Big interview with Simon Dunlop - founder of Dream Industries: how to bring Russian IT products to the world market

Simon Dunlop can be called a Russian entrepreneur of English origin. This person, to date, has seriously influenced the IT industry of our country. He has already confirmed and continues to prove that Russian IT products can successfully compete with Western ones not only at home, but also at a party - abroad.

Sometimes it seems that he understands the Russian business mentality better than we do. This is perhaps the main reason for the success of his projects in Russia. Having learned that Simon did not mind talking, we agreed to meet at his office and recorded this conversation.
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My first question is: how did an Englishman who worked in the tobacco industry get into IT, also to Russia?

I have been working in the tobacco business [Philip Morris] for almost 7 years. During this time I had a desire to do something with my own. During this time, I saw how our customers developed their businesses - from zero to several hundred million dollars in turnover. I wanted to do the same.

My first business after that was snack-business (English snack - "snack") - Bridgetown Foods. But before that, in 2000, I had little experience with the IT business. In England, my partner and I registered a small incubator that was physically located in Israel. We had an idea to invest in startups in the military-industrial complex of Israel and we needed seed investments. Then, in 2001, there was a collapse of the dot-com, and for several years this market stopped. We closed our business until better times, closed the losses and returned the money to investors. At that time I was in England, and decided to return to Moscow.

And just then I started to study Bridgetown Foods with Victor Frumkin. After that Dream Industries appeared, and we returned to IT projects.

Dream Industries holding includes companies Zvooq (music services ecosystem), Bookmate (social book service) and DI Telegraph ( co-working center).

Zvooq was the first project of the company?

Yes.

In today's IT, I absolutely understand why people think about the creation of streaming music services. Today we already have Apple, for example, which has entered the market. What motivation was then, in the early 2000s or a little later, to create such a service, when at least there were no analogues to it in Russia? In the West, it just started in the form of Spotify and Pandora. Why did you think you would be successful?

Zvooq was launched in 2009. We had an idea based on market analysis that the consumption of music (including digital) in Russia is enormous. At that time already several tens of millions of listeners were listening, downloading, streaming. But at this point there were almost no licensed applications. We then believed that the main problem of piracy was not in consumption (because there were a huge number of potential customers willing to listen), but in applications. Because if you make a good application, create a good service that people really need and covers their needs, then this can be successful.

And now, too, we remember that music consumption in Russia is quite developed. The user can listen to everything - including music from pirated sites. Although then they were not considered pirated, because then there was no relevant legislation that would explain that it was illegal. Therefore, it was not piracy.

This is just an unregulated area.

You understood that in Russia there are actually consumers of this music who are ready to listen and pay for it, maybe not directly with money, but to pay indirectly. Because you, as a commercial company, in any case should receive income. None of us exist in an altruistic business model.

This is definitely not an altruistic business model. To be honest, I don’t believe in altruistic business models at all. But I believe that more than money is time. And if a person is ready to spend his time on your service, then somehow you will find a way to monetize this attention.

When we started, some people said: “You are crazy, how can you do such a project in Russia - there is only piracy and so on.” But we understood that there is a rather sensitive and developed consumer. And if our competitor is free, then you need to make a product that is better than free. This means that the product must be very good, but remain free. And so it happened, and over time we found a business model for Zvooq, which turned out to be successful.



But before that, we changed a lot, and this happened after a long period of development and development. We tried different business models, tried to sell music that people did not buy. Then we understood what the model should be, and now the service is developing successfully and making money.

An interesting feature of the Russian market is that today almost all international competitors for one reason or another have decided not to enter the Russian market. Spotify was supposed to open here this year, but decided not to open. Being in Russia one of the few who does this is a good position.

Do you think that your prospects here, on the Russian market, are bright enough, good enough?

Yes. And I believe that such an algorithm, where a good idea, technology, and creative are involved, can give a good result on the Russian market. Because the Russian market has its own characteristics - the territories are huge, the economic situation is not like in all other markets. Therefore, here we must think a little differently.

We used the same idea and approach for Bookmate, which began some time after Zvooq. But we also saw there the economic sector, which has a great dysfunction, also associated with piracy, as well as with the geographical features of Russia. There are few bookstores here. There was a network of bookstores that tried to develop in the 2000s, but this happened with great difficulty. People began to buy less paper books and began to use technology.

Can you say that Russia is the most reading country?

Yes.

Bookmate users are quite active, do you have a large influx of new users? Those who are today, constantly use the service?

Yes, and that, and another. Those that are already quite loyal. And we are now seeing an increase in the number of new readers. If a person visits Bookmate for the first time, it usually stays there. Bookmate answers a lot of questions for those who like to read: what should I read, with whom to communicate, to be advised to read something. The idea of ​​a resource is to develop thinking through reading books. Now the team comes up with new features to make the service more social, more attractive.



