Yorso and 500 Startups with Sberbank. Week 1.
November, 26th the first ever Russian-American acceleration program held by 500 Startups started in a partnership with Sberbank in Moscow. Yorso — online B2B wholesale marketplace for fish and seafood industry — was chosen among TOP-30 projects applied for the program out of 800+ candidates.
Starting with this post I’ll regularly disclose our team progress, faced and solved challenges, data and metrics, decisions made, fails and wins, and the overall information about this unique acceleration program: organization, methods, our impression and subjective feelings on what is going on here.
Intro
As a team Yorso has already passed to be a finalist in several acceleration programs before (in New York, in Rome, in Prague) but the first and the only we accepted to participate was the PulsarVC acceleration program in 2018. In Summer we applied to the 500 Startups in CA and even reached the final 2x20 min interview with 500S partners. The result of the final interview became a redirect to the Russian program which finally got us accepted. And here we go!
The high-level program structure
The most inspiring thing was to know that it is the original 500 Startups program and nobody tries to reinvent the wheel. Basically, it consists of several parts:
- Every team is assigned with the personal EIR (entrepreneur in residence) who becomes like a personal mentor/tracker/coach/inspirer for the team. Once a week we have 30-minutes slot to work with him personally and adjust our vector of activities. The EIR for Yorso became Tristan Pollock who has a great expertise as an entrepreneur/an investor (having sold two startups) and connections especially in the marketplaces world
- Every Monday three new mentors from 500 Startups team come to the Sberbank place located in the same building as new innovative project “School 21”. They provide us with lectures for the topic they have the deepest expertise (sales, marketing, growth, etc.)
- During the working days from Tuesday to Friday we participate group workshops on the most “hot” topic with each of the mentors and also take individual sessions to dive deeper in our particular case; the first week we got a chance to talk to Chandini Ammineni, Saalim Chowdhury and Salim Virani
- Every Friday there is a debrief lunch when all the team are sharing their thoughts on “Wins”, “Challenges” and “Asks” during the week
- Every night and weekend we apply the gotten knowledge in practice; one might think it sucks but this is all about doing a startup, you know…
The first impression
- The organization is done in a perfect way: no questions with logistics, coordination, where to leave the clothes, where to eat, train, etc. (yes, we have coffee, cookies, place for workout and scooters!);
- Almost all activities are in time without delays, queues, etc.; so special thanks to Chris Brown, Kate Seledets, Elina Kirillova, Nikita Pimenov, Natalya Magidey and Michael Erman for the organization part
- Our foreign mentors / guests are more relaxed / smiley / feeling good while we are in most cases shy and calm and if not it looks unnatural
- The speed: everything is changing and moving extremely fast, you must fit into this or you are out of the scope
- Never talk to mentors without data or specific questions: we tend to be more “general” by nature but it is less professional
- Most pitches are not well prepared and I’d suggest to many companies make 20–30 runs before going public; sometimes it is even not clear what project is about
- All mentors are “practitioners”: with own startups (successful and dead), made exits, “hands-on” investments, opened to help and respond if you are prepared; it excites you a lot but you understand sometimes that probably “they are too good for you!”
- The information during the lectures looks general but extremely practical and there is always a chance when you think “well, this is obvious” but especially this “obvious” thing finally kills your startups
- The overall approach is: have fun, communicate, study, grow, run, never stop, SHOW THE DATA, focus on traction
- Everything is in English but there is a sync translation into Russian which annoys me a lot because creates the additional noise in parallel with the main speaker
Yorso team progress
Current state
Yorso as an idea started in 2013 and today is a working business with recurring revenue, sales and dev team with customers in 7 countries: Ecuador, Morocco, Mauritania, Russia, China, Taiwan, Spain. The GMV in 2018 will be ~$6m. and revenue ~$120k. We work mostly as a trader but not an IT company so we decided to forget everything we did before and use the #sber500startups program as a chance to find the right pivot and greater value proposition for our clients: fisheries, processors, distributors, HoReCa and Retail.
The ultimate goal for us is to finally reach the product market fit and make the network effect work on the platform.
So what?
First of all, we started with a theory. Every team member was obligated to read this perfect book about marketplaces and a bunch of extremely useful articles and insights on how to succeed in the world of marketplaces so we can proceed with the brainstorm session and decompose the tasks / thoughts among the team. By the way: we decided to go through the program altogether: sales and technical team and involve developers in the sales process because each team member MUST contribute in sales and product design from the business perspective and this program is a good fit for this.
