We talk to startups and investors, you get the value.
Last summer, George Kachanovskiy wanted to open a kick-scooter rent, but in the working process, he noticed the adjoined, larger and idle niche. Now, his project ScootAPI (before rebranding it was Samokato.app) offers soft and scooters to those who want to open a sharing in his city under any brand, not as a franchise. The company already has two companies in Belarus and Ukraine who pay, and negotiations with entrepreneurs from Croatia and Turkey are on the final stages.
We talk to startups and investors, you get the value.
Recently, a startup won a tender to open a rental with 100 scooters in one sunny European country (details further in the text). What is more, from October 1, the CEO of the project will study at one of the most extraordinary European accelerators (also, we’ll tell about this).
How to understand that pivot is needed? What does a startup get from membership in HTP? Why is it right to make a company’s activity report public? ScootAPI CEO George Kachanovckiy shared his experience, vision, and plans with Startup Jedi.
This is a service that helps to open kicksharing (scooter rental) in any European country within a month. For those, who already have scooters, the startup offers a license on the in-house soft. For those, who only have an idea — we offer both — soft and scooters form the direct manufacturer in China. Our guys help clients to equip scooters with GPS-trackers and numeric locks. They train staff in the maintenance and working with software, and after the launch, they provide 24/7 support at any time.
“Last summer I wanted to open my kicksharing. I had an idea, that it is comfortable and fun, and people learn how to ride electric scooters at once. I tested this hypothesis on my cousin — she is 35, and my nephews — they are up to 15 years old. All of them tried and succeeded to ride scooters. Surely, people in the age from 20 to 35 years old will be quick learners.” — Georgiy tells about the startup project.
Back then, the entrepreneur couldn’t find 120 thousand dollars, needed to launch his own electric scooter kicksharing in Minsk. However, he managed to find soft-suppliers: he was selling a license with the condition of working under his brand. In fact, it is a franchise, where the main value of such a business is a customer database that does not belong to a franchise. He owns only a fleet of scooters working to develop someone else’s brand. It is unprofitable to work under such conditions; this cannot be called an independent full-fledged business.
At this stage, Georgiy realized that the niche was not occupied: no one on the market offers a free, not developer-branded software for kicksharing. So, he began creating a solution for people who want to start scooter rental under their own brand, but cannot write software themselves.
Such a working model is called the white label. It offers the manufacture of off-grade products or services by one company and the use of these products or services by other companies under their brands. So to say, it is easier to buy scooters for such business, than to create quality software.
If to analyze this case from the typical startup-oriented point of view, then pivot was the right decision. “For me, the indicator of the pivot need was weak growth and the lack of the ability to scale. It was necessary to quickly change the strategy or close the project. Otherwise, with the money for the launch, I risked getting a regular business without the possibility of dynamic growth and getting stuck in the swamp of the operational staff, having spent a lot of time and effort.”
In the process, three more people joined Georgiy as co-founders. They invested “smart money” in the project — everyone works in a team as specialists: in the positions of a developer or marketer. There are eight people in the team, others work on the conditions of salary and warranties.
The application is ready but the team constantly elaborates and develops it. The software is updated both with scheduled updates for everyone and custom “features” for a specific client. Things, that are interesting for everyone, gradually appear in the basic set of options: unlocking by QR code, displaying the battery charge in the application, the possibility of booking equipment (it happens that a scooter is intercepted — a person has to go to another nearest one).
ScootAPI sells software license for $ 4,990 (one-time payment). In addition to the mobile application and the online dispatch, it includes the connection of one payment system, which the client chooses. Usually, this is a bank acquirer that supports Visa and Mastercard — the company sets up the integration of software with it so that payments go directly to the client’s account. So he has full control over the incoming money, is free to use them to solve current operational issues.
If the client doesn’t have scooters, the startup is ready to provide a consignment of 100 units. In this case, the minimum rental launch price is 75 thousand dollars.
This is one of the ScootAPI advantages and differences from the makers of software for sharing, that emerged recently. Other companies receive the ride payments on their accounts, transferring the money to their clients minus a fee.
From each ride, a startup holds down a commission fee, moreover, depending on the scooter quantity, the percent of this fee diminishes. For the rental fleet of 100 units, this is 10% of the cost of a ride. Further, every 100 scooters diminish the commission fee per 1%. The minimum commission fee for the clients, whose rental fleet has more than 700 scooters is 4%.
“We created a scale of progress, so the clients are interested in growth. In such a way, they increase their revenue not only in cash correlation but in a percentage ratio, too”, — CEO explains the book-keeping of the project.
In the planning stage, people often have inflated expectations from this business. Despite 6–7 rides on each scooter per day, Georgiy advice to count in 3–4 rides in a financial model. The precise figures depend on the climate in general, the weather on a specific day and the level of population well-being. The average time of a ride is 15 minutes.
The company is ready to provide recommendations on pricing, but in any case, the customer sets the pricing policy. A client from Grodno took advantage of the ScootAPI recommendation: 50 cents per trip start + 18 cents per minute.
In Europe, kicksharing is regulated in detail by law. To put scooters on the streets, you need to get permission from the city authorities. The maximum allowed speed limit is 25 km / h on average. But, for example, in Germany — 20 km / h. Do you need a driver's license to ride a scooter? Ride on the sidewalk or on a dedicated lane on the roadway? These issues countries resolve differently.
The startup has two paying clients — in Grodno (Belarus) and in Lviv (Ukraine). The company highlights 4 categories of potential clients. Software and scooters can be used for:
City rental fleet;
Office (employees can use scooters to get home or to come to the office);
Manufactures (employees can move on the scooters around in/between the work sections on the large enterprises);
Hotels (guests can go around the city on the scooters, not depending on the local transport system).
