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How does it work? Success formula for innovative business

According to the data of Ukrainian Venture Capital and Private Equity Association, about three thousand start-ups currently function at different stages in Ukraine. There were no more than five hundred of them in 2014. Such breakthrough was possible “not because of, but despite”. There is a war in Ukraine. Our market remains very risky for long-term investments: neither the banking system, nor the national currency are particularly stable. Meanwhile, the state is still not ready to share partial risks with innovative business, by establishing the tax system to stimulate start-ups. Nevertheless, Ukrainian inventions are gradually conquering the world. There is a recent example: Lviv start-up Senstone raised $ 324,000 at Kickstarter for a couple of months and already has 5,000 firm orders.

Such stories inspire Ukrainians to start doing business in the innovative sector. A future entrepreneur asks himself the first question: how can I win the competition under initial poor economic conditions? Of course, there is no universal formula — otherwise the start-ups that test new business models would not be needed. However, the success stories of young innovative companies definitely allow you to define certain common principles and approaches. As a person, who has been doing business for a long time and is exploring new spheres of activity, I can compare their experience with mine. Moreover, I can provide a list of criteria (certainly, to some extent subjective) for the successful development of start-ups:

(1) Motivation matters. If you ask an ordinary person what drives the founders of start-ups, it is likely that he will answer: a desire to make a profit. It is a wrong answer. According to statistics, only 10 to 20 per cent of projects return investments and a small number of them makes a super profit — note that founders receive less profit than investors do. The right motivation is the one about which successful entrepreneurs tell: “I cannot help doing!” At this point a personal enthusiasm “intersects” with an obvious market demand. Subsequently your success will not depend on a single need for action, but will depend on your belief in yourself. It is not enough to work effectively — you need to get across to wider public why this business is so important for you.

(2) Do not be afraid of competition! A completely new niche is mostly a myth. The good news is if you have competitors, then your product will have a market. The ideal option is to enter a promising segment, where the competition is still small. It is even better, if your business can scale — increase without substantial additional funding.

(3) Execution is more important than an idea itself. Unfortunately, that is true. The project will not “soar” without a strong team of executors who have relevant experience. The first thing that interests potential investors is whether founders will be able to implement their idea. Only then they evaluate the business model in the application to the addressable market. It is also important how fast the start-up can optimize execution in response to new challenges. For example, the former Ukrainian team Slando, which developed a successful mobile classifier Lalafo, refused to increase the personnel of “classical” developers, but formed the data science department of 10 specialists instead.

(4) Be closer to people. Successful startups always offer a good product that addresses a real problem. When a thing or service is necessary and useful, clients from any country will appreciate it for sure. Typically, the ideas that “have blown up” the market meet the most basic human needs: food (Foursquare), accommodation (Airbnb), communication (Facebook, Instagram, WhatsApp), transport (Uber), etc. The modern concept of doing business relies on the search for ideas that make lives easier or improve them. Before you start, give an honest answer to the question: why will your future client want to pay you money? If you cannot give an answer to this question — no one will give money, the business will not operate.

(5) The simpler the better. Once one of my familiar start-up persons told me that their product could raise funding only when the team ignored the endless “Now let`s…!” At least at the start your proposal should be maximal functional and “minimalistic” — no additional services or funny items. Aleksey Malitsky, the cofounder of Sammy Icon, mentioned: “Launching the project, you need to find the minimum acceptable level of quality and launch, because 10 other people in Ukraine and 10,000 other people in China think about the same thing”.

(6) Small achievements lead your business. Stagnation and lack of results for a long time kill both motivation and creativity. Even if you are implementing a long-term project, you need “small victories” at least once every two weeks. Test different approaches and define immediately which of them is better. Deep analytics is an essential tool for an entrepreneur nowadays.

(7) Innovations produce innovations. Everybody can now use many technologies, for which development corporations used to spend millions of dollars, just for a few dollars a day. Half a year ago, there was a significant breakthrough in artificial intelligence — average commercial companies were able to afford computer vision and NLP. Everything that can be automated will soon be automated. Machine learning + Big Data is one of the most dynamic areas in Ukraine. The winners are the ones who risk being proactive.

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