The opening of a mobile development studio from scratch in St. Petersburg - 3.5 years later. Reincarnation. Part 1

Hi Habr! In 2014, I published a great article about our experience of opening a mobile development studio “from scratch”. I want to come back to it, share with the community what has boiled over 2 years and bring new figures on the turnover, tell about the "stuffed cones", how we enter the western markets, etc. In Russia, 2 years of work is a huge period, we have grown eight times over this period of time.

I took the original publication from 2014 and added it (in brackets marked upd 2016 ) with a new look, which for 2 years has changed a lot.

So, meet - part 1:

This is our first article on Habré (and, I hope, not the last) and I want to tell you as honestly and openly as possible about our experience of starting a business in St. Petersburg developing mobile applications from scratch, what mistakes we made, what mistakes we continue to make (well, where of this) and how we are trying to build something really large-scale and “change this world” - namely, our mobile product aggregator tapki project (the name is funny, of course, was born as derived from the English word “tap”). Looking back at the article, after writing it, I see that quite a few text came out (about 18 pages in the word), but I hope that what has been said will be useful. Colleagues advised to break the document into parts (upd.2016 - broke, broke - otherwise too much), but it seems to me that a solid narrative affecting a period of just over a year will give a more complete picture of the company's development. In the article, the reader will find the economy (management balance), which "stretches" from the very beginning, with a breakdown by cost items. We didn’t add-off anything and give all the numbers “as is”.
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(Upd.2016 - looking back, I’m not sure that I’ve repeated the path again, although I don’t regret it. My own business is fundamentally different from work as a hired employee, especially as the company grows. But to be honest, I received the most invaluable experience in the past 3.5 years business development and now, if the moment comes to work as a regular employee, understanding business will be more efficient, although age can prevent me from doing it - I'm 42 :)

I will tell you about starting a business from the very beginning: searching for premises, searching for investments, about the main (initial) idea of ​​business and how it has changed throughout the year, about good luck and failure. Since we registered a legal entity in June 2013 (or rather May 29), we can be considered as 1 year old “with a tail” and some nuances can no longer be remembered, but the main milestones with photos have been preserved. It is important - if somewhere in the text I make a conclusion for myself (and readers) or give advice (directly or indirectly), I ask you to regard it solely as my personal opinion, which with a probability of 50% may be fundamentally wrong. And yet - some moments I can’t remember in detail, so there may be some minor inaccuracies in explaining certain figures - this is not an attempt to conceal information, but simply elementary forgetfulness, since I did not keep a diary (unfortunately I am correcting) and I am writing from memory.

I emphasize that this is by no means a guide from the series “10 mistakes of beginning businessmen” or, for example, “How to achieve success in business from scratch”. Success is a loose concept and we definitely have no right to write about it, because we have not yet achieved it, although we are trying in every possible way, implying, for ourselves, by “success” to achieve a stable profit in operations. Despite the fact that we are an investment project, our investors (and ourselves) set the goal not to capitalize the company (customers, contracts, payments), but to pay a monthly dividend policy (or, in other words, profit).

(upd.2016 - well, now we are already a profitable business, with a total staff of 19 people, most of whom are programmers and designers, but still I don’t teach anyone and I don’t, although I often advise companies and individuals. I get a little bored with business - trainers, who often no longer have their own business, but are engaged in purely consulting, forgetting "the animal world of business" :).

Immediately it should be noted - we are (so far) unprofitable project. I met businesses in IT that literally took 3-4 months to pay back and began to return investments (if they were) in the form of dividends. It is pleasant to read about such projects, feeling inside easy envy of the more talented guys (no irony), who could “jump” into the market. We could not; moreover, our initial concept in the part of mobile applications, under which attracted investment, was absolutely not vital. I enjoyed reading the history of running Amperca on Habré, but trying on the experience of the guys to myself, I conclude that retail and software development are fundamentally different projects, and in our case we reach the operating profit for a long time and painfully, because business transactions are very different in time (unless you have a very large client, under which you collect a team - but this was not our case).

(upd.2016 has been profitable for a long time, but there is another trap here - the bigger your company is, the larger your customers should be. Why? The team should be supported, salaries should be paid regularly, and there are few large customers in the market and they are interesting for everyone. Therefore, everyone I want to make a product that can be sold as a “box” and deal only with its development. But how can this be done if all the resources go to customers?)

The idea of ​​business and venture funds as a source of investment - what to expect?

