The opening of the Studio mobile development "from scratch" in St. Petersburg — 3.5 years later. Reincarnation. Part 1

Hello Habr! In 2014, I published a long article about our experience Studio mobile development "from scratch". You want her back, will share with the community what has been boiling for 2 years and allow the new figures for net sales to talk about "full of bumps" as we enter the Western markets etc. In Russia 2 years of work, huge time, we have grown eight times over this period of time.

I took the original post in 2014 and have added to it (in parentheses marked with upd.2016) a new look, which believe me for 2 years very much has changed.

So, welcome — part 1:

This is our first article on habré (and hopefully not the last) and wants as honestly and openly talk about our experience of running business in St. Petersburg to develop mobile applications from scratch, what mistakes we have made which we continue to commit (well where without it) and about how we're trying to build something really big and "change the world" — namely, our project is a mobile commodity aggregator tapki (ridiculous name of course, was born as a derivative from the English word "tap"). Looking back on the article after it was written, you see, what happened is not little text (about 18 pages in word), but I hope that the above will be useful. Colleagues were advised to divide a document into parts (upd.2016 — broke, broke — or too much), but I think the whole narrative, involving little more than a year, will give a more complete picture of the development of the company. In the article, the reader will find the economy (management balance), which "stretches" from the beginning, broken down by cost items. We did not add, diminish, and all the figures quoted "as is".

(upd.2016 — looking back I'm not sure that repeated the path again, although I do not regret. Own business is fundamentally different from working as a contract employee, especially with the growth of the company. But to be honest, the most invaluable experience I received over the past 3.5 years of business development and now, if the moment will come to work as an ordinary employee, understanding business will allow you to be more effective, although there may prevent age — I'm 42 :)

I'll tell you about running a business from the beginning: the search of premises, search of investments, about the main (original) business idea and how it changed during the year, about the successes and failures. Since we registered legal.the face in June 2013 (or may 29), we can assume marks the 1 year plus and some details do not remember, but the milestones with pictures — preserved. Important — if somewhere in the text I'm doing for myself (and readers) a conclusion or give advice (directly or indirectly) — please regard it solely as my personal opinion that with a probability of 50% can be fundamentally not true. And yet — some things I can't remember the details, so you can meet a small error in part of the explanation of certain figures is not an attempt to withhold information, but just a basic forgetfulness, because the diary I had (sorry — corrected) and write from memory.

I stress that it is in any case not the user of a series of "10 mistakes aspiring business people" or perhaps "How to succeed in business from zero". Success is a relative term and we definitely have no right to write about it, because we have not achieved yet, although struggling, meaning, for themselves, under the "success" output to stable earnings in the operating activities. Despite the fact that we are an investment project, our investors (and we ourselves) have the goal not the capitalization of the company (clients, contracts, payments) and monthly dividend policy (or in other words, profit).

(upd.2016 — well we have already a profitable business, with a total staff of 19 people, most of which are programmers and designers, but still — I did not teach and will not, though often advise companies and private individuals. enrage Me a little business coaches, who often already have their own business, and doing pure consulting, forgotten "the animal world of business" :).

(upd.2016 — profitable for a long time, but there is another trap — the more your company is, the larger should be your customers. Why? Team should have to pay a regular salary, and major customers in the market are few and they are all interesting. So everyone wants to make a product that can be sold as a "box" and to deal only with its development. But how to do it, if all the resources spent on customers?)

Business idea and venture capital funds as a source of investment — what to expect?

So is our history. In the autumn of 2013 within the team, which by the way is pretty old — I believe that the average age of 35-37 years, I had the feeling that we can go to market with the idea of "Designer of mobile applications for online stores". You know, this is when mobile applications are assembled from ready-made templates in html(5). By the way the market for such projects is — myapps.com, ibuildapp.com — of those who are "hearing". Assuming that our competitive difference lies in the coverage of all mobile platforms (ios, android, windows 8 and winphone) and native development (specifically, we use products from Hamap) we began to develop a business plan to find investors. Although, I have from the beginning had a vague feeling that our venture capital funds, let's say, not eager to see us and are aimed at projects in a more Mature state, the idea was it in the newsletter for the major funds gorgeous presentation.

