How and why accelerator MetaBeta works with projects
Rusbase spoke with Eugene Ginzburg and Dmitry Maslennikov, the MetaBeta Accelerator founders. They talked about how they work with companies for a share, what they do for corporations and how they see the private accelerators market.
About work for a share in the company
How did you find each other and when did it all start?
Dmitry: Our background is experience as the founders and business owners in the web development. Both of us had companies which helped clients develop websites, IT products, build sales, Internet marketing and everything related to it. These were digital agencies. Eugene had it for already 8 years when we met. I’m 10 years younger and my company was “younger“, but we started working together.
Over time, we realized that this business was not alienated nor scaled. But there was an expertise accumulated during the time of working with clients. We thought about how we can apply it to work with startups. We really liked to launch new projects, and at that time we already had experience working with companies for a share. We understood that we have only our experience, knowledge and connections, and tried to start getting shares for them in the companies. This is called a sweat equity model, when we get shares in the company in exchange for working inside, without direct financial investments. We bring three things: direct work in the startup, expertise and communications, which we have in Russia and abroad.
How many projects do you have now?
Dmitry: We have shares in 10 companies. We enter as a company in most cases.
We have a Russian and a foreign company.
How many hours per week do you spend on one company?
Dmitry: We do not rely on any particular number of hours. We have a distributed zone of responsibility. There are companies where more attention is first needed, for example, from me, then from Eugene. His competences are marketing and sales, brand building, user experience, I have business development, communications, partnership.
We work with companies for a long time. This is a conditional acceleration, for now we have not come up with another word. This is very similar to cofounding within a certain period of time in order to quickly develop a startup at an early stage. At least we work six months, on average — a year or a year and a half, for us it is not a limit.
Is KPI or something else somehow reflected in the contract?
Dmitry: There are different KPIs, which we assume depending on the project goals. This can be specific sales levels, attracted by a certain investment estimate, time of work (“seniority”). We are stick to options and vesting that we get for the result over time. We get into the project with some minimum share, but we agree on a bigger one, which we will get after reaching the promised indicators.
How many projects can you lead simultaneously?
Dmitry: We see that we have an annual throughput — no more than 10 projects.
Is the incoming stream larger?
Dmitry: It is. We launch some projects, then we take others, some are in my active stage, others — in Eugene’s active stag, and they intersect from time to time.
Do you already have some success cases?
Dmitry: Success and failure is very conditional in our difficult business. We take projects at the earliest stage, often without money, which is a big risk. It takes time to make an exit. Success-failure? We see that so far, for a year and a half, no company with which we started work has died. We believe that this is a success.
Does it happen that everything goes wrong, not as we planned? Yes, of course, we are still ordinary people, this also happens. In particular, when we carry out corporate accelerating programs, within the framework of which we cooperate with a large company and a lot of startups.
What is your main idea?
Dmitry: First, it is important for us that work with startups is primarily based on mutual understanding with the founders, in accordance with our values. The second is that the work should be built independently of any external influences, preserving our freedom of action to realise our experience and expertise. This is one of the reasons why we did not follow the traditional way of creating a venture fund for an accelerator. It is also important for us that everything we do, will be global, at least in the long term, and the work and communication with the entrepreneurs of our portfolio companies make everyone happy in terms of human relations.
All the projects we work with have a global potential. We invest a lot of attention, forces, time and money in establishing partnerships and relations with international accelerators, incubators, funds, support programs, both state and private.
How can such connections be established?
Dmitry: We spend a lot of energy and time on trips: to Europe, to the USA, to Israel — to all key ecosystems. Over the past 2 years, we have been at almost all key conferences and have made more than 15 business trips to the global startup ecosystem centers to make connections and partnership.
Are partnerships established through communication?
Dmitry: Yes, through networking, recommendations and direct connections.
What are the characteristics of a project that has a chance to collaborate with you as the cofounders?
Dmitry: We have specific criteria, they are as follows:
- The project should have a leader and a team. We tried to work with teams where there were an idea or technology, but there was no leader or team. In our experience, this does not work, since there is no point of support.
- The availability of technology or product, I mean, some kind of innovation, it can be not even something complicated, but some kind of scenario of interaction between separate entities. There must be a food vision.
- Global potential. The possibility and the desire to scale, go beyond Russia, including the willingness to move with the project.
How important do you think it is for an entrepreneur to go to the Silicon Valley?
Dmitry: I can not answer unequivocally. You go to the Valley and see how it look like — well, it’s warm and beautiful. Does this make a radical change in your mindset or skyrocket the project development? No, it does not. A trip to the Valley should be a tool, the question is to what and how it will be applied.
