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In the eyes of employees, being late for work for 10–15 minutes is trifling, but a lost profit for business owners. Time tracking systems help to solve the problem with discipline, also to improve internal communication and simplify the lives of accountants and HR managers. The Kazakh startup Clockster started with a simple time tracking, and now it has grown into a whole HR system. People are ready to pay for it not only in the CIS, but also in the countries of Southeast Asia. Yerzhan Ryskaliev, CEO and co-founder of the project, tells how to survive during the pandemic, on what $750 000 of investment will go for, and how to sell the product to various markets.
We talk to startups and investors, you get the value.
In 2014, together with my partners, I opened a company, which develops custom software, called Constant-lab. Next year, I launched my first startup, Time to Chill (an application for searching places and dishes by prices, requests and ratings in Kazakhstan) — but the project didn’t rise. In 2015, our company won the tender for the development of a biometric time tracking system for Americana Group (the largest food company in the Middle East, franchisee of KFC, Costa Coffee and other brands in Kazakhstan). They needed it, because the company was hourly wage and any delay of the employee affected the benefits of the business. In Kazakhstan itself, this practice is not accepted, because, in many places the salary is fixed.
To realize the project, we decided to use terminals with fingerprint recognition. The solution was already available on the market, and we didn’t have to invent anything new. The technology had been piloted for three months. The project was successfully completed In 2016 in Almaty and Nur-Sultan (Astana).
After we have earned the money, we decided to invest it in our product, which is simpler in technology and more affordable in finance. Searching for the right devices, we searched all over China and found the optimal tablet. In 2018, the first sales began — but in 2019, there was a pivot of the business model.
Originally the idea was to rent out tablets. But we faced a logistical problem: if the tablet doesn’t reach the customer or breaks down on the way to another city, it begins a long and unprofitable process of finding out the reason.
It was difficult to expand in such conditions, so we began to think about how to get rid of the “iron”. It isn’t enough to use the mobile phone of employees with a username and password: other people will be able to register for “truants”. So we tried Face ID: first we wrote our own, and then we implemented a solution from Cyberlink in 2D. Then we removed Face ID at all and simplified user control by linking the employee number and phone ID. So, if an employee tries to log in on someone else’s phone, the system will block both, and they will have to contact the administrator. The employee keeps a record of the time on his phone, he / she must be within a radius (go-fencing) of 50 meters from the location. This trick worked: by giving up hardware, we reduced the receipt, made more tariff options, and expanded the audience of small and medium-sized businesses.
Currently, we use Face ID technology (in addition to time tracking) when providing access control through integration with turnstiles and electromagnetic locks. We made the Clockster X add-on, ordered face recognition terminals, and got HR + Access Control. The system also recognizes the employee’s body temperature and the presence of a mask on the face.
Our indirect competitor is Kickidler, a white-collar software that controls what an employee does at their working computer. These guys are taking “aim” in a different niche: their audience is large corporate companies.
Paper magazines for tabulation are also competitors. There is also the Kazakh mentality, which is the reason why our technologies are hard to implement in local companies. In our niche, in Kazakhstan, the average age of a small business owner is 40–55 years. As a rule, the turnover is small, so businessmen are trying to economize on everything — they don’t need new technologies. Many owners of the local business naively believe that their relationships with employees are built on trust and freedom. But after half a year, they come back to us and complain about problems with discipline.
In the Southeast Asia countries, we have more than 20 competitors — there is a very serious level and a huge number of potential customers. However, in comparison with their product, we see our advantages, that will allow us to get ahead in their market.
First, a simple employee registration system. For example, Americana Group in Kazakhstan is a large company with more than 3 thousand employees. When you first register in the system, you need to create profiles for all of them. HR managers manage the system — imagine how much work they have to do at one time! We solved this problem in such a way that each employee independently registers in the system, and HR managers only double-check the information. If it is necessary, they only change or delete unnecessary details.
Secondly, the creation of a flexible schedule: an employee can independently send a request to change their schedule to the HR manager.
