We talked about business development, IT businesses, Russian startup scene, IT Biz Broker, IIDF, and investing in Russian businesses with Alexey Komarov.
Our guest today is Alexey Komarov from Saint Petersburg, Russia. He has a lot of experience in managing and consulting Russian brick-and-mortar and online businesses. In addition, he knows the Russian startup scene like the back of his hand.
Welcome to Worth Of Web Academy!
Please tell our readers about yourself. We would like to learn more about your background and experiences.
Hi, Aykut! Thank you very much for the invitation to the Worth of Web Academy. I hope it would be interesting to the followers.
Before starting my own business I worked for the huge international companies such as wppg.de (plastic packaging group) and hildinganders.com (hotel beds manufacturer) as the chief of sales in its Russian branches. While working at hotel supplying I’ve faced with the problem of hiring temporary staff for the unloading trucks with furniture – it was hard to find proper people in appropriate time. So I decided to solve this problem for the market and established my first business in late 2009. We were making outstaffing service for our customers and optimize human resources costs.
At 2010 we with my partner added construction orders to our business and started to make office renovation for the corporate customers and to build houses for our private clients. At 2012 we sold our HR business (it was my first experience in selling a business) and focused on construction activities. It was successful and we had a lot of orders until Russian crisis of 2014. We sold it in 2015 and after that, I focused on scrap metal business.
Timemet company was originally founded by my wife in Moscow and I moved it to the St. Petersburg (together with wife). We hired a very good team and made a very progressive company (compare to another at this market) – we built a very effective website and attracted a lot of customers from the web. We made a kind of online marketplace for scrappers and its customers. Also, we started the first franchise program and opened few partner branches in Russian regions. We sold this business to the big public scrap company in 2016.
Simultaneously with running my own businesses I became interested in IT startups market and since 2015 I’m working for the IIDF – the biggest Russian and Eastern European venture fund – as the part time mentor (tracker). It’s very interesting experience for me which gives me the chance to look through new technologies and future IT market leaders. I managed to work with more than 50 startups and helped to raise investments to some of them. My current business united all my previous experience and now I’m developing itbizbroker.ru – specialized internet business broker agency. We are helping Russian entrepreneurs to buy and sell profitable online businesses. Also, I have my own consulting project – komarov.bz.
How was your transition from brick-and-mortar businesses to online businesses? Which one do you like more, and why?
All my offline businesses every time had strong online constituents – sites, CRM systems, online ads and so on. And this is the reason why buyers liked it and bought it. Online was my competitive advantage in brick-and-mortar businesses. The main trigger to jump to online business was my work in IIDF fund. I love IT projects because it gives you the possibility to work from anywhere you want, to travel and not to afraid that something can go wrong with your offline assets.
How is your typical working day? Which projects are high-priority for you?
I’m workaholic and usually, I have many tasks inside my working day. Now I’m deep inside my itbizbroker.ru, talking with buyers and sellers, assessing new businesses, structuring deals. Also, I usually have 3-4 startups teams from IIDF in tracking (consulting) cycle in one moment. Besides these, I’m launching one new secret project and it takes rest of my time.
“I think that investing in Russian online businesses could be a profitable deal if you do not read newspapers and think with your own head. Some of the businesses from our marketplace have international sales and income in US Dollars and EURO and it could be interesting for foreign investors because our multipliers and payback periods are much more interesting compared to the Western markets.”
– Alexey Komarov
Could you tell us more about Internet Initiatives Development Fund (IIDF) and itbizbroker.ru?
Yeah, IIDF is a huge IT venture fund and the strongest startup accelerator in Russia. We usually invest on pre-seed stage in the internet, mobile, IoT and big data companies. We started on 2013 and have more than 270 deals now. IIDF also makes very important infrastructural things – basically, we are developing Russian startup market from the green field with our business educational events in Russian regions.
As for itbizbroker.ru, this is specialized internet business brokerage agency which was founded to help Russian entrepreneurs to make M&A deals professionally and to decrease risks of both sides. We are focusing on e-commerce, SaaS, mobile apps, profitable businesses which could pay off in not longer than 18 months.
