Alex Pospekhov Of Missiontech On 5 Things You Need To Know To Successfully Scale Your Business
An Interview With Ken Babcock
You always have to prepare for everything to go wrong. All of your predictions are an illusion. When I talk with startups, they always bring me a business plan; in response, I tell them to divide their revenue by three and multiply their costs by two, if not four — and then they’ll have a realistic model. That always works. Planning is one thing, but the practice is another.
Startups usually start with a small cohort of close colleagues. But what happens when you add a bunch of new people into this close cohort? How do you maintain the company culture? In addition, what is needed to successfully scale a business to increase market share or to increase offerings? How can a small startup grow successfully to a midsize and then large company? To address these questions, we are talking to successful business leaders who can share stories and insights from their experiences about the “5 Things You Need To Know To Successfully Scale Your Business”. As a part of this series, we had the distinct pleasure of interviewing Alex Pospekhov.
Alex Pospekhov, founder of Missiontech.co, VP of strategy at Mission Space. Alex has developed a variety of startup projects — from the first media platforms to FinTech marketplaces and SpaceTech startups. Since Alex has helped more than 180 startups to relocate and scale-up in the EU and rise more than 20M EUR of investments.
Thank you for joining us in this interview series. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’?
I was born to an entrepreneurial family, so the desire to follow in their footsteps was in my blood. At 17, I started working in telecommunications, developing digital services for mobile. We built systems analogous to iTunes and the App Store before those platforms had become widespread. Afterward, I had a company that did mobile development on commission. We created iPad magazines, interactive mobile services, and lots of fintech projects.
When Revolut first launched and the PSD directive was issued in the European Union, people started coming to me for advice about the mobile field. I could easily imagine the kinds of programs that existed in Europe since my business already had European fintech clients. This motivated me to study European regulations, after which I created my own fintech marketplace. At the same time, numerous startup programs were launching in the EU and I decided to relocate my project to Latvia. After a successful launch, people began asking me questions about the finer points of startup visas, company registration, and taxes. I saw a real demand for that kind of help, and that’s what inspired me to launch Missiontech.co.
You’ve had a remarkable career journey. Can you highlight a key decision in your career that helped you get to where you are today?
I moved to Latvia in 2017–2018, and I was the first person to receive a startup visa: the country had just passed its startup and new tax laws. I was able to establish a close relationship with the Latvian government, and we began to work with the government agencies responsible for startups and innovations to present Latvia as a country at the service of tech entrepreneurs.
What’s the most impactful initiative you’ve led that you’re particularly proud of?
When Latvia had only just passed its startup law, I saw an opportunity that others were ignoring. Thanks to that, we were able to take a small country that was only beginning its journey toward technological development and rise to the top of the Index Venturas list in terms of attractiveness to early-stage companies. Latvia took first place thanks to a clear regulatory policy, taxation system, options, and both the quality and cost of living. It turned out that this tiny Baltic country was the perfect place to start a tech company; for businesses in their later stages of growth, there are plenty of other countries.
Sometimes our mistakes can be our greatest teachers. Can you share a mistake you’ve made and the lesson you took away from it?
In 2018, we created a marketplace media outlet about cryptocurrencies. We wanted to create the perfect product but didn’t focus on our customers’ pain points or bringing in traffic. As a result, we launched three months late. By then, the crypto market had taken a downturn. I thought that my investment partner would raise more funds, but everything went sour. We made an unbelievably good product and spent an enormous quantity of resources on development instead of sales. This is a classic founder’s mistake: lots of people make it, and everyone has to live through it.
I did everything wrong then: we rented the wrong office and paid an extra €25,000 in taxes by choosing the wrong legal and accounting partners. In addition, we were focused solely on the product, rather than on sales. At the time, there weren’t really any venture communities, and there was nobody to ask about the best way to do things. In the end, I went home with €500 in my pocket. Today, I would have warned myself not to outsource Biz Dev and dive deeper into the local ecosystem, communities, and networks. You have to ask the people with experience handling the kinds of questions you have, and thereby avoid pointless expenses — or even save your startup.
This was a great experience that inspired me to start Missiontech.co.
