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Development institute of the Russian Federation

Press about RVC

GenerationS: “Startups must think globally, and act locally”

06.02.2019
Source: Kursiv

What companies that seek to enter the international market need to do ...

Kazakhstan’s start-up market is becoming increasingly attractive for international investors. Large companies are paying attention to technology because of growing competition and are trying to make friends with local accelerators in search of optimal solutions for their businesses. Start-ups themselves, with a more or less viable product, dream of entering the international arena. The desire for such expansion is understandable and fully justified. The local market is not yet mature enough, and the expectation that they will notice you on it is extremely small. We talked with Ekaterina Petrova, RVC’s GenerationS Corporate Accelerator Director, who told how much the Kazakhstani and Russian startups market are different and what entrepreneurs who are seeking to earn support from foreign investors should do.

— What trends in the startup sphere are in the world? Which industries are becoming more popular among start-up entrepreneurs?

— We see several industries that are the most promising. The first direction is all that is connected with data transmission security technologies and their verification, for example, document authentication and biometric protection. Most of the settlements are carried out through online banking and various payment systems. Therefore, many startups are now creating solutions in the field of biometric protection – by face and voice, document verification using the blockchain, blocking malware and hacker attacks, as well as solutions related to quantum communications and cryptography.

Fintech also remains a promising segment. PwC estimates that investment in innovation in this area will grow to $ 150 billion over the next 3-5 years. In recent years, an enormous number of startups in the financial services industry have entered the market, both for corporate customers and consumers, but only few companies that will be able to gather an audience will survive. The purchase of such services is a great opportunity for sluggish banks to quickly and inexpensively implement modern technological solutions.

Another significant trend is the growing demand for technology in the field of medicine and health support. The digitalization process is also going on in this industry, but the problem of long-term implementation and the shortage of specialists ready to integrate predictive analysis systems and big data in medical organizations remain a limiting factor. For example, for early diagnosis of patients. Another example is the emergence of projects on the production of bionic prosthetic hands, but this is not a mass technology so far due to the high production cost.

— What is the difference between the start-up markets in Kazakhstan and Russia? Can we say that the infrastructure of the markets is different due to the social and cultural background?

— The markets differ in terms of technology and how quickly they are developing. For our part, we say that Kazakhstan is the second Singapore, because we see that the market is only being formed, but there are already very strong projects and infrastructure players who understand how to work correctly with entrepreneurs, investors and how to form a result. At the end of last year, we concluded a partnership agreement with the Kazakhstan accelerator DAR Lab in the field of logistics and supply chains because its representatives are trying to grow strong business players from start-up entrepreneurs who can strengthen the economy of the country.

— What directions in the start-up market in Kazakhstan do you consider most promising? For which customers is GenerationS looking for projects in Kazakhstan?

— We first got acquainted with the local market about two years ago, when we were doing a joint project in the field of education and looked at the technologies that were then on the market. Now, with the help of DAR Lab, we are actively working in the direction of logistics. We have a corporate partner Michelin, for which we have managed to attract several projects in the field of logistics and transport from Kazakhstan.

There are also strong startups in the chemical industry and metallurgy. There is an institute of non-ferrous metals in Kazakhstan (The Eastern Mining and Metallurgical Research Institute for Non-Ferrous Metals), which offers the market strong technological projects in the metallurgical industry. Some of them have already been selected for corporate accelerators of Krastsvetmet and ALROSA companies. Another question is that such projects are not always “packed”, that is, they are more about science and technology than about business. Therefore, we teach teams as part of the accelerator how to present their development.

— Why did GenerationS decide to start a partnership with a Kazakhstan accelerator?

— First of all, we saw that our colleagues are open to projects with Russia. Kazakhstan is interesting to us as a partner that is actively developing in various directions. In addition, the country has a strong expertise and specialists, which is necessary for us as an accelerator. Now we are considering the creation of a joint initiative on the acceleration of technological projects with DAR Lab. For our part, we are ready to provide expertise in finding and launching local startups to international markets.

— Returning to the trends, how do you feel about start-ups that take the western market’s idea and try to adapt it to local realities? For example, create another taxi service, like Uber. Can this ultimately lead to rapid growth and development in the country, or have the services already resolved all the client’s “pains” before them?

— I believe that there is nothing wrong with the appearance of such projects, since competition is a guarantee of quality and an optimal price for the end user. The main thing here is not to blindly copy, but to try to find your own vision and distance yourself from a competitor, to offer additional functionality characteristic of a particular region. Users are even more likely to trust local counterparts than Western brands.

— What shall startups who seek to enter the international market do: whether take some knocks in the home market first, and then go to the international one, or immediately go to the United States or Europe?

— Startups must think globally, and act locally. The Russian start-up market, for example, is quite capacious, and many startups have a very high potential inside the country and do not even think about going abroad. In Kazakhstan, the market is so far significantly smaller, so technology startups can safely explore the possibility of foreign expansion. It is important to consider how the local demand for goods is growing, whether there is any global interest in this direction at all. The second point is whether your competitors are entering other markets. It is important not to focus on the United States or Europe, but to look more broadly, for example, at the Asian market, which is now on the rise. Moreover, Kazakhstan has such a favorable geographical location.

— Despite the mutual interest between startups and investors, it is still very difficult for both of them to work with each other. How to improve this relationship, what are the investors themselves missing?

— If you look at the global economy of startups, it is developing with a geometric progression, which leads to quite a tough competition that is not so easy to overcome. Startups have to fight for the attention of investors, and investors want to find “diamonds” in which they could invest.

If we talk about how investors look at projects, it is very important to take a few moments into account. As a rule, investment funds have their own industry specifics. They are constantly exploring the market and the existing trends so as not to overlook the technology that can become successful at the right moment. In addition, each investor is interested in being a kind of mentor for his or her startup, who will tell the founder where to go and maybe what should be changed in the project. There is also a pool of corporate investors who are looking for projects to develop their companies. Each project must clearly understand what stage of the production chain it can take root in and what contribution it will make from a business point of view (will reduce costs, increase profits, open a new market for marketing, etc.). Taking these features into account, it will be easier for startups to find their investors ...

By: Tais Akhmetova




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