How we launched our business in the US. Oleg Demidov from Navigine talks about his experience at Starta Accelerator.
Oleg Demidov, co-founder and Director of Business Development of Navigine.
My co-founder Alex Panev and started to actively develop our company in the Russian market in 2014. At the beginning of this year, we started to run our business in the US market.
In this article, I will explain how we came to this decision — where the idea came from and what steps we took. I hope that this information will be useful for similar companies new to the foreign market or deciding whether or not to enter it.
I’ll briefly explain the origin of our motivation to enter the American market.
Our company creates a software B2B-platform that precisely monitors the positioning and movement of people inside buildings. The devices used to do this are a set of sensors available in modern mobile devices and equipment for the implementation of IoT (Internet of things) applications. We operate in the global market of geolocation services within buildings that despite the rapid growth ($ 4.4 bn. In 2019) is still in its infancy. This innovative market requires a considerable period of time to catch up to the classic ones, such as retail, transportation, manufacturing, and logistics. The Russian market usually develops behind the West, so it is small, making up 1% of the world market. The US is the most advanced and makes up to 50% of the world market.
At Navigine, we have managed to create a core technology, which makes us competitive on the world market of software products.
Our first projects in various sectors (transport, retail, entertainment), proved the consistency of our technology and business models.
We understood that to raise the company’s value, it would be necessary to enter the international market, specifically the American market.
We faced issues that any company entering foreign markets faces:
1. Choosing which market to start with.
2. Choosing which resources to use for this purpose.
3. How to create the best proposal for the unknown market.
4. Choosing which channels of promotion to use.
5. How to determine the output efficiency of the market.
I will first try to answer these questions on the basis of how it happened in our case:
In 2015, we started to visit foreign conferences, mainly supported by the Skolkovo:
Mobile World Congress, Hannover Messe, Slush. Communication with potential customers, partners and competitors confirmed that there is a demand for our solutions. We also got to get a feel the competitive environment at these conferences. Mobile World Congress 2015 was the most important for us, as we found our first foreign partner and made a pilot deployment in Berlin.
In the summer of 2015, we participated in the first set of the accelerator for mobile technology projects, organized by the Mobile Technology Center at Skolkovo in conjunction with the fund-accelerator iDealMachine. The program helped us develop considerably, allowing us to grow in all key business indicators by more than 50% in 3 months. This experience has shown that a good acceleration program, suitable for our focus, can bring substantial benefits.
In the fall of 2015, we gained investments from the Russian Fund AYR Ventures, which also helped us to find a strong local partner in Germany, the Chamber of Commerce of the Russian Federation. Taking into account existing knowledge and resources, we decided to test the possibility of entering the German market.
For about one and a half months, our small team in Berlin was conducting customer development tests and we were able to generate a flow of potential projects.
Our team realized that the market is promising but pretty inert. Another important discovery was that we can work as well as communicate effectively with foreign contractors.
With this new knowledge, we started to strategize how to enter the American market, realizing that in the spring of 2016 there will be a great probability of attracting investment through the Finnish investment platform -Innovestor.
Coincidentally, our first institutional investor Starta Capital has been planning to organize its own acceleration program in New York City, starting in January 2016.
Factors for choosing the program were as follows:
-We were well-acquainted with the team that had to help us on the spot
- New York, although pretty expensive, is objectively cheaper than the Silicon Valley. You can live there for about $2,000 per month per person, including accommodation, transportation, and meals (we did not consider other places in the US because of our focus on B2B Software)
- New York is much closer to Moscow (faster and cheaper flights — easier to organize communication with the Russian team)
- There is more of a focus on business development than attraction of investments in New York (because we have an idea that is not entirely new and unique, we have to show projects in the US market quickly)
- The accelerator team has sped up our adaptation process through training seminars: The Culture of Doing Business, The Features of Marketing and Sales, Formulating the Value for the Final Customers, Taking into Account the Specifics of the Market, A Study of the Peculiarities of American Communications
- The accelerator provided us a basic set of mentor connections that allowed us to connect with customers and partners — in total we were able to talk with more than 50 people
- The accelerator provided us with access to investors, professional business angel John Ason joined the round during the program.
- We had useful weekly meetings where we tracked results, which helped us to focus on the important tasks for customer development
- During the program, we made our first deployment in the partner’s New York office and formed several strategic partnerships
What we are doing now:
- Continuing to grow our network of customers, partners, and investors obtained during the acceleration process
- Looking for a new industry accelerator, which will help to make the next leap
A brief conclusion and recommendations to companies that are considering entering foreign markets:
1. It is important to decide whether it’s the right time to enter the foreign market or not: if you feel that you’ve hit a ceiling and need to expand, then go for it
2. Get a sense of how much interest there is in your product and how strong the competition is — it’s very important to visit a few targeted conferences and exhibitions, but do not overestimate the feedback of exhibitions — as a rule, it’s much more optimistic than reality
3. Select the most promising market, taking into account factors that will enable you to compete successfully
4. Find a partner with strong local connections: accelerator or other network structures can be very helpful
5. Your company might be a leader in its industry in the Russian market, but the development of the company in American and European markets may leave you starting from scratch, building a brand and earning a reputation
6. My conclusion on working with Starta Accelerator, which is currently setting up its second batch of companies:
I am constantly asked, “How are they better than Y-combinator, 500 startups, or TechStars?”
Alexey Girin, managing partner of Starta Accelerator, has a good answer for this: “If you can get into one of these top programs, of course you should go.”
Adapting to the American market is incredibly difficult without the company already having a presence there. Though companies with a unique technology in a trending market can be given exception, the company’s marketing package must be at a high level for it to work.
Starta Accelerator respects and thrives in its niche, and can be a good first step for companies to adapt to the American market. Here you also can test hypotheses about output prospects in your market.