Key accomplishments
- All team members become familiar with the same theory of marketplaces (book, all articles, lectures from the previous week)
- We completed the “scoring” of YORSO through 10 points to understand if it really worth disrupting this old-fashioned B2B fish and seafood industry and bring them online (even though we were trying to do this before and even got some external attention emphasizing this):
New Experience vs. the Status Quo. We can provide tenders for logistics, easy access to new markets and clients, reduce the dependency on key people inside the company, provide more transparency, reduce the errors inside the documents and put all the transactions in one place. Since now sales are done 24x7. As Bill Gates told “If your business is not on the internet, then your business will be out of business”.
Economic advantages vs. the Status Quo. We reduce transactional costs for sales, purchases and logistics departments up to 30% and reduce the number of intermediaries in the supply chain which allows suppliers to sell with higher prices and get product items for buyer cheaper.
Opportunity for technology to add value. Big data analysis and machine learning algorithms allow to provide new experience in analytics and forecast the demand / pricing balance for the market.
High fragmentation of the market. Market is extremely fragmented so definitely we score “1” here.
Friction of supplier sign up. Well, it is one of the most difficult part. We need to put “offline” people “online” which is definitely the biggest issue for us and significantly increases our CAC metric. So “0” points here for YORSO.
Size of the market opportunity. Annual volumes for import + export + internal consumption of fish and seafood just in Russia — $9.6 bln., in Europe — almost 50, in the US — almost 35, in China — 60+. Just to compare the full IT market in Russia is ~ $27 bln.
Expand the market. Probably, at least for now we don’t see the ways to expand it more. Market is already established and no ways to grow / reach new ranges because everything depends on logistics / total catch / supply by aquaculture. Thus, “0” points.
Frequency. Definitely “1”. Every producer / distributor / HoReCa / Retail needs fish and seafood on the regular basis and since we can provide new experience and deep integration with existing ERP systems it brings us opportunity to not afraid that companies will trade offline once they match each other on YORSO.
Payment flow. In case of SaaS model we probably will not control the payment flow. In case of managed marketplace of SaaS+ approach we do. Thus — “0.5”.
Network effects. It looks like each trader or producer or supplier/buyer can definitely contribute with their existing customers but at this stage it is a tricky part: no one wants to share the clients database. Thus, “0”.
Result: 6.5 out of 10. Not bad. We have chances :)
- We identified the ultimate goal for the acceleration program: to come up with the product market fit
- We identified key hypothesis to check on what Yorso is: managed marketplace, SaaS-enabled, on-demand or not a marketplace at all but the procurement order processing which is a trendy thing today too in the B2B eCommerce world
- Based on the analysis of organic traffic almost all clients are from HoReCa segment which is completely out of our current focus today. So if the market is “pulling” us from this side maybe it is a good sign to pivot to?
- We identified key metrics to keep an eye
- # of new suppliers that put product items online (since we want to fulfil the platform with more data from the supply side first)
- Revenue from the transactional model and SaaS model
Priorities of Yorso for the next week
- Generate contacts for different segments of clients / stakeholders for the interview: fisheries, processors, distributors, HoReCa, Retail, marketplace owners, VC’s in the marketplace world
- Conduct 20 interviews with different stakeholders to identify the product market fit options with VP/USP
- Conduct 20 interviews with existing clients to convert them into the SaaS model (paid or free plan)
Challenges we have
- Come up with the right business model and pricing: transactional, SaaS, SaaS+, hybrid?
- Get response and agreement to conduct the interview from people we don’t know: so if the reader is eager to help us — feel free to outreach me via Facebook
- Identify the real pain: going online vs order processing vs logistics vs reduce transaction costs vs something else
Fails and lessons learned
- Sometimes we were not well prepared for the mentors' sessions and it is a shame on us
- We don’t track enough data inside the project so here is a huge room for improvement especially in sales and marketing
Key metrics and data
- Cash Balance: $50,000
- Monthly Burn Rate: $10,000
- Runway: 5 months
- New orders: 1, transactional revenue — $780
- New suppliers who put products online: 0
What’s next?
People. You never know if your startup will fail or succeed (and statistically it will likely to fail) but you always know that people around you bring inspiration, new knowledge and their energy. Never forget about this and share your experience / contacts: all entrepreneurship is about communication and helping each other and this is probably the real network effect. So…
Go, go, go, teams: wish you all to become the next unicorn!
And keep updated with every next step we do on the #sber500startups #500Strong program :)
