Startups inside IT-companies: Powercode experience

Startups require maximum focus and dedication from founders. Many CEOs advise you to focus on your project and not get distracted. But Vladislav has his own way. He has launched several successful startups within his own outsourcing company Powercode: FoodTech-startup Foodex24, greetings service DWIZH and a sports app Professional Weightlifting. Vladislav told us about the state of his projects and the pitfalls of his approach.

Powercode is an outsourcing company founded in Ukraine in 2015. It develops mobile applications and websites and is now actively working with e-commerce. They work with orders starting at $25 000. Powercode orders geography include USA, Germany, England, New Zealand, Singapore, China, Israel, Greece, Canada and Sweden. Its major cases include World Health Organization, Google and SAP. The UN is one of the company’s major partners. It has offices in Kyiv and Zaporizhia.

I have no IT education, I am a lawyer with a great ability to assemble good teams. When I started to expand my personal network, I got to meet more and more people from the IT sphere, and in the end I decided to set up my own company.

How did we get started doing startups? The team sat on the bench ((IT-slang) — to be hired by an IT company and not working, waiting for a suitable project — Startup Jedi), and it got me thinking: “I’ll make a successful unicorn. I have a couple of ideas in my head. Let’s get to work! “ I ended up spending roughly $300 000 on two failed projects.

First, we worked on a fintech startup that would help companies regulate their payments and take values into account. It didn’t quite work out. The design was beautiful, but absolutely not functional. This mistake cost us $150,000. And only after several failed stories, we decided to create another startup.

What lessons have we learned from failed projects? We realized that it is impossible to create a startup with a bench. We made dedicated teams within the Powercode company — and this scheme worked. Now, every startup is managed by a co-founder or product owner. I only do strategic marketing and analyse global mistakes.

It also turned out that a dedicated team in an outsourcing company is constantly under the gun of a commercial department, whose employees want to pick up startup participants and sell for another project. Now this problem has been resolved, and all processes have been established.

In total, I lead about 10 projects, but two of them are under scrutiny: the IT company Powercode and the online supermarket Foodex24. Three startups of ours: Foodex24, DWIZH greetings service and a sports app Professional Weightlifting have successfully passed the release stage.

The online supermarket Foodex24 appeared in April last year in the first wave of the coronavirus. We created it in 2 weeks, having made the fastest launch of such a business in Ukraine. At that time, some of the customers left, and Powercode lost approximately $50 000 in monthly turnover. Therefore, we decided to create a case that would help us sell.

We used our best practices, looked at ready-made solutions and made the first delivery in 14 days. Foodex24 operates according to the dark stores model (stores without a customer) — in fact, these are large warehouses with a huge assortment of goods. In such a short time, we managed to assemble a team, warehouse, logistics, establish basic automation and accounting systems.

The startup is focused on IT and built on process automation. After all, the more efficiently the delivery routes are calculated, the easier it is for people to place an order, and, accordingly, the more customers.

In the first stages, we showed the entire process of creating a project online, actively involved the media and launched our own YouTube blog. Thanks to this, two months later we were able to add $100 000 to turnover. At the moment, $2.8M has been invested in the platform from the funds of the IT company Powercode.

The client base is about 35 000 users, the total turnover is $500 000 per month. The project covers Kyiv and the Kyiv region, and a month ago we launched in Poland — the city of Bydgoszcz. The plans are to grow a unicorn out of Foodex24. I hope that when we enter Europe, we will get a couple of successful multipliers (A number that shows how many times it is necessary to multiply the increase in investments that happened once in order to calculate the increase in total production caused by this — Startup Jedi). In Ukraine, the multiplier is 2–3, in Europe — 12–25. We have started negotiations with the Spanish food delivery service Glovo as we want to introduce our model there. It should be noted that FoodTech is now actively developing all over the world, and the capitalization of companies in this area is growing rapidly.

We have developed WMS technology (Warehouse Management System, — Startup Jedi). It enables you to connect smart racks with web boards (specialized sites for posting ads) and logistics applications for drivers. The result is a cool one-piece product for dark stores, — this technology allows one person to collect up to 15 000 orders a day.

We are not going to compete with offline networks. They have a tremendous purchasing power, while we have it at the level of half a million dollars a month. We focus on exclusive local producers and products not available anywhere else. Today we have about 70% of Ukrainian goods in the assortment on the Polish market, and 85% of buyers are Poles, although about 10M Ukrainians live in Poland. Our further strategy is to develop in Europe, launch in Hungary and Slovakia. We also received proposals from Germany, which we are now considering.

Our next startup is the DWIZH greetings service. This is an analogue of the American project Cameo. You can order personal video greetings from Ukrainian influencers and show business stars on the platform.

The project was launched in September last year. DWIZH has its own co-founder, Victor Nazarenko. $200 000 has already been invested in the platform. Today the service shows traction, but not as good as we would like to. According to my calculations, at the moment it is necessary to invest about $70 000 in the platform. Now we are repackaging the product for the markets of Europe and the USA, which opens up new prospects.

The Ukrainian market is quite small, so the local story turned out to be a test one for the animation of the project. It is obvious that the country is not yet ready for such a product. At the same time, gift services are actively developing, and we fit well into the business of selling emotions.

