Starting a business in USA - Stas Matviyenko #11
Michal: Hi, my name is Michal Rokosz. I'm a partner at Inovo. We are a first choice fund for most ambitious founders from Poland and Eastern Europe. Today, I'm happy to talk with Stas Matviyenko. Stas founded allset. He's currently the CEO of the company.
The interesting thing is he started the company already in the States. He moved from Ukraine. He got his first funding there and is still managing the company from California. Stas will share with us the story about getting first funding in the States, launching the company over there, how to convince Andreessen Horowitz, as well as basically some interesting facts about the company and how he's managing the business.
I hope you will enjoy the episode. Please subscribe to our YouTube channel. You can also follow us on Spotify and Apple Podcasts. Enjoy. Um, Hi Stas, great to see you on the video conference.
First of all, let's maybe start with you telling a little bit about yourself. Who are you? What are you doing and what brought you to becoming an entrepreneur? Stas: Hi Michal. Thanks for having me. I'm really excited for being on that podcast. About me...
I'm just a regular, not best student from a regular University in Ukraine who decided to just do something that is more interesting than listening to some old guys in Ukraine. For me the most important was just to start doing something, just start. This is how I got my first failed start-up. After I kind of got into that space I figured out - ok, so we have mobile phones now, like smartphones that can help us in doing some things for us.
And thanks to that I came with the idea to create a company, a mobile loyalty program for restaurants. That one was cool in Ukraine. And then we expanded to European countries as well.
After that we played with other technologies in the restaurant space. And the restaurant space is actually the space that I have been always looking at as an opportunity. The restaurant space was, and still is the greenfield in terms of technology. You can see that there are still a lot of things to discover, conquer and still the whole market - especially before it was mostly offline. And now the market actually got digitized really quickly, within one month.
Actually, right now we are in the future. Before people have been forecasting that restaurants will sell online around 80% to 90% of their sales in 2025. But right now, here we are in 2021 and 80% upto 90% of sales on average per restaurant is done online. Most of those sales actually are not delivery. Yeah, delivery is a big part of the restaurant online sales, but another big part, especially right now are contactless payments.
Simply before you were going to restaurant as previously and you were just telling "Hey, I want this" and they were like "Ok, here's the terminal, pay with that". But now when you go into a restaurant and you say "I want to order", they tell you "Hey, you can either pre-order with any of these apps that we are working with or here's the QR code that you can scan and order there because we don't take in-person orders right now. This is to make it safer".
So that's why a big portion of sales right now are online. Even though it's kind of partially offline, but the transaction itself is done online in the cloud. And this opened up a huge new market that I call contactless ordering. And this is why with allset we are focusing around that at the moment, and we are in the best position to pioneer and get a leading share of that market.
Michal: Yeah, I think you actually had an amazing pivot last year and it was a crazy ride, for sure. We're in the future right now, but let's go back to the past. Around five years ago, you mentioned you started your first business that failed. You started it in the Eastern European markets, focused on the restaurants. And then with your second business you moved to the States. What was the reason for failing the first business and then having a successful launch of the second one? Stas: So actually it wasn't a big fail.
We got the revolution started in Ukraine. And it was really hard to operate in Ukraine because of that. So we decided to move on to a new market where we don't have a revolution and all the restaurants are on fire. But if you want to move to the US... the mobile loyalty program that we had in Europe was not new in the US. And they already had players that already got the market.
We connected with our investors and we said that this is more obvious thing to do, is to make not just a pivot, but actually figure out what else. What we can do for the US market to get it. And we actually decreased the price for the company as well. And we raised another seed round with the new presentation for the new product, for the US expansion. And that's how we got it done.
So basically, the first one was more like an experience for us on how to launch and operate business in Ukraine from Ukraine. But the second one was - ok, how we can keep that R&D team in Ukraine to save money and get the US market while we're not spending as much as other companies there. Michal: I would like to deep dive into that part.