Third, integration with the turnstile system via Face ID. We have already partially implemented the Business Communication Tool module (a mixture of Trello and the request system). For example, an employee sends a request for the down payment of $100. The manager responds in LiveManager that he will give out $50 and sets a task for the accountant, who is able to see the entire history of correspondence and tracked with Face ID hours worked. This creates a complete request cycle, where each tracks the actions of the other. The task monitoring system for the employee isn’t overloaded with functionality and improves communication inside the team.
Fourth, we are making a Payroll — salary accounting system with all the rates and deductions for overwork and underwork. By the end of January, we have the first product version, which we will test with two Filipino companies. We develop this product to the standards of Southeast Asia-mainly to the Philippines, they have hourly waged, and we will not be bought there without Payroll.
Initially, we were focused on the availability of our product, primarily to small and medium-sized businesses, as in large companies, time tracking is already set up. Most of our clients are blue-collar companies. HORECA is suitable for this segment: hotels, restaurants, cafes, as well as supermarket chains, dentists, cleaning services, security organizations.
In the pandemic, we entered new niches: we started working with companies where employees are “white-collar”. For example, recently a network of car dealerships has become our client, as well as a network of gas stations.
Some time ago, a contract was signed with Home Credit Bank to develop a system for recording the working hours of remote employees, as problems with their discipline were revealed. We started working with the bank in the most representative region for it and counted 776 hours of shortfalls out of 14 000 planned hours of work, which led to the loss of the profit about $370 000. It turned out that the employees created their own “micromafia” at their places: they exchanged usernames and passwords with each other and “covered up” the absence of colleagues in the workplace — this trick will not work with our solution.
From October to February 2020, we grew by 15–20% per month. And if in February we had 185 customers, then with the arrival of the pandemic, a sharp decline began: since March, all restaurants and microbusinesses — our main customers began to close. In the first months of the pandemic, we lost 40% of our customers, and six months later — about 60%. However, after the “Covid-19 hibernation”, businesses began to wake up slowly: there were budgets, and they began to master them — our equipment began to be ordered. In that way, since August, we began to grow in revenue and at least began to cover our expenses. But for some customers, accounts receivable is still growing: payment delays range from 3 months to 6 months. In general, it is important that we survived the pandemic, although many of our customers were exposed to risks and dangers.
By integrating with the turnstile system in the pandemic, we were able to attract another type of customer — business centers. Recently, they are turning to us more often.
Our subscription business model starts at $5 — this is the minimum amount we set for the owners of small sales islands: they employ a couple of people and the revenue is small, it makes no sense to pay large amounts for accounting working hours. As the number of employees increases, so does the subscription price: 10 employees — $10, 30 — $25, 100 — $35, 500 — $200. It is not comfortable for us to make payments through a bank, so we try to motivate customers to pay by card with a 50% discount. If you pay for a year with one check, we give you a 20% discount.
When the access control is ordered, the receipts increase, as maintenance of the turnstiles requires additional costs. In addition, we sell equipment to business owners where employees don’t have good mobile phones or the usage of a personal phone at work is not welcome. In such cases, we sell Face ID terminals the size of phones: their cost starts from $150. We sell such devices on a one-time basis.
We have four Russian clients — all of them came to us through “word of mouth”. It was a signal for us: it’s time to enter the Russian market, because our competitors don’t cover even 10% of the Russian market.
There is no need to localize the product: we build our software so that it works the same everywhere. The app is now available in 5 languages, including Russian. The culture of consumption of our product among Russians and Kazakhs is identical.
In the Philippines, a Payroll is required. In June 2020, we tested our first sales there: through Google Ads, we threw 33 registrations in a month, 3 of them were converted into sales — it turned out $4 per lead. In the Philippines, the big market is the second English-speaking country in Southeast Asia after Singapore. IT products in English are widely used in the region. There is also a very well-developed culture of consumption of HR products: customers come themselves to us by a simple search. And in Kazakhstan, we have to explain to our customers on our fingers why they need our product.
In addition, we are testing the Indian market — this is the next promising direction after Southeast Asia. An Indian client also came to us through “word of mouth”. Generally, our product suits the consumer, but it should be noted that India is very sensitive to pricing.
