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Launching a startup is always stressful. Developing a new product might be scary, as almost every step can be a mistake that will cost you business.
How to develop the right idea, get funded, and scale properly? I was able to sit and talk to Nikolay Vakorin, a serial founder, whose latest project Gmoji, an app for sending emoji-coded gifts, was valued at $17m and got $3,3m investment. Below, his answers to questions, every startup founder is struggling to figure out.
First thing first, can you share your advice on working out the startup idea? How to figure out what to work on?
Well, I think the practical algorithm is as follows: you need to think through what characteristics your project should have, then brainstorm ideas that meet your criteria, discuss them with people you trust as experts, iterate.
For example, before launching Gmoji, I had a bunch of offline businesses and wanted to quit this niche. So, my criteria for a new company were:
- no physical assets you need to support and pay for;
- no accounts receivable – almost always in my previous projects I needed to send products before the payment, and it was a real pain collecting the money afterward;
- minimum staff needed – in offline business you need a lot of employees, whom you need to control and motivate;
- the room for capitalization growth – in offline it is hard to scale and sale the business, but I wanted to build a potential unicorn (why not?);
- exit strategy – I needed to create a high-liquidity business I could sell really fast if required.
This list was a starting point. Then, I've collected several ex-colleagues, partners from previous projects, and even some employees who were interested in joining a new venture. Together we formed something like a discussion club. We've spent several months brainstorming and tossing around business ideas. As a result of this stage, we've got a list of filtered ideas that meet the list of criteria above.
In the third stage, every one of us should work his top idea through, conduct market research, drafting a business plan. And we should pick the only idea, which in our case was a "gifts-based social network." When we started working on the project and iterated, the final idea has changed a bit to what Gmoji is now – a gift-sending app and custom keyboard with a marketplace interface.
Let's add more practice. How did you understand that there is a real pain in sending and receiving gifts?
There are three major gifts-related problems out there. The first one can be formulated as "I don't know what present to choose." The second one is connected to receiving gifts ("How do I stop getting useless stuff as a gift?"), and third sounds like "How do I send a gift to another city fast?"
If you analyze the situation, you'll understand that there is still a lack of solutions to these problems. Sure, you can visit a gift recommendation website or read an article on the web, but usually, these are just native ads of some e-commerce shops with the limited offering. As a gift-receiver, you can come up with a wish list, but this only works with "big days" like birthday, but not in the situation when the person wants to send you a gift with no particular reason. Gifts delivery from person to person is a massive pain in any country.
We wanted to understand whether people are ready to switch their gift-sending activities online. To do so, we've studied the psychology behind gift-sending. It turned out that there are more than 100 reasons for sending a gift, and many of these were online-ready. The unexpected thing was that people even can send paid gifts to express negative emotions (negative attitude towards a person or his/her actions), while positive emotions always prevail ("thank you" and so on).
How to decide between working as a b2c versus b2b project?
Actually, you do not have to stick just to the specific format. But it is always helpful to start with only one thing. We decided to dive into a b2c market because we had a relatively big network of entrepreneurs in our hometown, and it was easy to fill our marketplace with relevant offers. But lately, we've understood that the b2b segment has its own gifts-related issues.
Companies send a lot of gifts – to partners, counterparties, customers, etc. This process is opaque, include middlemen; businesses always had little control over gifts delivery.
We thought that gmojis could fix this niche. First, our platform is eliminating the delivery problem, as the recipient gets a digital representation of an original item, which can be received later offline. Second, you have more control over customization like branding and delivery time – it is super easy to customize emojis, and you can schedule them to be sent, say, at 23:59 on the New Year's Eve. Finally, the company gets all the gift-related data: when the gift was claimed, where was it passed to someone else, etc.
Is it crucial to have founders who code?
Well, I'd say the visionary and business part of a project is more important. If you manage to develop a worthy idea, you will recruit technical guys. In our case, none of the founders were coding. At some point, it might slow us a bit, but finally, we still got an app, mobile keyboard, and nearly launched our b2b marketplace.
In the beginning, we were developing our future app's screen flow using a pencil and paper. This work allowed us to understand our priorities. For example, while drawing pictures, we realized that our top focus should be solving the gift delivery problem.
And what about funding, what is your approach to getting it?
Funding is highly personalized things. There are no two identical startups, so the approach to acquiring investors will vary from company to company. But basically, you should act upon your market analysis. If you have a big, understandable market with examples of successful companies solving your problem, it will be easier for investors and startup accelerators/incubators to understand the project and offer a fair valuation.
For us, for example, that did not work because there was no market for online gift-sending apps at the time of our launch. It would be hard to get sufficient money from VCs and accelerators for a project working at the not yet formed market. Instead, I've referred to my network of entrepreneurs and negotiated a $3,3 million investment from one of my previous business partners. The company's valuation was $17m, which is impossible to imagine when working with angel investors or accelerators.
Let's finish by talking about scaling the business. What is your advice concerning international expansion?
Again, there is no silver bullet you can use to successfully scale and expand internationally. My advice here is to read signs your business sends to you. Here is what I mean: at first, we were not actively working towards international expansion, but at some point, started getting inquiries for selling a franchise. I was skeptical and did not view this as a real scaling mechanism for us. However, after getting several dozens of requests, we had to sit and think, how to pack the project for selling a franchise.
We run a test experience in two countries, things went smoothly, so we expanded our franchise offering. Now people in three countries are sending and receiving digital gifts using our app (this number will increase up to 8-10 countries by the end of the year), and the list is continually growing, by 2021 we will scale to 50 new countries.
We are very actively recruiting new partners who want to jump aboard launch Gmoji in their country. And we could easily overlook all these opportunities to scale if we did not pay attention to signs our own business was sending to us.