During this year we successfully launched in several countries in Asia and Latin America. Accordingly, catalogs in different languages ​​have been pumped. Now the site supports 9 languages: English, Russian, Azeri, Spanish, Kazakh, Danish, Dutch, Swedish and Indonesian. We are cool read in the US, UK, Australia, Canada. In European countries, several pilots launched.

Among our users there are a lot of young people - up to 35 years. The average session on the Bookmate site [per user] does not exceed 12 minutes. The person is in Starbucks, found free time or goes to the subway, picked up his phone and instead of reading Facebook or playing Angry Birds, go to Bookmate.

Recent events occurring in the Russian market, affect your activities, or you do not notice the negative effects? For example, someone notices the positive effects, for someone the current economic situation is an incentive to grow more quickly, hire employees, solve new problems, launch new projects. What do you think about the current moment and the future?

In general, the economic situation is generally positive for our business. If we talk about our third direction (coworking center DI Telegraph), then there is a negative and positive.

If we talk about Zvooq, then international competition has become less (we have already spoken).

In the case of Bookmate, the situation is as follows: the prices of paper books have gone up, and the prices of e-books have not changed. So, for those who like to read, it has become a more affordable, cheaper way.

In addition, we are still attracting third-party investments for business development. Today it has become more difficult to attract finance. This is what we decided to do with Bookmate a year ago: we decided to move abroad very actively and quickly.

That is, seize other language zones?

Yes. And we realized that the product that we were developing now in Russia is in great demand and can successfully develop in other markets [with content in other languages]. We already thought about it, but due to the economic situation we made this decision much earlier. Now we have a business there, where we earn not rubles and attract international investment.

Do you have good expectations for entering the international market?

I think there were high expectations, but now a good result is being obtained. This is a good indicator for me - in Russia you can develop an excellent product that will have international success.

There are many examples proving that this is not the case. There is the same LinguaLeo, a good Russian product, quite famous here. But repeated attempts to enter international markets (Turkey, Brazil) are now curtailed. Of course, the situation of LinguaLeo is complicated by the fact that they had a very bloated staff.

What do you do with your staff in the current situation? Are you trying to keep it compact and efficient, or is it better to take more and do more now, and then deal with these frames?

Our approach is more conservative. Most of the state we hold in Moscow now. Our product is already mature enough and can compete in the international market. We add people to the team that we have now, when business already appears in a new market. We now have local managers in Indonesia, Latin America, Azerbaijan, Singapore, and a marketing director in Berlin.

I and our CEO Andrey travel a lot. We are trying to develop business there. If we talk about Bookmate, then when we have at least one contract appears, we are entering a new market with a mobile operator. So far we have managed to sign several contracts.

With large mobile operators? National operating in these countries?

With international operators operating in these countries. When the contract is concluded, we can exhale a little. And then it makes sense to hire another one or two people. When there is a result and the potential is visible, we can hire the minimum number of people who provide this new market. And I think that is the only way to do this. Because there is no such thing as in Silicon Valley: the ability to attract several tens of millions of dollars.

But even if you attract more money, then the cost of product development will be much higher there.

Yes, it is a fact. But in Russia, I prefer such an approach, more nimble, aggressive and dynamic, instead of having a huge staff and slowly moving somewhere - there are many such companies. But there are also examples of good companies in Russia that are developing in international markets, for example, LucaNet , a developer of BI applications. Or World of Tanks from Belarus.

It often happens that a startup “from childhood” starts thinking: “I have my own home market. He is huge. ” And indeed it is huge. Even after the crisis, the Russian market is in first or second place in Europe. So, if there is such a huge home market, then why think about other markets.

If you develop a business in the Russian market, which has its own specificity, then it becomes difficult to adapt the product to other markets. This topic, about which I often talk. And if we compare our situation with the situation in Israel, Sweden, Denmark, there companies from the very beginning want to be international.

What do you think, is it possible to occupy a large part of the market of a country that is not home to the project? After all, there is a need to adapt to each national peculiarity of countries. You have a Russian company that is gradually becoming international through penetration into new countries. Will you win local competitors there?

If you make a company that is analogous to a successfully operating model in a local market, then it is unlikely. But if you create something that has a unique approach to solving a problem, there is a chance of success.
But now I am faced with this situation: we are competing with an American company. Usually, American startup workers have 10-12 days of vacation.

There in startups work 60 hours a week. They have everything on fire, they spend their last strength on this startup. They feel that they should start first, that if they don’t work, they don’t find a client as soon as possible, they won’t earn anything. This approach they have so developed that they are our main competitor, and not only in the States, but also in Germany and England. They are just such wolves: aggressive, "hungry." They have good products and they work very quickly.