So you were like 25 back then, moving to the US and you managed to raise a seed round from tier one investors. Like, how did you do that? Stas: Yeah, so first before those tier one investors, we had investors from Ukraine that I had to pitch as well, and I pitched a lot of investors in Ukraine and Russia. And I think I got some skills. Before I actually raised 300 K on a presentation. I just had a presentation. I was 22-23 years old and startups were like something new back then.
And if you were doing a startup in... not just Ukraine or Russia, but for Europe... that was already big for investors. They didn't have much experience there. So that was easy for me.
I got some confidence. Ok, so now I know how to raise. I was learning a lot, not just from books and experience from the US.
I was actually pitching a lot and I was getting a lot of questions that investors got. So I was able to automatically respond to some questions quickly and understand what investors are looking for. And then when I moved to the US, I was like "ok, who's number one here?". I just started cold emailing everybody.
This is the number one thing that you don't need to do. Don't cold email to investors. So after that, I actually read a lot on that topic.
And I investigated positive responses from whom they were. You need to figure out who is looking for you. Who is already looking for startups like yours. And then I went to Crunchbase. I started looking at who invested in similar companies, in a similar space, who already exited from a similar space. And then I was filtering those funds.
You can't email just somebody from that fund. You need to figure out who exactly was working on that deal. This is his job and he is covering that space. He already knows everybody. And if there's a new player, they'd definitely want to hear about you.
I don't reach out saying "Hey, this is what I do". I actually reach out saying "Congrats on your article" or "Congrats on the company you invested in". And basically that's it. And then at the end I just put my name and the website and then whoever is interested, they're gettin' back to me "Oh, thank you very much", "Oh, I'm interested in your company. What do you do?". And then, when you have interest from them, then you start.
Michal: So you still did the cold emails, but you were not pitching. You were trying to build a relationship. Stas: Yeah. I was asking recommendations from guys who are already experienced in that space.
So there's a good advice - don't ask for money. Ask for advice when you're looking for money. This is how I reached out to Jeff Jordan. I was simply looking for his thoughts on our company, because we were doing pre-orders for dine-in and he used to be the CEO at OpenTable, the leading booking platform for restaurants.
And, of course he got interested because this is what he's been doing. Perhaps he and his team had ideas on how to merge table reservations and orders and this is what we've done. We've got a few calls with him and then he just said "Hey, come by to my office".
And then when I came there were like eight partners staring at me and waiting for a presentation. I was like "Ok, hi guys. Here's what I do. And here's where we're going with that". And yeah, they tried our service right away when we were by their office. Michal: In the past it was worth to have a few clients around Sand Hill Road, I assume.
Stas: We actually went to Palo Alto and other suburban hubs where we have high density of restaurants in the Bay Area, nearby Sand Hill Road. And we got those restaurants. And we've got a few popular ones that I know personally a lot of guys going to. I was going there every day, because even though we didn't have users there, I was going there at least once a week to make sure that they serve it nicely and they don't forget how it works. So then when I have partners and VCs that want to check it out they will order in that restaurant and that restaurant will serve them nicely. Even though Bay Area was not a big market for us, support team had a high priority for orders in that area, making sure that everything is going to be right.
Michal: That's actually really interesting. I have a similar case from Booksy when one of our co-investors, he was hesitating whether to invest or not and suddenly he became much more excited. And after the round, it turned out in the process he was cutting his hair and he saw his barber started using Booksy.
So he asked him and he was like bragging about the product. So it's good to... if you have a consumer product you can really make an additional impression just by this kind of service.
But if you could elaborate a little bit... So, when did you move to the States and what was the state of your business when you actually closed your US seed round? Stas: We had launched a pilot with 12 restaurants in San Francisco when we were raising seed. When we closed seed we were live fully in San Francisco and Bay Area and the state of business was non-profitable, not many orders. We got seed round to see how the marketplace is going to work when you add more users and more restaurants. Because you can't verify how the marketplace is going to work - not at the scale. So at least we were pitching that we're gonna take over one district in San Francisco.