How has mentorship played a role in your career, whether receiving mentorship or offering it to others?
My mentor in Latvia is Konstantin Sinyushin, the founder of The Untitled VC. I came to him for advice and feedback. I also asked Ivan Ladan, the founder of a startup called Marine Digital, about mentorship. They left for Germany when they got a €1 million grant from the government. Later on, I also mentored Elliot Goykhman, who launched Zelf, a neobank for zoomers with more than a million active users by now.
For my part, I mentored plenty of startups and services that came up.
Developing your leadership style takes time and practice. Who do you model your leadership style after? What are some key character traits you try to emulate?
I’m a completely chaotic entrepreneur. On top of that, I have ADHD. I don’t like control or deadlines, and I have no sense of time. That’s why I try to surround myself with lots of highly responsible people with a lot of freedom to act. In addition, I’m partial to earning on commission, rather than a fixed salary. This lets you achieve results and put together a team that can help you do that. When all the usual methods don’t work, this approach can help you see what others don’t, and learn what businesses are actually made of.
Thank you for sharing that with us. Let’s talk about scaling a business from a small startup to a midsize and then large company. Based on your experience, can you share with our readers the “5 Things You Need To Know To Successfully Scale Your Business”? Please give a story or example for each.
I think that if the blitz scaling — taking investors’ money and blowing it all on rapid growth — a model used to be in vogue. The speed at which you grew was the most important indicator for your future capitalization and valuation. Now, during this recession, your real economic power is the most important criterion. If we take the story of WeWork, don’t forget that before Masayoshi Son gave them their last installment, WeWork was running out of money every two weeks.
Whenever you’re creating a small business, you need three months cushion. People talk about having a runway to last a year. I believe that in the next 3–5 years, all scaling has to be built around economic efficiency; otherwise, investors will simply be flushing their money down the drain and founders will have wasted a chance to build things differently.
You always have to prepare for everything to go wrong. All of your predictions are an illusion. When I talk with startups, they always bring me a business plan; in response, I tell them to divide their revenue by three and multiply their costs by two, if not four — and then they’ll have a realistic model. That always works. Planning is one thing, but the practice is another.
You always have to account for local quirks. Relocation, scaling, and breaking into new markets are all nerve-wracking processes. You need to be ready to stay calm. These problems don’t get solved quickly: everything works slowly in the European Union. You have to understand the culture of the place where you’re settling down. Portugal isn’t Sweden; Luxembourg isn’t Poland; Italy isn’t Germany. All of these countries have their own cultural code and want you to interact with them like a local.
In order to act like a local, you need to be super-active on social networks. I spend an enormous time on Twitter talking with the Luxembourg Twitter community and creating lists. We start talking; I understand their problems and how they live. i understand how a business that solves global problems could be interesting to the country where we’ve arrived.
Find the right product-market fit — especially if you’re working in a cool deep tech startup. Everyone knows what СustDev is, but not everyone does it. To see a startup as your idea and your baby; to be in love with it and think that everyone else should feel the same: all of these are fatal errors for a business. The biggest problem when scaling is scaling your product-market fit. You can assemble a team and everything else, but growing from one client to ten is another matter entirely.
An idea with a proven hypothesis and startup capital are two necessary components when launching and scaling a startup. If you don’t have money but want to create a startup, you can’t just launch your MVP. You have to test your hypotheses and get a signed pre-contract in any form at all — even a corporate registration. RobinHood just created a landing page announcing a zero-commission trading platform, which was a new idea for the market and got 100,000 signups. That got them their investors.
In testing your hypotheses, you need to have a clear perspective on things — the most important element in business, and especially in startups. Bob Dorf’s “Startup Owner’s Manual” is an excellent tool: it clearly describes how to test your hypotheses, how to work with them, and how to go to people and ask them what they need. Opponents of this approach might say, “If Steve Jobs asked people what they needed, we never would have had an iPhone.” The point might be correct, but you’ve got to remember: you’re not Steve Jobs, and never will be.
Can you share a few of the mistakes that companies make when they try to scale a business? What would you suggest to address those errors?
