Where to get money for business
Part one, the beginning: what to do business. A story through the prism of Madrobots history
Alexander Gorny promised to talk about my Telegram channel in exchange for a story about why we chose Karma as the platform on which we attract a loan.
By the way, if you suddenly are still not subscribed to Startup of the Day and at the same time have something to do with startups and entrepreneurship, you lose a lot.
I started writing and could not stop until I set out in words my experience in raising money from starting a business to finding financing tools with an annual revenue of more than 500 million rubles.
The story is based on the example of Madrobots, the first gadget marketplace in Runet with Kickstarter and Indiegogo. Finding money for an entrepreneur is a daily task, comparable in complexity to making it.
I recently listened to Tinkoff’s book, How to Become a Businessman.
The book is eight years old, but it has not lost relevance. I highly recommend it – as one of the most practical for a Russian entrepreneur.
In it, Oleg Yuryevich talks a lot about money. Whatever the size of your business, there are always ideas that require more capital. Unless, of course, you are a grandfather who does not need anything.
I listened to Oleg Yuryevich’s wise thoughts and came to understand: while you are an active entrepreneur, your obligations are always higher than assets.
Growing your own is slow, so entrepreneurs go through the same spiral: they choose a market, gather a team around them, determine a strategy, test the market for their money, attract investment for development and try to stick to the chosen plan.
Along the way, it becomes clear whether the idea was strong, whether the market is large and whether the team and the founder themselves are good enough to reach the intended goal.
Starting Madrobots, I had no idea where I was going. I understood the concept of EBITDA for the third year of doing business. I have learned literally the other day to count in my mind the return on invested capital and the marginality of products. But this did not stop me from laughing at Dmitry Portnyagin in an interview with Evgeny Chernyak.
How we solved the issue of financing business at the start
I’m lucky, I have successful friends. The rule of three F works.
Three F: Friends, Fools, Family.
And that’s why these are ideal investors, in my opinion:
Friends: if friends do not lend you, maybe you should not ask strangers?
Fools: how can you name people who give their hard-earned money for pictures and graphics?
Family: it’s great when there is someone in the family who takes money for a business instead of a mortgage.
At the start, I had savings, a partner (a colleague in the corporation) and friends.
I was lucky with the timing of starting a business. When I said goodbye to my corporate career, it was the fall of 2013 in the yard, another whole half a year for a dollar of 30 rubles. We managed to bring dozens of crowdfunding innovations to Russia and learned how to work out the process of their promotion and sale before the currency crisis.
The first (and so far the only external) investor I found corny – through Facebook. I wrote a note about starting a business, and literally right away, Maxim Osipov (at that time CEO IMHO VI) knocked in a personal email. He liked my fighting spirit and the idea of carrying gadgets with Kickstarter. So the project has an investor and partner.
Maxim has since become for the company something more than the first investor. Not participating in the operational management of the company, he helps us in matters of strategy and management at our internal “meeting of shareholders”.
Maxim also taught me to soberly evaluate my strength. During the transaction, we linked the final assessment of the company to annual results.
We missed KPI by almost 30%. As a result, Maxim’s share in the company was 30% cheaper. Since then I have been compiling four versions of the plan (optimistic, realistic, pessimistic and most likely). The most probable one is even a little worse than the pessimistic one – and for some reason it usually works out for some reason.
The initial investment was enough to go through a series of tests by 2016 to break even, change the business model twice and begin to prepare for multiple growth.
Reflecting on our path, I recall a column by Josh Payne (the founder of the StackCommerce service, which allows media to monetize the audience by launching branded stores) about how the entrepreneur’s path goes. A couple of years ago I formulated my version of similar theses, but in a strange garden apples are sweeter.