Therefore, competition with Russian startups is not the best preparation for the fight against American companies in the international market. The Russian startup community lacks this “hunger”. They reason that if something is not done today, there is always tomorrow.

I believe that the Russian startup community is about 10 years old. And now, in a crisis, these people have become more hungry: now it’s not so easy for them to find money, it’s not so easy to find clients, now it’s harder and harder. And maybe because of this, those companies that are now called successful are more ready to enter international markets. If the company overcomes the crisis, it becomes much stronger. Visiting events for startups, in the eyes of these people, I now see that “hunger”.

A year ago, they were more relaxed, calm, and reasoned like this: "We will still win, because we have more creative ideas, approaches, design." And now you just need to be really "hungry."

I recently heard the phrase: “Anyone can be a good businessman in a rising market. Only a really good businessman can be a good businessman in a falling market. ” This is roughly what you say: good ideas survive and scale in the face of some collapse.

Yes. Here is another example. If 10 years ago startups thought about wine, now they dream of grapes.

A good example ... You say that there is no Spotify in Russia, no Pandora. But Apple Music started in Russia. Its price of 169 rubles is strongly dumping other services. What are you going to do?

I think a little differently: the money that customers are willing to pay is 160-250 rubles. But today there are many sources of free good music: YouTube, and many others. The question is not in cost: music in the markets of the former Soviet Union should be free. An entire generation of people has grown up who are used to [digital] music not worth the money. Moreover, the idea that music should not be sold is supported by the musicians themselves.

Some success with Apple Music will be, perhaps, but it seems to me that the service will be in demand by the owners of the iPhone 6 and so on. I think this is not a massive decision. Mass solution should be free. But this does not mean that you can not make money on music. Is radio free for the listener?

We believe that Zvooq is a very good tool for raising and developing the music market in the country. True, we also have a subscription model. But we believe more in advertising monetization.

We talk a lot about problems, but I still have one final question about difficulties. Since May 1, 2015 the anti-piracy law entered into force. He now regulates not only music or movies, but absolutely everything except photos. How does government regulation affect you? Do you have to adapt to this? Or do you not experience problems and difficulties?

This is more a question for the CEO of Zvooq - Mikhail Ilyichev. Our common position on this issue: this is a very good step, and maybe not immediately, but over time this will bring more regulated and civilized mechanisms to the market.

That is, do you think that this can help build the very productive relationship between owners, musicians and listeners?

Yes.

What do you think about coworking? First, coworking came to Russia not so long ago and immediately became largely popular. Oleg Tinkov, who said about coworking smoothies, in my opinion, showed that in the eyes of some people from this community, the power of co-working as a place not only for work, but also a place for coordination, is greatly overvalued. Supposedly people go to coworking to drink smoothies and do nothing else there.

In some ways, I can agree with Tinkov, but in something - definitely not. Our guests in co-working drink coffee and red bull. There is a trend in the world: the entire working layer, which works in startups, has become more mobile and independent. These people do not work for any company, they work for an LLC named after themselves, investing time and energy in their own development. Coworking illustrates the idea that these independent units can join forces to create individual projects, and then designate a way out of this interaction, leaving the coworking territory.



There is also an option when projects created in coworking go to another level and become companies. Then these independent work units cease to meet sporadically and begin to work in a more rigid framework.

Coworking is the most dynamic and fastest way to create a project, by recruiting to the team those who are within the reach of the arm.

WeWork's coworking network recently raised $ 780 million with a valuation of about $ 16 billion. They have about 25 spaces around the world. Their approach is quite simple: there are two values ​​- space and people.

And our approach in the DI Telegraph is reduced to the iterative development of the second value.

It turns out that you sell coworking as a service? This is a complete service that develops and is thus provided to the consumer of this service.

Yes. We thought up from the very beginning that our goal is an ecosystem of people working together. It employs 120 people from Zvooq, Bookmate and Theory and Practice. There are also many other talented, highly professional people working on their projects. These are 110 people who work in 30 different projects. This self-organizing ecosystem, there is no incubator. Sometimes someone comes, pays and organizes events. We ourselves try to attract, hold interesting events, conferences.

That is, here for you and for them coworking is not only work, but also networking? What you are talking about is networking. This helps people to unite, to find some kind of joint topics to which they are interested - due to this, you first of all build this business?

Yes. Moreover, I do not believe in incubators. If a start-up knows what he wants, if he is “hungry” enough, he does not need to sit in an incubator for 6 months. He needs to find partners, a team, customers, and so on.

And your coworking can help them with this?

Yes. Our coworking helps him get to know the right people. , , – , .



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Good. What is your next project?

Today I even discussed with my partner, Victor. I had a good idea, but unfortunately, I could not do it. And in the near future does not work.

Why?

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