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„Baltic Classifieds Group“ nuotr.
Justinas Šimkus, the CEO of Baltic Classifieds Group, sat down with us for an open conversation that covered everything from the book that nudged him towards entrepreneurship as a teenager, to the road towards the IPO and the principles that helped him create a billion-dollar business.
“We only need time before we have more startups and unicorns in Lithuania. Everything else is already here. I’m very proud of what both Lithuania and the Baltic states have achieved. Over the last 30 years, we have created a miracle – I saw it up close when growing my business. Today we’re on a great trajectory and, if we stick to it, we will live better in five years, and even better in ten. The Baltics are becoming the new Nordics and this circle of success is spinning fast – we see it ourselves, and investors do, too. We have a lot to be proud of, and we shouldn't stop here,” Šimkus says.
– Last February, it was widely reported that Dealroom.co analysts recognized you as Lithuania's third unicorn. Immediately after, everyone started discussing how and when it happened. How did you receive the news? Why had you decided not to publicly disclose this assessment until February? After all, you had been known as an unofficial unicorn in the local startup ecosystem for some time.
– It was like celebrating my 18th birthday for the second time. It might be strange, but who wouldn't want to do it again? 1.5 years ago, when our stock exchange listing took place, we deliberately decided not to boast publicly about the unicorn title, although we celebrated internally, thanked our employees, and so on. Our management team values privacy, and most of them would rather sit in the back row than step on stage. We also thought pragmatically – publicity is useful for business when it can help to attract talent, but we have grown consistently to form a talented, loyal team. So there was no personal or business-related need to toot our own horn. We didn't go after the title, but the public recognition was nice for some of the team.
– Tell us about what your path towards unicorndom looked like.
– I'd say there were three most important dates. The first was 2007, 16 years ago, when we purchased the skelbiu.lt portal. Before that, we only managed real estate portals, and this acquisition let us enter such categories as cars, jobs, services, and others. It was probably at that point that our ambition to expand into multi-vertical audiences was born. The same year, Simonas Orkinas joined us. As we took over the portal without a team, he was the first employee of skelbiu.lt. An extremely intelligent and talented person, today he’s the CEO of Baltic Classifieds Group and my main partner in this business.
The second significant date was 2019, when we implemented our development plans and Apax Partners, one of the largest private equity funds in the world, invested in our business. The deal was worth close to 400 million EUR. It was a moment when we realized that we were getting big. This investment had not only opened our eyes, but also expanded our horizons. I sometimes tell my team that our honeymoon started at that moment. And it is still going strong, as Apax Partners still owns about a third of the company's shares. These are very pleasant and professional people, who have shown us our direction and inspired our ambitions. I'm sure we wouldn't have wanted to go to one of the world’s biggest stock exchanges in London without them.
Our third stage as a business began in 2021, when we went public. This required completely different standards, so we had to transform the company. In addition, all employees became shareholders, which also influenced their motivation. This phase is still ongoing, but I have a feeling that we’ll have more business stages in the future – not everything has been done yet. And I'm not alone in feeling this way.
– Can you share more about these stages? What goals have you set for yourself for the future?
– First of all, they’re going to involve more aggressive expansion outside the Baltics. I’m talking about new markets in Europe.
– Being listed on the London Stock Exchange is a very special achievement for any company, and Baltic Classifieds Group had one of the biggest journeys to the stock exchange among Batic businesses. What did the entire IPO process look like? What advice would you give to those who are on this path?
– IPOs operate according to the “open window” principle – when investors' money is concentrated in one place, successful listings on a stock exchange are more likely. Today, the markets are quite closed.
We started the process during the second lockdown of the Covid-19 pandemic. While we understood that we have this opportunity, initially it seemed like an impossible mission in practice. Our fears centered around the fact that we were just beginning to develop remote working skills, and the trading process on the exchange was complicated. At the end of the day, there were about 100 employees working on it, all remotely. I remember we had an online call every week – I had a giant screen in my house, but it still couldn't fit everyone's faces in.
After that stage, I’d say that the process wasn’t so difficult. There are people and companies whose daily work is to take other companies to the stock exchange, so first off, you need to choose partners that you can trust and let them take control of the process. In our case, the preparation took half a year. It’s a very short period – the shortest possible. But we got some good advice: the length of the process depends on how much time you devote to it. When preparing for the listing, our management team didn’t work on other company management issues. That’s another piece of advice – make sure you plan for that.
