Heading for Moscow
When I was studying at Harvard Business School, I became acquainted with Nina Pogosova, who had a tourist startup in Russia. I told her I had some experience in this field, and she invited me to join in the project.
We began our cooperation in 2010, and from May 2011 I concentrated entirely on this project, became a partner of the company’s founders and its CEO. My experience came in very handy. At first, Travelmenu.ru was concerned with individual hotel offers, but from 2011, we began to concentrate on tourist packages, and in March 2012, we started a search engine for tours. Tourist packages are preferred in Russia. This is the simplest way of travelling. And the internet makes it possible to buy tours sitting at home, and at very attractive prices. We retain a few hotel and airline ticket offers, but our main product is now comprehensive tourist packages.
Of course, quite a bit of time had to be spent on developing the technology and building good relations with tour operators. We became partners of all the major tourist companies operating in the Russian market: TezTour, Natalie Tours, Coral and Tui. They saw us as a promising distribution channel, and willingly signed contracts with us. We, like the offline agencies, receive commission on sales. In fact, this is the source of our income. For us, our partners are an important channel for developing our business. Our offers are on their websites, and get a good response. Our offers can also be seen on resources in this field such as Travel.mail.ru. Advertising on Google, Yandex or TV would not be worthwhile – the market is still too young.
How can investors be attracted to Russia? In just the same way as to anywhere else in the world!
Our website now gets 20-25,000 hits a day. Most of our clients are families with children, or groups of friends. Their average age is 35 years. These are the customers who are most active in buying package tours. Our focus on package offers is a competitive advantage for us. We are the leaders in this area. When I joined the company, there were ten of us. Now there are 40.
About Katrin Buckenmaier
She began her career at lastminute.com, a leading international tourist agency. She worked in various top management positions in Warner Music Group, Lehman Brothers and in the London headquarters of the Nectar Capital investment company. She dealt with bank investments, private capital, mergers and takeovers. She has a diploma from the London School of Economics and an MBA from Harvard Business School. She likes travelling, and is considered an eminent expert in the field of tourism and leisure. Her native language is German, she speaks fluent English, and works hard at learning Russian.
In the next 10 years, the Russian tourist market will become the biggest in electronic marketing. I think some companies will reach an annual turnover of more than one billion dollars.
The Russian spirit is here
I had been in various countries, but had never been to Russia. I was apprehensive about coming here – you hear a lot of negative things about Russia in the West. In any case, I decided not to draw hasty conclusions. I always try to avoid generalisations. You should not judge a whole country from your first impression - you have to get to know people better. I don’t even remember what my first impression was, but I can now say with confidence that just the same sort of friendly and likeable people live in Russia as in other countries. All my local acquaintances are well educated Muscovites who speak English.
By the way, the language barrier is what I find most difficult in Russia. At first I hoped to learn Russian in six months, but then I was so overwhelmed with work that I haven’t managed it in three times as long. But I am determined to speak Russian in 2013 – let’s see if I can do it. Knowledge of Russian is very important for a successful business in Russia. So far, I can only converse on everyday subjects, and even that is not easy.
How to attract an investor
We have two investors: the Russian venture companies Runa Capital and Almaz Capital.
A consultant of Nectar Capital, where I was working in London, introduced me to Sasha Galitsky, the founder of Almaz Capital. I found the other investor through a friend of mine, who had obtained investment from a Swiss business angel. This business angel turned out to be Runa Capital. Of course, Almaz and Runa were very well acquainted with all the members of the management team, including Nina Pogosova, who was CEO at that time, and Mikhail Pogosov, the marketing director. I dealt with finances in those days. And we came to an agreement with both these investors. I think it’s always better to have several investors rather than just one. If you only have one investor, you are dependent on him alone. But having several companies means more ideas and more money. One investor may be well versed in conducting business in Russia, and another may specialise in technology. You create a support group, and the bigger this group is, the greater the chances of success.
How can investors be attracted to Russia? In just the same way as to anywhere else in the world. You must have a clear understanding of the smallest details of your business, you must know exactly what funds are required and what for, what results will be achieved in three to five years, how your company differs from its competitors, and so on. You must have your business at your fingertips.
