Peter Arvai
Prezi
Prezi is cloud-based presentation software that allows users to make zoomable presentations that are completely different from slides; the old technology that Prezi is working to replace. It was founded by Adam Somlai-Fischer, Peter Halacsy, and Peter Arvai in Budapest in 2008.
Adam Somlai-Fischer is an internationally-renowned architect and visual artist who has worked with zooming presentations since 2001. In 2007, Peter Halacsy convinced Adam to develop an editor so that anyone could make zooming presentations. After creating a prototype, they invited Peter Arvai to join the team as CEO. Prezi was launched in April 2009 from Budapest, and has investments from TED Conferences and Sunstone Capital.
Before joining Prezi, Peter Arvai founded omvard.se, a healthcare company that compared treatment outcomes of clinics based on performance data. He was also vice president of product management at Mobispine, a mobile internet start-up.
Pedro Santos: Can you tell me how you came to know Adam [Somlai-Fischer] and Peter [Halacsy], and at what point did they actually talk to you about joining the team and to build Prezi as a company?
Peter Arvai: Yeah. I got to know Peter two companies ago. Since I finished university, I've been with two start-ups. The first start-up I was with was a mobile internet start-up based in Stockholm, where I was the first employee on the business side. So I became VP of product management there and part of my job was to find complementary code to fit in with our product, essentially. I came across code that Peter Halacsy had done. Back then he was doing research in natural language processing and we were in need of that. This company also had a development office in Cluj, Romania. When you go to Cluj from Stockholm, you fly via Budapest. My parents are from Hungary actually. When I went to Cluj, I would stop for a day in Budapest and say hi. And that's what I did. I figured since I'm in Budapest I should try to actually meet this person who had done this interesting code.
So I hunted him down and managed to meet him. We had a great conversation. He actually ended up doing some consulting work for Mobispine, the company back in Sweden that I worked with. That was really it. And then we didn't have much contact until he and Adam started seriously thinking about building a company.
At that point he started reaching out to me asking me for advice on how to go about building a company, and then after a while they came to the conclusion that they actually need someone with more experience closer to them, and that's when they asked me if I wanted to join as CEO.
I went down to Budapest in 2008 to meet them, and to see if this seemed to be a good thing, and we just had a great time. I felt like I wanted to really work on launching Prezi, so I decided to move to Hungary at that point, although I had just gotten my own company off the ground back in Sweden.
That was a big step for us. Yeah, when I had met Peter and Adam, I felt very passionate for the product and the company.
Santos: So, you just started a company and you dropped that company for Prezi at the same time?
Arvai: Well, we had worked on omvard.se for two, two and a half years, maybe. But really we had gotten sort of a breakthrough a little bit before. It was important for my decision that I felt that there is a good person in the company taking over after me. But it was a tough decision, because it was very much based on my own idea and my baby so to say. On the other hand, I felt very much related to Prezi's mission because I love sharing ideas, and I thought Prezi could be a fantastic platform for doing that.
Another thing that was a big motivator for me was regardless of whether you were in Hungary or outside it, people always think that this country is sort of a gray, former communist, boring place where nothing fun can be done.
So, in fact, when I was going down to meet Peter and Adam, I was picked up by a relative, who immediately started saying, “Oh, there's no great companies coming out of Hungary. Can you name a Hungarian brand?” I couldn't. “There's all these Western companies, they buy up old factories. Everyone is just outsourcing to Hungary. That's what Hungary does”, he said.
I hated to hear that picture of Hungary and I've hated it ever since I grew up, because I always thought that there was a ton of potential there, and I think this idea can change very simply by creating a few successful companies. I felt very strongly also about wanting to create some sort of story where we show, “Yes, you can start a company in Hungary, and yes, you can go global and create a global brand”
Santos: Can you give some examples of questions that Peter would ask before they invited you to be a CEO?
Arvai: Yeah, they had just started working on a prototype for Prezi and so primarily it was feedback on the prototype itself. And then it became questions of, okay, how could we go about launching this? If we were to do a product like this, how could we launch that on a bigger scale? And then all the way to financing, how do you finance a company like this that has a great idea but is not ready to go to the market yet?