We encountered a certain parochialism in the heads of Ukrainian artists and influencers. They are sure that recording videos and communicating with fans in this format is uncool, it’s humiliating to an artist. For me, it’s at least strange not to communicate with people who bring you money. At the same time, it is normal to advertise lotteries and sports betting. Therefore, now we are adding values ​​for celebrities — for example, part of our royalties can be automatically transferred to charity.

It’s a sports app, a training program developed by the world championship medallist and three-time European weightlifting champion Dmitry Chumak (he is also the co-founder of the project). The system allows you to create an individual training load for the user, thereby increasing its effectiveness with each workout.

You can get advice from professional nutritionists on sports nutrition in the app. We plan to tie this startup to Foodex24 and deliver the right products to the doorstep of the home of professional athletes. We are preparing an application in 20 languages. The potential niche audience of the startup is more than 2M customers, and today the app has 25 thousand users in the App Store.

Now, the feature with the trajectory of body movement is being improved, with the help of which a smartphone paired with computer vision technology can replace a trainer. You shoot an exercise on your phone, and the application will give recommendations or correct mistakes when lifting the bar along the drawn trajectory.

Investments were raised only in Foodex24 — the rest of the projects are coping on their own. A few months after the launch of Foodex24, the project received about 60 offers from investors. For example, Ukrainian businessman Yevgeny Chernyak offered a startup to buy 200–300 cars specifically for e-commerce. Now we are communicating with 6 venture capital funds, but so far we are not raising external money, because at this stage our main task is to increase capitalization.

We are primarily interested in venture capital funds, because they will definitely not compete with us. For example, if the same strategic investors close a task in a project, then at a certain moment they may say: “We don’t like the project” and the startup may lose liquidity. And venture funds, in addition to money, provide expertise or help find niche experts.

Startups also constantly approach me with offers to invest in them. I dive into some projects, having reviewed about 300 startups in the last two years. For example, DWIZH is an investment in a friend’s idea. He offered to participate, I liked the idea and invested in the startup.

Startups have become a working tool for motivating the team. New employees come to us because they want to become part of a company that creates successful in-house products. I noticed that when you have your own startups, it becomes easier to sell yourself to a client, and strengthen the brand.

Bogdan Semenov, CEO of Powercode, helps me a lot in my work. He immerses himself in many processes that take place in our startups. In general, we employ guys who have an interesting story to tell, like a professional handball player, a former flight attendant or a lifeguard from Disney.

When we launched Foodex24, the team worked 12–16 hours and was very enthusiastic. The project started in four cities at once: Kyiv, Dnipro, Zaporizhzhia and Kharkiv. The team did short one-day sprints and everyone was so motivated that they even worked on tasks they didn’t have to close.

In our startups, employees see the result of work, and we listen to their opinion. Therefore, they do not leave projects, even if they are offered much more money.

Mistakes in evaluating the project are very common. At the very beginning of the Powercode journey, we joined the development of a marketplace auction. We worked at a fixed price and lost around €120 000. According to preliminary estimates, we planned to employ 4–5 people, but it took 14 people to meet the project deadline. We were 2 months overdue, and of course, the client was dissatisfied. The problem was in the poor-quality pre-launch audit of the idea. Besides, our business analyst burned out and quit, leaving the technical specification with a bunch of unresolved problems that needed to be fixed. And since my position as a businessman is to avoid dubious products, we finished this one, spending a lot of money, but in the end, the client was satisfied.

The rapid growth of the company also brings a lot of problems. The team grows along with the company, which is why business processes and business logic do not have time to adapt to each other. A recent case study: A company representative ordered an improvement to a logistics program that distributes orders. The cost price of this feature is $20 000. And then they tell us: “This employee quit, we didn’t need these features at all, we are rolling back to the previous version.” Can you imagine what red eyes I had? And the problem wasn’t just money. The CEO called me and shared the situation: “The whole team is demotivated, we urgently need to do something about it and cheer the employees up”.

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Insights

• I also have a consulting direction in business, and people often ask me: “Where did you study?” I answer: “I have the most expensive education in the world, I have been building businesses for more than ten years.”

• As a startup founder, I realized that no one but me would close important tasks. Founders often avoid this by delegating important tasks to other employees. If something goes wrong, your co-worker might just burn out and quit. Therefore, you should be very concentrated and demanding, first of all, towards yourself.

• When I first started creating Powercode, it was very difficult. I’m not a techie, so I could be easily fooled in the early stages. Be patient and constantly learn something new if you don’t want to lose faith in people.

• It all comes down to communicating with your customers and asking them questions that will help improve the entire ecosystem. Very often we think for the client and make wrong guesses. Now we make questionnaires about the client’s dreams and problems, in order to get into their head and make a good product for them.

• I’ve learned it the hard way, and I can advise you to first create an MVP, and then test how good it is and how it fits into the market. What’s the point of making a perfect product that no one needs in the end? These are all mistakes and experiences that will teach us a lot.

• As an entrepreneur, I don’t feel the thrill of making money for the sake of money. Money is not the raison d’être of my existence. I create interesting products and bring professionals together into teams. It has so much more value than money.

First, to gain domains, solutions, or specific hands-on experience in a specific industry.

Secondly, having your own startups and products makes it easier for you to sell new solutions. Customers are more disposed towards a company whose founder themselves is developing their own startup and, in fact, is on the customer side.

And of course, this is good PR for your business.