We already had 12 restaurants, which we were still thinking it's not enough and the problem was that we had more expensive restaurants, cause we wanted busy people to enjoy quick meals at not quick serve restaurants, at the table. But it was hard to get those customers using us. And then we pivoted more to casual part. But the state was again, early, early stage, like very early stage, just a few months, I think, since we launched in San Francisco. Michal: I think a lot of founders hesitate to move to the States permanently.
They fly in and out or they always decide to do it later. But do you think you can effectively raise and manage the company that is targeting the US market without moving permanently to the US? Stas: No, you don't need to move to the US, but you need to be there for some time. Or you need to have somebody on your team at least a leading product manager, better a co-founder that lived or lives in the US. Because if you want to get US customers and US users you need to understand what they're looking for. If you do a business from Ukraine, then you create a product in the US for Ukrainian people. They're like "Why do I need that?".
US people may not have that problem that you're trying to fix in Ukraine and sell that in the US. So this is most important. Michal: How about the formal side - like visas, accommodation, etc.
Was it a big challenge to organize that? Stas: So if you have a leading investor or at least any investor from the US who already backed you, at least you have a term sheet, you will not have any problems getting a working visa there, for your team, no problems. That shouldn't be a problem. That's what they have to do because already they invested in you.
But first you need to get B visa, like tourist visa. I'm pretty sure it's not hard. Of course you can get a lot of NOs, but who tries then you get. The more you try, the more chances you will get it, but definitely you will get it. And then just start your relationships with investors and start building a product there. B visa is enough for you to...
at least for, I think six months is enough for you to polish your product for the US market and find first initial investments. And then after that with US investors you can easily get working visa for your company because you already have US money. E visa is the one that you need. Or you can go for O visa, with special abilities connected to your company. And this can be a good case because you can say "Hey, they invested in us because we have that special ability that nobody else has in US. Michal: So you went on a regular B1, like this business / tourist visa.
And once you got the investment, you organized your permanent option to stay. How do you run the company now? How big part of the team is based in the States versus in Ukraine? Stas: Before we had more people in the US, right now less, because we were impacted heavily. So most of the team right now, up to 80% in Ukraine, around 20% or less in the US.
But I wish we can hire more in the US. Right now we are working on the round to make that happen. Because we didn't fire anybody. We just used to have a lot of independent contractors in the US, mostly sales. And my thoughts here...
You need to hire the best people in the country where they are cheaper, but in the US you also need to target for the best people. It's better to have the best person in Ukraine for me than average person in the US. Honestly, because that's a waste of money there. But of course it's better to have a leading person in the US, in your space, because in Ukraine you don't even have that people, but you need to have budgets for those. And this is really important.
So until you have money for the best guys in the US, don't hire people there. Or if you need somebody just for a basic job - ok that's fine, but don't expect from them something big. Michal: You and one of your co-founders are based in the US, in Los Angeles, as far as I remember. It's a crazy time zone difference.
How do you manage the company? Like 90% of your team is asleep when you are awake and the other way around. Stas: Remember, best people. We can't afford to have best people in the US, but we can afford to have best people in Ukraine and other countries. The way we built our operations is similar to OKRs. This is where we're going right now. We divided the company by departments that have their own specific goals and plans and KPIs based on what the company needs.
So, first of all, we set up the biggest targets, goals for the company for this year. One general metric - for us it's revenue. And second one is - how are we going to achieve that? What strategy we're going to use.
Then you build a strategy and you know, which metrics are important to implement that strategy. And then, after you have that important metrics, for example for us - areas where we are offering the largest selection of restaurants, number of zip codes and where we have the network effect launched. So it's a minimum amount of restaurants and a minimum amount of orders per zip code. This shows us how we're executing our strategy because the more zip codes we have, the bigger we are, and the more areas we have where we're in leading positions vs our competitors.
