Founders of ad tech company surf mobile advertising wave
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
To fully grasp the prescience of Mihael Mikek, a co-founder of Celtra, the advertising technology company, requires an exercise of mental time travel.
Return, for a moment, to 2005. The iPhone is still two years away and most of us are talking on BlackBerrys or flimsy flip phones. The biggest money to be made in mobile is in the sale of ringtones and screen wallpaper.
But Mr Mikek, then a first-year MBA student at Babson’s Olin Graduate School of Business, sees an industry with enormous potential. Although it would be a few years before he and his co-founders — his wife, Maja Drolec, also a Babson MBA and the company’s chief financial officer, and Matevz Klanjsek, Celtra’s chief product officer — begin to focus on ways to make mobile advertisements more effective, they all saw the budding power of mobile.
“We were looking for ideas and we all believed mobile was interesting,” says Mr Mikek. “But to catch a wave like this — to catch an industry that has disrupted so many things — that was big.”
Founded in 2006, Celtra’s software AdCreator — now in its fourth iteration — helps businesses create rich media ads that use animation, audio, video or other interactive elements, optimised for different devices and formats. Using data, other signals and triggers such as a mobile user’s location, Celtra’s platform also ensures marketers deliver relevant ads to their intended audience.
Ad tech is a booming industry. According to eMarketer, the internet market research group, the global mobile advertising market is projected to surpass $100bn in 2016, of which mobile will account for more than 50 per cent. Celtra has a tiny but growing sliver of that market. This year the company, which is based in Boston, will serve more than 50bn ads and earn a projected revenue of $37m, nearly double what it earned in 2014.
The rise of programmatic advertising, which uses automated computer systems and sophisticated algorithms to deliver ads across the internet, is another boon to Celtra.
In some ways, the three founders make for an unlikely team. Mr Klanjsek studied architecture and design and previously worked in advertising. “I never had a desire to be an entrepreneur,” he says plainly. “I just wanted to do advertising.”
Ms Drolec also admits to being a reluctant entrepreneur and still talks enthusiastically about one day pursuing a career in social work. She also had reservations about starting a company with her husband. “To be frank, I didn’t think that us working together would be [for] the best,” she says.
However, Mr Mikek, the unabashed visionary of the group, insists: “We complement each other. Maya was always really good with numbers, Matevz wanted to change advertising for the better and I wanted to build a big business. When you put those things together, it becomes pretty powerful.”
The founders all grew up in Slovenia and came of age when the country gained independence. “After [that] the world started to open up a little bit more,” says Mr Mikek. “Many people in our generation started to go out and study abroad.”
Mr Mikek was the first to enrol at US-based Babson, where he won a place in the school’s signature class — the Entrepreneurship Intensity Track — a specialised elective for those who plan to launch a venture shortly after they graduate. His class project was a mobile payments company, which Bill Bygrave, professor emeritus at Babson, admits he was dubious about. “It wasn’t obvious to me that there was a great market for it. But along came the smartphone and that changed the world,” he says.
After they graduated, Mr Mikek and Ms Drolec toyed with a range of mobile-related business ideas. They later met Mr Klanjsek on a trip to London and began to hatch the company that would eventually become Celtra.
Their initial idea was to create a web-based marketing platform for entertainment clients, mainly Hollywood studios, to publicise their films via social channels. “Quite honestly, we knew nothing,” recalls Mr Klanjsek. “In the early stage we had the freedom to explore. It was tough but it was magical in a way.”
Having raised a modest round of seed money from their families, Ms Drolec and Mr Mikek worked from their flat in Cambridge and Mr Klanjsek worked from his in London and later San Francisco. They also commissioned a small group of developers in Slovenia to write code and hustled for every scrap of business. “We probably did 15 campaigns but we pitched hundreds,” says Mr Mikek. “We went to literally every company in Hollywood.”
Eventually big name studios, including 20th Century Fox, New Line Cinema, and Warner Bros, signed on to use Celtra’s service for movie release campaigns such as Sex and the City and What Happens in Vegas.
In 2009, RSG Capital, a Slovenia-based venture capital fund, invested $1.2m in Celtra. Two years later, as Celtra expanded its client roster to include other companies such as Viacom, Pandora, and Shazam, it raised $5m from GrandBanks Capital and Fairhaven Capital, both Boston-based VC firms.
It was “really tough to get the first believers”, says Ms Drolec, but their Babson roots helped pave the way for investment. “Business school gives you a passport to US business,” she says. “We’re immigrants, so venture capitalists and institutional investors can’t just call up three of their friends to check on us. [Babson] gave them a reference point. It made us legit.”
The investment meant the business became much more real. “Everything needed to be done by the book: we needed structure and employment contracts,” says Ms Drolec, who found the financial skills she learnt at Babson useful. “Up until three years ago, I put together our consolidated financials. I needed to understand every line.”
In 2013, Celtra received another $4m in venture funding led by SoftBank Capital, and today Celtra has 140 employees and more than 400 clients.
For now, the company is focused on “maximising shareholder value” and “constantly delivering” on its plans, says Mr Mikek.