They sell illusions and compete with the ‘big boys’: Musk kicked us out, and we beat Samsung and Nike

tportal – Slaven Kordić, interview – January 2024

There are very few domestic brands that are globally recognized. Among the newer ones, Rimac is certainly the most famous. However, another brand is rapidly rising – the Museum of Illusions, backed by Croatian ingenuity. It is already the largest chain of private museums globally, present in 50 cities worldwide, with revenues that have grown more than tenfold in the last two years. Slaven Kordić, Managing Partner at Invera Equity Partners and one of the five finalists in the economy category for the tportal Visionary of the Year award, shared the story of their success in an interview with tportal.”

Innovative and original, the concept of the Museum of Illusions was launched in 2015 by Tomislav Pamuković and Roko Živković. Over the next six years, they expanded through franchises to 27 locations in 20 countries.

A significant expansion commenced in July 2021 when the Invera Equity Partners fund, under the leadership of Slaven Kordić and Kemal Sikirić, acquired a 65% stake in Metamorfoza, the company managing the Museum of Illusions.

A new management team was appointed, and a new corporate business model was introduced. The chain is no longer expanding solely through franchises; instead, museums owned by Metamorfoza are being opened.

Last year, they opened 13 new locations, including six of their own museums, all in the United States, including the largest one in Las Vegas.

This year, the Museum of Illusions chain will increase by as many as 18 new locations.

As the number of museums grew, so did the financial figures. Last year, their revenues rose to 23 million euros, with EBITDA (earnings before interest, taxes, depreciation, and amortization) reaching about six million. For comparison, before Invera entered ownership structure, Metamorfoza generated two million euros in revenue, with an EBITDA of around 800 thousand.

Visionary of the Year

In the economy category, the finalists for the Visionary of the Year award are: Ivo Usmiani, Tomislav Knezović, Slaven Kordić, Velimir Korak, and Stjepan Talan. The winner will be announced at the conference in Zagreb on February 14

There are more than 350 employees, with the majority located in Zagreb, approximately 80.

The exceptional success of the Museum of Illusions and Invera has been recognized by tportal’s top 100 key partners, commentators, interviewees, analysts, and chroniclers, who nominated Kordić for the Visionary of the Year award.

In the States, you are opening museums ranging from 700 to 1500 square meters. Doesn’t Zagreb deserve such a grand museum as well? After all, everything started here.

I agree. But it has to be a very good location. The museum in Las Vegas has 1500 square meters because it is our flagship for the entire world. We cannot afford to earn less in Zagreb after relocating. There have been some discussions, but nothing concrete so far. Perhaps if there was support from the City of Zagreb. After all, we are a private equity fund managing the money of our investors. Every decision must be backed by mathematics.

Which museums have the highest performance?

In terms of revenue – Vegas, but in terms of profit, those are Charlotte, Denver, New York, and Atlanta. In Zagreb, a ticket costs nine euros, while in Vegas, it’s 47 dollars. In our case, you have to sell five tickets to reach the value of one from Vegas. However, on the other hand, in Zagreb, the rent is lower, and in Vegas, it’s much higher. Zagreb has 120,000 visitors annually, while New York and stronger locations in the U.S. have 300 to 350 thousand. Vegas, which opened in September last year, can accommodate half a million visitors annually.

You are aggressively expanding in the U.S. I assume that is driven by the higher purchasing power of Americans.

Absolutely. People in the U.S. are accustomed to spending on culture and entertainment, or edutainment, which is what we offer. Moreover, schools have recognized the STEM content in our museums. We were the first to introduce this educational aspect in Europe, and now we are doing the same in America. During weekdays, from Monday to Thursday, our museums are filled with school children. On weekends, couples and families with children visit. For Americans, it’s a good evening outing.

You have set a goal to have 100 museums by 2026. You are currently halfway there. What are you opening this year?

In the U.S., we are building in Cleveland, St. Louis, San Diego, and Seattle. In Europe, Copenhagen and Manchester. These are six museums that we will manage. In addition, we will open another 12 through franchises, including locations like Boston, Ottawa, and Lille.

The founders of the Museum of Illusions expanded exclusively through franchising. Why did you decide to build your own museums? Isn’t that much more expensive?

Our economic analysis showed that it would be profitable. When we scaled the business and opened our first museum, we saw that it was a success. The return on investment is fast, and all the revenue and profit that we used to share with franchisees are now retained by our company – Metamorfoza. Our plan is for at least 20 to 22 of the targeted 100 museums to be our own.

How much does each museum investment cost you?

The cost varies significantly. All our museums are located in very prominent locations. There are cities that are very, very expensive, such as Las Vegas and New York. I would say that the investment per museum ranges from 2.5 to 15 million euros.

You must surely compete with large companies for these locations. How do you manage to surpass them? After all, you don’t have more money than they do.

We don’t, but we have the ability to generate more footfall. Owners of these exclusive locations like to see a crowd, hustle, and bustle in front of them. And we can bring in 300 to 500 thousand visitors annually. For example, in London, we negotiated with the Royal Family, the Crown. From Piccadilly to Oxford Street, everything belongs to them. Our concept was very interesting to them because that part of London lost a lot of visitors after the pandemic. They wanted to revitalize it. We replaced Netflix from the premises where our museum in Las Vegas is located. In Denver, we initially lost to Tesla, meaning Elon Musk kicked us out, only to later beat Samsung and Nike. Those are the big players we compete with.