So we're beating everybody there. And then you go to each department and you make sure that you have a proper team lead there. And that department that has upto three metrics assigned to him that are really important in order to execute that strategy. And then it's their job to pitch you on their plans, on the execution and how they're going to bring that metrics with their team to live for this year. And then you do it for each department. And then they're all on their own.
They have their plans that they came and said "Ok, these are our challenging and ambitious plans for us. This is what I and my team wants to achieve". And that's it. They don't need me for that. They need me only when we do a monthly check-in and they say how they're going with their plans, how they're executing, if they need any help from other departments, but they can do it on their own.
They go to other departments on their own. Yeah, mostly my job here is to make sure that we have the correct strategy and that in a year we will be in a correct place. Just thinking on what we should do in a year to be most successful in two years. So, this is what I'm mostly thinking about right now.
Michal: Ok. So it's basically about having an independent, strong senior team that doesn't require management day to day or week to week, that will focus on - what are the product needs, what are the customer needs and on the strategic decisions. Stas: So you need to remove micromanagement and bring in more trust to the people that you hire.
Make sure that you hire the right people, whom you trust, and if they trust you. And then if you have mutual trust and you both agree on targets, then let them work. Don't bother.
This is what I do. Michal: There is this famous quote: "Hire exceptional people and then get out of their way. And that's it".
Stas, coming a little bit to the present. I remember when we first met, I visited your office in Kiev and there were two things that made us very excited about the company. One was - your brilliant network effects and the second was - how well organized you were on the execution. I mean, executing on the business with many, many restaurants is very difficult.
And I think, having my experiences from Rocket Internet's business and some other businesses, given the stage of your company, you were really at an amazing level. But the network effects were in the busiest business areas for the business lunches, which is kind of an event that disappeared this year. How did you handle this? I'm not sure if we can reveal this, but you're already above your previous numbers, which given the market, is quite amazing.
How did you manage to turn around the company in these 12 months to actually come back on an amazing growth path. Stas: So first it was a disaster for everybody. So we were focusing on the busiest areas, financial districts, of all the biggest financial centers in the US. And we were growing like 15-20% month over month. Everything looked great.
We got a network effect there. But then in March, within one month, you see that people switched from working from offices to home, and then you have a lot of areas, where there are restaurants, but nobody is using you there, because there are no people there. And we dropped around 60% right away. With my co-founder Anna we started thinking on opportunities that we can get from that and how we can quickly get back. And then we also noticed that people were still looking to order with us, but they were asking for restaurants in areas, like for example in New York they were asking in areas - Brooklyn, New Jersey and... well some restaurants that we had there, not many, started receiving a lot of orders and then we quickly figured out - "Ok, so we have the same strategy as before.
However, right now we need to change urban areas to suburban areas where there are people right now". And then we quickly created priority areas where already we had most of the users that have been launched in our app and we kind of had a map for that. Right away New Jersey, Brooklyn - they became leading areas for us, Bay Area as well, Austin. So we started seeing a lot of areas that have grown really fast. And then we focused our sales team there to speed up the growth. So right now we are growing much faster than before, because in suburban areas people are not just looking for lunch as before - they're looking for breakfast, lunch, dinner, brunch.
That's why we have more orders per user right now than before. This is really good for us. Plus contactless payments - that's something new that we launched. And that added even more orders and that is driving a lot of new customers for us right now, because restaurants are promoting us as a solution that their customers have to use in order to order at that restaurant. I think there are a few most important things. First of all, you don't need to wait until everything gets better.
So most important - you need to act and figure out what changed and what people need now, why they don't use you now. In our case, it was easy - "Hey, I don't see any restaurants in my area now because I'm in Brooklyn" and we're like "Ok, that's fixable". It just takes some time. We looked from the product side and we noticed that - "Ok, so restaurants now need to figure out how to feed people without any contact.
