A Startup Is Not A Sprint, But A Marathon With Obstacles
New startups in various areas launch quite often. Some of them become successful, scale to new countries, raise investment and, most importantly — get new customers. This path is always thorny. Victories alternate with mistakes and vice versa. After all, as we all know, there are two sides to every coin. The article below is about victories, losing, and most importantly — about the lessons of the startup PatentBot.
On my last day of work as Managing Director of PatentBot, I would like to share my experience developing one of Ukraine’s most successful startups. In one and a half years of work, PatentBot managed to grow from a local project that helped check whether a trademark in Ukraine is available, to a company that operates in 28 EU countries, the US, China, and Ukraine. In this article I will share about the project’s victories, the difficulties that we faced and the lessons that I have learned from these challenges. After all, we are all accustomed with talking about our achievements, but it’s not so often founders talk about the reverse side of a startup’s development and what is goes on behind the curtain.
The lexnet.io legal innovation laboratory and the start of working with Juscutum.
My partnership with the Juscutum law firm started in July 2016. At that time, the lexnet.io legal innovation laboratory , which I founded with my partners, joined Juscutum. In our portfolio for development was Legal Alarm — an emergency call button for a lawyer. Then we created several more legal tech projects (LITT, Sudo Bot, Trade Bot, Paralegal Bot). All of them were local and aimed at the Ukrainian market. One of the most successful was Legal Alarm, with which we managed to earn the title of the best legal tech project of 2016 in Ukraine, by the Hague Institute of Innovations in Law, and received a grant of 20k euros for its development. In 2016–2017, the number of searches and corporate raids was critically high and our product, more than ever, was able to help people and companies navigate the legal field in difficult and unforeseen situations.
Start of PatentBot in Ukraine.
In April 2017, as I said in my interview, an idea came to us: “What if we could make the procedure for trademark registration in a bot possible?” After all, the procedure is quite automated. Three months of development and on July 11, 2017, we launched PatentBot. The idea took off. I remember my delight when hundreds of users began to see if their trademark was available.
Conclusion: build an MVP, a simple product that would be understandable even to a 10-year-old. You shouldn’t develop a “spaceship” in the hope that it will be in-demand immediately.
On the first day, we had about 800 unique users.
Two weeks later, on July 28, we launched full functionality and on Friday evening, when the patent attorneys were resting, just 10 minutes after launch, we received our first sale. During the day, the bot tested hundreds more unique users. I think that launching at a time when patent attorneys are not working was a brilliant marketing ploy. In the future, this will play into our hands during the pitches, as it delighted investors.
In turn, we didn’t expect and didn’t plan a stormy and instantaneous reaction by the market, therefore, on the one hand, we were pleased with the interest among users, and on the other, we were not ready for the wave of criticism that we faced from patent attorneys. The day after the release, we collected a number of comments and articles from patent attorneys and lawyers who said that such automation is impossible and that the project will last from the strength of several months. Zealous reaction in action — nothing else. Having read reviews, at first we tried to justify ourselves and show why our theory should work, but at some point, we were tired of responding to such statements and decided that time and our client would be our judge.
Conclusion: the client is your judge. Only the sales and growth of users shows how much your product is in demand.
The first trial steps and “exploration” in the United States.
During the first three months of work, we received hundreds of clients, reviews, and we managed to become one of the best legal innovations in Ukraine in 2017 by the version of the Hague Institute for Innovations in law. For the legal innovation laboratory lexnet.io, which also developed PatentBot, this was already the second product that was recognized as the best by the version of the Hague Institute for Innovation in Law.
At that time, in parallel, I was still closely involved with the Legal Alarm, which I wrote about above, and together with Nestor Dubnevych in September 2017, we visited the largest technology exhibition TechCrunch Disrupt in San Francisco. When we returned to Ukraine, it was decided to scale PatentBot to the US.
Conclusion: such trips help create global thinking. If you want to become a global product, you must think in terms of what is happening in the industry worldwide. At the same time, treat the entry to each new country as a separate project. It is impossible to build an international company without knowing the end-user in all countries thoroughly.