Words pay no debts
I plan to return investors their money in five to eight years. Yes, this is quite a long time, but you have to understand that the Russian internet business is still too new to give a quick return of investments. On the other hand, the market is forging ahead, and it will definitely catch up with the Western one in about ten years. Wise investors fully realise that there are good prospects for business here, and that it is highly profitable to invest money in Russia.
But I give this advice to novice entrepreneurs: don’t obsess over money, there’s no need to be thinking of investors all the time. Just conduct your business well and build a great company, and the money will surely come to you.
Only ten of my colleagues work in Moscow, the rest work in Ukraine. This is much more profitable. Moscow is too expensive a city to keep all your specialists there.
I’m not going to disclose information about my colleagues’ pay, but I can say that qualified people in Moscow are often more expensive than those with the same qualifications, and sometimes more experience, in Western Europe. But salaries are lower in Ukraine because the cost of living is lower there.
However that may be, the first rule of successful business, and not only in Russia, is to find talented people who are willing to work really hard, to learn and to be pro-active. People with the right approach to work. I rely on young people up to 35 years old. Young people in Russia are up-to-date and dynamic. But people older than 35 don’t often like to show initiative, and don’t get good ideas so often. They are used to carry on doing what they have been told. But it’s important to me that colleagues should not require constant explanations, I want then to do everything themselves. And I am happy that I have just such colleagues. For the sake of team-building and creating the right atmosphere, I try to hold corporate outings once a month, trips to the countryside and other measures.
I rely on young people up to 35 years old. Young people in Russia are up-to-date and dynamic.
Another thing: we deliberately selected an office next to the Tsvetnoi Bulvar metro station (which is in the very centre of Moscow, a very convenient place for all Muscovites), so that our clients can call in on us and confirm that we really do exist, that we are not just a virtual company. Many Russians still have a great distrust of internet sales. But we are absolutely real. Yes, it’s a very expensive luxury to rent an office in the centre of Moscow, but if you share it with someone, it can be within your means. We took one office for three companies: our own, Altergeo and Looksima. They are internet services too, though in a different line of business. But in spirit, our companies are alike. Having a space in common creates a real atmosphere of drive: people move around the office on small bicycles, sit on the floor – it’s all so informal! We feel like a sort of startup community. But some colleagues prefer to work from home. I’ve nothing against that. It should be convenient for everyone. Drive, a positive attitude, youth – that’s our atmosphere. Furniture is important too: better contemporary light articles from IKEA than heavy Soviet-style cupboards.Another important factor is to develop the expertise of colleagues. Russians want to know things, they want to find out more about the experience of international or European companies, to understand world trends. There are very good specialists in Russia, but they don’t have sufficient knowledge at the global level. Naturally, as a startup, every kopeck counts for us. So we have introduced this rule: we send people to study, we pay for them, but they must undertake that they will continue to work in the company for at least three years.
Russians want to know things, they want to find out more about the experience of international or European companies, to understand world trends.
The most important thing I want to hear from a candidate for a vacancy during our conversation is how this person sees him or herself in a few years time. I want to understand how motivated he is, how ambitious, how ready for something new. If this person thinks it important just to sit it out in the office from ten to six, he’s not for us. We have a team that shares everything for the sake of the common cause. We stay late in the office, we work on days off, and in a nutshell, we are thinking about work twenty-four-seven.
Marina Zueva, leading expert at UniFest Travel:
A few years ago, many travel agents, for example TourIndex (similar to Travelmenu), actively used search engines to put together holidays. However, this led to a series of scandals with customers. This is because the “Law Governing the Protection of Consumer Rights” is applied in Russia. According to this law, the vendor is obliged to return all money for the holiday to the client if they don’t take it up: excluding costs incurred for which the travel agent (Travelmenu, for example) can provide evidence.
Some unscrupulous people exploit this. For example, a man has a row with his wife before their flight. He refuses to go on the trip, and demands his money back. The travel agent (for example, Travelmenu) is forced by the courts to pay back all of the money to the client. But the travel agent receives no money from the tour operator (TEZ, Natali Tour etc.). Now, this question of the tour operator and travel agent’s responsibility towards the customer is being widely discussed.
