This month, Mircea Stan, CEO and Founder at Postis, was interviewed by Oana Dimitriu, News Editor at SpotMedia.ro, as part of the Entrepreneur Profile project supported by BCR and George by BCR. From the discussion, you will find news about Postis, its development vision and the benefits that our platform brings to businesses. The original article can be found here.
Every period we go through comes with opportunities or challenges, and the fate of businesses being established today is influenced by the war that broke out next to us, the explosion of inflation or, for tech companies, the wave of layoffs that has already started in the US and is heading slowly but surely to Europe.
Mircea Stan created Postis in 2016, when the logistics and courier infrastructure was not digitized. Its B2B SaaS solution has been the lifeline for hundreds of companies that have streamlined their operations by turning to the machine learning-based platform. The Postis Platform has recently drawn the attention of even those from Amazon Web Services, who have also awarded the idea by including the project in a strategic partnership.
The moment of launching the platform was an auspicious one, says Mircea Stan, but it was not a readymade recipe involved. It is certain that success did not come overnight, says the entrepreneur who has so far attracted investments of two and a half million euros in Postis.
First, it was the desire to get out of the corporation. At the time I was finishing school in London and pretty much everyone was asking me why I didn't stay in London. Because it was a great opportunity to stay there, it was a good business school, I could have opened a business relatively easily.
But I told myself that there are more opportunities in Romania than in the West, there are many problems that deserve to be solved. Even though a lot has changed since 2016, this statement still stands. Romania still has many things to solve, and someone needs to solve them.
From this point of view, Central and Eastern Europe has an advantage over the West. We will probably see more and more solutions coming from East to West, from the periphery to the center, in several waves.
A first wave was that of fintech. In the banking area, there was quite an old infrastructure that hadn't changed, and it was very difficult to be changed from within. Then the need also appeared in this area of logistics, where there was a fairly old infrastructure, built in the 80s-90s. We, in Eastern Europe, were lucky that the e-commerce wave entered the market quite late, in the late 90s, early 2000s. The development was done using the latest innovations in the market and, because of that, we are more advanced from a technological point of view.
First of all, digitization was quite poor in the logistics area, and because of that there were quite large inefficiencies. And there still are. Today still, our main competitor in the market is pen and paper. Because these are the tools that many logistics and retail companies still work with.
Some have switched to the version that uses Excel, a slightly more elaborate way, but there are still subjective decisions and are "based" on the experience of people who have worked in the logistics-transport or e-commerce area for a period of time. The efficiency in such an approach is illusory. Most of the time, people can't work with a lot of variables. And from one level of complexity up, even if they have experience in the field, 50% of the decisions they make, they make wrong. Because that decision is simply random.
We came to the market for this problem. At first, it was a handicap for us to be from outside the logistics or retail industry, but because we had a good background in engineering, development, IT, software, we were able to prove that inefficiency and decision-making can be solved through data driven optimization and process automation.
We created some algorithms that feed themselves with information, with data, so that decisions are much more objective and predictable. That's pretty much what we've done from 2016 until now.
For retailers, e-commerce players or fulfillers, the interconnection with external logistics and courier systems is greatly simplified. Instead of them integrating with 2, 3, 5 carriers and couriers, they only integrate with us.
Our platform is a single connection point that optimally unites the need for delivery services with the offer of couriers and carriers.
The customer gets into our platform and, from the first moment, has access to a very large variety of delivery options, without any effort needed. This is just the starting point.
After you have managed to have a lot of options at your disposal, there it comes the second problem. How do you choose between the various options you have?
This is a problem that retailers had before too, because if they worked with more than two couriers, they had to have a mechanism by which they made choices for the allocation of the orders they had to deliver. Most of the time, they relied on intuition, they had a flow of their own that worked. Many of them were making a model in Excel, but it was always behind the times. They looked a little bit at the past data, made an estimate of what happened in the last month and said "Ok, based on the history, I think it will look like this... Or this is the optimal operating option". Which was not true either, as the history they were analyzing was already something that was no longer relevant for the future. Because it was very much about seasonality and what they were selling at a given moment in time.
If we look at the market, now it's the end of the year. The months of September and October have a certain pattern, November and December have a different pattern because there are special offers, promotions.
In the "classic" version, retailers made somehow wrong decisions all the time, but not intentionally or out of ignorance, but because they didn't realize that they had a very high latency in making decisions. But when this whole process is dynamic and you have algorithms that are constantly evaluating performance and taking into account all kinds of variables, a lot of error and inefficiency is eliminated. Little by little, when you look at data over long periods of time and you go into this machine learning territory, you go into prediction and you estimate what the future will look like – the nearer or farther one – what the performance will look like on a certain geography, on a certain type of product and so on. And then you can make decisions that help that customer optimize their operations.
The challenge from the beginning was not necessarily related to the field we were approaching, in which we had little to no experience, but to the lack of properly collected data that we could have entered into the system to create some good enough estimates.
At the time of our launch to the market, we were opening discussions with customers by not going into the topic of machine learning. We were simply going with the idea of operations simplification. We were telling the retailers "You can be much more flexible, you can scale more easily, you can have visibility over your information".
The way we used to select the optimal transport option for each delivery was more complicated to explain and this part was not necessarily exposed. Even now we don't really insist on this area, because not many people are ready to discuss data science. On the other hand, there is also a problem in the market, not only here in Romania, but everywhere. A lot of people talk about algorithms, machine learning and artificial intelligence, but very few really know what it means, let alone how to develop and use such technologies properly.
