'We invested everything and lived on $ 200 a month': how a Ukrainian startup attracted $ 5 million in investments from the USA
Andrey Surzhinsky and Alexander Huda - co-founders of the Ukrainian startup Restream. This is a service that allows you to broadcast video in real time on more than 30 world platforms, including YouTube, Twitch and others. Mc.Today.
Andrew and Alexander began creating Restream in 2014. Now the service is used by 2 million users, and it receives $ 5 million of investments. But the guys started on their own savings and once, due to lack of money, they almost lost a startup.
Andrei Surzhinsky spoke about how entrepreneurs had to go before the first investment, and how the company from Vinnitsa received an American residence permit.
Errors in a previous startup
— Alexander Huda and I first met in the Tutorsband project that he founded. I came there as a developer a few years before the "death" of a startup.
It was an educational platform on which to stream and webinars. Users could broadcast the video for free or for a fee. The platform earned on commissions.
The main market for the project was Ukraine and the CIS. They tried to enter the western market, but failed. This, perhaps, is the main reason why Tutorsband failed to become a successful startup, although there was a demand for it at one time. For example, PrivatBank used it.
In order to attract new users of the platform, it was necessary to create high-quality content, and in order to earn money on this content, you need an audience. It is very difficult to build a company without an initial audience. Restream, unlike Tutorsband, is a streaming platform for users who already have their own audience.
This was followed by the usual story. The startup ran out of money, it was not enough even for a salary, the team began to scatter. Somewhere in such an atmosphere the idea to create Restream arose.
About the idea of Restream
Once, Alexander shared with me the idea of creating a service for streamers that would make it possible to broadcast video on several resources simultaneously. We still sometimes laugh at the fact that this was the first idea, after listening to which, I said the first time: “It may work.”
In fact, we did not have time to analyze the idea for a long time, to test it. We created the minimum viable product in a month. To be honest, he was in terrible condition, but we still started it.
We started to share the idea on forms, Reddit and other resources, where users discussed the possibilities of multistreaming. So we saw that the first users came to us, leave feedback, report errors, recommend the service to each other.
From the very beginning, it so happened that I in our team dealt with technical issues, Alexander - in promotion. He sent thousands of letters to the media. We really hoped that they would write about our project and everyone would know about it.
No one answered us for a long time, but once TechCrunch wrote about us. Other publications began to distribute their publication. At some point, the number of registrations jumped sharply.
About financial difficulties
When the number of users grew, at first on the platform, of course, there were technical failures. But that was not the main problem.
The main problem for us was the lack of funds to pay for servers. Streaming in this regard is a very expensive thing. We launched the product for free. This was our advantage over competitive services, but also a disadvantage, since the company did not earn.
We had some very difficult months when we did not know what would happen tomorrow. We borrowed money from friends, acquaintances. We called the hosting providers, thought up some kind of nonsense, that we have a problem with the card, "do not disconnect, please, our servers, we will pay for everything."
It was scary from the realization that we found a product that people really need, but we can lose it because we do not have several thousand dollars.
Until we found the first investors, we had to get into debt, spend our savings, live on $ 100-200 a month.
Later we added the Donate button to the product website. Users dropped a few dollars. Received from voluntary donations $ 100 per month.
About why the search for investments is not a quick thing, and why you should not look for them in Ukraine
The main thing that we made a mistake with: we incorrectly calculated the time for which we can find investments. We were too optimistic.
Now I understand that if the search for an investor is delayed for three to four months, this is normal. No matter how attractive growth indicators are, whatever the potential of the idea, 99% of investors will still refuse. This is a normal process, it should be treated with patience from the very beginning. We were not desperate over the refusal, but, of course, we were afraid to lose the project.
There was experience with the search for an investor in Ukraine, after which we decided to move on. We talked with several Ukrainian potential investors. They could perhaps offer us more money than we received in the end. But most of them offered inadequate conditions. — wanted up to 20% share in a startup in a pre-seed round (initial stage. - Ed.), demanded to coordinate all decisions.
I’m afraid that they simply ruined those startups that agreed to such conditions, because the next investor would automatically refuse, looking at such a distribution of shares in the company.
Our first pre-seed angel investors were simple entrepreneurial guys who also built their business from scratch. They are not from Ukraine, but they believed in our idea and offered favorable conditions.
The guys gave us several tens of thousands of dollars in exchange for a small share in the company. It was a relatively insignificant amount, but it then saved us. — closed ongoing infrastructure costs and allowed further work on Restream.
In addition to finances, they helped us a lot in building the company with their advice and consultations. And that they recommended us to go to the States.
About the accelerator and the first American investment
In search of financing, we also sent many applications to American accelerators and venture funds, such as 500 Startups and YCombinator.
They did not receive any response for a long time, but after the pre-seed round they unexpectedly went to the accelerator International Accelerator, which is located in Austin, Texas. In 2016, Alexander went to America for several months to participate in the program, study and get acquainted with investors.