In 2017, we participated in the Seedstars World Competition (organized by a Swiss private group of companies, aimed at holding events and realizing programs mainly in developing countries): and became the winners of the Kazakhstan qualifying round. On the same day, we found several investors: for example, Kazakh businessman Abdrakhman Amreyev invested $100 000 in our project. Since then, he has become our co-founder and is still involved in the business: he often goes on our business trips, negotiates with other investors about us. I would say that he is a very venture-oriented, non-classical Kazakh businessman.
In 2018, we met with the local Kazakh venture fund ABC-I2BF Seed Fund. In parallel, negotiations were held with another Angel investor Olzhas Zhienkulov, who is based in Singapore and is CEO of the Singapore fund Paladigm Capital — that is how an additional $240 000 were raised.
In 2019, we started negotiations with the Singapore venture company Quest Ventures: they were just entering the Central Asian market and were considering local startups. In January 2020, we already had our first serious session with one of the main partners, James Tan, where we talked about the evaluation of our project and the amount of investment. In May 2019, we conducted due diligence and Quest Ventures invested $500 000 in us.
The deal was closed for a total of $750 000: it also included a young Russian HR & EdTech accelerator that focuses on HR and educational projects. The third investor was the Kazakh business angel Talgat Ismail, who totally entered 15 Kazakh startups.
However, we began to have problems with opening a bank account in Singapore: it turned out that it is difficult for a foreign company to do this, especially if it has founders — a legal entity. KYC (Know Your Customer or Know Your Client) — the principle of financial institutions’ operation (banks, exchanges, bookmakers, investment and mutual funds), which obliges them to identify the personality of the counterparty before conducting a financial transaction. — Startup Jedi) takes a very long time — six months. We are still dealing with the bank account in Singapore, and in March we will start expanding to the Philippines.
At the moment, our main task is fundraising. The received money will be used for the first “outing” in the Philippines: we need to test and run the product, make customizations. Further, we will find money for marketing to have a deeper entry into the market of Southeast Asia.
In general, the year started good for us: several pilots took place with large companies, and they began to buy a lot of equipment, which we had initially refused to do (we used to lease such equipment, but now we sell it on a one-time basis, and this generates almost half of our revenue). Therefore, we decided to continue the direction of selling biometric devices.
Several funders (all of them were originally in my company Constant-Lab, which I closed in 2019) came to the company as developers.
Clockster currently employs 25 people. There are 8 developers and designers in the team, two of them are engaged in production: they shoot video content for SMM. The rest of the team consists of marketers and sailors. We are based in Almaty (5 people) and Nur-Sultan (20 people).
As the project progressed, there were many technical problems. Our current software is the third version of the product (in general the first and second versions were built architecturally incorrect). It should be kept in mind that rewriting the product completely from scratch is normal, and you shouldn’t worry about what investors will say about this, because it is impossible to foresee in advance all the nuances. Now we have already learned to conduct a deeper custdev for at least 20–30 clients, to avoid such mistakes.
In Kazakhstan, we are pioneers in the field of working hours accounting. There is no culture of consumption of such products: we cultivate it from scratch and raise it. Facebook Instagram and b2b sales are going well: we have learned how to sell our product on Instagram and Facebook with the right content. The ratio of CAC/LTV is very awesome -1/20.
In general, companies understand that a late employee leads to a loss of revenue. I have a good personal example. One day I came to the coffee shop at nine in the morning: the cashier was there, but the barista was absent. It takes 15 minutes, there were already 3 people in the queue, and the barista was not in his place. In 15 minutes, the coffee shop lost 15–20 dollars. What if this is a common practice on the ground in this franchise? For an employee — this is a small-time of lateness or delay, for a business owner — a large loss of money in the context of one year, for example.
Now the main sales of the product are brought to us by cold calls: nothing works better than them and “word of mouth” in the CIS. We are planning to continue to adhere to the same policy. On the contrary in the countries of Southeast Asia online marketing will go well. They know the product well, there is a culture of consumption and customers already find us themselves.
Focus is the most basic thing for success. Don’t take other projects in parallel. I kept my main company until 2019 and was just bursting with stress: you don’t have to do that. Don’t try to chase money, make a product of high quality, and pitch, pitch, pitch.
Delegate tasks. The main task of the CEO is fundraising. Do it.!
Don’t be afraid of failures and be patient. According to statistics, out of 100 investors, 3–4 people will want to work with you — this is reality for both Russia and Kazakhstan.