Endeavor Entrepreneur Andres Alterini, CEO of Smowtion, recently sat down with the Latin America PE/VC Report to discuss building a global company from Argentina. This interview is reprinted from LAVCA (Latin American Venture Capital Association).
LAVCA: Give us the Smowtion elevator pitch.
Alterini: Smowtion is a leading technology company focused on developing products and support for advertising networks. We serve over 120,000 Web publishers worldwide with an audience of 270 million unique users, enabling them to remain independent by monetizing their online content. The Smowtion SSP Publishers Platform is available in eight languages and reaches more than 200 million users around the world each month. Smowtion today is not only an IT company, but also a leading ad network that has contributed to the evolution of online advertising.
LAVCA: How did you come up with your business idea?
Alterini: The idea for Smowtion was actually born out of Keegy.com, another company I started with my two partners [and Endeavor Entrepreneurs] (Santiago Pinto Escalier and Mariano Elizari). The final business model evolved after ten years of interacting with and interpreting the needs of the booming Internet advertising sector. After many attempts, we developed a clear understanding of what the market needed and how we could provide it.
LAVCA: Tell us a bit more about Keegy. What lessons did you learn that helped you start Smowtion?
Keegy was a news aggregator, like Google News but with blogs. It let you organize the content generated by users themselves by integrating it with information from news portals. Santiago, Mariano and I started it in 2007, and at the time these functions were still separate.
In that sense, Keegy represented a democratization tool in the dissemination of content and personalized information consumption patterns based on preferences, behavior, geographic location, etc.
Although the venture was a success in regards to number of visits (more than 4 million unique users for any month), it failed to become a solid source of income so we had to evolve quickly because the money we had to put into it was running out.
However, the experience provided us with a platform to create Smowtion, which aims to create a bridge between advertisers and the people who generate web content (page authors, not massive, niche blogs or social networks).
LAVCA: What sort of financing have you received thus far?
Alterini: To date, we haven’t received any institutional funding. We were originally financed with personal savings and family investment. Fortunately, we reached the breakeven point in our seventh month, enabling us to grow organically.
LAVCA: Are you planning to approach institutional investors in the future?
Alterini: We are always looking for strategic capital to enable us to continue our steady rate of exponential growth. However, during 2009/2010 we experienced a 400 percent growth rate, and we continue to grow organically without additional capital. Although it’s not necessary at this time to raise outside funding, we are always open to new experiences and lessons to learn from others, which is something VC investors offer.
LAVCA: Your biggest market segment is the U.S. and in fact, Smowtion is included on Facebook’s approved list of ad networks. What were the key factors that enabled you to penetrate such a competitive market?
Alterini: Our formula for success is to clearly identify our customer base and listen carefully to what they are saying. Having continuous feedback from them enables us to constantly modify our products and adapt quickly to changing needs. We’ve been able to interact with both big and small publishers, which is essential for the success of our business.
LAVCA: What is your most pressing strategic challenge right now?
Alterini: In the midst of rapid growth, our challenge is retaining the unique culture and spirit we’ve developed as a startup while introducing the best corporate practices that enable us to thrive in an increasingly competitive market.
LAVCA: How are you addressing this?
Alterini: As Endeavor Entrepreneurs, we have access to a network of mentors and leading experts in the area of strategic consulting. We are constantly connecting with them to learn from their experiences. To me, a successful example of how to deal with this challenge is Mark Zuckerberg and the transition he’s managed as Facebook has grown so quickly.
LAVCA: Who is your competition? What do you see as your competitive advantage?
Alterini: Our competitors are primarily other sell side platforms (SSPs), including Admeld (Google), Rubicon Project and Pubmatic. Smowtion’s advantage is its technology and human capital resources. Because of this, we are a global company even though the CEO and his team are based in Argentina.
LAVCA: Where do you want Smowtion to be five years from now?
Alterini: We will be billing more than 20 times what did last year; that would be revenues of $500,000 per employee. With a staff of over 200 employees and a solidly professional human resources structure, we will have a dynamic company culture that, while resembling the intellectual and creative atmosphere of a university, is based on the sound business practices of the digital world and global markets.
LAVCA: As an entrepreneur based in Argentina, can you give us your perspective on the current entrepreneurial community in the country? What changes would you like to see in order to strengthen the environment for start-ups in the country?
Alterini: The Argentine entrepreneurial culture is in its early stages. There is a need for increased training at all levels, a greater emphasis on risk taking and a better understanding of the financial instruments that will enable projects to be born and developed with funding structures that won’t fail before startups can grow and prosper.