– You mentioned that during the IPO, all your employees became shareholders of the company. What figures are we talking about?
– Due to confidentiality, I can’t share the exact figures, but all – then about 130 – employees became shareholders of the company. We took their length of employment, the value they created for the company, and other factors into account. I can tell you that for the vast majority of employees, the figures started from 10,000 EUR and continued up to sums that you wouldn't be able to earn on salary alone. We don’t yet have many examples of this in Lithuania, but this practice is popular abroad. We wanted to thank our team because it was them who created the company. It was a gift for their effort without any future commitments. But most still hold their shares and are putting even more effort into their work, because it benefits them directly – it’s their company, too.
– Team loyalty makes your company stand out in the IT sector. The average tenure for employees is 8, for managers – 14 years. How do you attract and retain talent?
– When we started the company, we spent every night and weekend with the team. Today, I consider many of them my friends, not just my employees. Of course, now we have families, children, so we spend less time together, but the feeling that we work as one remains.
There are different views on who you should hire – people who are similar to you or as different as possible. Everyone in our team is more or less alike, and it works. Simonas and I talk to every potential employee, and I often ask them how they did in school, what subjects they liked. In school, people very purposefully and consciously choose to study certain subjects. I believe this reveals the fundamental qualities and interests of a person quite well.
When it comes to loyalty, people like to work among smart and strong colleagues. They’re motivated by the opportunity to grow. In Lithuania, the IT field is probably the most competitive – there are strong specialists who learn from each other and easily understand if the team is strong. That’s what we are trying to ensure.
– How did you do at school? What environment shaped you as a person?
– I'm from Panevėžys. When I was 15, we moved to Vilnius, where I graduated from high school. My parents were civil servants, and they started their business when I grew up. I did well at school, played sports for various teams, enjoyed basketball and football. Pretty early on, I realized that I would need math, IT, and English in the future. When I think about it, the vision I had for my future has come to fruition. I believe that logical thinking that mathematics teaches is certainly necessary in any profession, as well as for managing family or personal finances. Personally, I scored a 100 in the national math exam, and achieved high scores in all the other exams I took.
Talking about my past, I’d single out one moment when I was 14. I got my hands on a book titled “Rich Dad, Poor Dad.” It impressed me so much that I probably read it ten times, I could even quote it. I remember then telling my parents that I was going to be an entrepreneur and a millionaire. They just smiled and said nothing.
– Was there a moment when they tapped you on the shoulder and said that you had proven yourself?
– On my 30th birthday, my parents gave a speech. It was a very personal, tender moment.
– And what did you do before turning 30? What did you study? What was your first job?
– I studied management information systems. It was a new field of studies that combined economics, management and IT – all very similar to the areas we work in today. Encouraged by my study environment, I started working at a real estate portal after completing my second year of studies. I was the first employee there, which was good because I had to do absolutely everything – IT, marketing, sales, customers, bills, and even assembling new furniture in the office. I’d recommend starting your career at a small company or team – it’s important for a young person to have as many responsibilities as possible.
Today, a significant part of the Baltic Classifieds Group executives have similar experience. If we look at our valuation and sales, we are a big company. However, we have around 150 employees that manage 14 portals (Autoplius.lt, Skelbiu.lt, CVbankas.lt, Aruodas.lt, Kainos.lt, Paslaugos.lt, and others.), so there are about 10 people in each team. Each manager can answer a call, call a client themselves about a debt, set up the work pipeline, and answer questions related to IT or marketing. We encourage this, which makes us very different from other companies, especially abroad. We recognize that some aspiring managers might be good specialists, but only in their niche. They lack context and are unable to see the bigger picture. Every manager must be able to assess the market and decide what business model is the most effective.
The Baltics are becoming the new Nordics and this circle of success is spinning fast – we see it ourselves, and investors do, too. We have a lot to be proud of, and we shouldn't stop here.
– What are some of the principles that led your business to success?
– I’d like to highlight entrepreneurship. When we develop our leaders, we often ask them, “If it was your money, would you do it?” All our projects must have a clear budget, create value, and be more than just “interesting”. I’d say that we are very entrepreneurial and efficient. There are very few companies in the world with a profitability close to 80%. Our EBITDA margin is 76%.
