Repatriate Diary Part 2: How to Attract Startup Investments Without Connections and Experience

    In the last post, we wrote about Ostrovok.ru attracting investments of $ 1 million from the best investors in just 6 weeks, having only an idea.

    We received a lot of positive feedback on that post. But there was a significant drawback: we described the process in terms of our previous experience and connections. Most of these recommendations do not apply to the question of how to start a business in Russia without any connections and experience.

    We really want to help develop the local entrepreneurial ecosystem, and this post is an attempt to talk about how to launch projects without anything but desire.
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    Indeed, it is very difficult to start a business without any experience. Therefore, we recommend working for several years in a full time at some company that knows how to raise investments and build teams in order to obtain the necessary knowledge. This is how my colleague Cyril (on Slide) and I (on Google) started.

    If you are a developer, online marketer or sales manager who wants to establish his own company, come work with us! You will learn more details at the end of the post.


    Problems

    Let's start with the key issues that confront you:
    1. Investors do not know you and do not have confidence in you
    2. You do not know investors
    You need to solve both problems in order to get money. And it will not be easy. image

    The most important issue is not communication, but trust.
    You should think about it from the point of view of investors. There are much more investors and money in the market than companies worthy of investment. As a result, investors are constantly looking for good investment ideas. But Russia seems to be a very dangerous place for investors who have not invested in it before. Therefore, potential investors are afraid of losing their money (and also look stupid in front of others).

    Decision

    You have to do some things to solve this problem:
    1. Create an excellent team with staff from companies with brands known in the market.
      If you can attract Yandex developers to work with you, this will make investors more confident with you, since Yandex is a well-known, strong company. It also demonstrates the fact that you can convince people (and this is the most important quality for startup founders).
       
    2. Find several investors or advisors who are actively looking for projects and who are known to other investors.
      For example, working with the founder of KupiVip as an investor or adviser, you are improving your brand because investors know about KupiVip and their investors.
       
    3. Become experts in your market, learn about market leaders and their key financial metrics.
      Read the 10 annual financial reports of global companies in your area, subscribe to industry blogs and forums, meet experts at Linkedin and ask questions. Investors will feel more comfortable if you appeal to companies that they know, and if you deeply understand the topic of what you are involved in.

    Successfully completing these three steps is a test of you as a potential entrepreneur. If you think these three things are too hard to do without initial connections, you better not organize your startup. In a startup, all the time you need to solve complex problems with limited resources (no matter how much investment you have) and further tasks are incommensurably more complicated than these three.

    When you have such a basic background, then the problem of trust partially recedes into the background, and you begin to search for investors.
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    1. You should know who in the world are the best entrepreneurs in your area and who are the best investors in your area.
      Take a look at Crunchbase's investors and find those who are interested in your area. Look for people with good connections, but with an unpopular profile. For example, everyone can write Reid Hoffman, but he does not have time to answer everyone. He also does not answer us by the way :).
       
    2. Make a brief (5 sentences) in the “elevator pitch” style about who you are and what you are doing. Write sentences in a clear and simple language.
      If you start writing too smart, complicated things, you will be ignored and you will look stupid. Follow the words of Einstein: "Genius is not to complicate, but to simplify without losing meaning."
      Here is what I wrote for an example in 2 minutes (this is a theoretical example, this niche has become very competitive over the past 12 months):
      “Our team consists of talented young developers who build Zappos in Russia, one of the five largest world markets where the niche for selling shoes is not yet occupied. Before starting work on the project, I was educated at MSTU - one of the three best universities in Moscow, where I won first place in the Olympiad for programmers. My colleagues came from Yandex and Mail.ru, the two largest Internet companies in Russia, we have an adviser for the director of logistics from Ozon.ru (# 1 retail online store in Russia).

      We have already created an alpha version of our product and are looking for an expert who can advise us on the commercial construction of a successful company. "I noticed that you have experience building successful companies in this area in Germany, will you find 10 minutes to talk with us?"

       
    3. Start sending this to people (for example, via LinkIn), talk to them and look for someone who will inspire the respect of potential investors for communication.
      Make sure that the people you communicate with have a reputation and connections, and can also be your mentor, that is, a person who will actively promote you. Then you can use their reputation to start a conversation with other people, and it will be much easier for you to communicate with them.

    Basic reading resources

    To have real knowledge in your field, you must be fanatically interested in it. When I leave work at 1 a.m. and get home before I go to bed, I go through 30 different blogs about startups, marketing, online travel and read about 300 articles. To make this process more time-efficient, use an RSS reader (e.g. NewsRack for Mac).
    It is worth noting that I do not read technological news, just to learn something for the business or to find out ideas for investors. I do it because I really like it.

    What I recommend reading
    Quora
    This is the best site for exploring entrepreneurs and investors. I already gave invites there and I don’t have them anymore, but you can find them yourself online.

    AngelList / Venturehacks
    The world's largest community of angel investors. They do not often write on their blog, but their posts are of very high quality.

    HackerNews / Ycombinator
    This is the world's most successful business incubator, which created companies worth $ 10 billion. At Hacker News, you can interact with a large number of talented people who make startups and learn from them. At Ycombinator, I recommend reading Paul Graham's essays - they are great for understanding the general attitude to startups in Silicon Valley, as well as for philosophical rather than practical, but very good advice.

    Startup Company Lawyer
    A good resource that explains the many legal terms and principles of investment structures. This is a professional resource, so basic knowledge is needed to understand the information.

    Techcrunch
    The world's largest tech blog. Only a few articles are good, but by reading it regularly, you will learn more about startups in Silicon Valley.

    VentureBeat
    A good blog about venture capital and the tech industry.

    Silicon Alley Insider
    A good blog about technologies in general, although there are many articles published earlier on other resources.

    A VC
    Blog of top venture capitalist Fred Wilson. You can learn a lot of useful things from his posts, but this also needs some basis.

    Good local investors

    I also want to recommend two good investors in the Russian market, investing at the seed stage.

    Oscar Hartman at FastLane Ventures
    Oscar is the founder and CEO of KupiVIP, one of the most successful startups in the last few years. He was not an investor in Ostrovka, but he helped us for a long time with his connections and expertise. If you are a talented developer or manager looking for a mentor and investor, this is a good opportunity.

    Eduard Shenderovich at Kite Ventures
    Edward made the decision to invest very quickly - an hour after meeting with us. At that time, he helped us with ideas, connections, market understanding and hiring. He usually invests in companies at an early stage, but already with the product. He spent a long time in Silicon Valley and therefore is very competent - we are happy to recommend him.

    By the way, my report on 404fest is devoted to the topic of investors. I speak on October 2 in the Startups section. Come!

    Come work with us


    We are actively recruiting talented developers, online marketers and experts, as well as b2b sales managers. Our team consisted of 7 people at the beginning of the year, and now it consists of 65 people who came from companies such as Yandex, Booking.com, Euroset and others. We have an excellent office with a gym, free food, and a free work schedule. Working with us is the best way to get investor relations and experience in building your own brand.

    Next post


    In the next post, we will write about attracting a larger investment round at a later stage (we recently raised the second round for $ 13.5 million).

    Comments and questions?


    Please let us know if you have questions or ideas for this post.

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