Santos: When you started with Prezi as CEO, what was the first thing that you actually did to start the company?
Arvai: The first thing I did was to convince the guys that we needed to change the name.
Santos: What was the name?
Arvai: ZuiPrezi.
Nobody could remember or understand or hear what you said when you said this.
So, the first thing we did was to change name, to simplify to Prezi.
Santos: So you launched the company, as you said, in Hungary. In eight months', you opened an office in Silicon Valley, where you're based now. You as CEO, not the company.
Arvai: Well, I travel back and forth a lot. So, in the last five months, I think I've traveled almost every month.
Nowadays we have operations in both places, but I think my job includes being in both places, at the moment. But I'm trying to actually cut down on the traveling. Yeah, we have all our product development in Hungary and we opened up an office in the US as it is the main stepping stone in going global.
In my experience, if you come from a smaller European market, like Hungary or Sweden, you tend to think that it's a nice next step to go to UK or Germany because from Hungary they are seen as large markets. The issue is that if you go to the UK, for example, and you become successful there, the UK is still only a sixth of that of the US market.
So, if you get a US competitor, you immediately become a regional player instead of a global player. So, very early on, I said to the guys that we shouldn't even be thinking about opening up offices in Frankfurt or in London because the way to make it globally was to first prove that we can make it on the world's biggest market, which is the US.
That's going to be the truth at least for the next ten to fifteen years. So, that's why we opened up offices in San Francisco. Because this is a place where we have most of our potential competitors and partners and this is also a good place to establish our credibility for the US market.
SantosIn the US market, are you seen as a Hungarian company or are you seen as a global company?
Arvai: I don't know if you've seen the tutorials, but some of the tutorials are made by this Indian American girl called Angelie, who's employed here in the San Francisco office. So some people think we're an Indian company because of that. So there's many ways of answering that question. I think anyone who talks to me or talks to the founders realize very quickly that the origins of this company are from Hungary. Because it's an idea that we're proud of and we don't hide in any way.
I think it depends on in what way you find out about the product. As I mentioned to you, if you just see a tutorial with Angelie and her Indian looks, you might think that this is an Indian company. And some people think that we're a San Francisco company. For us, the most important part is still the product and not our nationality.
But, as soon as we talk about the company itself, we try to emphasize our Hungarian background. Because, I think that we all feel strongly that we want to be a part of changing the image of Hungary as, actually, a good place to innovate and do nice IT products.
Santos: What were the key moments in the beginning of the company? When you moved to Silicon Valley, what were the key moments that happened there and were there key moments also in Hungary?
Arvai: We only established the office in San Francisco a full year after we had worked on Prezi. So, I wouldn't say that that was a key moment. Well, okay. There was a key moment there.
When I moved down to Hungary, we started really thinking about, okay, how do we go about creating a product out of this prototype? At that time we had something that looked a little bit like Prezi does today, but we had no concept of how to create a business model, how to present the idea to other people, what the strengths and weaknesses were. Adam and Peter had started making money on building custom presentations for CEOs but that is not scalable or sustainable in the long run.
So my first job was to idientify our long term vision.
We had offers from various different kinds of backgrounds of people who wanted to put their video content in a Prezi. So, television channels wanted to put their videos into a Prezi-like environment. And so we could have been, more or less, an OEM kind of company or we could have even become a company that just delivers UI innovations for large hardware manufacturers, for example. In fact, some people suggested to make Prezi the new OS for computers.
But, the first thing we had to figure out was what was our passion and why did we work with Prezi? That was a journey of really trying to understand what the real drivers are for Adam, for Peter, and for me. I think if I were to summarize it in a few sentences, for me, I've always yearned to change and improve the world. HP always wanted to create products that people actually use, and Adam always believed that you could create better communication tools than what we have today, where we could decrease conflicts with the right communication tools. And he believed that Prezi could be a part of it—a more conversational, open exchange of ideas which Prezi was better for than, for example, PowerPoint.
