Davor Runje: Successful companies arise because individuals transform knowledge and passion into incredibly successful businesses

Davor Runje is a serial entrepreneur with twenty years of experience in the technology sector. Every few years he starts anew and enters a new field, and now it is the application of artificial intelligence. He is known as the founder of the first digital agency Drap, which he sold to Imago Ogilvy in 2018, along with several other companies. He is a software engineer and computer scientist currently developing a new fintech startup, airt. Runje was recently elected president of the association Croatian Independent Software Exporters – CISEx. In an interview with Lider, he discusses his plans in his new role, the state of the domestic IT industry, and technological development.

What are your plans at the helm of CISEx? Your predecessor was quite active in advocating for the interests of software exporters; what are the main goals of the association now?

CISEx has nearly a decade-long tradition, and we as the new board plan to continue all previous activities, primarily maintaining a continuous dialogue with legislative and executive authorities to reduce barriers to industry development and collectively build a better society. We are not alone in this; the previous board is still at our disposal, and we have already jointly drafted and sent a letter to the relevant ministries regarding what we consider an unnecessary amount of reports that we regularly have to fill out.

The new board consists of very successful entrepreneurs: Anita Cvetić Oreščanin from Poslovna inteligencija as the vice president of the association, and Alan Sumina from Nanobit, Marko Linke from Repsly, and Mario Frančešević from SeekandHit as board members. These are people I usually consult for business advice, and I am confident that we will function very well as a team. In the short term, we have been thrown into the fire due to the extraordinary circumstances arising from COVID-19, and our activities in the coming months will focus on helping members adapt to the new situation. For the first time in history, CISEx Friday was held in an online format, and the theme was precisely how to adapt business in this very specific crisis.

What are the main problems that continue to plague IT companies as the most dynamic part of the economy?

Structurally speaking, the biggest problems in the market are legal uncertainty, unnecessary bureaucracy, and high taxes, as well as an insufficient number of skilled workers, largely caused by the mismatch between quotas and programs of higher education institutions and the market, as well as the significant outflow of our experts abroad. There are many examples, but as an entrepreneur today, you cannot be sure that an inspector won’t visit you tomorrow and penalize you for something you didn’t even know you were obligated to comply with. There are far too many regulations, and they are often contradictory; the interpretation of those same regulations is even more so, depending on who interprets them, and the main method of enforcement is punishment without prior warning and allowing the error to be corrected within a reasonable time. Taxes are high and also stifle growth; countries with lower tax rates are much more attractive to investors. A different, more partnership-oriented relationship between the state and companies, which would be a common service for all companies and citizens, rather than a repressive apparatus, would certainly result in greater economic growth, and thus greater revenues from nominally lower taxes. Our IT companies successfully operate in the global market, grow year after year, and generate increasing demand for quality employees. On the other hand, young IT professionals often leave for EU countries and beyond immediately after graduation, not necessarily just for higher salaries, but also to gain experience living and working in a different environment. In the long run, this is not bad; in fact, many will return to Croatia with new knowledge and contacts and start new companies, but in the short term, this brain drain is certainly felt. I believe that these trends in the industry will encourage us to develop more products rather than services, as this will be the only way to continue growing in conditions where capital is increasingly available, but human resources are becoming scarcer. We already have excellent examples in the technology sector, such as Rimac Automobili, Infobip, Photomath, Nanobit, Repsly, Gideon Brothers, and many others that are increasingly appearing on the scene.

What new challenges has the coronavirus crisis brought? Who will be the most affected?

The crisis was first felt by companies operating in industries most affected by the epidemiological situation, such as tourism and retail of non-essential products. Already contracted projects are being canceled, revenues are plummeting, and these companies received a very strong blow from the first days of the epidemiological measures. We conducted a survey among our members about the consequences of the crisis, and as many as 95 percent reported a decline in revenue, but the part that is most concerning is that even a quarter has a revenue drop of more than 30 percent. This situation is unsustainable, and 23 percent of members can endure this state without drastic cuts for a maximum of 3 months, and 28 percent for a maximum of six months.

These are still just short-term effects, and I fear that the long-term ones will be much greater, and I do not believe that any of us will be spared. No man is an island, as John Donne wrote long ago, and when the bells toll, they toll for all of us. The IT sector will ultimately share the fate of the industries it serves, and all will be affected by reduced consumption, lower global trade, and a decline in GDP everywhere in the world. On a personal level, our children go to schools and kindergartens, our parents are retirees, and our spouses work in other industries, and we will share their fate.

This is not the first crisis; what have previous ones taught you?

Yes, this is not my first crisis, and I am actually an optimist. Everything will eventually turn out well. I experienced the famous dot-com crash in 2001 in Silicon Valley, and it was a brutal experience, and I faced the financial crisis of 2008 and the fall of Agrokor a few years ago in Croatia, and that was also painful. However, in the end, all of this passes, and life goes on. At the beginning of my career, I thought that in business it was important to have a good idea, find good people, and then success is guaranteed. Today, I believe that the most important trait in business, but also in life in general, is having the strength and will to get up from the ground after failure and try again when life knocks us down. So today, I deeply believe that failure can be accidental, because life will knock you down even if you did everything right, but success is not an accident; it is the result of talent, hard work, and that little bit of always necessary luck. If you don’t succeed the first or second time, that is actually expected, and just keep going. Fortune favors the brave.

How will the coronavirus crisis affect the fintech and AI industries? Does it favor them since there has been an even stronger shift towards digital channels?

The market share of digital channels has certainly grown significantly, and this will surely be a quantum leap in the digitization of absolutely everything, from government services to any industry. Suddenly, we are forced to do everything online, and I believe we will not return to the old ways. The AI industry has been growing relentlessly for several years, and there is no end in sight for this growth.