(upd.2016 — I have not abandoned the idea to make a mobile apps designer... not left. And I hope that by the end of 2016 we will offer the market something interesting, because 3.5 years of experience in the market applications allows basic to understand what people want. And people need ready a neat solution that you can take and use as is without agony in the adaptation by itself, especially on their own using html5).

Here I want to digress and tell you a little about the team that originally formed the backbone (of 5 people — two developers .net, project Manager, financier and businessman). We all came from e-Commerce and conventional retail (mainly consumer electronics), which just happened to be moving through life together in different projects. Experience in business suggests that there are forces in hand to make your project and has a future in mobile applications. No, not even that — we saw no future in regular web projects in e-Commerce, i.e. online stores. The market is very tight, is expensive, etc. At the same time, there is a trend of development of mobile applications, and the boys had experience with Hamap. Thus was born the idea to make designer native mobile applications for online stores. They say, and let us sell "prospectors" (Internet-shopping) shovel (well known story about the fact that during the "gold rush" grew rich not so much miners, "washing" the gold and the sellers of jeans, shovels and trucks). Failed.

(upd.2016 — should work when you do 70 projects in the field of e-Commerce and retail, you begin to understand that in General each project at the start, about 70% functional again. The conclusion? We must give people ready-made solution that will involve to start applications 80% of its needs at once, and the rest... yeah, it's already finalized, but they may not be necessary! I'll be honest — a huge number of customers often did not understand immediately the value for yourself in mobile applications — they want to try! Cheap, fast...)

Our venture capital funds... a Strange industry, probably due to the fact that it personally did not work, and intelligence and according to the available crumbs of information — she did not understand. The presentation took us about a month. In April 2013 I made a list of funds operating in Russia and began to send with a cover letter. Looking back, I realize 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 for decision-making about investments, people, even in the first stage, should carefully study written and then, if you like to invite to the meeting. Just sent about 15 letters to the most famous funds. Said only one wrote that answer in 2 weeks. But spun and apparently forgotten. So if you have a business in most stage zero stage, when there is a team, some ideas and good (as I think) the idea — don't expect strong attention from foundations. They can be understood as the highest risks to the zero stage of starting a business, although you can expect the highest returns.

(upd.2016 — the fact that you do not need anybody in the beginning. But as soon as the project begins to develop — they will come directly at Woland from the Master and Margarita. Will find contacts, call and get through. Will offer money, but also have to choose...)

And one more note — if your business is part of the Foundation, the more often his task is to come up with a profit in 3-5 years by selling its share of more expensive investments. Accordingly, the profit of the business can take second place, because it all will be asked to put on the increase in the size of the business and increasing capitalization. If we talk about private investors, it is likely that it will be of interest not the company's capitalization, and profit distributed in the form of dividends.

(upd.2016 — I have many friends in Facebook and many of these I have been told that venture capital - investment money "toksichnye". I can not judge, because we do to raise money, but it was the money of private individuals interested in long-term business development. Single story with return on investment — while this tight we. Need to earn more to start to pay dividends, but it needs to go beyond the Russian market! About it later... do the first steps...).

Should be noted that now the situation with support for the early stages of changing and there were Pro-state Fund FRII (Foundation for Internet Development Initiatives). It is easy to find online and I encourage young teams to consider it seriously enough. Looking ahead, I note that we were nominated in the first set of FDII in 2013 (autumn) and been in the TOP 30 projects, among, seems, 750 applications. I'll tell more about our experience with Fria and the reasons why we have not received (or we have not taken a view) investment, but the overall impression of this organization is positive and I, frankly, due to my current knowledge of the VC industry, I do not see alternatives for teams at a very early stage of development in Russia.

(upd.2016 — Yes, FRII is probably the best Institute at the moment of startup acceleration. Strongly recommend working with them — my opinion 2 years is not changed).