These three factors together turned into a very global vision of how we wanted to change the world: to make it more fun to exchange ideas. There was not one moment in time when that happened, but it was something that was my main job task during the first year. To nail down our direction for where we're going with this. Once we had that, going to the US was just a means of achieving our vision of create in product that could be adopted by the world. Does that make sense?
Santos: It makes a lot of sense.
Arvai: But there were a lot of milestones along the way. I think it was at the end of December that we launched the Prezi web site with the new name. In April of 2009 we launched the first version of Prezi everywhere you could actually start paying for Prezi. Back then it was denominated in euros and so… Actually, one of the lessons that we had pretty early on there was that, for example, Americans didn't understand what a euro was. One reason why we needed to establish a US presence was to be able to charge for our product in dollars. Because Europeans knew what a dollar was, but not vice versa. So we actually kept the same prices, but started just denominating our product in dollars instead of euros.
Santos: You mentioned several different directions that you thought about. Did you actually test any of the other directions, or was it just an internal discovery process? Did you go out to customers?
Arvai: No, no. I mean we were in discussions with several companies and we talked to them, because it was, of course, a way of getting inputs for our internal conversations. But we never went as far as to have an established relationship with these other companies. Because once we started reflecting on these options, we realized that this wasn't why we were doing this. But it was a good way of informing our conversations internally.
Santos: You've got a seed investment from Magyar Telekom. How did you meet them and in this agreement, what terms did you get with them?
Arvai: That was actually something that was inherited, you could say, by Peter's and Adam's history. They had been involved with a project before, called Kitchen Budapest.
This Kitchen Budapest is a media lab, a little bit in some ways similar to the MIT Media Lab, which you may or may not be familiar with, and Hungarian Telecom sponsored that project.
So, they had already had an established relationship with Hungarian Telecom and when they got started working on Prezi, Hungarian Telecom felt that Prezi was an interesting project as well. And that's how they got involved with Prezi.
Santos: And €100,000 for a seed investment. Are you okay with saying what kind of valuation they gave the company at that time in such an initial phase?
Arvai: To be honest, I don't remember. I could potentially look it up and I would have to think about disclosure, but the honest truth is I don't remember.
Santos: The valuations are so different when you are from one country to another.” What are your thoughts on that?
Arvai: I've written about this. If you are interested in learning more about my thoughts on this, you can actually look it up in the [Venture Capital Journal].
I've written an opinion piece there, where I describe my experiences. I mean, I agree with you that the venture capital market is extremely different in Europe and in the US. I think that it's about critical mass. Nowadays there are actually quite a lot of venture capitalists even in Europe. But the problem is they are so fragmented on different markets and many European enterpeneurs and investors still don't share the forums. So this makes the deal flow much less open and much less comparable.
So, I think that the only place that I found that the words “capital market” truly applied is here in the US. Because here I think it works much more like a market. What I mean by that is that there are buyers and sellers who go to a place and they promote their goods. So both entrepreneurs and VCs compete for the right offer here. Sometimes that's an unusual perspective if you come from a small European country where these deals are being made behind closed doors and much more dependent on your established network, etc.
Santos: When you got the financing from Magyar Telekom, what did you invest in with that money? Where was the focus? Was it in product development or was it in business development?
Arvai: That was only product development. Essentially it paid for the salaries of a couple of developers. When I moved down to Hungary Peter and Adam had already gotten the Hungarian telecom seed investment, so that money was already there when I came down to Budapest. Peter and Adam had not left their jobs, partly because there wasn't so much money yet and there certainly wasn't much security in an idea like this. Remember we had not clear direction back then. So when I moved down to Budapest, I quickly realized that there wouldn't be any sense in me taking out the salary from this.
I just figured that I would live off of my savings and the first thing that I set out to do after changing the name was to convince Peter to leave his job. He was working on his PhD at the time, but there was no way we could really make Prezi happen with Peter being distracted by other things.
