“To create a startup, you need to identify a market in which there is money, and find people whose problem you can solve,” – Vitaliy Fish, ex-adviser to the Prime Minister of Israel on the development of the startup ecosystem
Photo: SHAMAN BAR / 057.ua
Vitaliy Fish is a former advisor to the Prime Minister of Israel on the development of the startup ecosystem, a freelance advisor to the Deputy Minister of Digital Transformation of Ukraine.
On the air of the Big Fish Youtube channel, he spoke about the development of startups in Ukraine, about investments and why there are so few entrepreneurs in our country.
ABOUT STARTUP COMMUNITY
My main activity is helping products. If there are no products, I have nothing to work with. I can wait, but I can make efforts to create them, so I tried to create start-up parties, and not only in Kharkov. It inspires me.
The problem is that there are few entrepreneurs in Ukraine. No entrepreneurs, no startups. This is due to the lack of a legal state, imperfect tax legislation and a lack of competence in general. 98% of startups do not survive from idea to successful MVP. And if there is no critical number, there are not many effective products. You cannot call it a market.
Another reason for the small number of entrepreneurs is the low cost of living. In Israel, 36% of people are registered as entrepreneurs, not because they want to be, but because you have to pay the bills, and you can’t pay with dirty money for anything.
ON THE POPULARIZATION OF ENTREPRENEURSHIP
It is important to carry out public works like, for example, the “Iron Entrepreneur” event at KhNUE with the guys from GrowthUP (the first Ukrainian business accelerator). It looks like this: there are teams of 5 people, two IT specialists come, talk about technologies, what pros and cons each have.
And the task of students is to come up with a business model in an hour that uses one or both technologies, then make a presentation and defend their idea. This model is not viable, but it can be finished. This format improves the soft skills of future entrepreneurs.
ABOUT ENTREPRENEURIAL THINKING
There is a difference between an entrepreneur and a businessman. A businessman does not work with a hypothesis, but with statistics and understandable business processes. Have you bought a franchise? You are a businessman. The entrepreneur has a hypothesis – there is a problem that they are willing to pay for. This is a special style of thinking. A startup is, first of all, entrepreneurship. And an entrepreneur starts making money when he becomes a businessman.
People who want to make products immediately ask about money, but have no idea what to do with it. Startups are not always fundraising. You don’t need to attract investments if your profit allows you to scale.
Of all the IT product areas, the blockchain industry is currently developing best. It is easier for them to raise money, hire specialists, and they have already accumulated competence. What is the reason for the success? They received investments in a cryptocurrency that was not regulated.
ABOUT THE CREATION OF A STARTUP
To create a startup, you need to identify the market in which there is money and find people whose problem you can solve. And then you can make a solution with a product set of functions. When you have a hypothesis, you need to test it, make an MVP and test it.
You need to set a framework for yourself: I am ready to spend so much money and so much time on testing a hypothesis. And if I do not achieve such traction indicators, then you need to either reconsider time and money, or abandon this direction and do what is important to you now. Maybe, by the way, not to give up forever, but to freeze it.
ABOUT THE RIGHT EXIT OF BUSINESS
To walk the path, you need to know the starting and ending points, understand what the exit should be like. There are only 5 types of exits. The first is an IPO, but in Ukraine this is a single story. The second is a takeover by a larger business. The third is to make a “cash cow” that may not grow, but will bring cash. The fourth is to sell the business. And the fifth is just to close.
It is necessary from the very beginning to understand what type of exit the product is being made for. Very often the goal is to take over a particular company. YouTube was made clearly for Google, for example. In Israel, some startups are opening specifically for takeover by US giants. The emergence of R&D took place because in Israel, thanks to emigration, there is a strong academic sector. The human resource is very valuable. There is, for example, Salesforce: 80% of what the company has absorbed is the businesses of its former employees.
ABOUT VENTURE INVESTMENT
There is an opinion that it is not worth taking money in Ukraine. It applies to the concept of “non-core investor”. Venture investments are the most expensive money for a business. It is better to refinance than to take venture capital investments. I believe exclusively in smart money. Non-core money ruins business. People should do what they have the slightest expertise in.
ON THE FORMATION OF THE ECOSYSTEM
I do not agree that the state should be engaged in the formation of an ecosystem of startups in Ukraine. I believe that it cannot do this, but can only contribute to its appearance. How to understand that the ecosystem has taken place? When 10-15 projects appear annually with an estimate of at least a billion in several years, this is already a market.
We need to create R&D development. People leave Ukraine because there is no market. People do not understand what startups are, and those who do understand are no longer in Ukraine. Since 2012, the situation has certainly improved. There is progress, but it needs help in order for more people to succeed.