That means people will be ordering online or somehow. But if I don't know where to go, how can I order there online?". So we understood that people will be out, but they will need to order without any contact on the spot. And that's how we quickly introduced QR codes and options for people to order without contact on the spot and the restaurants rushed to use that right away. And we offered that for free, like "Hey, use that for free".
And we don't charge any money for that. And right now it drives a lot of restaurants towards our company. For us right now restaurants are free user acquisition.
We don't do marketing and restaurants are promoting us. Michal: I think that's actually a brilliant part of your model that your product makes sense for restaurants, because your interests are aligned. So they actually promote allset while promoting their business as well. And your user base is just growing and growing. Stas, one question here.
Because you didn't move. You're still in the States through all the pandemic and your team is in Kiev. Was it a plus or a minus in the the time with all the business turbulences? Stas: For me it's a plus, because before everybody in Ukraine were in the office and everybody wanted not to go to the office.
And I wasn't a big believer in working with people, not in the office. I had to travel frequently to Ukraine. Right now, when we switched to working from home and everybody liked that, we didn't even see any drop in productivity. Or if we saw any, we fixed that. Right now we have a big office in Ukraine. It's a bit empty, unfortunately.
But we turned it into a coworking space. So it means nobody has their concrete spot, but whoever wants to come by, they're free to take any spot and work. So overall it positively impacted, because - first, we spent less on offices in the US, we closed all the US offices and everybody is comfortably working from home. But again, if you have strong team leaders, who are day-to-day in contact with their team and they have concrete KPIs, you don't need to micromanage and manage them. It doesn't matter, honestly, whether they are in the office or they're working from home.
If people want to work from home and they are more productive, why not? For example, we want somebody who will help us to grow the amount of users that come in from the referral program. Let's say this is one of the features of a product owner. Then we're going to look for a product owner. Then we'll put that in the descriptions.
And then when we hire that person, we want to make sure that person will prove that he will have fun and enjoy while working on that feature and then get those results. And then when they have fun and they like doing what we want them to do or what we need them to do, then they're unstoppable. They will work anywhere more hours than needed. This is just a simple strategy we have there. So now they spend less time on traveling and they spend more time working or doing what they like.
Michal: Stas, one final thing. I hope there are founders who are considering moving to the US and launching a business there. What are the kinds of things you would advise them to do or surprises you had on your journey that are worth sharing? Stas: So it depends on the stage of your company, for sure. First, just get to know the markets where you're in - there.
For example, you may be in the car market in the US or in a European country or anywhere else. So you should know that this market is different than in the US. Speak to customers and owners or users or potential users, potential customers there. And figure out if they really have that problem and how it can be fixed. Because most likely it's going to be different there in the US than what you have in Europe.
Probably not dramatically different, but it's hidden in details. You need to get it right. Make sure that you're doing the right thing for the right people. Second, try to find a Partner. Of course you need somebody in the US to help you on the product and on sales.
Sales definitely need to be done only in the US by a US person, at least lead by a US person. And product preferably as well. So first of all, even if you don't have money, don't look for cheap sales reps or cheap product managers there. Just look for the right experienced people in that. And try to get them as partners or as advisors for a bit of stocks for the help or make them co-founders, but better just advisors.
You will need that. Otherwise it won't help. I wish before I wouldn't hire some average people, but in exchange I would get less time, but from more experienced people, that are in my industry, that can be working with me and saying good things about me to other potential clients or investors.
Those are a few recommendations. Michal: Cool. I think super valuable. Stas, thanks a lot. This was super interesting. I think your story can be very inspirational and a lot of learnings to be taken.
Thanks for listening. I hope it's valuable. And you got some interesting tips or findings. If you liked it, please subscribe to our YouTube channel or you can get us on Spotify and Apple Podcasts.
Thanks again. And see you in the next episodes. Um,