Santos: He was also a university professor at the time, right?
Arvai: Right. So the first thing was to get him to feel that he was able to and willing to leave his job. I helped to secure a contract with gave us a little bit more money so that wouldn't be too much of an extreme decision for Peter to join, and then as soon as he had joined, which was I think around the end of 2008 or beginning of 2009, I started working on convincing Adam to leave his job, because he was also not working with Prezi.
Santos: The financing you said you secured was from Sunstone Capital?
Arvai: We did a new round of financing, that's right, in the summer of 2009. We had launched a product three months earlier and then we did a new round of financing with Sunstone Capital, and TED Conferences. That's right.
Santos: Well, Sunstone Capital I can understand. A VC company, although a Danish one which gives it a bit more color because there are already four nations in here. But why TED Conferences? How did you get to meet them and talk to them about Prezi?
Arvai: Well, I had been a huge TED fan ever since TED launched their videos on the web. So, when I was still back at that mobile internet company that I mentioned to you earlier, one of the projects I was working on was to make these videos available on your mobile phone. It was really some of the most valuable content that exists still today on the web. Actually, the format is quite good for the mobile phone, too. The lectures are not too long. If you're in the subway and you have a fifteen-minute ride, you can more or less go through one of the TED talks.
Because of that, I had contact with one guy who helped me to figure out how to make these videos available also in a mobile format. When I joined Prezi my first thought was that they should really take a look at Prezi because it would be just a more engaging way of doing the presentations.
When I moved down to Budapest I sent over an e-mail to my contact mentioning, “Hey, by the way, I just joined this incredibly cool company. I think we have a very interesting way of presenting ideas and I am curious to hear your feedback.” Really I didn't get any response to that.
But then after we had launched the product in April or May, yeah in April 2009, I got an e-mail back from the guy saying, “Peter, how was it? Did you join Prezi?” I said yes, yes, I tried to tell you this about nine months ago.
Then he said, “Some people here were wondering about what this new thing is and maybe you can tell me more?” I said yeah, I'd love to do that. My idea was that, okay, maybe if we can get some sort of collaboration in place, of course this would be great for Prezi to be able to be seen in an environment like TED.
So we set up a meeting and I booked a flight to New York. On my way to New York, we were actually in the middle of negotiating an investment with Sunstone and I realized that having a Prezi presentation at TED is cool, but why don't I try to convince the TED folks to actually invest in Prezi because that would be twice as fun?
But when I got to New York, my meeting with TED was canceled. And I had a couple of other meetings with people I knew before, and I was, of course, disappointed, but during those three days I was trying to figure out a way of trying to meet them anyway.
Somehow I managed to guilt-trip the secretary of Chris Anderson to realize that I had come all the way to New York to meet with them and that I must meet them. Just before I was going to leave to the airport, I got twenty minutes with Chris Anderson, who is the curator for TED, and fortunately those twenty minutes were enough to actually get Chris interested in Prezi and feeling like our values and our mission were really the same in the sense that we are working to spread exciting ideas around the world.
So they ended up investing in Prezi based on those twenty minutes that we had.
Santos: Quite impressive.
Arvai: I would say that that it was the most successful twenty-minute pitch that I ever did in my life.
Santos: I can believe you because it's quite an achievement for one. I'm sure that in the meeting he didn't have that expectation, probably.
Arvai: No, I don't think he did. And also, just to give another perspective on it, as far as I know TED has not invested in a company before or after Prezi.
Santos: Yeah. It just reinforces what you said before. How did this affect the negotiations with Sunstone, because you were in the process of negotiating with them?
Arvai: I think they were just happy about that. That just made them feel reassured that we were a good team with the right values.
Santos: When you raised your Series A round, it was announced that you would get Jack Dorsey as an advisor. How did you meet him and convince him to be an advisor? Now he's no longer an advisor to the company or listed as an advisor.