Important is the fact that even if you are already successful in Ukraine, in the United States it doesn’t matter. Local investors are completely uninterested in the achievements of the project in another local market. Only success in a certain market, where the investor has ties, matters. Also important is the personal reputation of the founder. It is better to confirm it through the intro or accelerators. In the US, 90% of success depends on communication and the ability to reach the people you need through the intro.
Even if you have contacts with investors but you don’t have a personal recommendation from a person whose opinion is important to them, such a scheme won’t work. Therefore, it is better to start communication in two stages: 1) search for a person who can be asked for advice and personal acquaintance; 2) further direct negotiations.
Conclusion: Without the ability to find the right people through the intro and building personal reputation, succeeding in the United States is difficult. Your connections, partners, local media, accelerators, and product “wrappers” will significantly accelerate the development of the project.
Full launch in the United States.
Technical preparation of PatentBot for the US market took about 3 months. On 14 December 2017, we have announced that project starts working in the US. And in January 2018, I moved to Palo-Alto (California) to grow the startup, receive business education in Stanford University and learn more about a local business culture.
Based on the experience of TechCrunch Disrupt, we understood that somehow we need to get the first users in the US. Among one of the free opportunities was the platform called Product Hunt. Product Hunt helped us to receive first reviews from American users and even sales.
Also, entry to ProductHunt led us to the nomination for the annual Golden Kitty Award, and as a result — to the title Bot of 2017 according to ProductHunt.
I can say that this was the first step of a perceptible move in the development of the project in the United States, as it was the kind of achievement at the local market. This led to publications in local media, and it, in turn, along with the title, enabled the project to gain some confidence in the eyes of investors and partners.
One of the main problems is the construction of a purchase funnel, the miscalculation of the cost of attracting a client and the client retention rate. In other words — how to make the client come back to you. Given the fact that image and reputation play a fundamental role, we placed a great emphasis on searching for partners, submitting to accelerators through the intro and publishing in American media. Speaking about media, for example, we looked for specific journalists through Twitter, Linkedin, and sent them about 150 letters weekly. Answers were rarely received, or “thank you, we will look through your project”.
Nevertheless in two months, in February 2018, we were finally first mentioned in the US Forbes. This raised the level of credibility in us among American partners, yet, didn’t bring a flow of new users in such a quantity as we would like to have. In particular, sales remained one of the key problems of the project.
Conclusion: it’s better to start the development of the secondary market for a project only after getting a fully established system of work in the first market. Neither Product Hunt, nor the many publications in the media and the title of the Bot of the Year are not as important as sales. In particular final sales and marketing lined up in parallel with sales is the key to success.
The US is a rather competitive market. You should just start from it, look for investment and try to scale after that or try to get some new investment only after starting to receive a stable income and funding round. Also, it should be understood that every market has its own special features and ideally you should be physically present in every country where your startup operates.
Launch in the European Union.
After that, we committed ourselves to scale to the EU countries and fulfilled this promise on April 19, 2018. Patentbot began to register trademarks in 28 countries of the European Union. At the same period, we actively continued to explore the Asian market and worked for attracting a new investment. I submitted an application to the Hong Kong accelerator Betatron, and in April 2018 we were informed that our project was chosen for participation in the acceleration program. The project was estimated in $750,000 and this happened before the launch to the countries of the European Union. On May 10, 2018, I and the CTO PatentBot Vladimir Yaroslavskyi moved to Hong Kong for 4 months.
Acceleration in Hong Kong.
It is worth noting that the market of China and Hong Kong is much more difficult to master than the markets of the United States and the European Union due to the language and cultural specificities. Acceleration in Hong Kong gave a final understanding of the fact that it’s difficult to be everywhere at once and that concentration of attention is one of the keys to success.
China is the largest and the most promising market in the industry we worked. At this market, the enormous prospects for the development of the project become visible despite all the difficulties, in particular — with language. This problem is aggravated by the fact that not everyone knows and understands English there either.
There were a number of the reasons that contributed to the fact that acceleration in Hong Kong was a turning point. First of all, it is the rhythm of life coupled with almost complete absence of personal space. There is extremely small housing in Hong Kong that also leaves its mark on the productivity of work.
