Marina Treshchova, Fast Lane Ventures: “Selling a business is not the end of a path”
24 May '12
Oleg Kouzbit, Online News Managing Editor
Whether a business accelerator is successful and on the ball is best seen from how well its start-ups sell to strategic investors. When Russia’s Fast Lane Ventures that develops, launches and promotes new Internet businesses (at a reported rate of one start-up a month) announced in February it had sold its online shoe store Sapato.ru to Ozon.Ru, it made some headlines. When just a month later the young Russian accelerator shook hands with Germany’s Home Shopping Europe on its online and TV store Shopping Live offering a wide range of domestic and international brands, some reckoned the post-crisis mire in Russia’s venture business was almost over. We contacted recently Fast Lane Ventures CEO Marina Treshchova to find out what she thinks of the achievements and anticipates in the future.
Marina, Fast Lane Ventures orchestrated two start-up exits in just two months; the companies are sold to strategic investors. In your opinion, is this a sign of new life in Europe’s venture markets and recovery in domestic IT investing after 2009’s 40% sag in the Russian IT sector, or was it simply because you were quick to jump on the bandwagon of traditionally attractive e-commerce in this narrow niche market?
There are signs of life, sure. I would put it differently: it’s swirling. The Russian Internet market is growing exponentially and is far from its apex, and this is a fact Western investors just can’t overlook. The trend stems from three key reasons: Europe’s fastest rates of Internet user growth in Russia; conventional retail players going online; and strong demand that clearly outpaces supply in quality online services. E-commerce and B2C services are the drivers of growth. We talk about products and services consumers are intimately familiar with and would find more convenient to buy online rather than off-line, including air ticket booking, hotel reservation, looking for housing or information, discounts in product and service sales, etc.
The clear potential of the Russian Internet (RuNet), particularly in its B2C segment, has put it on the radar of the global investment community and brought actual investment. We estimate that in 2011, about $1bn was pumped into Russia’s Internet market (without taking Mail.ru and Yandex deals into account). But even more importantly, international investors no longer view the RuNet as a playground for just two or three movers and shakers. The investors are more interested in Internet start-ups and young Internet companies.
However, with seed-stage investment mushrooming later-stage financing and exits show far more modest dynamics and are a bottleneck in the RuNet’s investment process. We did some research into 2010-2011 RuNet investment and found out that out of eleven deals that could pass for ‘exits’ most were purchases of teams and technology or changes in stockholder structure. Regrettably, we identified only two true exits. Charting the RuNet’s development to date would look like this: a good start, a slowdown at later stages, and a near halt at exit.
I want to believe that the strategic investment deals we struck earlier this year were but the beginning of an overall trend, and Russian Internet entrepreneurs will step up assertive demonstration of their vivacity.
Your company is just two years old; in fact, you’re a start-up yourself. But in addition to Fast Lane Ventures’ existing innovative Internet businesses you’re already mapping out regional expansion, starting from Ivanovo some 250 miles north-east of Moscow. What are Russia’s regions for you: lower admin and operational costs compared to Moscow? bargain basement priced local ‘IT brains’? potentially lucrative markets for your start-ups’ products and services? more convenient ‘launch pads’ for faster exits of your companies? or something else?
With the businesses already sold we have a portfolio of 19 companies that are all tailored to cater for domestic consumers. This is an endless field to plow given the size of audiences and their growth rates, on the one hand, and relatively low competition and few sizable players in some segments, on the other. For some of our companies, their target audiences are Russian-speaking people across the globe rather than Russian-based users. Such services include Vitaportal providing health information for people irrespective of where they live on the planet; or Teamo, an online matchmaker. Other businesses target both Russian-based and international audiences, such as TravelRent or RentHome that operate in the tourism sector and offer short-term private house rent in Russia or abroad. With e-commerce at large, beyond just content or service models, going global is more difficult; the high costs of logistics and competition with Western players provide a hindrance.
Speaking about Ivanovo… We’re opening a back office there, close enough to make one-day business trips and not too close to have admin costs comparable with Moscow’s. There are several factors here. The city of Ivanovo is no longer ‘a town of brides’—its old nickname for being a single-industry city where at textile factories predominantly women worked. Ivanovo has good universities and the local administration is interested in keeping college graduates inside the region by providing them with interesting and well-paid jobs. Regional officials gave us ample support and enabled us to find an office and fully staff it within just two months. Our employees there are all young and not very experienced but they love the Internet, want to learn and are ready to work hard and grow. We value this above deep knowledge; we will train them ourselves. Market specialists, economists, designers and programmers, they will get involved in our start-up operation at any stage from IT support to client service. And we already have plans for more staff; 50 are not enough!
In an exchange with East-West Digital News last year you identified your company as a certain ‘adapter’ customizing interesting foreign models for Russian reality. Your recent start-up, geolocation service Lokata for product and service promotion that you set up in collaboration with Germany’s Bonial, seems to come perfectly within this description. Is tapping innovation by making domestic copycats your long-term strategy, or do you have plans to use your business accelerator to create technology that is unique and disruptive both domestically and internationally?
Two years ago when we launched Sapato there was no specialized shoe-selling resource in the Russian Internet, not a single one. Hard to believe now, right? In fact, we opened a new window of opportunity for Russian women to innovatively buy shoes online—fast, enjoying an assortment unthinkable at any large off-line retailers, and for reasonable prices. Not good enough innovation for you? Being innovative is not always developing something from scratch. Your innovation may fail to work—and what’s the use of it then? We create new values for domestic consumers, and we do that based on time-tested business models, thus reducing risks and ensuring faster implementation. This is our strategic focus and moving away from it in B2C looks irrational. Why, talking of innovation, do we always have to prefix the word with ‘techno’, ‘nano’ or ‘bio’? Our people cannot enjoy the lion’s share of services and products that have been par for the course in the West for years, such as banking, e-commence, delivery of goods, e-pays, etc. A great scope for innovation that is needed, and needed now!
Your ‘dream start-up’, the one that you would consider the ‘crown’ of your entire career—what is it like? In what sector, how would it change the market and the world?
My ‘dream start-up’ is Fast Lane Ventures. Two years ago we began from scratch with three employees, seed investment, inexhaustible enthusiasm and a desire to turn the world upside-down. Today we have almost 800 employees, 19 launched businesses, a total investment of $78m, and two successful exits. But my greatest achievement in career is still far from completion. Fast Lane Ventures is a company that has the potential to become a leader in the Russian Internet; we are already number one in the B2C segment. But there’s so much work ahead with so many opportunities and inspirations for new endeavors. Our goal is to set up sizable profitable companies, future frontrunners in their respective sectors. Selling a business is not the end of a path; it’s rather the beginning of a new one. There are more start-ups down the road to eye.