Business idea
A year ago, I started the business Juvalia&You which traded in Russia, Brazil, India and Germany. We managed to attract four investors from different countries, who put in several million dollars. We sold fashion accessories on the internet and through network marketing. A year later, we realised that we were best concentrating on India: the market there is bigger and there is less competition. And, I took up a new Russian startup.
About Christian Graggaber
He is an Austrian manager and businessman. Born 23rd of June 1979. Studied in Milan, Paris, Moscow and Boston. Carried out military service in the Austrian army. Graduate of the SKOLKOVO Moscow Business School (MBA 2010-2011). Took a course at MIT in Entrepreneurship and Innovation (2011). Worked for DaimlerChrysler (in Romania and Germany), the Mondi Group (Vienna and Munich). Launched the Russian startup Juvalia&You.
For the time being, I can't reveal all the details of the new business to be launched in September this year. We are currently looking for people, formulating the concept, and so on. I will say only that it is a commercial project in selling new cars and motorcycles. There is a huge car market in Russia. Such a massive area, so many customers! In a couple of years, the Russian car market will be the biggest in the world. My business idea is to simplify the process of acquiring a new car or motorcycle with the use of modern information technology. We have a lot of stiff competition (Yandex.Auto, for example), but we will be offering an utterly new approach to the customer. Furthermore, the car business is something I am very familiar with: I worked for Mercedes in Romania and Germany. And, basically, I am a car worshipper!
Why Russia?
While I was studying in Austria, I had the choice of learning Italian or Russian. I chose Russian. In 1997, I came to Russia for two months on some language courses. In fact, I speak English, French, Russian, German and Italian. It's not so difficult: they all have a common vocabulary, to a large extent.
There is a huge car market in Russia. Such a massive area, so many customers!
Then, I went to Milan for five years to learn business administration and Italian. But I didn't forget about Russia. I came back here to train at the International Moscow Bank. Then, I lived in Paris for nearly a year, then went back to Austria. I worked for six years at the Mondi Group (it is the largest producer of paper and paper-based packaging materials), occupying management posts. I read somewhere about the SKOLKOVO Business School, and I thought to myself: now that is a place worth studying at! And so, I did. If you want to learn more about technology and entrepreneurship in Russia, then head straight for SKOLKOVO. For me, a foreigner, planning to start a business in Russia, it was the ideal choice, even though I had already studied management. Being at Skolkovo helped to reinforce what I already knew, as well as to acquire new knowledge. Then I studied some more in Boston (Information Technology) at MIT. And now I am here.
Startup, Russian-style
You need to know the people you are trying to appeal to. If you were to say that your customers are Russian women, then that’s 70 million people! Far too many. You need to narrow it down, specificy certain characteristics. When we launched the previous startup, we carried out our targeting like so: we singled out women between the ages of 20 and 35, Moscow and the regions. But after a few months, we realised that we had made a mistake: our customers were women of 30 to 50. And they weren’t from Moscow, they were from the regions. It is not so straightforward defining your target audience. You need to understand them: know everything about their interests, particular characteristics, typical behaviour. For this, it is a good idea to organise focus groups.
If you want to learn more about technology and entrepreneurship in Russia, then head straight for SKOLKOVO.
Business plan
At the start, have your calculator ready, you will have a lot of counting to do. You won't get very far without it. However much you believe you will be successful, you still need to work out everything in advance. Think through every detail of the business: they should all converge upon the same point. For this, you will have to make a few assumptions, but it's best if these are based on experience.
And, another useful thing to do is to hang a large chart on the wall mapping out the whole project. It will help you see the overall picture of the business: who your customers are, what they are going to buy from you, how much it is going to cost, how much needs to be invested at the beginning, how much later on, and so on. Once the picture is fully developed, you will feel much more self-assured.
How to attract investors
After an interview, an investor can say one of three things: “yes”, “no” or “maybe”. Most often of all, they say “no”. When I started my first business in Russia, 13 investors said “no” to me. That's quite normal. I made mistakes during the interviews: everyone makes them. But you have to hone your presentation speech, and each time it will get better. You need to feel sure of yourself, but that is not how you usually feel on meeting your first potential investors. It often turns out that the first version of your business model is no good at all, but it will gradually become more refined. And, naturally, you need to pick the right investors. If I was launching a car business in Russia now, then I wouldn't go to a Frenchman who invests in accessories. You have to know how to choose, out of hundreds, those few people who you particularly need. It's not finding a hundred people that is the difficult part. As they say, Google to the rescue. I can recommend the website Crunchbase and the Russian equivalent Rusbase.com.
When I started my first business in Russia, 13 investors said “no” to me. That's quite normal.
What is important to investors is your past experience. Your chances are considerably higher if you have already launched your own business, even if it wasn't that successful. They taught us at MIT and SKOLKOVO that any experience is useful: it will bring you contacts and essential skills.
Also, investors look at your education. I have studied in Milan, Paris, Boston and Moscow: four universities. Naturally, that creates a favourable impression. International experience is always useful to a business.
How many windows are there in Moscow?
When I was opening Juvalia&You, I had an interview with, I think, about six different investors. They checked if I am able to solve cases, if I have an analytical way of thinking. Investors evaluate your capabilities, including how you react to the unexpected. And that is natural: both sides want to know if they will be able to work well together. For example, I was once asked how many windows there are in Moscow. Many ask about your personal qualities. I, for example, was asked about my weaknesses. Between you and the investor, there should evolve a relationship very much based on trust, a certain kind of chemistry. Then, everything will run like clockwork.