The main criteria for search engines are: a) how up-to-date the prices are b) speed c) simplicity. The problem with search engines is that all operators whose sites issue this information deal in so-called “dynamic pricing” i.e. prices change according to how many bookings have already been made. And the customer, on receipt of the final bill once the holiday booking has been confirmed, often expresses extreme dissatisfaction.
Keep it clean
Yes, it’s very expensive in Russia for a company to do business honestly. It is particularly difficult for a small business. I know that many Russian entrepreneurs resort to “grey” schemes. Life makes them do it! I am sure that if the regulators relaxed the fiscal requirements, almost all Russian entrepreneurs would keep out of such schemes. But a Western business in Russia just has to be “clean”. Travelmenu.ru, is a “clean” company, of course. Furthermore, we have international investors, and for them, as for me, it is very important to conduct business in full compliance with the tax laws.
A Western business in Russia just has to be “clean”.
A glance into the future
I don’t know what awaits me. I don’t know where I want to live. I don’t know if I’ll always stay in Russia. But I know one thing: life is always making changes to our plans. If you had told me five years ago that I would have been running a business in Russia, I would have thought you were joking. I never planned to live here! But everything changes. An enterprising person sees opportunities for himself everywhere he goes. I try to be as open as possible to something new. And it seems to me now that Russia, Belarus, Ukraine and Kazakhstan are fine places for business.
Djois Franklin Sronipah, Member of the Board of Directors of Anywayanyday:
The condition of the e-commerce market in Russia – if this is to be understood as all transactional internet services – is difficult to define precisely. In such areas as municipal or social commerce, or paying for mobile services, Russia is outstripping certain western countries. But in online retail it is patently lagging behind. However, the rates of growth are enormous. More than 50% of those buying goods and services on Runet have been using this method of settling payments for less than two years. Russia is the largest market in Europe in terms of internet user numbers. Russia’s e-commerce market potential is clearly enormous. E-commerce development in Russia is being facilitated by the good economic conditions, the increasing size of the middle-classes, and the widespread availability of bank cards. What slows down e-commerce development in Russia is buyers’ lack of faith in paying online, the high interest charges on bank card payments, and the lack of coordination between payment systems. As in other developing markets, such as those in Brazil and China, purchases of tangible goods (74%) still predominate in Russia (from sites such as “Ozon”, “Utkonos” [Platypus] and “Holodilnik.ru” [Refridgerator.ru]), but digital goods and services already account for over a quarter of the market. In 2012, the market was valued at 400bn roubles. Sales of airline tickets and hotel bookings is one of the most dynamically developing areas.Online sales constitute only 15% of the tourism market, but the levels of competition and technology for sales of airline tickets and hotel places online are fairly high. In terms of sales of online services, anywayanyday.com and OneTwoTrip are placed amongst the top ten in the world. And OKtoGo featured amongst the world’s Top-50 innovation companies.
Competition on mobile devices is hotting up. As regards the traditional tourism market (package holidays, for example, which make up 60-70% of the market), use of the internet is still in its infancy. It is precisely this market at which the travelmenu service is aimed.
You have to learn something, acquire some new skill, every day. My present aim is to bring up Travelmenu.ru – the company is like a child to me. What comes after that depends not only on me, but also on the investors. I like Russia, but will I stay here forever? I don’t know. I like to live in different places. I have already lived in Germany, Spain, England and the USA. Perhaps I will want to go to Asia in a year or two? Yes, living my whole life in one place is not what I want. Nowadays you can allow yourself to choose the future you desire. Our world is amazing, it is a world of unlimited opportunities, and I am still too young to pass them up. But I know for sure that my life is greatly dependent on the people around me, and if I were thinking only of myself, I would be very lonely in consequence. So I am trying to find a balance: I’m working a lot now, but in ten years, maybe I will start a family and give myself with the same passion to my new life.
The main resource
I would advise foreign entrepreneurs who intend to open a business in Russia never to give up. Learn to understand the particular features of the country and its people. Don’t despair because of the weather. Be prepared for certain business processes to take longer here than in your homeland. And always invest in the people who work for you. Set them new tasks, encourage them and you will soon find that these people are capable of many things.
The head of a business has two most important resources: financial and human. Russia has splendid human resources. Find the right people, and they will help you create a splendid business in Russia!