So - our story. In the fall of 2013, inside the team, which by the way is rather old - I suppose that the average age is 35-37 years, there was a feeling that we could enter the market with the idea of ​​"Designer of mobile applications for online stores." Well, you know, this is when mobile applications are assembled from ready-made templates on html (5). By the way, there are such projects on the market - myapps.com, ibuildapp.com - of those that are “on the ear”. Assuming that our competitive difference lies in the coverage of all mobile platforms (ios, android, windows 8 and winphone) and native development (more precisely, we use products from Hamarin), we began to develop a business plan for investor search. And although, from the very beginning, I had a vague feeling that our venture funds, let's say, did not really want to see us and are focused on projects in a more mature state, the idea was precisely to send to the main funds a beautiful presentation.

(upd.2016 - I didn’t give up the idea to make a mobile application designer ... I didn’t leave. And I really hope that by the end of 2016 we will offer the market something interesting, because 3.5 years of work in the application market allows you to understand what you need people. And people need a ready-made neat solution that can be taken and used as is, without suffering in terms of adaptation for themselves, especially on their own with the help of html5).

Here I want to digress and tell a little about the team that initially formed the backbone (5 people - two developers .net, project manager, financier and merchant). We all come from e-commerce and conventional retail (consumer electronics mostly), which, as it happened, moved together in different projects. The accumulated experience in business suggested that there is power in the hands to make your project and there is a definite future in mobile applications. No, not even that - we did not see the future in ordinary web projects in the field of electronic commerce, i.e. in the Internet - shops. The market is very dense, advertising is becoming more expensive, etc. At the same time, there is a trend in the development of mobile applications and the guys had experience working with Hamarin. So the idea was born to make a designer of native mobile applications for online stores. Like, let’s sell shovels (online shops) to shovels (well, the well-known story about the fact that during the gold rush period the rich people were not so much the miners washing gold and sellers of jeans, shovels and carts). Did not work out.

(upd.2016 - it should turn out when you make 70 projects in the field of e-commerce and retail, then you begin to understand that in general each project has about 70% of functionality at the start. Hence the conclusion? We must give people a ready-made solution that will cover At the start of applications, 80% of its needs are immediately, and the rest ... yes, these are improvements, but they may not be needed! Frankly, a huge number of customers often do not immediately understand the value to themselves in mobile applications - they want to try it! Cheap, fast. ..)

Our venture funds ... A strange industry, probably due to the fact that it did not personally work in it, and it is impossible to understand it by intelligence and by the available bits of information. It took us about a month to present. In April 2013, I made a list of funds operating in Russia and began sending out with a cover letter. Looking back, I understand that the presentation was, to put it mildly, not very, because there were few beautiful graphs (exponential up!) and tables, and more text with a detailed description of the project. But we proceeded from the fact that in order to make a decision on investments, people, even at the first stage, should thoughtfully study what was written and only then, if they like it, invite them to the meeting. A total of about 15 letters were sent on the most famous foundations. Only one answered - he wrote that he would respond in 2 weeks. But apparently spun and forgot. Therefore, if you have a business at the stage of the zero stage itself, when there is a team, some achievements and a good (as it seems) idea - do not expect strong attention from the funds. They can be understood, because The highest risks are at the zero stage of launching a business, although here one can expect the highest return.

(upd.2016 - the fact is that no one needs you at the very beginning. But as soon as the project starts to develop, they themselves will come, right along Woland from Master and Margarita. They will find contacts, call and call you. They will offer money, but also will have to choose ...)

And one more remark - if the fund enters your business, then most often its task is to come out with a profit in 3-5 years, having sold its share more expensive than the investments made. Accordingly, the profit of a business can go into the background, because they will be asked to allow her to increase the size of the business itself — an increase in capitalization. If we talk about a private investor, then most likely he will not be interested in the company's capitalization, but in profit, distributed in the form of dividends.

(Upd.2016 - I have a lot of friends on Facebook and these many told me that venture investment money is “tax”. I don’t presume to judge, we did attract money, but it was money from individuals interested in building a long-term business. Separate the story of the return of investment - so far with this tight with us. You need to earn more to start paying dividends, and for this you need to go beyond the Russian market! More on this later ... we are already taking the first steps ...).