What is the current situation of Russian startup scene? Which cities are the most active? Which industries are popular for these startups?
We are slowly growing up. Russian startup market is very small at the moment if you compare it with USA’s and the main problem is that we have a very little quantity of exits. Geopolitical situation separated Russian economy from the international deals and most of acquisitions are made by the biggest Russian IT companies such as Mail.ru and Yandex. And of course this is not enough for the market.
But on the other hand, we have very talented entrepreneurs and engineers here who are creating more tech startups year to year and we can notice that the interest to the VC investing is increasing in Russia. More private investors and business angels are coming to the market and makes early stage deals. The main startup city in Russia is Moscow. Most of businesses and investors have offices there and almost all deals are closing in the capital of Russia. As for industries – it is changing in the order of the day. New technologies become popular and new startups are appearing in these niches. One year ago we have a lot of “Uber for something” startups, now there are new trends with VR/AR, blockchain and other new things.
How about the condition of Russian online businesses? In your position as an IT business broker, I believe you have the chance to talk with all types of online business owners.
Up to 80% of all online businesses working in Russia are e-commerce projects. Most of them use dropshipping business model but some of them offering stock balance for the buyers. Second popular model is Adsense and Yandex ads sites. Other types of online businesses such as SaaS, marketplaces, mobile are less common. As for valuation, we usually use multipliers between 10 for heavily operated e-comm projects up to 25 for automatically running SaaS business.
What are the advantages and disadvantages of doing business in Russia? How are bureaucracy, taxes, regulations, etc.? How hard is it to run an online business there?
Last years our government is working hard to decrease bureaucracy and regulations in Russian businesses and I think that they are successful in this work. Most of the government services are going online now and now it’s very easy to register and run business in Russia. As for taxes, they are less than in the most of EU countries and USA. Also, we have special plans for IT companies and you can pay less if you are developing IT projects and hiring engineers. The main disadvantage of doing business in Russia is that our system is closed for the foreign markets due to sanctions and geopolitical situation. I hope that it will get better if only because there is no place to make it worse.
“All my offline businesses every time had strong online constituents – sites, CRM systems, online ads and so on. And this is the reason why buyers liked it and bought it. Online was my competitive advantage in brick-and-mortar businesses.”
– Alexey Komarov
What would be your advice for foreign investors who want to invest in Russian online businesses? Is there a way they can add profitable Russian web-based businesses to their portfolio?
I think that investing in Russian online businesses could be a profitable deal if you do not read newspapers and think with your own head. Some of the businesses from our marketplace have international sales and income in US Dollars and EURO and it could be interesting for foreign investors because our multipliers and payback periods are much more interesting compared to the Western markets. For example, now we have a B2B marketing service on sale. It is growing on 10-15% month to month and has customers in four EU countries. We translate some business cards to English and you can join our English-speaking buyers list.
I believe our readers who have online businesses would like to hear your advice for them as well. What to focus on, how to develop their web-based businesses?
I’m an adherent of lean and thrifty models of business developing. I think that you should decide what you should NOT do in your project before doing something. This is very popular now to raise investments to the startups but I think that you should think how to run it without investments and to get profit from your customers. I believe in bootstrapping.
What do you think about the future of online businesses in Russia and around the world?
I think that we will face with disappearing border between online and offline businesses and now this process has already started. All businesses will come to online for sales and marketing and those who will not come will go away from the market. Another trend is automation of all processes. You will use more and more business services for your routine and it will help entrepreneurs to save costs and increase profit.
Is there a book, movie, podcast, event, workshop, etc. that changed your life? Any suggestions? Do you have mentors, idols or role models?
Now I’m excited by “Antifragile: Things That Gain from Disorder” by Nassim Nicholas Taleb. I recommend this book to all entrepreneurs. As for me, all my mentors are in my IT Business Broker Podcast. I like to have conversations with successful and highly motivated people and it gives me chance to follow them and to get me and my projects better.