Arvai: Well, Jack Dorsey, but also Evan Williams actually. We had e-mail contact when we launched Prezi because they really liked the product essentially. And so, we kept in touch via e-mail. As I was coming out to San Francisco to figure out how to set up offices here we just said that we would meet up. And we did continue to meet on regular occasions. The reason why Jack Dorsey is not listed any more as an advisor is: because he's so busy with both Twitter and Square.
Santos: Can you give me an example of an advisory conversation that you had with him that really had an impact on Prezi?
Arvai: I think that Jack was and is a guy who is really all about a great product, and he really strengthened my sense that we shouldn't spend too much time figuring out how to market Prezi or how to find secret backdoors into people's hearts. Instead, we should really just focus on making the best possible product and the simplest and best user experience that we can. If we do that, then people will like what they see. That resonates very strongly with me too.
At the same time though, once you start get to builda real business, all sorts of other pressures come in from customers, from partners, from investors, and everyone has sort of different expectations on what you are supposed to do. But to this day Prezi is spending very little effort on traditional marketing. Our marketing guys work mostly with support, training and only a limited outreach.
Santos: When you actually launched Prezi, you put the site up and what did you do?
Arvai: I went to a conference in Amsterdam, the Next Web Conference, and they had a start-up competition. We came in number two in that competition. We launched that day, so April 2009.
Santos: And that was your marketing for the launch?
Arvai: Right.
Santos: How did it go? Did people pick it up immediately, or did you have to do additional efforts? Did you continue to go to more competitions to get more exposure?
Arvai: No, not really. No, we didn't do that.
Santos: So, the growth of Prezi was mainly word of mouth?
Arvai: It was and is. It's always been and is.
But it was a great moment. I was given a five-minute pitch to talk about Prezi, and after my pitch the host of the conference asked the conference, how many of you would pay to use Prezi? And half of the audience raised their hands. It was just a great feeling.
Santos: Were you disappointed that you were number two?
Arvai: Of course I was disappointed, but I got so much positive feedback from the participants at the conference. So, in many ways I felt like a winner anyway.
Santos: Can you talk a bit about revenue? Can you give an idea of when the company became profitable and what kind of growth of the user base and the revenue you've seen from the beginning?
Arvai: We reached our first millionth user after eighteen months, so eighteen months after that April time. We've been growing exponentially ever since, so right now we're at 4.3 million users. (Today we're at 6M) Regarding the money part, I actually don't want to comment at the moment.
The only thing I would say regarding that is that we're a freemium model, and like many other freemium models out there, we have a part that converts to paying. I think we don't do worse or better than the average company in this arena, and if you look into how these companies are doing, then you will get a pretty good idea.
Santos: Until now, what were the main lessons for you, and what would you consider to be the hardest challenges you faced until now?
Arvai: There's been a lot of different challenges along the way, as I told you in the beginning. The first challenge was to figure out what we even wanted to do with this innovation. Then, later on, how do we execute on a global strategy and get the finances to add up? How can we make sure that people actually have salaries to live off? Right now, I think our biggest challenge is to grow our engineering team with the right people. We need to find really talented engineers, and really that's right now a pocket that can't be too full right now, it seems. So, we are growing it in a way that puts challenges in terms of not just recruiting, but how to organize our efforts, etc.
Santos: Where do you actually hire the engineers, in Hungary or in Silicon Valley?
Arvai: In Hungary. We have all product development in Hungary, as from the start.
Santos: What advice would you give to European tech companies that are starting up now? Is it to stay in Europe?
Arvai: I don't think our way is the way for everyone. I think each company's strategy has to start with a goal and the vision of what they're trying to achieve. I think for us it was an important step to create a US presence because, as I mentioned to you, we believe that our biggest market is in the US.
And also we are very much a consumer-facing product. So having presence in the world's largest consumer market is necessary for us. I don't think that that's necessary for all types of businesses.
Really you have to begin with asking, “Who are we, and why are we doing what we're doing?” Because if that's clear, the rest becomes just a function of how you achieve your goals. And I think that that is really important because, of course, there's going to be a certain glamour attached to being in San Francisco or in Silicon Valley. But I think that that is not sufficient to build a serious business off. So I think it's good to reflect on these questions.