By that time, we were still very financially limited, and the amount of one and a half thousand dollars that we had to spend on a ticket to Austin and back seemed just cosmic. But our friend gave his plane ticket to Alexander, who actually brought us to this accelerator.
The accelerator itself does not give much — training and a small amount of money that actually goes to live in the States. But thanks to the program, we learned to communicate with the local business community, present ourselves correctly, and found many useful contacts. We also met our main mentor there, who helped not only with advice, but also with participation in negotiations and calls.
Thanks to the accelerator, we received investments for the first round of $ 700 thousand. We spent the money on building a full-fledged team.
After the second round in 2018, when we raised $ 4 from the Silverton Partners venture capital fund, the startup first started making money. The fund is based in Austin, it is not such a big city, so we were introduced to future investors by people who worked with us in the accelerator.
About the features of working with Americans
The mentality of Americans is very different from the worldview of people from Eastern Europe.
Americans are not inclined to openly criticize, show dissatisfaction or even directly refuse during negotiations. These are people who perceive everything positively.
They tell you at the meeting that everything is great - both the idea and the product. But in fact, this does not mean at all that they are ready to say "yes" to you. They don't even like to say no. To be denied in plain text, you have to do something very bad.
At first it causes bewilderment. It seems to you that the meeting was successful, but in fact it ended with nothing.
About team building and opening an office in the USA
From the very beginning, our entire office was in Vinnitsa, in our hometown. Last year we moved to Kiev. Here we have the entire engineering team, marketing, technical support.
At first it was difficult with the recruitment of the team. In Ukraine, especially in Vinnitsa, it was difficult to find developers focused on productive work. That is, those who are truly responsible for what they do.
However, in the first year, our team grew to 10 people. Now we are a little over 35.
On Friday, January 31, our first office in Austin opened. We chose the United States to register a company, because here is a clear and transparent process of opening and running a business. Clear taxes. It is very simple to receive payment from anywhere in the world. I think that in Ukraine difficulties could arise with this.
Many say that Austin is becoming the new Silicon Valley for the States. The city is developing very fast. Here before there were many offices of large corporations and startups, but now — a real boom.
Business purposefully moves to Austin, opens R&D centers here, because access to the market is the same, and life is cheaper than in San Francisco, to which it takes several hours to fly from there, and domestic flights are very cheap. However, prices in Austin have also been rising in recent years.
This is a classic American city with a business center, where most of the business, offices and entertainment are concentrated. It is impossible to move outside the center without a car, there are no sidewalks and there is practically no public transport. In general, you can live in Austin, except in the summer it can be unbearably hot.
I do not plan to move there yet, but to build long-term plans in a startup — it's useless. Anything can happen.
There are three people in the American office. Alexander moved there to build a team. One of the developers will also work there, he is involved in working on a new product that helps brands promote their offers through streamers.
Our business development specialist is located in San Francisco, because there is a large concentration of companies with which we work. But the product itself we are developing in Ukraine.
About audience and profit
It is difficult to name a country where we do not have registration now. In almost four years, we have grown to 2 million users.
A third come from North America, mainly the United States. Another third — from Europe, 25% — from Asia. Russia and Brazil also stand out, where our service is very popular.
From the very beginning, most of the content was broadcast online games. Now trends are gradually changing in favor of life style, when people just say something on camera. Increasingly, companies are developing live streaming as another type of content in order to promote their services and show production.
We are growing rapidly in Asia. The content there is quite specific, for example, streamers that just eat on camera are very popular. This is strange for me, but people like it, judging by what huge audience the bloggers are collecting on this.
Six months ago, Restream came to self-sufficiency, we are no longer dependent on investments, so we feel more confident.
Our subscription itself is free. All functions that were originally free, remain that way now. Later we added additional features for those users who are willing to pay and subscribe. Also, over time, they added a business subscription. This brings the platform a basic income.
We recently launched a product that allows brands to access our streamer’s audience. The brand creates an advertising campaign with us, and we offer advertising to streamers.
The model is very similar to Google AdWords: brands get ads, streamers — payment for it, and we earn on commission. We have just begun to develop this area, it is very promising, but there is still a lot of work ahead.
About competitors and future plans
Despite the fact that streaming is very popular now, we do not have many competitors. There were several similar services when we were just starting out, but over time they disappeared or replaced them. There are several services that focus on the B2B segment, but they have very high prices, and there is no free access at all.
We spend a lot on the part of users who do not pay us, but we get fast growth and consider this our main marketing channel.
There were cases when our service was copied, but not a single copy became a full-fledged competitor. In 2016, Mail.ru offered to sell them a company, but we refused because we thought we were capable of more. Then they began to threaten that they would copy us. They copied, launched their streaming platform. I have not heard anything about her for a long time, perhaps she has already closed.
In general, our plans depend on trends and new opportunities that appear in our industry. In addition to growth goals, we plan to develop an advertising model and create simple streaming solutions that can be used without any technical knowledge.
As for the growth of the team, we have the biggest plans in Kiev, now we are looking for engineers, a designer and a recruiter.
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