Returning to the question of investment. Our partner was the exit to investors in St. Petersburg who believed in us and became interested in the ideas, and after a number of meetings with them, it was decided to open our investment. Thus, the investor received a share of 51% in new business. This process took us a little over a month (3-4 meetings, usually in one of the cafes) and early may 2013 we were able to celebrate as the Victory Day in world war II and the birth of our company. Note that we asked of investment under the original business plan, which in addition to describing the business process that contains the financial calculations of expected income — expenditure. Of course, as we started work, it became clear that planted the idea and, accordingly, the costs have nothing to do with reality and therefore suggest — make a reasonable reserve, if only your life and management experience may not provide a detailed forecast. Applied to us, we have pledged the sum of 10 000 000 RUB., but exceeding this amount, according to our conservative forecasts, will be about 6-7 000 000.

As far as I know, rarely venture funds ask for a share of 51% in business, but I suppose that is often applies to a situation when there is some incoming financial flow, interesting and proven business idea and a solid team. We definitely do not fall under this definition, as was the idea, some ideas of the developers old places of work and business plan. All. I think it's perfectly normal "price" for high-risk investments from zero, because otherwise (a smaller share in the Charter capital of the investor), can offer equal investment.

From my experience I would advise to allow yourself some moments of communication with investors. Need not assure success, as it is not paradoxical sounds. Investors are serious people and, of course, expecting a return on investment many times, you know that the market conditions are not greenhouse cucumbers with fertilizer and not very friendly for beginners environment. Therefore, assessing your chances, try to be very honest to yourself and to the people willing to invest. Doubt is perfectly normal, I suppose that irrepressible optimism may just harm.

(upd.2016 — began to meet from the well-known venture capitalists mention the fact that they do not need a business plan for the project. They are willing to invest in the team. Speak gently — I think this is populism, as something not turn to our team to give money, although she's a professional :).

Next, list the terms of the dividend policy. At least to specify them in words. It is clear that we all want to "change the world", but the purpose of the business, eventually the income and good to hear the views of investors about his vision of separation of future dividends. Ask a question about the future of co-investor and whether or not your investor is willing to dilute its stake. For example, we are currently in negotiations about co-investment because as already mentioned, our expectations have not matched reality, and a new co-investor may continue to allow the business to grow, it is possible to returning the invested funds of your first investor on the redemption of its shares (partially or completely).

(upd.2016 — dividends dividends — you are waiting for them. In a crisis, that is, at the moment of writing these lines specifically, it is very difficult to implement. The task of the peaceful growth of the company, strengthening and training teams — and that requires money from the clients and not so much on the market, although the industry of mobile development is actively developing. In General, you should not deceive themselves and of the investors in the dividend policy is likely to you personally will increase the salary you negotiate with the investor about the scheme when a certain amount of money is paid him salary scheme).

How it looks in practice? In our case, the investor is willing (theoretically) to sell 25% of its 51% stake in under condition not just of redemption, but still open for more investments in the agreed amount. And, by the way, this model is quite convenient because the investor comes already in running a business, showing some financial indicators that have a established customer base, etc. it is worth noting from experience with venture capital funds, very rarely there is a redemption of shares of the founders (unless it is a profitable, growing business) and get a share in exchange for future investments. For example, recently held a dialogue with the German Foundation, which stated its position — 25% share for an investment horizon of 40-50 000 000. - for 3 years (the opening of the financing in exchange for shares).

Of course, the investor primarily wants a return on their investment, to stay with a certain stake (preferably locking), not to continue to invest and expected dividends. The new co-investor, considering a company with a negative operating balance, may resist the purchase of a share and here it is possible to propose a scheme in which the buyout does not occur, a new co-investor continues to invest in the company funds, but when you exit to self-sufficiency and receiving the first profit, the first investor receives dividends on the basis of their original shares until, until you return investments.

