Mike Collier in Vilnius -
There's good news for anyone wary of sinking their money into the Baltic states - now you can invest in the Baltics without really investing in the Baltics.
A prime example emerged at the World Forum for Direct Investment 2009 held recently in the Lithuanian capital, Vilnius. After speakers from sprawling multinationals rattled through PowerPoint presentations on the joys of relocating call centres to emerging markets, one of the final speakers provided a fresh perspective on the idea of an international company.
Ilja Laurs is chief executive of GetJar Networks, the first Lithuanian company to establish an office in Silicon Valley. GetJar produces and distributes those irritatingly addictive mobile phone and computer applications that have become a staple of the Facebook generation.
The company traces its roots to 2000 when three Lithuanians created a joint venture with UK company Midas Interactive. It was profitable, but the real action happened later as mobile apps came of age - just as GetJar went independent again. "In the middle of 2005 we realised getjar.com was exploding as there appeared to be massive interest in mobile apps," Laurs tells bne. "By the end of the year we became the largest mobile application place on the planet. Thousands of developers came to us not so much to beta-test their apps any longer, but to distribute their mobile apps. We started to get developers like Opera and Google. Then in the middle of 2007, we cut a deal with Accel ([investors behind Real Networks, Macromedia, Facebook], in which they took a $6m minority stake to expand GetJar globally."
Today, GetJar is the world's largest independent app store, has 200,000 registered mobile developers, distributes 50,000 apps, and does 35m downloads a month (15 per second) - all with a staff of around 30 people. Revenues come via three different streams: paid-for distribution, an in-app ad platform currently being piloted and a new mobile billing system now in development.
The freedom of the online world makes physical location almost irrelevant, Laurs believes. "I don't see any difference in my colleague being at the next table or the other side of the world. No longer do you have to be present in one place from a company perspective, even in a small company," Laurs says. "We tend to distribute our business across the globe and put each part of the business into the area of best efficiency, even if that is just one man."
Freed from the need to corral employees, GetJar has its product development staff in Lithuania, its marketing in the UK and its sales and storage divisions in the US, because that's where the best people in each field can be found. "No region can be equally great for all business opportunities. Every single territory has optimised in one specific area. Only in Switzerland is the government concerned with the minutiae of watches," he says as an example. "I deliberately say we are in Silicon Valley instead of America because the US is segmented into specialist centres. That's why we have invested there. That kind of professionalism is only available in the hubs - you cannot find these specialists outside."
Those specialists include a US sales team. "Americans can sell anything to anybody. Unless you have an aggressive sales team you cannot compete - even the UK does not have that kind of sales culture."
Contrary to what might be expected, concentrating on centres of excellence can also be cost-effective. "If you were to host the same servers we have in Silicon Valley in Lithuania, it would cost five times as much," Laurs says.
Lithuania was chosen as a centre of excellence for imaginative programming, not for cheap labour costs. "At this moment, it is cheaper to find a programmer in the UK than in Lithuania," he says.
By contrast, a presence in the UK offers both marketing excellence and a solid legal environment in which the "Lithuanian" company can operate. "The legal environment is extremely important. The reality is that the legal infrastructure in countries such as Lithuania is unclear and unfamiliar - I'm not saying it is bad, but it is unfamiliar," Laurs says. "The skill of the PR agencies and marketing people in the UK is outstanding. To be a professional you need 10 years in the industry, and Lithuania simply does not have that depth of experience."
Next on GetJar's list is Asia, with Singapore chosen as the hub of excellence. The decision was made after being impressed by the professionalism of government agencies, Laurs says. "Government help and expertise is vital - they seem to know your company better than you do. They approached us just like a sales team, saying 'Let's negotiate how much tax you will pay, how we can ease bank transfers for your people.' As an entrepreneur you love that approach."
Meanwhile, back home in the Baltics, Laurs predicts the region will increasingly become a "playground" for new businesses. "Small in size, advanced in IT and communications, these markets are ideal for testing innovative concepts before launching in large markets," he says.
Nowhere is that clearer than in banking, Laurs believes. "The Baltics are far more advanced than the UK. Just compare any Lithuanian bank internet system with something like Barclays. Internet payments in the US don't even exist for businesses and the average consumer or even CFO won't know how to make a wire transfer or what IBAN stands for."
As if to prove his words, a few days after the World Forum for Direct Investment disappeared from Vilnius, Barclays confirmed plans to invest in a new IT centre there.
GetJar may not be a Google or Microsoft yet, but it provides a compelling example of a new breed of "Eastern European" company able to leapfrog from startup to global player without having to conquer territories one by one. So how about investing in Vilnius... via Silicon Valley, London and Singapore?
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