In collaboration with Endeavor Global and Stanford University, the World Economic Forum recently released a new report, “Global Entrepreneurship and Successful Growth Strategies of Early-Stage Companies.” Click here to learn more.
The report, which demonstrates the importance of High-Impact Entrepreneurship in driving economies forward, includes interviews and insights from eight Endeavor Entrepreneur companies: DocSolutions, Globant, MercadoLibre, Petfor, Pharmacy 1, Refinancia, Technisys, and Yola.
In this special series on Endeavor’s blog, we are reprinting the published interviews with each Endeavor firm. Below is the section on Globant.
Globant was formed in 2003 by four founders (Martin Migoya, Martin Umaran, Nestor Nocetti and Guibert Englebienne) to combine the technology skills of LatinAmericans (initially Argentineans) with the IT needs of global companies. The aspiration was to be the leading Latin America outsourcing company. The Latin America advantages Globant promotes include real-time communication, geographic proximity and integrated teams. The ‘Day 0’ focus on software development includes design and innovation to meet scaling as well as engineering and infrastructure needs. Products are built using a combination of open source technologies and proprietary software. In July 2005, Globant was selected as an Endeavor company by meeting criteria of being an emerging entrepreneur-driven market leader with high potential and a passion to excel.
Martin Migoya, co-founder and CEO, has an engineering degree from National University of La Plata and an MBA from the University of CEMA, both in Buenos Aires. Prior to Globant, he was Director of Business Development and Regional Business Manager for Latin America at a large consulting and technology company. He has worked in Argentina, Brazil, Mexico and the United Kingdom.
Guibert Englebienne, co-founder and CTO, has a computer science/software engineering education from UNICEN University in Buenos Aires. He previously worked as a scientific researcher at IBM and later headed technology for CallNow.com. He has worked in Argentina, Venezuela, the United Kingdom and the US.
What was the source of the initial idea and how did that idea evolve into a viable high-growth business venture? How did it change over time?
Migoya: “After the Argentine financial crisis in 2001-2002 and the destruction of the currency, my salary plummeted. I had US$ 20,000 in savings and I thought I could make more money trading. The only stock I made money on was an Indian-based outsourcing company. That started me thinking about starting a business from Argentina by packaging up Latin American talent for software development and selling these services to first world global customers. The financial crisis devastated many Argentine businesses but the devaluation of the currency allowed us to compete on price and talent with other outsourcing companies in other countries. I called Guibert, (Englebienne), Martín (Umaran) and Néstor (Nocetti) – all engineers working for multinationals – and said, ‘Look, we have a big opportunity here and we need to take it.’ We started the company with US$ 5,000. We had a very clear idea from the start to build better and more software products for global audiences. We wanted to make a change in the IT services industry and build a service organization oriented to develop premium software for global markets with a fresh approach from Latin America. While I didn’t expect the success we have had to date, we started the company with a long- term view and every decision was about building for the long term.”
What was the initial growth vision or aspiration of the founding team? Was there a sizeable change in this growth vision or aspiration over time? If a change, please describe.
Migoya: “From day one we were clear about two things. We wanted to change the status quo of the software industry in terms of how to design and build software, and we wanted to build a company for the long term. We always wanted to be the leader in what we did outside of Latin America. From the beginning, we operated differently than most Argentine IT companies that tend to hire contractors and extract dividends immediately. We hired everyone as direct employees and re-invested 100% of everything we earned. We were also prepared for our ownership to become diluted as we sought outside investors to help us grow. In 2004, when we had reached 100 employees, we realized we had something bigger than we had imagined and that’s when we sat down with our first group of investors. It took us nine months to raise our first venture capital round, which was US$ 2 million. We held onto the right to sell the company or take it public when we – as founders– wanted to. That is still very important to us today. After that, Google selected us as their first outsourcing partner, and with Google as a customer it became easier to introduce ourselves to other companies, so our growth exploded. We raised another US$ 8 million in 2007 and another US$ 14 million in 2008, which was amazing because it was in November, just after the global financial crisis, when we asked for this money. We used the cash to make a couple of small acquisitions in Argentina that gave us important relationships and customers.”
Describe the strategy or business model that enabled your company to achieve its high rate of growth.
Migoya: “We create innovative software products that appeal to global audiences. That’s what we do. But the key concept was to change how this was done to create more intellectual property for our customers. Software creation has been driven by an engineering approach. We brought more innovation in design to the industry because this is something we (Argentineans) have a unique sensibility for. We also leveraged our expertise in both Open Source software and commercial, proprietary software and blended them in a very smart way to get the lowest cost of ownership for our customers. To service big global customers, we created the concept of a software service company where robust engineering, innovation and design meets scale, and that’s how we sell ourselves. Our development methodology is also unique. We use a methodology called ‘Agile’ which breaks down large design, development and implementation projects into smaller pieces that we call ‘sprints’. It is very efficient, allows for more flexibility and the customer gets to see results at every step.”
What were the major growth accelerators for your company in its high-growth years?
Migoya: “Part of our growth has been due to geopolitical or cultural differentiators in that we have exploited a huge talent pool for software creation in Argentina and Latin America. We are also working on the same time zone as our US and European customers for the bulk of the day, unlike in India or China. But there are other Globant-specific reasons for our growth:
1. Engineering: We base a lot of what we do on open source technologies whereas most companies are not doing that because they are restricted in their partnerships with big commercial companies. We have partnerships with big commercial software companies, too, but from the outset we blended both open source and proprietary technologies to create better software at a lower cost. This is key.