Despite the difficult relocation, it was a great support that accelerator provided. Betatron is one of the largest technology accelerators in Hong Kong. It doesn’t specialize at legal tech, but after us going through the programme, its team began to pay more attention to this industry. Betatron helped us to revise the development model of a PatentBot and pay attention to major errors.
We began to analyze our customers’ behavior, stages at which the user leaves a product without having made a purchase and also made calls with customers, asked them to give their feedback and point out the disadvantages. We recorded all the reviews and wishes of customers and then analyzed them with the team. Such process helped us to see all technical faults and for the first time of our work — understand what our users really want.
Every Tuesday, for 4 months we made a report on changes of a project during the week and discussed it with the mentors of the program. In China, as in the United States, personal reputation, trust, and intro play a huge role. It was easier to arrange meetings in Hong Kong than in the United States.
It is quite normal to meet with the fund, in the portfolio of which the majority shareholder is Forbes. You, as a young entrepreneur, is treated with respect. If we talk about the countries of the former Soviet Union, there is still ageism and so on. Also, the Chinese are easier to lift and formalize the arrangements. The right follow-ups and meeting obligations in time will help you to become partly “just one of the guys”
Speaking of trademarks and registration of intellectual property, China is a huge market. More than 5 million trademarks are filling for the registration there annually ( compared with 1 million in the USA). China and Hong Kong are definitely one of the most promising markets in the world in a field of technology. This is confirmed by Demo Day, organized by Betatron which gathered about 500 investors in the same place and gave us the opportunity to present them our product and get feedback. The speech at the largest technology conference in Asia, RISE, also played a big role. We were in the list of the top 20 finalists and got a chance to present the product in front of an audience of thousand people along with companies such as Amazon and Tencent.
Conclusion: Hong Kong is an excellent place to start the project in Asia, but if you plan on scaling to mainland China, it’s better to look for investments in Shanghai. For example — at China Accelerator.
More insights about building of a company:
- Company’s culture and common values.
There is one of the fundamental moments in the development of a startup — to form a team that can be trusted and which will go hand in hand, speeding up. The team (both employees with options and founders) should have common values.
2. Supporting constant communication with investors.
Investor — it’s first of all your partner and not just a person or a company that gives money and sends you to float until you return to them with “bonuses”. The investor is like a mentor. They are the people with whom you have to build a long-term relationship as well as with clients.
Connection with investors is not limited by the short-term communication before raising a round of investments. There are monthly regular reports about progress in project development, consideration of their recommendations and so on. After all, investors are interested both in the financial well-being of a project and in the mental health of a team.
3. Gradual and deliberate scaling to a new market.
It’s better to scale into a new market after getting an adjusted system of work at the previous market and have made sure that it works. Also, careful analysis and preliminary study of the local audience is needed. Ideally, in each country you should have a person who will introduce you to the local business culture, help with connections and give instructions on how to become “one of them”.
CONCLUSIONS.
During the development of a project, I got a tremendous amount of invaluable experience that would be difficult to get in a project with less rapid development. I mean building a team from scratch, presentation in front of a large audience at the international events, working with investors, media and many more.
I admit that the decision to withdraw from PatentBot was not easy for me. As this concerns the internal structure of the company, I do not think it is right to speak about all the reasons. But I can say that to come up with an idea and make a worthy working business out of it — sometimes is not enough for personal participation in a project in the long term.
I still believe in the PatentBot project, but already as a client, because 2018 has shown a significant increase in investment in legal tech. In addition, PatentBot is one of those projects that has proven — access to justice through technology is truly possible.
Having this tremendous experience, I will work on my faults in details, take into account everything that was done well and not very well, and I will continue the path of an entrepreneur with the new forces.
After all, I have everything for this: an understanding of the industry, both in the West and in the East, communication with investors around the world and media support — since November 2018 I have been writing on Forbes, which has also opened many doors. I also regularly write about legaltech in the Telegram-channel. Moreover, together with the like-minded people, I continue to develop the largest legal tech community in Europe — Kyiv Legal Hackers
To be continued…