Sergey Kapyev, Manager, Ernst and Young:
The market for new cars in Russia is growing. It is estimated that sales in 2013 will increase by 6% and will reach 3.2 million units, barring any future economic difficulties. Moscow is the largest market for new cars in Russia, which is as much to do with income levels here, the availability of car financing, and the developed nature of the dealership network, as with the standard of the transport infrastructure.
In terms of the prospects for the market in new cars in Moscow, despite the rather stiff competition, the capital's market remains sufficiently attractive to dealers that sales in one Moscow showroom are significantly higher than the same figure for the country as a whole, while growth in the market matches that of market growth generally.
In Russia, levels of car ownership are lower than in Europe or the United States: 1,000 people per 260 vehicles. In Germany, for example, this figure reaches 532 : 1,000 and in the US it is 641 : 1,000. Foreign makes of cars predominate on Russia's market (68% in 2012), and western manufacturers will continue to invest in the Russian market, and demand will increase. The infrastructure of both the American and Western European car markets is more developed, with more robust logistics, more extensive dealership and servicing networks. The American market is recovering quickly after the recession. It is expected that in the US in 2013, 14-15 million cars will be sold. In Western Europe, business is not quite at such levels. Western European manufacturers are setting up their production bases in Russia in order to meet growing demand. Also, the Russian Government is coming forward with various economic initiatives (customs exemption, the creation of economic zones etc.). This is also having a strong pull effect on suppliers. Between 2007 and 2011, foreign investors set up more than 90 projects in the Russian automotive industry sector, creating over 16,000 jobs. This is a record figure for the Russian economy.
These days, I mainly stay in contact with the investor by way of short emails, and only if absolutely necessary. But when we first started cooperating, we very much had to meet up, even if only once a week.
Of course, investors are all different, but nobody is interested in a business which requires constant supervision: after all investors may have a good dozen or so projects on the go. It goes without saying that investors provide support, but it is me who owns the business, who is its CEO. It is my company, my business plan, they are my employees. So, if I make a mistake, then I lose business, and let a lot of people down.
Rupert Stadler, Chairman of the Board of Directors, AUDI AG:
Despite the continuing debt crisis in several EU countries, Audi Group exceeded its targets for 2012. We managed to reach record figures for production, supply, revenue and profit. Last year our brand produced over 1.45m vehicles with a turnover of € 48.8bn. Audi Group also increased its operating profit to € 5.4bn, which is a record result for the company to date. For the whole year, our operating margin was 11%, exceeding the projected corridor from between 8 and 10%. Two regions are currently developing the most dynamically: North America (+19%) and Asia (+28%). The car industry in Europe is not growing as quickly at all. We have been resisting the general trend and swimming against the tide.
By and large the EU, as before, constitutes the main market: 739,000 vehicles. There, we have grown by precisely 30% over the last 10 years. But at the same time, the overall size of the European market has hardly changed. Everybody knows where the problems are at the moment. Spain has had the smallest car market since 1986. In Italy, demand is at 1979 levels i.e. the car market has been set back by almost 30 years.
But the Russian market for new cars has exhibited fantastic growth: 44%. It is the best market in our Top 10. Over the last three years, the Russian car market has doubled in size. That really pleases me!
Russian Team
Finding the right people is never simple. I have spent a lot of time interviewing people. And now, I am engaged in it once again: I am putting a team together. I need to find out what kind of person is sitting in front of me, what kind of skills he has, what kind of work experience. Sound experts in Moscow come at rather a high price for a startup. More so than in the West: one-and-a-half times more. And the higher the position, the greater the difference. Changes to the education system have led to Russians having a better feel for business, they already know exactly what they need. But their work experience is rather lacking. They consider five, seven years to be a lot. In actual fact, it isn't. 20-30 years, that's what I call a lot of experience. And then there are those with a thirty-year work-history who don't know the first thing about business. It becomes something of a vicious circle. The best staff are those who are just past 40.
I prefer not to hire employees in other Russian cities or in Belarus or in, let's say, Ukraine, even though they don't request such high salaries. The cost of living in Ukraine or Belarus is a lot lower, but so is the level of professionalism. And, in any case, I like my people to be on hand at all times. Whereas now there are four people working for me, in a year there will be two dozen. Our office is in Moscow. Although Moscow is the most expensive city I have ever happened to live in. Prices for renting office space are considerably higher than anywhere else you may care to mention, including London.
The Russian Expanses
I love Russia. I love Moscow. There are enormous opportunities for business here, it is easier here to get a project under way than in the West. Although, it is true, that due to the bureaucracy, it is harder to sustain it. To go on a business trip, I have to fill in a million forms. Why is that? But Russia now is catching up with the West at a rate of knots, which is why so many business opportunities are opening up here.
I am lucky that I am able to do business in a city after my own heart.
I am lucky that I am able to do business in a city after my own heart.
The Russian entrepreneur is inclined towards quick decisions. If he says today that he is going to open a shop, then, by the next day, that shop is already up and running. In the West, he would take another twenty years to think about it, and while he is mulling it over, the opportunity has gone. Russians act according to the principle “Just do it”. This doesn't always bring success, but everybody has a chance of making a go of it.