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4 years ago, the company AI Helps consisted of five people, and among them ― one developer, also the founder, Adam Golovenko. The change in strategy allowed them to grow to 45 people and a turnover of $650 thousand per year. We talked about these successful changes and the new project.
We talk to startups and investors, you get the value.
AI Helps is a Ukrainian product company, developer of solutions for business automatization (Beauty Pro, Denta Pro, Fitness Pro), has been working since 2011 Now the company has more than 2 thousand customers in 27 countries. This year, the team is launching a new product ― an automatized resupply platform for cosmetics suppliers, Supplio.
— Adam, you have been working in the field of business automation for more than 10 years. Let’s start with the basics ― what do beginners need to know about this market?
— You need to know that this industry is very easy to enter, but it is very competitive and low-margin. Just imagine that now there are about 1000 serious products for automating beauty salons in the world… In Ukraine, every 3–4 months something new appears in this niche.
With a standard approach and without understanding the unique way of monetization in this market, I would not have counted on anything at all. 80% of our competitors either close or stagnate precisely because of the inability to reach profitability.Others take round after round in the hope of coming to zero on volumes: for example, our Russian competitor YClients took the 6th round a year ago, $10 million. The fact that we work in a plus is the result of long and hard work and luck.
— Your company creates three CRM products for different industries ― beauty, dentistry, fitness… Is it enough to create a template solution and then to adapt it?
Not at all! Although all of our products are successful, in this case, we are rather an anti-example. Developing a product in three directions is more difficult than taking one and becoming a market leader.
Moreover, once we tested CRM for catering, English language schools, and even bathhouses. Only a year and a half ago, we came to the conclusion that working in several directions at once is not the best idea.When you spend half a day thinking about what other features to make for beauty salons, then another half of the day-how to transmit a new idea to the trainers of fitness centers, and in the evening you understand the medical restrictions for dentistry — everything becomes very complicated.
In general, it all depends on how much you want to “deepen” in the product. When you work on the product base, everything looks similar. But the more you delve into it, the more you make a custom decision. For example, I know a fitness project that has narrowed down to just a crossfit niche.
— So, can a narrow specialization become a strong competitive advantage?
― Yes. I didn’t know this before. Now my opinion is: it’s better to choose a narrow niche and make everything perfect. For example, you can develop a product for permanent makeup or make-up, nail service. The narrower industry is ― the better solutions are obtained, and they allow you to beat the competitors.
— But all your three products keep evolving, plus you’re launching another one…
— Yes, but we still give priority to the beauty product, since it brings us 70% of the profit. In the future, we want to segment our activities and possibly open three different companies.
— It turns out that your strategy to create three CRM systems for different industries is more difficult than if you created only one. What has helped you to stay open for so many years?
— About three years ago, we didn’t even have a website. In 2017, we suddenly took first place in the Russian rating for products of the salon industry. They were compared by 240 parameters, and Beauty Pro turned out to have the largest number of all possible functions. But the paradox is that other startups had under 2K clients, and we have only 50. We took one client and worked with him til the moment of his full satisfaction.
We made conclusions, created a website, began to build sales, and implemented technical support. We reread a lot of books, started to get acquainted with the business environment. We started doing all the things that startups usually do at the very beginning.
— Why does the beauty direction turn out to be the most successful?
Because there are a lot of beauty salons in principle. In Ukraine, there are about 11 thousand salons, 2 thousand fitness clubs and 4 thousand dental clinics. In addition, we started working with the beauty sphere much earlier, putting more energy and warmth into it.
— About focus. Among CRM, there are many simple solutions with limited functionality, but there are many functions in fact in your system-that’s how you got into the rating. Have you “ cleaned” your CRM from less popular features?
— Now we have more than 2 thousand customers, and there are many functions that only 5–10 of them use. For example, these are integrations with special equipment, some reports, and specific salary calculation formulas. Of course, sometimes there is an idea to delete something from the interface. But we have never done it. Maybe someone needs this function! It can be very hurtful for customers if you deprive them of a function that they have been using for 2–3 years.
We have always started from the desire to give the customer as much as possible.Now we are not adding so much ― we make what already exists as user friendly as possible.
— Were there any cases when customers left?
— Of course, but we have a lot of small clients, and the beauty business is not long-living. On average, the salons exist for 3–3.5 years, and we are on the market for 10 years.it is quite clear that many of them simply closed up. 7 or 8% of customers didn’t survive quarantine in the first wave of the pandemic. We thought there would be more of them.
— Since 2020, you are creating Supplio, an automated replenishment platform for the cosmetics industry. Why did you need a new direction?
This startup was born out of a desire to upgrade Beauty Pro. About a year and a half ago, we realized that it lacked several features to enter the American market:
First, the product was desktop, which is normal for the Ukrainian market, but for America this is a bad idea, it is mauvais ton to work in the web version there;
Secondly, the technical component of our developments is great, but it is more difficult for us to “pack” them and stand out from the competitors. Therefore, it was necessary to change the marketing strategy.