The company uses two main channels of the leads acquisition: paid traffic and partnerships.
Traffic from the browsers goes to the landing — guys launch the targeted advertising in Yandex Direct and AdWords. In the advertising campaigns, the team tried to achieve very precise settings: the ads are only involving those people, who are interested in opening their own kicksharing. Those people, who want to ride a scooter will not see the ads.
Thanks to Google Search, a car-sharing from Germany has found ScootAPI. The company has been doing car-sharing for several years already and they have decided to variegate their business portfolio.
The “hardware” partnership Georgy found in China. As strange as it may seem, but there they are lacking the quality and accessible software for kicksharing. The available variants are worth 60 thousand dollars. The company arranged the partnership with one Chinese manufacturer — along with their scooters they also offer ScootAPI software. They have already brought a ‘warm’ contact from Turkey.
The latest news that shows the dynamics of project development:
The startup has won a tender to launch a rental fleet of 100 scooters in Cyprus — the contract will be signed soon;
The first white label application for the client is ready and launched — E-wings in Lviv;
On the Angels Band pitch-session in September, Belarusian business angels were interested in ScootAPI, having noticed the project progress, they marked the project with a title “Traction Star”.
Recently, the startup applied to enter the Park of High Technologies in Minsk. The necessary documents were collected in two weeks with the help of accountants and outsourced lawyers. As Georgy notes, the business plan for the HTP must be not only written but also implemented. The figures in the document should correlate with each other, revenue should allow to pay salaries to the employees and invest in growth.
This is what ScootAPI sees as the main benefit of membership in HTP:
1. Considerable freedom of making deals with the clients.
“We can structure them according to English law. So, as we will start working in one legal field with clients, we will not need to search the common law language with them.”
2. The possibility to attract investments on the base of a contract on the convertible loans.
“It is convenient, clear and attracts investors, as, in the early stages of development, startup valuations often disperse.”
3. Tax incentives.
“In HTP, we will be able to pay developers a market salary without a tax burden. In fact, if the startup does not “take off”, we will have to leave the Park.”
The startup is now exploring the markets of Turkey, Greece and Cyprus. These are the especially attractive locations for the kicksharing: there are no seasonality and intense heat, as it is in UAE or Israel, for example.
The project is searching for investments from 50 to 100 thousand dollars while the startup value is 800 thousand dollars.
The startup plans to direct investments into:
testing the markets in Greece and Turkey;
creating content and formation of the expert reputation in the industry;
studying in the accelerator;
participation in the thematic exhibitions in Europe.
Recently, CEO of the startup received e-residence in Estonia. In the range of other benefits, electronic residence gives a possibility to open a legal entity in the EU. Register a company in one of the EU countries is a prerequisite of the Founders Institute accelerator program in Amsterdam, where Georgiy will go to study in October.
It is an unusual accelerator. It takes 4%, dividing it between Founders Institute, mentors and startup founders, who accomplished to the end of the program. From the group of 30 people, the average 10 of them make out to the graduation, and all of them become the co-owners of each other’s companies. Before this, people are studying 3.5 months together, so they clearly understand and know the products of other graduates.
The model is non-standard, but documents for such mutual co-ownership are drawn up according to proven templates, strictly according to the law. Cash-out is possible when a company is sold under a merger-acquisition transaction or enters an IPO.
Founder Institute — the largest world accelerator for startup on the pre-seed stage. Its graduates have created companies that are valued at more than 20 billion dollars in total. Since 2009, more than 3,500 startups have completed accelerator programs in 65 countries.
The way you are selected for the program is also different from the usual accelerator approaches. The Founders Institute does not evaluate the idea or business prospects, but the project’s founder. He needs to take two 45-minute tests designed especially for the program — in Logic and Psychology. Success in these becomes the basis for selection. “We believe that Great Companies start with Great People, and the most important variable in the success or failure of any company is its leader,” — the accelerator declares.
Georgy hopes, that training in this accelerator will help to acquire the necessary networking and find clients in small and medium-sized European cities.
The demand for kicksharing can also grow in large cities. According to Georgiy, in the “bicycle capital of the world” — Amsterdam — there are not enough parking spaces for bicycles. Multi-level parking lots are designed for 18 thousand bicycles, and at peak loads, 36 thousand pieces of equipment are parked on them. An electric scooter can be a solution: being folded, it takes up much less space than a bicycle.
Regularly, according to the results of several working weeks, Georgiy publishes a report on his Facebook page. Here’s one of the latest (in Russian).
This positive but untypical for the Belarusian startup-community phenomenon, Georgiy explains this way: “I am a follower of the company’s publicity. I lived in New York for two years and such information is openly shared there. Perhaps, I adopted this culture there. Also, I was influenced by “Rework”, a book by Jason Fried. One of its key ideas is — do not hide what you do. Show it, tell about it, and somebody with the common interests will join you.”
The fact, that entrepreneurs rarely share such information, ScootAPI explains partially by the legacy of severe 90th, and partially by the fear of the Tax Agency. However, regarding his experience, he is sure that now, Tax Agency understands, that developing companies which can reinvest in the business, perspectively will give more money in the budget. Therefore, tax officers can tell how to optimize taxation within the framework of the law.
ScootAPI is searching for a contextologist, who knows how to set up the advertising company in English, Spanish and French. The Greek language is the ultimate dream.
Georgiy searches for an assistant in Minsk — for the period during his studies in Minsk and after it. It is a possibility to gain experience in company development with limited resources and “deep ocean” of possibilities global market possibilities of sharing portable electro-transport. Write to him on Facebook.