Separately, I note that we are extremely lucky investor, because we are free to take any managerial decisions, which, of course, aimed at growth of income. Some may argue with this statement reasonably indicating that an investor who participates in strategic management, can "open blurry eyes" on a number of important issues. But there's a fine line between a delicate part and a situation where the investor actually interfere in operational management, creating just a tense situation in the team.

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Organizational issues of running the company — how did it

Returning to the start of our business. Throughout may 2013 we have spent on organizational matters registration Jur.persons opening Bank account (we chose a fairly conservative Bank, Nordea Scandinavian roots, as there were familiar to managers, and "pedigree" of the Bank has inspired confidence) and search the premises. I shouldn't have to stop there, because the process is quite simple and described on various occasions including on habré. From the nuances — strongly suggest to split legal the actual address, because it is now quite strictly monitored by our fiscal authorities and... well, why do you start these problems? For registration you can use the services of a mediator or do it yourself.
We decided to name the company by name domain name. And began to search for the latest, keeping in mind the domain in the zone .com, because we're doing the constructor, so we must be subservient to the whole world! Not all of us turned out in addition to purchase domain notissimus.com; notissimus word from Latin can be translated as "well known", "recognized". Importantly, the domain was free and search for trademark in the US also didn't match (I searched on www.uspto.gov/trademarks, even though logic dictates that with the registration of a trademark usually just register a domain name). Pronounce it as latissimus with marked emphasis, we sometimes call funny. When you open a Bank account (legal face, we have the same name with the domain — "NOTICIAS") is a funny story. The Bank employee asked the name of legal.face, and then asked: "and what does that mean?", upon hearing the translation from Latin: that is saying "this is the proverbial" apologized and said he didn't know, although it seems to be the term all well known :).

(upd.2016 — once heard from customers that they like the name notissimus. They say it is capacious, silo, solid, unusual. I didn't think about this interpretation when registering, but now I begin to suspect that this may be their very small contribution to what we walked through the "valley of death" and remained to work in this competitive market. In fact, if we take the code name funki mobile client may tune into a "playful" way and not the fact that he wants to pay you money — this is only my opinion, I do not dare to impose. But all our new businesses which we are launching today, I try to call based on past experience)

We were lucky to find space in the center of the city, near St. Isaac's Cathedral with more than a reasonable rate of 100 p. 1 per m2. As you were looking for? Used all available free resources (no agents), plus personally traveled by car in the center of the city and sought the intriguing inscription "rent" is a pretty effective method. For us and the investor was important to find an office in the center, near subway (it is convenient for both employees and customers who call in guests, and adds a bit of importance of a young company when I say that the office near St. Isaac's Cathedral). We are now working in this area, gradually expanding at the expense of interconnecting rooms — a business center of class "C" that the plans should become a class "A" (with all its consequences, including "funneling" us). Room (45 m2), made cosmetic repairs, to be pleasing to the eye, spending about 45 000 RUB together with materials (worked guests from the southern republics). Allowed myself to rent two Parking spaces, because the center of St. Petersburg near St. Isaac the chance to find Parking there and understand that it will be a permanent irritant in the beginning of the working day (5 000 RUB. for one person — looking back I clearly understand that it was worth it by far).

(upd.2016 — we are now making 160 m2 at the rate of about 700 p. including utilities. Premises in the business center in the center of St. Petersburg near m. Frunzenskaya. Previous room we had on the Petrograd side, 100 m2 with entrance directly from the street. At first I was very happy such a room, but frankly now I do not advise — security is lame. The business center has security access system, video, etc. And when we had the room with the entrance from the street and 5 Windows of which overlooked the courtyard — we are extremely worried for the safety of equipment. Especially on a long weekend. Yes, of course, we put the room on private security, but this additional cost to utility bills, which are paid separately. Plus were paying cleaners, we were flooded from the apartment above, etc.).

Here's how looks at the moment our office, and at the photos below — the first room at the start of the business.


To be continued next week... still have parts 3-4.

p.s. For those who want to get much more information on the different tools on the Internet, we suggest you contact publications at http://startup.today

Article based on information from habrahabr.ru