Scaling a business is often tied to relocation to a different country. When you move to a new place, you always rent the wrong home or office. When you’re taking your first steps in a new market, you don’t know whether a given thing is cheap or expensive, or whether there are other options. At the very beginning, I wouldn’t advise signing long-term contracts; at that point, you probably don’t know whether that’s what your startup needs at its current stage. There will never be a shortage of people ready to make a quick buck off of newly arrived founders.
The biggest mistake is overestimating your own abilities, and when you create a startup with the last of your money. The likelihood of your startup attracting investments and taking off is just 2%. The image of the founder as romantic, launching a project with the last of their money and subsisting for months on Cup Noodles while believing in their grand idea, only came after the first dot-com boom. This was when we were inundated with success stories, stocks skyrocketed in value even when companies had nothing to show, and the media shared countless stories of people like Mark Zuckerberg making money off of ideas. The most common survivor’s mistake is to analyze a successful case rather than studying the entire market. Everyone wants to believe in miracles and fairy tales. Those fairy tales, though, are the stories of just a few companies that received unheard-of funding from investors for an unheard-of idea. That’s the exception, not the rule.
Today, an idea isn’t enough to become a unicorn. All the services that could make life better are already out there: the world operates digitally, and there’s no room for yet another SaaS product. There isn’t much of a chance for it to succeed, either. Building a startup is all business. You have to plan out your income, expenses and assets; you need to come up with options of what to do if your idea doesn’t take off. Remember: the likelihood of failure is 80%, if not higher.
Scaling includes bringing new people into the organization. How can a company preserve its company culture and ethos when new people are brought in?
It’s a magic process. These people always find their way to you. How do I communicate my values? Through my own communication channels. I have well-developed social networks, and I take the content on my pages very seriously. This lets me stay in touch with people that share my views.
What do you do if you have a lot of employees? I love old-school communication, I like writing letters and holding one-on-one meetings. I send Christmas cards. You can be friends with your team if you have just 10 people, but once you’ve got 50–100 employees, your team relationship is necessarily different. Still, those 50 people have their managers, and you need to establish a personal line of communication with them.
In my work, I focus on helping companies to simplify the process of creating documentation of their workflow, so I am particularly passionate about this question. Many times, a key aspect of scaling your business is scaling your team’s knowledge and internal procedures. What tools or techniques have helped your teams be successful at scaling internally?
I love the tactics of the Brazil and Argentina’s football teams: they don’t work on their weak points, but dedicate all of their resources to maximize their strong suits. I take the same approach in business.
What software or tools do you recommend to help onboard new hires?
I’m an old believer: I love in-person meetings. Remote work is cool, but nothing will ever take the place of an in-person meeting. You can’t close a big partnership deal if you can’t see a person in the flesh. Like I already said, I’m a big fan of mailing paper letters and sending New Year’s and Christmas cards. It’s a sentiment that shows how engaged you are in communication.
Because of your role, you are a person of significant influence. If you could inspire a movement that would bring the most amount of good to the most people, what would that be? You never know what your ideas can trigger.
As an inspirational movement, I would spread the word that entrepreneurship isn’t for some exclusive class of people — it’s for everyone. The future in which we are immersing ourselves is completely unpredictable, with no guarantees whatsoever. If our parents’ and grandparents’ generations grew up in a world full of social safety nets, living wages, and good work, today’s world tells our generation that we need to take risks and be responsible for ourselves.
This lets us create incredible products and deliver better services. Just imagine how we could change the world around us if the 5% of entrepreneurs grew to 15%, or even 20%.
How can our readers further follow your work online?
I would be glad if you add me on LinkedIn or follow me on Twitter
This was truly meaningful! Thank you so much for your time and for sharing your expertise!
About the interviewer. Ken Babcock is the CEO and Co-Founder of Tango. Prior to his mission of celebrating how work is executed, Ken spent over 4 years at Uber riding the rollercoaster of a generational company. After gaining hands-on experience with entrepreneurship at Atomic VC, Ken went on to HBS. It was at HBS that Ken met his Co-Founders, Dan Giovacchini and Brian Shultz and they founded Tango.