How is your latest startup airt doing? In how many banks have you implemented the solution, and what are the results? What are the next steps in development and business, are you looking for investors?

We have currently successfully implemented the solution in two financial institutions, we are currently implementing it in two more, and we are negotiating with several others. The results we achieve have a direct, measurable impact on the profitability of banks, and there is no shortage of interest, although everyone is currently in a waiting phase to see the impacts of the crisis on business. Our solution is based on the insight that banks sit on large amounts of data about their clients that they do not use, which would help them detect their clients’ needs more quickly. This is where we come in, processing 99 percent of the data that is currently unused to create very precise client profiles, which then enable bankers to identify clients they can assist with some banking product or service. The efficiency of such personalized service is much greater than when you are bombarded with advertisements for everything and anything you do not need.

Recently, domestic startups have had more sources of funding available in the form of various funds; will there now be a ‘closing of the tap’ due to the crisis, or do you expect continued investment in technology companies?

Here I can share personal experience because I have no better insight than that. We are currently in the process of raising investment, and I must admit that we were afraid of how this situation would affect the process. Fortunately, it seems that this fear was unfounded. The fund we are talking to openly told us that there is money available and that this is not a problem, and for the seed round we are in, technology validation is more important than scaling sales, so there is no problem related to COVID-19 and the general decline in sales while quarantines are ongoing. If we were raising an A round, we would already have a bigger problem because it is difficult to grow in conditions where everything is on hold.

What is the potential for the development of fintech and artificial intelligence in Croatia? Although we as a country have missed previous opportunities for stronger technological development and positioning on the global map, can we now jump on the train in time? What is key for that?

I do not believe in some state strategies for technology development in terms of choosing which area we will be positioned in on the global map. Rimac Automobili did not emerge because Croatia decided to specialize in electric vehicles, nor did Infobip arise because the state recognized potential in telecommunications, and Photomath because we have a national strategy for the development of artificial intelligence. Such successful companies arise because individuals have transformed their knowledge and passion into these incredibly successful businesses. What is key, and this is actually what CISEx primarily deals with, is for the state to enable everyone to do business more easily in terms of greater legal certainty, reduced unnecessary bureaucracy, and lower taxes, and then some new kids will emerge who will achieve success in areas we do not even know will exist.

You have pointed out that deep learning techniques and artificial intelligence are the most exciting technologies that have emerged in the last twenty years. What phase are we currently in regarding the application of these technologies, and what could succeed them?

Deep learning, the technique on which modern AI systems are based, is the biggest technological wave that has emerged after the internet. For the last twenty years, we have been connecting everything that can be connected, first computers, and eventually microwaves and washing machines, and now that everything is connected, we have started to incorporate greater perception and processing capabilities of all the signals that these devices register. I believe that for the next twenty years we will ride this technological wave, as long as it does not become normal for everything around us to be “intelligent” just as it is today completely normal for everything around us to be connected.

It should be noted that artificial intelligence today is not intelligent in the way that humans are intelligent. Today’s AI systems are comparable to humans in perceptual tasks such as object recognition in photographs or speech recognition, but they still do not understand language in the way we do. This practically means that AI cannot replace humans in tasks that require deep thinking, but it is often sufficient for some routine tasks. For example, AI cannot replace a good journalist who will study a topic and write an article for the front page, but it can easily write a report on a football match. The result of this technology is that it puts pressure on jobs traditionally filled by young people, while older colleagues are under much less pressure. This situation has never been seen before, and we do not know what the long-term consequences will be because until now, it has always been the young who embraced new technologies, while the older ones who were unable to learn new things were under pressure. Specifically, the question is where journalists will hone their craft if we eliminate junior positions and who will be able to deeply investigate a topic and write a front-page article in 20 years.

What do you consider your greatest successes in your career so far, and what are your failures?

The real question is how to measure success, and that is an individual character question. We are all born with some talents and have some conditions to develop them. In this lottery of life, I drew two very good cards. Technology comes very naturally to me because I was born that way, and I was fortunate to be born into a family that was a great support to me, and then I was lucky to attend MIOC and FER, which are excellent educational institutions on a global scale. All of this has little to do with me; I simply won it in the lottery of life. I believe that this is a great blessing, but also an even greater obligation to develop that talent and take advantage of all those opportunities to do something good for myself, my family, the wider community, and for the world, if possible. Through that lens, I measure my successes. For example, my first startup worked on MP3 technology in the late ’90s and early ’00s, and our clients included Nullsoft known for WinAMP, then America Online after the acquisition of Nullsoft, and finally Napster. In the last year and a half of Napster’s existence, I practically spent 100 percent of my time working for them and became part of their team: I had my desk in their office, wore their t-shirt, and was in corporate photos. On weekends, we often went to San Francisco together, and once a man approached us, drawn by our t-shirts, and said something like: “Guys, I downloaded such a great thing through Napster yesterday, and my whole day was great after that.” We were in shock and spent a good part of the day talking about it. We did not cure any disease or contribute to world peace, but we made that man’s day better. And not just his, but millions of others. Our work made sense, and we happily returned on Monday to do another 80-hour work week. For me, that is a great success, not just because we earned well and were in the public eye, but because we made a positive change in the lives of unknown people. On the other hand, I have won about 50 various awards in my life, I would go up on stage and experience that adrenaline rush when a full hall applauds you, but that lasts exactly one minute, and after that, someone else is already on that stage, and you are applauding them. All of this is very exciting, but it is more a measure of vanity than a measure of success, and I think it would be foolish to consider whether my life was worth living based on the number of awards. At home, I have two little ones whom I try to raise into people I will be proud of every day. At the end of the day, that will be my measure of success, and everything else is more or less insignificant details along the way.

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