'Self-delusion is one of the main problems at a startup'

HSE graduate Mikael Yan and his company are part of the world’s largest startup accelerator, 500 Startups. In an interview with Success Builder, Mikael talks about the benefits of chat robots, how to stay positive when talking with investors, and how he became part of 500 Startups after getting a flat tire on a San Francisco highway.

Did you start the business and begin making money while you were still in school or afterwards?

I was in my second year at the university when my friends and I thought up the online magic school YouMagic.ru, one of the first in Russia. I was interested in card tricks – initially to get girls’ attention, but then I became took it up as a hobby. I could sit in front of the mirror for four straight hours working on a particular hand movement. We then took a video of me demonstrating some sleight of hand and put it on YouTube. People could go to our website, pay, and see how the trick worked. In the end, we sold the idea for a small amount of money, but it gave my 19-year-old self some pretty good experience.

In 2011, my friends and I came up with an idea, and we needed investments to carry it out. The working name of the project was QOODOZ (a play on the word kudos), and it was a platform where people could use their wit and creativity to compete like poker players. We entered into talks with Comedy Club to see about the possibility of creating a joint website, but in the end we ended up launching the website YouComedy.Me by ourselves.

What did your first experience with magic tricks teach you?

I would say that taking on a new project gets easier and easier each time you do it. You learn more and more about how to build a team, approach a new idea, think about a product, and test out your ideas with minimal required resources. The main conclusion that can be made following the magic school is that you should assess a project’s potential market earlier on in the project. This sounds banal now, but it wasn’t as obvious at the time.

How do you make money with a startup?

The secret to success is simple – make something people need. In searching for an idea, it’s best to start with yourself and your own problems. Is there something that ‘hurts’ bad enough that you are prepared to spend your own time and effort finding a solution? If the answer is yes, then you might not be the only one, and you may have found an idea for a project. The best situation is when you are your own target audience; after all, the main thing for any startup is to understand the client. If you decide to solve someone else’s problem, then you literally have to move in with the client, talk to them everyday, go to their office or home – all in order to understand the real problems they face and solve these problems in the best way possible.

What role does psychology play in making money?

I believe that business as a whole consists of human relationships – between business and client, management and teams, company founders… But the main thing is the relationship the company’s founder has with themselves. A founder is always the bottleneck of their business.

What in particular do you have to know about yourself?

The level of your ambition, fear, illusions… Self-delusion is one of the main problems at a startup since the founders don’t want to look at the facts and instead want to simply ‘realise a vision.’ But whether or not the market needs this vision is no longer the founder’s problem. I don’t want to offend anyone here. We ourselves went through this and have an excellent understanding of how it works. Overall, the founder’s personality is the DNA of the company. At any company, the qualities of the CEO’s personality are reflected in the company’s operating results.

Why do you work with startups in particular?

The right answer here is probably: it just happened that way. A certain combination of genes, my upbringing, and opportunity – well, plus a little initiative on my part… Some people want to create a startup for the sake of easy money. They read about exits on TechCrunch and think they can do the same. But believe me, you probably won’t make any money this way, and if you do it won’t be right away. The average time between the start of a project and a successful exit (a sale or IPO) is around 10 years. In addition, nine out of 10 projects close before that and the startup’s founders end up making zero. There are much simpler ways to make money quickly, for example, by learning to programme.

On the other hand, those who aren’t afraid of this statistic and marathon-like adventure; who are ready to learn from their own and others’ mistakes everyday; who aren’t afraid to trade in a life full of entertainment, relaxation, and comfort for a life full of drive, sleepless nights, and the feeling of 24/7 work – these people can expect great success thanks to their determination. The question is whether or not you need this.

How do you search for investors? Isn’t the main thing convincing someone to take a risk and give you money?

In order to find a venture capitalist to give you money, you have to convince them that your project is able to guarantee returns of at least 10 times more. It’s not that they are greedy; that’s jut how venture capital works. In order to cover all failures and half-successes, the best companies in a portfolio have to provide at least 10 times the return.

One of the most important pieces of advice you can get regarding fundraising is, get it over with as soon as possible. It’s better to try to get as far as you can through your own efforts. This provides two benefits at the same time. First, you don’t get drawn away from the product before you need to. After all, fundraising is a full-time job, and if you start it too soon, you lose valuable weeks, even months, that could be spent on something else. Second, the further you let your own efforts take you, the more valuable your company will be and the more money you can get for development, all while diluting the founders’ stake in the company as little as possible.

If you’ve still decided to find investors, you should do this quickly and have between three and five meetings a day. The majority of investors will say no, which is normal. Get some feedback, work on your pitch, and move forward. At a certain point, everything will work out, and if not, then that means you should find out why your project was rejected and get rid of all of the main risks that trouble potential investors. With this new information, go out and try again.

Which project are you working on now?

In July 2015, when Pavel Durov started Telegram Bot API, we started working on ManyChat, a platform that allows you to create a bot on Telegram and Facebook without programming anything. We created a prototype and launched after just a week. The platform has been used to create more than 250,000 bots, and we send nearly 25 million messages everyday. We’re one of the largest platforms on Telegram, and we recently launched on Facebook, where we’re also growing. With this project we became a member of 500 Startups, one of the best startup accelerators in the world. We did the programme this spring and are going back to the Valley soon.

How are bots useful?

Bots are automated accounts on a messenger that can be used to get news, order food and clothing, or set up an insurance policy, for example. Some bots help you manage finances, while others offer advice and track your spending. Overall, bots can do anything they are programmed to do, like programmes on your cell phone, just inside of a messenger’s chat interface. As for ManyChat, we help create business bots for marketing. The bots can be used to create a link, create an automatic message sequence, segment the audience, and more. The advantage is that 15%-30% of people go to these links versus 1%-3% when sent via email.

Can you talk about how you became part of the 500 Startups business accelerator?

We once met Diana Moldavsky [a partner at 500 Startups] and told her about ManyChat. I sent her statistics on the project after our meeting, but it wasn’t clear at the time what bots were and how to understand these numbers. So we decided to wait a little.

A month went by, and the whole time we just continued growing. When it became clear that the number of bots had grown by 50%, I decided to write Diana again. That’s when 500 Startups invited us to an official interview, which we could have done remotely via Skype, but I decided to fly to California.

I remember preparing for the presentation all night. I slept maybe three or four hours, left early, gave myself two hours to get there even though the trip from Palo Alto to San Francisco doesn’t usually take more than 40 minutes, and I got a flat tire… There I was in America, on the side of the road, in someone else’s car, with a flat tire, late for an interview that cannot be rescheduled (late=rejected), and the adrenalin was rushing through my veins. Uber, a tow truck, and friends – I got the miracle I needed five minutes before the interview, and I was full of energy, which really helped. That day, we had an excellent talk with the 500 Startups partners, and the next day they approved us.

You recently gave a lecture at HSE. What feedback did you get from students? Are they still interested in startups?

Students are interested in entrepreneurship, which makes me happy. The main thing is maintaining this interest after your first mistakes and trial runs. There’s a universal formula for success that can be applied to entrepreneurship as well: 1) know your goal, 2) act, 3) evaluate your progress, and 4) change your approach if you’re not seeing progress. If you follow these simple rules, each step you take next will be more effective than the last. But this formula also implies that nothing works perfectly the first time you try it. The main thing is not to give up and to continue moving forward and learning. With this approach, any goal is achievable.