Eugene: To create and maintain a global vision, there are a lot of trips to various technology conferences: there you can see key things which are interesting for public and, in particular, for investors.
About collaboration with corporations
Let’s talk about your corporate accelerating programs.
Evgeny: We see an interesting future for this direction: big companies will learn to use the technologies of small ones, integrate them into their structure.
Dmitry: We are carrying out an educational program and working as methodologists in Tolstoy Startup Camp by Yandex. In the first camp we were Yandex partners, and now we only accompany projects within the program.
Eugene: We are a methodological partner, we work with projects within the framework of the Lean startup and Customer development methodologies.
And what are the goals for large companies in such programs? Release products that suit them?
Dmitry: Each corporation has its own goals in such programs. For some, it is an opportunity to find projects for investment and synergetic development, for others — the ability to scale up their technologies, form an innovative brand or find new employees with entrepreneurial thinking.
How ready are the corporations to integrate projects into their structure?
Eugene: We already see the first sprouts. One of our partners is a company that has a “lever“ in the form of a network of clinics and diagnostic centers across Russia. They understand that it needs technological projects that can be integrated into the existing structure and distribution channels.
The collaboration between Yandex and Level.Travel (Yandex Travel service launched on the Level.Travel startup API) shows that a giant like Yandex can launch a completely new service in less than 6 months, using the technological platform of an external startup.
The integration in large companies is quite difficult: there are technological problems and a human factor.
And the team was also integrated?
Dmitry: No, it was not. It is a partnership.
Could you describe your contribution? What exactly did you make for this deal between “Yandex” and the startup?
Eugene: Let’s just say that I work as a marketing director in this startup. I use all my experience, all my connections.
And when did you meet Level.Travel?
Eugene: Just over a year ago.
How do corporate people come to see you, how did Yandex, Renaissance, and Alfa Bank come to you? Why do they choose you?
Eugene: The story of our interaction with Yandex began with the fact that I participated as a cofounder at the launch of the project Smi)le (gifts-experiences) and Benzindex (corporate fuel cards). A couple of years ago we talked about this with some colleagues from Yandex, and told them that we had accumulated a lot of expertise, but there was no format to share it. Then in “Yandex” there was an idea of organising such event.
Yandex Camp was our first accelerating program, which did not concern our own projects.
Dmitry: We took the Lean startup and Customer Development practice as the basis, and later on this basis other accelerating programs were launched.
The corporation ask us for help for many reasons: because it does not have a team inside for this work, has no experience with startups, there is no understanding of the principles of creating projects with high risks and at high speed. To keep it simple, corporations turn to us, because they do not know how, do not like and do not want to work with startups, but prefer to get something already formed and with lower risks. After “Yandex“, “Alfa-Bank“ came, then Home Credit, “Renaissance Insurance“, then “Invitro“. Recently Google came with a request for a five-day accelerating event, which we organise on a turn-key basis.
Eugene: In April, we are hosting the first event in Russia, Google Launchpad — one of a series of venture activities by Google around the world. This is not investment for startups, this is an event related to the projects expertise. We are a Google partner for organising and selecting startups for participation.
Recently we held an event for medical startups, where clinics and academic medicine representatives shared with startups the hypotheses about what the market needs. We observed pivots from several projects. Another event was held last autumn, the Lean Startup Machine. This is a New York company that conducts training around the world. They have a well-known format: a 2.5-day training session, connected with a very fast test of hypotheses. In Moscow, 80 people gathered, including people from Kaliningrad, Samara and other cities.
Are corporate projects included in the list of 10 projects that you can maintain during the year, or is it a separate story?
Dmitry: A separate story. In the acceleration program there can be from 50 to 80 participants, 10–20 companies become graduates, and the work with our 10 companies is built separately.
The Russian corporate innovations market is very small and young. Did you initially have a goal — to take this small market and give the corporations the necessary services? Or was it born somehow by itself?
This was the original strategy, it was based on the following assumptions: we did not want to compete for all those projects that existed on the open market. We understood that the corporation is an additional lever for the projects development that are in our portfolio. Accordingly, if we can conduct preliminary work on the project development until the time when the corporation can interact with it, it is very valuable for the corporation. We receive “proven material“: trained entrepreneurs and projects that can be integrated into the corporate world. For us, this is the strategy of scaling our projects, the “Go to market“ strategy.
Do your programs change much and adapt to each corporate customer?
Dmitry: Yes, for each corporation we are preparing a separate program, depending on the goals, the number of participants, the level of preparation, the criteria, the criteria for the exit. Everything is individual.