Having said this it could be with adding that I have lived in three continents and seven countries by now. And I have to admit that those experiences have really impacted the way I see the world. I believe that for any entrepreneur to have some sort of experience outside their own comfort zone when they think about how to create a product that's really good. In my case my traveling experiences has shaped my views on the global potential for Prezi.
So what I mean by that is not necessarily that you have to go and live in Asia to be a successful entrepeneur. It can be that maybe you need to have experiences from working in elderly care and realize what kind of problems there are there. But having the ability to see things from different perspectives I think is actually very helpful in shaping the way that you look at the world. Probably that's will influence the way you run your business in many indirect ways. That's just something that you have to continuously develop.
But I don't think that you can get a business idea then go to India and see if it's a great product for India. Or you can, but usually these are very long-term learning processes. At least for me.
Santos: Is there any other topic that we didn't discuss that you find relevant for future entrepreneurs?
Arvai: Something that may be interesting to discuss is the question of the different leadership styles and the different company cultures that these entrepreneurs that you talk to have utilized.
In my case, and I think I alluded to this if I've not said it directly, I've been very concerned with not building a company where there's too much of a feeling that there's an A and a B team. And naturally you'd think that the A team is in San Francisco. That is the cool place where everyone wants to be. And the B team is in Budapest, this former communist, gray country—and that's where you outsource people. This is how most people tend to look at the world, and it's a view that bugs the hell out of me.
And so what can you do as an entrepreneur is to try to work on those preconceptions. So one thing that we do, for example, is a fellowship program. The fellowship program allows Prezi employees to work in the other office and Prezi sponsors the travel and the living costs for the person if this is within, of course, the three-month visa restrictions that are allowed. So this means that people can experience the different places with all of their strengths and weaknesses.
Another thing is, so far we've had a semi-annual power week. I don't know if we will be able to keep this up, but during this week we collect the entire company in one place and so far it's always been Budapest because that's always where we've had more people. This was probably a very important moment in Prezi history as well.
I think a lot about about build our company culture. When I moved down to Budapest, it was summer and then came fall and then as always with winter, the usual question came up to have a Christmas party or not.
I've always been quite resistant to these Christmas parties. What I observe is that partly the management feels like, oh, this is a must and that if we don't spend enough money on it, then people are going to think that we're cheap. It's something compulsory. On the other hand, I think that most people that go to these parties feel the same way.
They don't go because “oh, I'm really looking forward to this Christmas party,” but because “oh, it's a compulsory party. I need to go too” and then the evening ends up with people drinking a lot, getting very drunk, and maybe doing things that they, the next week, don't want to talk about.
I've always felt like I don't understand why companies do these parties where instead we could do something that is closer to the spirit of what Christmas for me is about. So I found a social agency in the poor parts of Budapest and I asked, “Do you think there's a family here whose living conditions are so terrible that we as a group could come there and change it dramatically?” Of course there was, so we spent two days renovating this flat. At the outset, some thought that this was one of the most unconventional to as a company of tech guys, to go in and do manual labor. And what if they will be ashamed of us coming and helping them?
We all had doubts and it was very strange to go into someone's home and start renovating. But the outcome was far better than all of us had expected and ever since then we have continued doing these renovation projects.
It turned out that not only did this family get a proper house to live in for Christmas, because it was in terrible conditions that they were living in, but it turned out to be the best team-building activity I think we ever did. We changed roles. I was painting the walls the two full days and one of our developers was project managing the entire thing.
We got to know each other in new perspectives and got a deeper relationship with each other. I think it really energized everyone, including the people we helped in the end. Although everyone around told us we shouldn't do this, it's not proper for us to do this. But when we took some time and supported each other, then we could overcome these challenges quite easily.
I think that those sorts of metaphors that can really set the norm of what it is that this company is trying to achieve. First of all, that if we workd together then yes, we can have a great impact on the world. Then second, having fun while we contribute to make the world better.