Besides the Museum of Illusions, your Invera fund has taken over the Croatian web service Kompare and the Slovenian manufacturer of wooden prefab houses Marles. These are totally different industries. What guides you in choosing companies for investment?

From an external perspective, they are indeed different companies, but in their nature, they are very similar. All three companies have an exceptionally good product or brand. Another thing is that all three businesses can scale very well, meaning their revenues can be increased without significant costs. The Museum of Illusions is a global product. We took over Kompare a year ago, and their turnover almost doubled. It’s an excellent product that solves a lot of financial problems for people – it finds the most favorable car insurance and telecom packages for them. We will expand services to housing and consumer loans, property insurance, and other types of insurance. The idea with Kompare is to make it a one-stop-shop for personal finance. Marles, on the other hand, is a company that has been around for almost 80 years, exporting wooden prefab houses worldwide, from Zanzibar to the States. They are a very strong brand, but they had outdated business processes. They had low profitability, and our task is to increase it. Moreover, EU legislation promotes and supports timber construction to reduce CO2 emissions, so prefab houses are the future.

Do you have any new companies in mind that you would take over?

We are in negotiations with two companies. One comes from the entertainment sector. And we are still in talks about bringing in a strong beauty brand. I can’t tell you more than that.

The Invera Equity Partners fund has a budget of about 62 million euros. The largest investors in the fund are the European Investment Fund, the European Bank for Reconstruction and Development, three domestic pension funds (Raiffeisen, Erste, and PBZ CO), and the Fund for financing the decommissioning of the Krško Nuclear Power. The remaining funds were invested by Kordić and Sikirić, key employees of Invera.

Can you explain, using the example of Metamorfoza, what you bring to companies that they couldn’t do themselves? Please explain the role of private equity funds.

A lot depends on the desires and motivations of the owners. Tomislav and Roko, founders of Metamorfoza, ran the business on their own for five years. They told us that during that period, they traveled around the world five or six times for business. If you are working and traveling so much simultaneously, it is extremely exhausting. There is material fatigue. They were looking for a partner who could take over a good part of that operational burden. They also said that they believed in their concept and did not want to sell 100 percent of the company. We settled on a ratio of 65 – 35. So, they wanted to retain part of their ownership and create an even better and bigger story with us. Then we discussed how to do that. It was decided to go for a capital increase of three million euros and the construction of our own museums. Normally, this requires a lot of financial resources, and so far, we have raised more than 50 million euros in external financing for this purpose.

What positions do the founders of the Museum of Illusions – Tomislav Pamuković and Roko Živković – currently hold in the company?

Roko works in marketing, while Tomislav has focused on developing new and even more interesting exhibits. According to the new strategy, we brought in new people to lead the company and strengthened the entire management.

Do you approach companies that interest you for investment, or do entrepreneurs come to you?

Usually, we approach them. It’s like having a crush. First, you need to see someone you really like. Various people come to us with their ideas, but the best opportunities and the best entrepreneurs are those who, I would even say, almost don’t need us. In the three years of the fund’s operation, we have looked at about 600 small and medium-sized companies in Croatia and the region. Of those, 300 were in Slovenia, 250 in Croatia, and the rest in Bosnia and Herzegovina and Serbia.

That means you have a good overview of the entrepreneurial landscape in Croatia.

I have been working with entrepreneurs for 20 years. In the last five years, there has been a real revolution. There are a lot of small tech companies that no one has heard of. They are based in Croatia, and almost 100 percent of their revenue comes from foreign markets. The speed of their growth is exponential and simply incredible. For example, we are currently in negotiations with an engineering company that has conquered the European market and now plans to expand its business to the States. Their customers (partners) there are calling them, all of whom are renowned global companies because they have top-notch product quality. In the gaming industry, we are also considering investments in two or three companies.

Let’s go back to the Museum of Illusions. Are you afraid that someone will copy you? The entertainment industry has many major players.

We fall into out-of-home entertainment. Trampoline parks, water parks, mini-golf, various museums are entering this segment of the market. This industry is very dynamic and has attracted major players worldwide, such as Lego, which is owned by Blackstone, which owns Merlin Entertainment, operating attractions like the London Eye, Madame Tussauds, and the London Dungeon. I think you can copy our concept, but it’s very difficult to replicate it. We currently operate almost 50 museums globally, and by the end of the year, there will be almost 70. It’s a machine. Just for research and development this year, we have a budget of over six million euros. We work with neuropsychologists from Harvard who help us create better illusions. We collaborate with two studios working for Marvel and DC Comics. We are developing new exhibits with them. We are preparing truly fantastic new things.

I can see that you are very excited about all of this.

Look, everything we buy – that’s what we live. I think that’s a big advantage for us. We spend most of lives at work. If you’re not happy with it, then it’s terrible. The path my partner and I chose at the beginning of our business careers is to be entrepreneurs. It’s harder, more stressful, but we do what we love and want. And another advantage is that many times we can choose who we want to work with.

It means you will be sorry when your fund exits the Museum of Illusions. The duration of Invera’s investment is, if I’m not mistaken, five years.

That’s how the business works. In that period, we transform the business, take it to a higher level, and ultimately sell it. We have to fertilize the money our investors gave us. But for me, it doesn’t have to be the end of the Museum of Illusions. Even when a new owner comes, we can consider the possibility of retaining a minority stake in the company.