We decided to become something more than a CRM system, and went towards an ecosystem for the salon business. To begin with, we started to find out what is the ache of our client. Just imagine, it turned out that one salon needs more than 2000 names of cosmetics and other products. And most of these transactions are conducted offline with the participation of sales representatives. There is going on absolute trash: some suppliers spend several hours on a small order. We decided to automate the purchase process, and it is precisely in the salon industry, and in the process of testing and acceleration, we were pivoting twice.
— So, is it planned to develop a new product as an addition to Beauty Pro?
— No, we made a new product specifically, not a Beauty Pro module, so that it would be independent, and all the CRM systems with which it would be integrated would be equal. Of course, both products will have a great synergistic effect, we will launch them in the USA at the same time: it is the similar industry, the same customers, we understand their problems and aches.
— In February 2020, you and Supplio were accelerated in the Sector X accelerator beauty track. How and why did you get there?
— Because the Supplio project just needed to be taken up and taken care of. And time finding for all these things. We, the founders, spent days running around with Beauty Pro… So, somehow I’m flipping through the Facebook feed and see that there are 3 hours left before the end of registration for Sector X .It was necessary to prepare a presentation and other materials for it. I strongly didn’t believe that we would succeed. But we passed!
— What did your participation in the accelerator give you?
— The most important thing — access to enterprise clients. Sector X is strongly distinguished by the fact that it closely interacts with the corporate sector: it finds a partner from among large businesses and gives participants the opportunity to communicate with them.
In fact, it brings the first big client. In our case, the partner of the beauty track was L’Oréal Ukraine, and we could ask its representatives any questions. We had about 10 meetings, and they themselves were interested. This is very precious!
Plus, the accelerator gives you an excellent program that you can take in self-study mode. We learned a lot of business knowledge from there. And another huge plus is access to the UNIT eecosystem.City: events, networking, a lot of interesting and useful people.
— You’ve mentioned that twice they pivoted. How did the product change after this communication?
— Generally, the original idea and what happened after meeting with L’Oreal and working in the accelerator are two completely different products. For example, we started from the main problem ― automation of purchases in beauty salons, but it turned out that this will also catch other suppliers, such as stores and pharmacies. The classic recommendation for startups again repeats: focus not on your vision, but on customer feedback-even before the release of the MVP, among other things
— How many hours does it take to conduct an interview “wholeheartedly” , to realize the client’s pain?
— As long as you need, until the potential client likes the whole idea. Moreover, if you communicate with the only company, then the product will be completely “for it “. I think that to launch a product, you need at least 10 respondents and at least 30 hours of interviews. And if the potential customers are small companies, then 30–40, until the information from them begins to repeat. We have communicated with more than 15 cosmetics suppliers.
— At what stage is the development of Supplio now?
— We started designing the MVP. In the next few months, we will launch the first version of the product, and we already have several corporate clients who are waiting for the launch.
— In December 2020, you raised a grant of $25 thousand from the Ukrainian Startup Fund. This is quite a small sum. Are you going to raise a further round of investments?
— We mainly develop the product for our own money, but, as it often happens, there is not enough of it. $25 thousand will help, but it doesn’t significantly change the situation. Although after raising the grant, we closed the issue with investors. And in some ways, this is even not bad, because we would not like to scatter shares in the project. By the way, now we are going through another program in the American accelerator, and there, instead of transferring a share, we agreed on a fixed fee of $200 for a team per month.
— And what were the difficulties in finding investments?
— I had a conversation with more than 20 investors and got an understanding that while there is no MVP ― don’t get involved with them. We had a huge list of investors who were willing to “talk a little later”.
We also refused some of them― I have prejudices about “Ukrainian money”. When I didn’t understand where the investor’s money came from, I refused. This is the reason why I prefer to communicate with investors from America, where reputation is more crucial. After all, an investor is a person with whom you can’t easily break up.
— How wide is the pool of investors in Ukraine?
— There are about 10 active venture funds in the country, plus I communicated with 7 business angels. Information about them is not structured, and it is difficult to find them. I heard that one funder communicated with 47 Ukrainian angels. I can make a conclusion that there are 60–70 of them per country, no more.
As far as I know, the average check in Ukrainian venture deals is much lower than in the US-an average of $32 thousand (the checks of business angels in the US are much higher) and there is disagreement about the share in the business that investors want in return. I know several cases when investors received 70% of the share in the company for $50 thousand: at this ratio, the startup is unlikely to be able to raise the next round.
Adam, and finally, a question that will help Belarusians navigate the Ukrainian IT community- a lot of them are now being relocated. Can you advise me on what activities to pay attention to?
I will name a few places:
Most of the activities now revolve around the innovation park UNIT. City, where there is a coworking, and events, and other useful infrastructure for startups;
The Ukrainian Startup Fund is also located there ― Belarusian startups can also apply for its grant if they register a local legal entity.
The main assistant and the engine of startups in UNIT is in the same place.City-the Sector X acceleration hub. They have tracks with corporations, in one of which we participated, this program is absolutely free for startups. There are also paid programs, such as “Preparation for investment”, “ Crash test of startup ideas”, “First customers in the United States”, and a separate free acceleration program for startups that do not pass on the tracks;
Once a year, the SaaS Nation conference is held in Ukraine ― this is a huge gathering of SaaS startups (and by the way, they have an active Telegram channel);
And the non-profit organization Ukrainian bridge builds connections between our community and Silicon Valley.