Investor, business angel, co-founder of the Angels BAND Belarus association Valery Ostrinsky visited the hosts of the ItStarts! podcast Ivan Vedenin and Sergey Lavrinenko. Elena Semenova has collected the most interesting stuff for you in this material.
Early Business Start
My business life commenced in the early 2000s, soon after graduating from the university. My friend and I registered a trade company and started selling stainless steel. We were buying in India and China and selling in Russia and Belarus. The business was growing, and so were the revenues. However, we never spent the newly earned money on buying yachts or other attributes of success. Instead, we would open new manufacturing companies.
It seemed thrilling to try something new, and we saw many opportunities for that. We have steel; why not use it for production of equipment for dairy industry? My competences were limited within the real sector then, and my ambitions didn’t stretch farther than the local markets. These companies still function, though having undergone certain rebranding.
Entering the IT
I met the phenomenon of coding and further selling the code successfully in 2009-2010. I lived in Kiev, and someone I knew lived in Panama. That guy suggested me to buy some bitcoins. Unfortunately, I never followed his advice (laughing). Ever since I haven’t tried to catch up with the bitcoin.
My encounter with the startup sphere happened much later. There was a period in my life when I travelled for three years, leaving all businesses behind. I wanted to try living in different counties with my family, to change Belarus for another location.
Finally, in 2012, I returned to Belarus, obtained my MBA and started looking for investment education. Three years ago, I joined the American program called Community connections, the module that focused on VC, together with other guys — Sasha Chekan, Dima Gursky and others, a fantastic company of twelve.
That period determined everything that happened afterwards. During one month we examined American VC ecosystem and gradually started to understand what was missing back in our country.
I started to integrate into the local IT community, visiting lectures and conferences and meeting people. I didn’t have a clear idea of becoming a business angel. I was rather looking at different projects, without knowing how to apply my knowledge and experience.
The idea to establish an organization wasn’t mine; it belongs to the guys from IMAGURU. They planned to found that kind of organization with the support from USAID, so the idea of creating a community of business angels was almost shaped. In fact, they offered me to summon this entity.
Thus, I started looking for the people who might have been interested in this idea. In order to register the organization, we gathered 15 members: Kirill Golub, Sergei Divin, Tania Marinich, Victor Denisevich, Anton Dmitriev, Dima Matveyev and others.
The board was set up, and we began to develop our community. On the one hand, we had to build a startup pipeline. On the other hand, we needed to explain to the business community who the angels were, and to engage business people into VC.
The business community needs some education. VC has to become more sexy. The “angelic” business differs from usual investment practices. When you invest to a café or a cement plant, you are a normal investor, change money for a share, and you don’t go deep into the project.
Personal Investment Strategy
I examine VC among other investment practices. I am not convinced that it will create a “safety cushion” for my family, instead, I consider VC as the means to develop my business profile and expertise. As for the plans, I hope to engage into ten projects within three years and make at least half a million dollars. Primarily, I am interested in the educational projects, this sphere seems very promising to me.
Last year I made two investments. First was the Lung Passport project, as for another project, the guys are not yet ready to announce the public kick-off. Before I made the investment decision, I looked through 30-40 projects, and personally met 15-20 of them.
Dima Matveyev brought us the Lung Passport project. He agreed to become the lead investor, and gathered the syndicate within a week. Why I decided to invest? Firstly, I believe in healthcare projects. Hardware is a more complicated option, but the project team was outstanding as well as the team of investors.
The personal factor in co-investing is an important issue. When you co-invest, you commit for further communication. The project moves on, you meet up and generate a common decision. It is a way to stay in touch with people you like.
Real Sector vs. IT
The difference in the mentality is very obvious to me. When I worked in the real sector, I never had a chance to even think about a teal-type organization. All procedures needed to be formalized like in MacDonald’s, which means less potential for creativity, less freedom for business decisions and less chance for a friendly atmosphere within the company.
The hierarchy within the real sector is widely supported by the “old-school” business people. They pursue the dominant idea about the business achievements reflected in the luxury possessions: after having earned your first million you have to buy a certain “Mercedes” and so on.
On the opposite, IT has nothing to do with the “crimson jacket” paradigm. The new millionaires grew up and established very quickly, they communicated with the whole world, while the real sector businesses were mostly developing within a very closed ecosystem. The new IT millionaires don’t take the things money can buy as the major priority. Their self-esteem doesn’t depend on possessing these things.
If I had a choice and my life experience, I would skip the real sector and go straight to IT. Not only for more attractive revenues. Actually, an average entrepreneur has more chances to succeed in the real sector developing the business he or she has expertise in. However, in a broader perspective, IT is a worldwide sphere, it has a bigger market potential. And even more important, brilliant people around you.
VC Ecosystem in Belarus
According to the statistics provided by IMAGURU, Belarus has over a thousand startups. However, Belarusian startups' only perspective is to grow up and move abroad for more investments. It is hardly possible to grow into a billion unicorn, as long as most of the huge funds shall not invest into the small Belarusian market. Some companies choose to keep the control center here, and move sales to the US.
Our major challenge now is to invest more into startups. The very process of investing is the best education for a business angel. Our organization is the educational platform for potential VC angels. When we meet, I try to focus them on investing at least 20 thousand dollars per year in startups.
We need to develop our organization. Last year I came up with a target number of 150 members. Why this figure? I have an example in front of me, our neighbor Estonia. A country with 1,3 million people invests over 10 million euro a year, talking about “angelic” VC. Estonian organization includes approximately 200-250 business angels. This is a good target for our market.
Concerning startups, they also need to make quality improvements to increase the number of deals. Firstly, to improve the quality of project teams. When a startup is comprised of a single founder or of the two guys with little expertise, a potential investor becomes cautious. The most attractive factor for the investor is an excellent team with a profound background.
Secondly, quality pitches in English, as well as motivating presentations. I plan a monthly business trip to San Francisco in August, in order to examine their ecosystem and find out what can be adopted here, without investing huge budgets.
It is also quite obvious that our country lacks business accelerators. It is more a social than a business project. We need more hackathons, both in Minsk and in the regions. The hackathons are not only meant for generating ideas, but also a good way to build a quality team.
My position is that any initiative supporting the development of the ecosystem is good for the country. Our organization is very open, and everyone who wants to try themselves as investors are very welcome. I am eager to meet and tell more about our organization, about the way it functions.
As for the startuppers, I advise to apply too. Even if you don’t obtain the investment after the first pitch, your startup gets into the database, and everything may change within few months. Chemistry is an important factor in the VC — a certain investor is attracted to a certain project. Don’t sit in your basements; you need to train how to communicate with investors.