The initial investment was 100,000 euros and it covered what was needed by the moment the product had its first paying customer. In the B2B SaaS business model, you first have to have a working product, you sell it to someone who pays you a monthly fee, which then recovers your initial investment, in a longer or shorter time.
We started with 100,000 euros and our time, and, from 2017 when we had the first client until now, 2 and a half million euros have already been invested, which we have drawn from various local investors. Obviously, as long as the solution is successful and you are growing, this model must continue. You always have to refinance to bring new functionality to the product, for expansion, because the payback comes only in the future.
At the beginning of 2022 we opened a branch in Poland, and we want to establish another one in Germany. In this way, with the three organizations (Romania, Poland and Germany), we want to cover all of Europe. From Romania - where the development center will continue to be - we will cover Southern and Central Europe, from Poland - Central and Eastern Europe, and from Germany - Western Europe.
Our long-term vision is to help as many retailers and e-commerce players around the world as possible. And not only them, but even this last mile transport and courier actors, because most of the optimizations we make, and which benefit our paying customers - i.e. retailers and online stores - are also beneficial for couriers. All in all, everyone is happy.
There are two reasons why we participated in the AWS AI Challenge.
First of all, we wanted to demonstrate that we do machine learning for real. Unfortunately, as with any technology that gets some traction and becomes popular, everyone is talking about AI, it has become trendy. Therefore, it is very difficult to be credible and differentiate yourself from the noise in the market. Participating in an event of this kind brings an external confirmation, a validation by an important organization in the area of cloud infrastructure and data processing, which is able to certify how much and how well you do in artificial intelligence and machine learning. That was our motivation for participating in the first place. We wanted to see if, indeed, what we claimed to be doing was also useful from a technological perspective.
Second, we wanted to benchmark ourselves against other innovators in the market. It was statistically significant, because more than 600 tech start-ups from all over Europe, as well as the US and Israel, entered and were evaluated in the competition. The top 10 companies were selected from those which were validated as having products that use machine learning and artificial intelligence, and we were part of it.
After winning the Challenge Master title and a $100,000 prize, we developed a strategic partnership in this area.
First, we want to grow. Moving from the technology topic to the business one, the Postis Platform is an already validated business model. We are in the stage of scale-up, on an accelerated growth, we have over 250 clients - the vast majority are from Romania, but we have 20% from abroad. With the two offices in Poland and Germany, we are trying to grow even faster and, in the next two years, to reverse the ratio. That is, to have the majority of customers from outside Romania and the customers from Romania to become a minority.
We closed last year with one million euros in recurring revenue. We want to continue our evolution and double our recurring revenue year on year. This year we are somewhere around two million euros and we want to reach 50 million in the coming years.
First of all, they must have the courage to enter this area of entrepreneurship. To enter with a lot of passion. And be prepared for a very long journey. Usually, in the real version of entrepreneurship, success doesn't happen overnight. That's why you have to build your long-term strategy, determine the direction you want to go.
In the short term, you have to survive first. This is a first test you have to pass. Companies, the vast majority of them, do not manage to stay "alive" for more than 2 years. The more months in which you last in the market, that is, you have some customers who use your services and are willing to pay, the more chances are that you will be able to grow and become profitable in the future.
Entrepreneurs need patience, resilience and prepare for a long journey. There is no overnight success like in the movies. Such situations do exist, but they are very rare cases, and no one should base their growth plans on such exceptions. We see lately that all those companies that had explosive developments also implode just as spectacularly.
It's hard to say if I would do anything differently, because if we were to start a new company now, surely our evolution would look completely different.
Even in the case of companies that have proven market success (and the most spectacular company that expanded from Romania is UiPath), I am convinced that if the moment of their take-off had been different a year earlier or later, their evolution could be completely different.
There is no recipe, because we are talking about what the future will look like. My opinion is that people who get into this kind of entrepreneurship should keep in mind that it's not a short-term battle, it's a long road and for that you need resilience first and foremost. It's like in life, if we look at evolution of any kind, you need a lot of time to find the optimal solution to problems that others don't see. That's exactly how it is here.
It's a matter of survival, first of all you have to find a way to keep functioning, and after that, success will come one step at a time. Obviously, at certain moments, you have some favorable market conditions and contexts that can help you accelerate a little more, and there are some other moments that slow you down.
From this perspective, the period we, all of Europe and the world, are going through right now, with the war that is very close to us, with the very high inflation, represents an external factor that we cannot control. Therefore, you only have to adapt to this context, it's not a problem you can solve by yourself. But there are also things that depend on you and those are the problems you have to focus on.
Furthermore, if we look at the market, we see now that, especially in the North America, the main theme is, even for the very large tech companies that are hugely successful, "layoff". They fire a lot of people.
There is a six-to-nine-month lag between what happens in the US and what happens in Europe, and these fall into the category of big problems that can't be stopped. Layoffs will definitely come to Europe as well. It may not be on the same scale, but it will also be in Europe early next year.
For smaller start-up companies, after all, this is not necessarily a bad thing because, up until recently, they were fighting for people with the big multinationals. It was very hard for start-ups to grow as long as the very large companies employed a lot of people. The fact that now there are several hundred thousand people in technology who are losing their jobs... well, they will have to re-employ somewhere. They won't be rehired in big companies, so it's a good time for them to move to smaller start-up companies or start new companies themselves.
If we will look back in 3-5 years from now, we will see that it will have been a prolific period for this start-ups, we will see many small companies that will become big.
This wave of change will surely come to us, but not now. It will take a bit more. And for companies that are already in the market, it will be a chance to hire some good people that they otherwise could not have touched.