Agustín Vivancos (Jungle21): “In the medium term we want to expand in Europe and the Middle East”

Jungle21 is the creative ecosystem created by Agustín Vivancos just over a year ago. It is currently made up of 11 companies, with PS21 as its flagship.

With ambitious growth targets, last year’s turnover was close to €20 million, a year-on-year increase of 80%. This turnover places it among the most powerful creative companies operating in our country and it is also the only one listed on the stock exchange.

We spoke to the company’s president at the recently opened Jungle House in Madrid, located very close to the Stock Exchange building.

Have you met your business objectives for 2022?

Yes, our strategic forecast is to double the size of the company every three years. That means we have to have a 44% compound average growth in margin. As long as we exceed that figure, it is very good news for us.

Part of this evolution is due to the incorporation of companies, but the organic growth has also been relevant (+42%).

Last year we made three types of acquisitions. One of them is incubation, which is setting up a company by ourselves from scratch. We have done this with True or with Invisible. When there is a lot of incubation, you don’t grow as much in the first year. That’s why last year’s growth is mostly organic.

This growth is due to the fact that our agencies are doing very well, especially Redbility and PS21. Organically we are in a good momentum: we are winning clients, we are being invited to most of the competitions…

You already have 11 companies in the Jungle21 ecosystem, is there cross-selling between them?

Yes, it’s happening in a very natural way because we haven’t forced it yet. The potential of Jungle21 is its combinatorics. That is, how we combine companies with each other. Between just two companies there are about 50 or 60 types of combinations. We have a lot of possibilities to go with different proposals to the clients.

But, as I say, we have not yet activated it proactively. Although we do get customers coming to Jungle21 saying they have a problem and asking which companies you would solve it with. In fact, we have just made a proposal in which we are going with four companies. In the future we are going to grow a lot in this way.

Cost increases

There has been a slight decrease in operating EBITDA. 2022 was a year of investments?

The main reason is what I said before about incubations and acquisitions. When you acquire new companies, the first year is usually the most inefficient of all. You’re putting in a lot of people when there’s hardly any revenue. You’re tightening up the companies. And that drives up costs. Over time these companies become much more efficient. It’s usually in the second or third year that we get the most out of an acquired company.

Has the increase in costs you refer to been reflected in the fees you charge your clients?

We try to reflect it. We talk to clients so that if they want to keep the teams and don’t want to lose them, they need to increase the fees so that we can afford the salaries. You can’t always do that, which is why margins were down a bit last year.

It is also influenced by the increase in costs due to investments in applications, in IT… When you become a bigger company, it requires things that are necessary and that we didn’t have before. For example, we now have a board of directors that has to be paid, stock market advisors, registered agents, auditors… This also forces us to be more rigorous with ourselves, because we have an independent board to which we have to report.

Acquisition targets: comms, design and production

Are you going to continue with the policy of integrating companies this year?

Yes, the idea is to integrate two or three companies a year. This will continue for the next three years.

What are you looking for this year?

We are looking to continue consolidating the ‘Comms’ part. This includes advertising, public relations, influencers… We see it as a good idea to have more advertising, PR and influencer agencies. We also want to strengthen the design cluster, where we already have Lúcid and Redbility. And we also want to incorporate production, which is very important for us.

You mentioned earlier the incubation of new companies. Are you going to continue launching internal units this year?

Yes, this comes when we detect opportunities with customers that are not well served in the market. At the time, at True we mixed creativity with public relations and it has produced a spectacular result. The same thing is happening with MeMe: they are giving us accounts directly because what we do is brand building from social. It’s not a social media agency. The fees are those of an advertising agency.

We may have to incubate the production issue I mentioned earlier, although we are looking at different options.

Another of the usual levers for growth in a company is internationalisation.

Yes, but it will happen once we have consolidated the Spanish market. We already have a presence in Italy with Pink, but we would like to tackle Europe and the Middle East in the medium term.

What about Latin America?

No. It’s not our aim. Nor is it in our strategy. We think there are many more opportunities and potentially more business in both Europe and the Middle East.

Would that expansion be via acquisitions?

We would need some acquisition as a local partner and then we would go with the companies we have.

The year is already a little bit advanced. What are your forecasts for this year?

We are not giving figures, but we do want to continue with the growth we have seen in recent years.

One of the company’s major milestones last year was its IPO. The initial plan was to carry out a capital increase this year to provide liquidity to the share.

We have delayed it until later because we don’t need capital in the short term to make acquisitions; we are generating it ourselves. We think it is better to first understand how the capital market works and go slowly. We are in no hurry to have more or less free float.

We have talked about acquisitions of companies, but would you be willing to bring in a partner or integrate into a larger group?

It is not our objective. Our strategy is to make an independent, large company that is able to internationalise and add creativity throughout the value chain. We have a very unique model and we have a lot of room for growth. We are not looking to integrate into a larger company.

“We have a very unique model and we have a lot of room for growth. We are not looking to join a larger company.

He is also president of the agency employers’ association, ACT. On the one hand, there is a process of agency consolidation but, on the other hand, new firms are constantly being launched in the sector. What is your opinion of the agency business fabric in Spain?

It is a very fragmented market that needs consolidation. There is a false belief that small is interesting. There are no entry barriers to enter the sector, but there are strong barriers to grow. We see this in the fact that most companies are small.

You need volume. You need that consolidation because the bigger you are, the better talent you can attract, the better clients you can win, the more capabilities you can have… We were very small two days ago. And now we have a palette of opportunities that we didn’t have until now. We can create MeMe, True… This is given to you by the fact that you are making a big and profitable company.

That there are small companies created by people coming out of multinationals has happened all our lives. In the media we see one agency a week. But how many have we seen in the last few years that scale up. That’s the question we have to ask ourselves.

Before creating PS21, with Dommo, we had already tried consolidation. But people wanted to remain small and king of their company. Now we are seeing that people are more open to joining a bigger project to be able to grow, to have the financial and management tools… When we analyse companies, we see that there is a lack of professionalisation in management and financial tools.

“We are in a very fragmented market that needs consolidation. There is a false belief that small is interesting”.

You have been trained in business schools in the United States. Is this type of training lacking in the agency sector?

It’s a structural deficit in the sector. One thing is that we have spectacular creative talent, which is what we have in Spain. And another thing is that we have the management talent to make companies grow. There is a false belief that a small company maintains the culture. All companies come out with the same thing: “I have a flexible structure and I am adapting”. But, at the end of the day, to manage large accounts, you need a structure. Yes, be flexible, but you need a structure.

What is big for us is small in the United States. There are companies like W+K or Droga5 that have thousands of people and have the same independent and creative spirit. In the US you can maintain the culture with 2,000 people, but here we seem to lose it if you are big. We need to think more about management and how to scale businesses to have even more impact on society. Small businesses don’t generate a lot of employment, but big ones do. When you generate a lot of employment, you generate wealth.

So do you think there is a lack of growth orientation in most agencies?

I don’t know if it’s compliance or a question of management capacity. Maybe it’s a mix of both. Maybe the ambition in some cases is to run four accounts. For us it is to have an impact on the sector and the industry. This means creating jobs, running bigger and bigger accounts, with more and more budget…