2. Design: The Argentinean creativity and taste, when applied to software design, has resulted in better interfaces. We have excellent art and design teams at Globant.
3. Innovation: We are constantly innovating and challenging and have structured the company to foster those traits. Therefore, instead of having a centralized team of innovators to solve specific customer challenges, we send the challenges out company-wide. We choose the best handful of solutions and then work through them. This approach to problem solving has won us big projects like Nike and many others and is very important to our growth.
4. Infrastructure: We know that our applications must be up and running 24/7, so we have a team of experts working to enable high availability and security of our products.
5. Signature customers: We grew with the likes of EMC, Google, Sabre and Electronic Arts. After we got Google, we didn’t have to explain ourselves anymore.”
Englebienne: “We learn fast. Like any organization, we make mistakes but at Globant we put a huge premium on learning from them. Growth factors include:
1. The complementary nature of the founding team. We each have different skills that we respect. We also found extra strengths of
each other over time.
2. Organization structure. Each of our areas of expertise (such as
gaming, mobile and consumer experience) is now run as a studio with its own founding team. Each team is now managing a studio organization larger than Globant was for several years after 2003.
3. Communication within the company. We share our plans with everyone within the company. Our telephone operators can tell you our revenue budget numbers. We also run an ‘Accounting for Non-Accountants’ programme every month to improve our employee knowledge base.”
Briefly describe the financing of your company and how this financing impacted the growth of your company.
Migoya: “We started the company in 2003 with US$ 5,000 and we self-funded through revenues and by reinvesting everything back into the company until the end of 2004 when we needed additional investment to grow in scale and infrastructure. In 2005, we raised US$ 2 million initial capital from Argentine investors managed by FS Partners. By then, we already had 150 employees. We raised an additional US$ 8 million in October 2007 from Riverwood Capital, a US venture fund. We raised a second US$ 14 million round with Riverwood Capital and FTV Capital a year later, right after the global financial crisis exploded. We used the money for headcount growth, to bring in experienced executives and professionals, and for a few small, strategic acquisitions. In 2008, we acquired Accendra, which is headquartered in Buenos Aires and had cultivated a strong relationship with Microsoft that we wanted to leverage. We also bought Openware, based in the city of Rosario in Santa Fe, Argentina. Openware had expertise in infrastructure and security software, and that acquisition resulted in consulting firm Deloitte & Touche becoming a Globant customer. So, our acquisition strategy at the time was for technology or customers.”
What were the major challenges your company had to handle in its high-growth years, and how were they managed?
Migoya: There were two major challenges:
1. “Finance: Financing was a nightmare in the early stages. Although we were earning revenue from day one (doubling revenue each year until 2008), we were trying to build the company for the long term and that meant we had to re-invest everything we earned for working capital and to hire people not as contractors, but as full- time employees. This consumed everything we had. We worked hard to get outside financing, but this was a learning experience because we also wanted a lot of control. We had to learn how to hand over certain rights without losing control of the company. This is a huge psychological challenge.
2. Scale: In the early years we did not have enough power and influence to convince big customers that we could scale as fast as they wanted from a software services company. Each new customer helped give us more infrastructure in a sense. Many VCs were also concerned about scale challenges. Being a services company tends to have a lower return than a pure product company. But we are a services company and we do it very well because we are doing it from Latin America and can compete on talent and price.”
Give examples of dark moments or negative periods that your company or you faced as part of your journey as an executive with this company.
Migoya: “The global financial crisis (October 2008) was a painful hit. We had been growing at 100% per year since 2003. Then, in 2008, it was 15% in terms of revenue. We had grown to more than 500 employees. This changed the dynamics of the company and we worked very hard to get through it. We turned it around by exploiting customers’ need for value-added services at a lower cost, which is what we can deliver using Latin American talent for software services. This was the idea from the start of the business, but after the crisis, we ran even harder and had renewed focus. Money crunch. “Other dark moments have more to do with the entrepreneurial side of things like financing and not having enough money to pay salaries or enough power to convince customers they could scale as fast as they want. There are particular problems of every entrepreneur that once you’ve lived through, you don’t want to face again. Another dark moment was a failed attempt at a spin-off. We started a small spin-off company for VOIP. We thought we could be successful in everything we started, but the people we placed to operate it were not very good and it failed. We suffered because of that. We found we were not as good as we thought.”
Englebienne: “There have been many dark moments, but our ability to learn fast has meant we have been able to leave those moments behind without regretting so much. We learned a lot from the 2008 global financial crisis, including the need to remain close to our customers. We also learned to run a tighter ship and trim our sails to survive the rocky seas.”
What are the key lessons about entrepreneurship and successful growth strategies you’ve taken from your company experience?
Migoya: “We are trying to continually teach and inspire new rounds of entrepreneurs in Latin America. There are several key lessons we try to convey:
1. Think Big. I think if you want to be a successful entrepreneur you can’t afford not to. You need to really believe that you can alter your environment with what you are doing.
2. Money will follow. Don’t pursue entrepreneurship for money alone. You need to pursue your convictions and your passion instead of just the money. It took us a long time to learn that. This is very important.
3. Serve others: if you are starting a company and you think that you are doing this just for you and your partners, then you are wrong. You are doing it for a lot more people. What you are doing will affect many, many families and people. You have to teach, learn and influence all the way.
4. Enjoy it. Because if you are not, then you will be suffering a very long time.”
Englebienne: “Beyond Martin’s points I would add: 1. It’s essential to build a strong team 2. Create a culture that is extremely appealing to those who work there 3. Develop an ability to learn fast”