– And what does your growth look like? Recently, the Rule of 40 has become popular among startups, which indicates what a healthy rate of growth and profitability should be.
– Over the past two years, we have been growing by about 20% yearly. In our case, for as long as I can remember, the sum of our growth and profitability rates was always around 100, so significantly higher than 40.
– Were there any mistakes along the way? What advice would you give to business owners today?
– At one point, we lost our way a little bit. We thought, “This is going well, and that is going well, so maybe we should start doing a third thing, too?” It seemed that we needed to do as much as possible, so we also took up e-commerce and started renting e-shops. We overestimated our capabilities, which was a mistake. You need to focus on your strengths. We closed some businesses, sold others for 1 EUR. It wasn’t easy, because these businesses required both time and financial investments. So my advice here is to not get distracted.
– What can help you realize that you need to let the business that you’re building go? After all, it sometimes seems that if you just keep on for a little longer, you’re going to achieve a breakthrough. We have such success stories.
– I liked Annie Duke's book, Quit, which describes different techniques for making this decision. I’d also add that you simply have to be brave. If you can't see any possibilities for growth, you have to admit that to yourself. When building a business, time and place are important. Being in the right place at the right time is part of success, but you also have to add ambition and hard work to the mix.
– How do you spend your free time? How do you relax after work and recharge for another work day?
– I enjoy tennis. My wife and I play, and we’re trying to get our kids interested, so it’s turning into a family hobby. I recently came back from a volleyball camp, and I like active leisure in general.
But when it comes to business, there's no direct correlation with my personality here. There are many people on our team who are smarter and more talented than me. It's teamwork – we make decisions together and I like it when my employees argue. At first, some of them may not have the courage to do so, and sometimes these discussions get heated, but I never have a “how dare they contradict me here” attitude. There are probably just a few decisions a year that I have to make by myself, because we hire professionals who have been working in their field for many years and often have even more knowledge than their managers.
– Would you advise someone to start a new business or a startup today? What do you think is important to consider?
– Of course. The startup ecosystem is becoming more and more active, making it easier to set up your own business. When we started about 20 years ago, entrepreneurs were not inclined to share knowledge, and there was no funding. But now, it gets better every year. There are more investors and different experiences. It is banal but true that every crisis is a new opportunity, and I believe that as well. We ourselves chose to expand in 2009, during the peak of the crisis.
Another important point of view is that there are very few unique ideas in the world. If you've come up with something new, there's a good chance that someone else in another country is already developing the same idea. Our business is also nothing unique, but we have done it better than our competitors. You don’t need unique ideas, you only need to keep up with what is happening in the world. And if something catches your eye and you see meaning in it, dive in and do it – adapt that idea to a new market. When you’ll reach your first customers, you’ll receive positive feedback, and a structure will emerge. There will also be investors who will share not only funding but also knowledge, helping you find answers to more complex questions and grow successfully.
– What business niches do you see as the most promising today?
– I’m not a guru, but today we’re actively investing in e-platforms for services. Paslaugos.lt is already a large portal, but it is growing rapidly because as the people are getting richer and more focused on their direct jobs, they are looking to outsource things like home repair.
Sustainability and the circular economy remain very relevant. We’re partially working in this area ourselves, because our portals facilitate the trading of not only new but also second-hand goods. Young people think about climate change, which is only getting worse, and want to build or work in sustainable businesses. Investors must devote part of their investment basket to this area, so this is also a long-term trend.
– What do you personally invest in?
– I’m a rather conservative investor. I work in IT, so I invest a lot in real estate for balance.
– What will be, in your opinion, the main challenges for business in the future? Artificial intelligence, economic stagnation, war, growing competition – how do they affect your business?
– I don't have a clear position on artificial intelligence – I don't yet know how it will affect our business or the future. Yes, most ads on the skelbiu.lt portal are checked by an artificial intelligence tool without human intervention, but when it comes to business development, we do not yet draw any conclusions.
As far as other factors are concerned, I’m optimistic. The GDP has now fallen by 3%, but we are living better than ever. We need to evaluate the current situation with a historical perspective in mind – our life today is great. As long as there are no major cataclysms, when the GDP drops by 15%, I look at everything fairly calmly – this is a normal economic cycle, a contraction that will be followed by growth.