To justice, it is worth noting that now the situation with the support of the early stages is changing and the pro-state fund of IIDF (Internet Initiatives Development Fund) has appeared. It is easy to find on the Internet, and I advise very young teams to consider it seriously enough. Looking ahead, I note that we were nominated in the very first set of the IIDF in 2013 (autumn) and were in the TOP 30 projects, among which, it seems, 750 applications. I will also tell you about our experience with IIDF and the reasons why we did not end up with (or we didn’t take - how to look) investments, but on the whole, the impressions about this organization are positive and I, frankly, because of my current knowledge of the venture industry, I see no alternatives for teams at the earliest stage of development in the Russian Federation.

(upd.2016 - yes, FRII is probably the best institute at the moment of start-up acceleration. I strongly advise working with them - my opinion has not changed in 2 years).

Returning to the issue of investment. Our partner had access to investors in St. Petersburg, who believed in us and became interested in the ideas themselves, and after a series of meetings with them, it was decided to open investment to us. At the same time, the investor received a 51% share in the new business. It took us a little more than a month to complete this process (3-4 meetings, usually in one of the cafes) and we could celebrate the first days of May 2013 as Victory Day in the Great Patriotic War and the birth of our company. I note that we asked for investments under the original business plan, which, in addition to describing the business process, also contained financial calculations of expected incomes and expenses. Naturally, as work began, it turned out that the ideas and, accordingly, the expenses had nothing to do with reality and I advise you in this connection - make a reasonable reserve, unless your life and managerial experience allows you to give a detailed forecast. In relation to us, we laid the amount of 10 000 000 p., But the excess of this amount, according to our careful forecasts, will be about 6-7 000 000 p.

As far as I know, it is extremely rare for venture funds to ask for a 51% share in the business, but I suppose that this applies more often to a situation when there is already some kind of incoming cash flow, an interesting and proven business idea and a solid team. We definitely did not fall under this definition, because there was an idea, some developments from the developers from the old work places and a business plan. Everything. It seems to me that this is a completely normal “price” for a high risk of investments from the zero level, since otherwise (a smaller share in the authorized capital of the investor) may offer a parity investment.

From my experience I will allow myself to advise some more moments in communicating with investors. No need to assure success, paradoxically as it sounds. Investors are serious people and, of course, expecting a return on investment many times, understand that market conditions are not a greenhouse for growing cucumbers with fertilizers, but not a very friendly environment for beginners. Therefore, evaluating your chances try to be extremely honest to yourself and to people who are ready to invest. Doubts - this is completely normal, suppose that irrepressible optimism can just do harm.

(upd.2016 - I began to see a mention from well-known venture investors that they don’t need a project business plan at all. They are ready to invest in a team. I speak carefully - I think this is populism, because there’s no line in our team to give money although she is professional :).

Next, write down the terms of the dividend policy. At least talk them in words. It is clear that we all want to “change the world”, but ultimately the goal of the business is income and it is not bad to hear the investor’s position on his vision of dividing future dividends. Ask a question about a future co-investor and whether your investor will be ready to dilute his share. For example, we are currently conducting a series of co-investment negotiations, since As already mentioned, our expectations did not coincide with reality, and the new co-investor can continue to allow the business to grow, possibly returning the invested funds of your first investor to buy back part of its share (partially or completely).

(upd.2016 - dividends, dividends - we are waiting for them. In a crisis, that is, at the time of writing these particular lines, it is very difficult to implement. The task is quiet growth of the company, strengthening and training the team - and this requires money from customers and so not much in the market, although the mobile development industry is actively developing. In general, you should not deceive yourself and investors in terms of dividend policy - most likely you will have a salary increase and you agree with the investor about the scheme when a certain amount of money is paid to him salaries scheme).

How does it look in practice? In our case, the investor is ready (theoretically) to sell 25% of his 51% in the authorized capital, provided not just a buyout, but also the opening of an additional investment in the amount specified by the parties. And, by the way, such a model is quite convenient, because a co-investor is already entering a working business, showing some financial indicators, having a developed client base, etc. It is worth noting here that from the experience of communicating with venture capital funds, it is very rare to simply buy out a share of the founders (only if it is not a profitable, fast-growing business), but to receive a share in exchange for future investments. For example, recently held a dialogue with the German fund, which has outlined its position - 25% of the shares for opening an investment horizon of 40-50 000 000 r. for 3 years (namely, the opening of financing in exchange for shares).

Of course, the investor first of all wants to return the investment, stay with a certain package of shares (preferably blocking), don’t invest further and expect dividends. At the same time, considering a company with a negative operating balance, a co-investor can resist buying out a share and here you can suggest a scheme in which a buy-out of a share does not occur, the new co-investor continues to invest funds in the company, but when you go to self-sufficiency and make first profits , the first investor receives dividends based on his initial share until he returns the investment made.

