through articles about competition, another investor learned about them, a friend of the two brothers in off-road competitions – Razvan Capaţina, owner of Smart Ideas, that Bittnet had shares for sale. “Yes, we knew each other, but he didn’t know we wanted to sell, and we didn’t know he wanted to buy. The participation in Venture Connect opened doors”, says Mihai Logofatu. It was the best decision, the brothers congratulate each other now, looking back, because after the capital injection Bittnet grew spectacularly – from €480,000 to €2 million.
GROW. CONSOLIDATE. GROW. When they’re talking about the Bittnet business, the two have the detachment of outsiders. They speak as though the business had not been founded by them and they didn’t own the majority package. As if they were two scientists in a lab, Bittnet were their experiment and they wrote down in a notebook the behaviour of the “patient” during the procedures. “We designed the company in such a way for it to open at a certain time”, explains Cristian.
Indeed, the two acted by the book – they took no money out of the company, everything being reinvested, oriented to growth. “We took some dividends in 2011 because otherwise they would’ve become time-barred. We had some amounts there, with a comma, after the share capital was increased and we became a joint-stock company and the financial statement had to be corrected,” says Cristian Logofatu. “When you’re growing, all the money has to go to the project. You have to support growth”, he adds. Therefore, the turned into a joint stock company from a limited liability one, because “it is easier to manage, more transparent and more attractive to investors”, they got an auditor – a company in Cluj, the same one ever since, auun Board, where they brought important figures in business – Sergiu Neguţ, former manager of the Centru Medical Unirea network, Dan Stefan, one of the Autonom owners, Dan Berteanu– an experienced salesman and manager. Moreover, they do not expect a bank to finance their investments, because “it is not natural”, you can’t ask the bank to wait and to settle for bigger expenses or even loss at the moment. “The Stock Exchange idea came from the books, too, from what we’ve read, that it’s one of the natural steps in development”, explains Cristian Logofatu.
What is interesting to mention is that the two brothers had found equity funding and they were about to sign the agreement, when they got the Stock Exchange idea. Someone had shown them the advantages of AeRO and they thought maybe it would work. “We didn’t know what to do. So we made a Board. We were afraid the new idea might go to our heads and we wouldn’t see the right path. The Board decided to list the company. So we did”, states Mihai Logofatu.
Was it good, was it bad? Hmm, the two can’t tell, but judging by the results, they seem to have got it right this time, too. “It is only by next April that we may be able to tell exactly what it was like. Now, if this plan goes well, we would have an eightfold growth in four years. So ahead of the plan. If it doesn’t… we’ll see where it stops”, repeats Cristian Logofatu. Which is exactly the term Mihai Logofatu anticipated in the speech he had used to attract investors in 2011 at Venture Connect. “We have an 800% growth opportunity. We are not a start-up with an idea, but a company with real revenue. Our business can grow eight times in five years”, said Mihai Logofatu at the time.
BUT WHERE WILL IT STOP? The two entrepreneurs won’t stop at the Stock Exchange. “With the Stock Exchange we gained a spot in a new race”, says Cristian Logofatu. What are their plans for Bittnet? Intensive development– attracting talent, growing skills and attracting new courses, new accreditations – Bittnet is, for instance, the only accredited company to provide training for Amazon Net Services in the entire Europe.
Then they intend to open local offices. Cluj was the first such enterprise, which proved to be a success, they say. “It seems a fair bet, it can support itself. It has even contributed to a growth in the company’s results”, says the CFO. Cluj will be followed shortly afterwards by other local offices, but the two cannot say where they will open them. “It depends a lot on the people we find to collaborate with. Because we adopted the Autonom model – the office manager should also have entrepreneurial qualities, he should know the business, to see it a little as belonging to him, to sell, to make business plans. He won’t be a mere employee”, add the two brothers. Anyway, they will go to those cities where they already have clients or where there are companies similar to their clients.
The third “path” is regional development, namely opening offices in Europe. Anyway, given that they are the only ones that can deliver certain types of trainings and implementations, they had work coming from Bratislava to the Netherlands. This offered them a rather accurate perspective of what those markets look like. “We are analysing things closely. I think we need to go there with actual offices they need a face, someone they know, someone they can trust, who can give them what they need. But we won’t jump right in from the start! We’ll just go up to our knees, slowly, to see if the water is cold or not, what fish are swimming over there. But we have a person who is only in charge of this – special focus on selling abroad”, says Cristian Logofatu.
The two never lose focus on the threats on the market either – because, they say, they are a relatively small company that works with big clients. “My God, the list is huge! Even if you don’t have problems with the proceeds, with the default, you still have to pay attention to the cash flow. You have a relationship with the banks. What happens if their support disappears? Attracting qualified resources and talent is a problem for everyone, especially for a business like ours. You have to manage it in such a way as to offer people a nice workplace. All the time”, lists the Bittnet CFO some of the signs he always has in mind.
FINAL WORD. During our discussions, one word seemed to come back again and again – “simple”. It was a “simple” idea, great American businessmen – Warren Buffet – one of the richest men on the planet, Charlie Munger – his business partner, Elon Musk – whose name is related to Tesla, PrePay or Space X, Sergey Bryn or Larry Page, Google co-founders, made things simple, easy to understand, logical, easy to follow. But when it comes to the future, well, this is where things change, nothing is simple anymore. The two – cautious, modest, almost refuse to go beyond their “simplicity”. They don’t see themselves doing grand things. Just simple, like they’ve done so far. “I drive a car that I’ve had for ten years. So does my brother. The idea is to buy experience, not things”, says Cristian Logofatu. That is because, for them, the value of an entrepreneur lies in the value of their company, which should not depend on its founders at all. “There’s still a lot to do, from this point of view. Let’s not get ahead of ourselves”, say the two solemnly. However, they do not dismiss the possibility of doing something else at a certain time. After all, the Earth is flat!
This article is taken over from the 11th number of the Business Days Magazine.