Do you take only the methodological part, or organisation, in such programs?
Dmitry: We assume the organisational part, when it is necessary for the client. But this is not our profile competence, in the first place, of course, we are responsible for the project development.
About accelerating programs
I read that not everyone liked how the hostel for visiting project was organised in the Alfa Camp. What is your opinion?
Eugene: Indeed, in the first camp “Alfa Bank“ did not make big investments in infrastructure. But the investments were still significant. People received scholarships and a place to live during the program.
Dmitry: And I’m a bit offended. I understand that people may not have liked the conditions for staying. But we need to appreciate the fact that they were given free knowledge, they developed and gave the opportunity to develop the project. It’s a shame, although we were not responsible for the organisational moments and hostel conditions, we were responsible for the content part.
I also heard a feedback that you are talking about things that most people already know. For what level are these programs designed?
Dmitry: “We have already heard about it“ is very different from “We know how to use it, we used it, and we did it.“ Indeed, Lean and Customer Development are not Rocket Science. But we talk so much about it, and people still do not know how to apply it in practice. So we have to repeat, there is no other way, in order to work with these projects in a personal format.
Eugene: I will add that in all our programs, whether one-day training or three-month acceleration, the theoretical part (speeches or slideshows) takes 10–15% of the time. The basis is the work with the methodology, the work of the participants themselves. It is not about transferring knowledge, it’s about transferring skills. We create a situation, conditions, give methods, tools for people to do their own work, receive feedback, draw conclusions, and gain experience. Yes, people sit and nod at lectures: they say, I read it. But we do not seek to impart unique knowledge, we strive for practice.
Dmitriy: This is the training of skills and the use of expertise of methodologists who work with it.
Eugene: We often meet with teams that have a finished product, but they have not done primitive things in practice, even knowing them. Very often, the founders have both fear and a desire to avoid disappointment as much as possible. A founder, driven by faith and vision, bypasses any facts that tell him that he wrongly chose the client and the problem, that his decisions do not bring value. We very often find ourselves in a situation where we have to put a person face to face with reality and convince him to change something. One of the first tasks that we set for ourselves and the entrepreneur is not to do what no one needs.
About private accelerators
Who do you consider your competitors in Russia?
Dmitry: We face with the fact that we are constantly compared with the accelerator FRII, including at the time of choice: to go to us or to the FRII. Apparently, this is the point, because in Russia there are few accelerators, and even fewer that an entrepreneur would have been heard about. But we avoid this comparison and deny it, because we are too different: in the approach to work, in the collaboration conditions, and in working with projects. Even in the business model — they have a dividend investment model, we have a stake on the company’s capitalisation growth in the future.
Therefore, currently there are no competitors on the market with which we could compete in terms of the startups development.
Eugene: At the same time, we proudly consider ourselves a private and independent accelerator. We assume that there are about two private accelerators in Russia, and we are one of them. There is someone about whom we do not yet know. But we know for sure that behind the majority of accelerators and programs there are some “free money” or interests that are not directly related to business development.
What do you think, how quickly can be this movement toward increasing private accelerators number in Russia?
Dmitry: While Russia does not create the appropriate conditions, accelerators will not appear.
Eugene: Besides, I think, recently all investors hunted for a “new Facebook“. Relatively speaking, the broad market is waiting for some heroes, who can lead others and create a pattern for the search for projects and exits.
Dmitry: This is also troubled by the current trend created by several funds, which are based on revenue, on the dividend model, on the company’s assessment in terms of its current earnings, and not on prospects, innovation, product, team potential — everything that is used in Israel, in the USA, in a typical venture, and not in a conditional one.
About personal effectiveness
How do you manage to lead simultaneously so many projects and participate in corporate drives?
Dmitry: There is a joke: “I am constantly asked: “How do you manage to do everything?“. And I answer: “Simple: I do not do everything“. In fact, we like what we do. We manage our time as much as possible. We get pleasure from what we do, from the people we work with, probably this is the key to success and the opportunity to do so much.
And how many people do you currently have in the team?
Dmitry: In acceleration programs, in addition to methodologists, there are 7 more people working. If we talk about our work with projects, then we do it together.
Aren’t you going to hire personal assistants?
Dmitry: Fortunately, we have a fairy who does most of the personal assistant work and handle all logistical issues for us.
And what do you recommend to “portfolio” projects in terms of efficiency?
Dmitry: Never give up, believe in success, yourself, the team and follow the rule: “Do it right, and it will turn out right“.