Separately, I note that we are extremely lucky with investors, because we are free to make any managerial decisions that, of course, are aimed at increasing income. Some may argue with such a statement, reasonably indicating that an investor who is involved in strategic management may somewhere “open up his eyes closed on” a number of important issues. But there is a fine line between delicate participation and the situation when an investor actually intervenes in the operational management, creating just a nervous situation in the team.

Organizational issues of starting a company - how it was

Coming back to the launch of our business. All May 2013 we went to organizational issues - registration of a legal entity, opening a bank account (we chose a rather conservative Nordea bank - Scandinavian roots, because there were familiar leaders, and the bank's "lineage" inspired confidence) and search the premises. I do not think that it is worthwhile to dwell on this, because processes are quite simple and are repeatedly described, including at Habré. Of the nuances, I categorically do not advise sharing the legal address with the actual address, since this is now pretty strictly watching our fiscal authorities and ... well, why do you also have these problems at launch? Upon registration, you can use the services of an intermediary or do it yourself.

We decided to name the company by the name of the domain name. And they began to search for the latter, keeping in mind the domain in the .com zone, since we after all did the designer, so the whole world should be subject to us! Not everything worked out for us, except buying a domain - notissimus.com; the word notissimus from Latin can be translated as "well-known", "recognizable." The main thing is that the domain was free and the search for trademarks in the USA also did not match (I searched on the site www.uspto.gov/trademarks , although logic dictates that when registering a trademark, I usually immediately register the domain name). It is pronounced as a note with an emphasis, sometimes we are called funny. When opening a bank account (legal entity we have the same name with the domain - NOTISSIMUS LLC), it turned out to be a funny story. An employee of the bank asked for the name of the legal entity, and then asked: “what does it mean?” When she heard the translation from Latin: what is this saying “it’s common knowledge”, she apologized and said she didn’t know, although the term seems to be widely known :) .

(upd.2016 - not once heard from customers that they like the name notissimus. They say it is capacious, "closed", solid, unusual at the same time. I did not think about this interpretation when registering, but now I begin to suspect that this may be by our very small contribution to the fact that we have passed the “valley of death" and have remained to work in this competitive market. In fact, if we take the conditional name funki mobile, then the client can tune in to some "playful" mood and not the fact that he will want to pay you money - this is only my opinion, I do not dare to impose But all of our new businesses, which we are now launching, I try to call based on past experience)

We were lucky to find a room in the city center, next to St. Isaac's Cathedral with a more than reasonable rate of 1,100 rubles. per m2. How were you looking? We used all the available free resources (no agents), plus personally traveled by car to the city center and searched for the intriguing inscription “rent” - this is quite an effective method. For us and the investor, it was important to find the office in the center, near the metro (this is convenient for both employees and customers whom we invite to visit, and it adds a little to the importance of a young company when you say that the office is near St. Isaac’s Cathedral). We are still working in this room, gradually expanding at the expense of adjacent rooms - a business center of class “C”, which should turn into plans in class “A” (with all the ensuing consequences, including the “leaking” us). Indoors (45 m2) they made redecoration to make it pleasant to the eye, spending about 45,000 r. together with materials (guests from the southern republics worked). We allowed ourselves to rent two parking spaces, as in the center of St. Petersburg near Isaac, there is no chance of finding a parking lot and they understood that this would be a permanently annoying factor at the beginning of the working day (5 000 rub. for one place - looking back clearly understand that it was definitely worth it).

(upd.2016 - now we are renting 160 m2 at a rate of about 700 rubles. including utility bills. The room is in the business center in the center of St. Petersburg near Frunzenskaya metro station. We had the previous premise on the Petrogradskaya side, 100 m2 with an entrance directly from the street. At first I was very happy with such a room, but frankly I don’t advise now - security is lame.The business center has security, an access system, video, etc. And when we had a room with an entrance from the street and 5 windows, some of which went out to the courtyard - we were extremely worried about the safety of the technician And. Especially on long weekends. Yes, of course, we put the room on private security, but these are additional costs to utility bills, which were paid separately. Plus there was a payment for cleaners, we were flooded from the apartment above, etc.).

This is what our office looks like at the moment , and the first room at the start of the business is in the photo below.



To be continued in a week ... more parts of 3-4.

ps For those who want to get much more information on different tools on the Internet, we advise you to refer to publications on the site http://startup.today