How the Ukrainian company Competera grew into a million-dollar business without any outside investments
The Ukrainian startup ecosystem doesn’t equate success with fame. The “loudest” and most obvious startups don’t necessarily make money and the most profitable ones aren’t necessarily the most famous. Competera is a name that’s rarely heard or discussed in the Ukrainian segment of the web. And although the company’s team has received several awards and has been ranked in industry ratings, few people will remember it when asked about the most successful Ukrainian startups.
The main reason behind this is that Competera’s history doesn’t include any prominent deals with venture investors. It developed and grew using its own resources. Despite this, the startup has gained clients from 12 different countries in two and a half years and the revenue from its service subscription amounts to more than $1 million annually.
AIN.UA sat down with Competera’s founders to talk about the inception and growth of the company.
A brief history of the business
Competera is a SaaS product that provides online stores with recommendations on price policy to maximize the ratio of profits-to-clients. The startup also has a product for manufacturers that allows them to track their goods, analyze their position in various national markets and generally receive vital analytics and insights.
Competera has three founders. Aleksandr Galkin used to work in auditing and IT-consulting. “Aleksandr is our great networking specialist, he’s a very social person, he’s friends with everyone and knows a huge amount of people in various fields and industries. That’s why he’s in charge of all the external communications” – says Andrey Mikhaylov, Competera’s CTO.
Andrey himself spent a lot of time working in IT outsourcing and launched technological products that included SaaS-type services. Logically, he’s responsible for development and product management. Galkin and Mikhaylov were the two initial creators of Competera and were joined by Aleksandr Sazonov during the company’s launch period. Sazonov’s professional history is connected to mergers and acquisitions and the development of real-estate projects. He takes care of the company’s financial, legal and operational processes.
We had a very quick start. It took us just a couple of months to move from an idea to a prototype and we got our first client 5 months after the company concept was finalized, – says Galkin.
The idea was born from finding a solution to a problem that the founders that had encountered themselves. Long before Competera was founded, Mikhaylov launched an online store and was faced with low sales and few clients despite an abundance of goods.
Mikhaylov recounts: “Right before New Year’s, a client called us and said: ‘Your Chanel–5 perfume is 50% more expensive than on your competitors’ websites. What’s up with that?’ We started digging into the issue and realized it’s a technological problem, not a commercial one. We found that there are very few services in the world that help companies deal with this and they are generally quite expensive. I told Aleksandr [Galkin] about the situation and we decided to create our own product to solve this dilemma.”
Approximately 80% of online retailers that Mikhaylov and Galkin talked to had faced the same issue. The founders created their first MVP and moved on to gathering feedback. “We demonstrated the product right away, with almost no visual design.” – says Galkin.
The story of Competera’s first client is an interesting one as well. The company’s analysts discovered a price anomaly on the website of a large online retailer: an electric kettle worth 1170 UAH [$25] had been showing a price of 11 700 UAH [$250] for an entire week.
“We just took a photo of the price discrepancy integrated into the interface of our dashboard and sent the screenshot to the company’s general email. The store (one of Ukraine’s largest online retailers) immediately reached out to us and became our first client within a week.” – Galkin recalls.
The growth of the startup
The company started working in full force in 2014, when its founders registered a legal entity and opened a physical office location. Before that, the team worked in beta-launch mode.
We had one client and we were treating it all as an experiment, – says Galkin.
For approximately one year, the founders had two jobs: Competera and their day job.
The total sum that the three friends invested into the startup launch is hard to name accurately: It’s a difficult calculation because we invested our funds based on necessity, in portions and over a period of time. Since we’ve reached profitability, we’re still reinvesting resources into Competera’s development, – says Sazonov.
By his estimates, the amount of money that the founders directed into their startup is somewhere in the ballpark of several hundred thousand dollars. No investors have been involved yet, but for about two years, the company has been in negotiations with potential backers with smart money.
Galkin notes: We’re looking for investors predominantly based on their networking strength and strategic reach. That’s more important to us than money. And that’s the reason we’re so meticulous in our search.
The client-base of Competera has grown organically: the first online retailers that the startup engaged for feedback on their product later returned to secure Competera’s services. There were no flashy campaigns or mass-advertising ventures and the only PR event that Competera put serious effort into was an industry conference in 2013.
We were pretty fortunate in our booth placement: it was right near the food court, lined by two huge monitors that showed our product. We made a lot of new acquaintances there. Beyond that, our clients just spread our name by word of mouth, recommending us to their friends and colleagues. We’ve also had customers just find us online independently Galkin recounts.
Nowadays, the marketing and sales department of Competera is a team of 8 people: price-analysts (sales managers), a marketing specialist and some journalists/writers.
We strive to create interesting content and teach our user audience of product managers to be effective and efficient. We also regularly attend and speak at conferences. I think these are good investments of time and effort, marketing-wise, – says Galkin.
Competera received its first payment six months after the official product launch. The profits were there, but they grew very gradually. Mikhaylov recalls: Our national currency, the hryvnia (UAH) seriously crashed (devalued) twice over this period, so did the Russian ruble. So, our profits grew slower than the number of clients. There was a short period of time when our earnings didn’t grow at all.
We’ve had instances in the past where we would acquire 10-11 new clients but our profit curve would still go down [due to the regional financial crisis]. That was an interesting graph, let me tell you. The money would just disappear.
Considering the fact that most of Competera’s contracts in 2014 were from the CIS [the post-Soviet region most affected by the current Russian-Ukrainian conflict], the company’s main concern was to simply survive.
Andrey Mikhaylov puts it even more colorfully: It wasn’t just a depressing time, it was more like a horror movie. A financial Texas Chainsaw Massacre.
How Competera works
Competera gathers information on sales, mark-ups and profit margins. It also indexes websites several times a day, similar to what Google and Yandex do, but it focuses only on e-commerce.
We provide clients with deeper insights. We can analyze what kind of sales are taking place, how an online store shows its goods to the customers and so on. And we actually crawl/index websites more often than the large search engines do, – says Galkin.
Every client has his or her own personal account with a dashboard. The latter conveniently shows all the relevant analytics and the company’s market position in one easily accessible spot. When the store diverges from its standard numbers, the system provides recommendations on how to improve the situation or change things up.
The dashboard (based on Competera’s own analysis) is generally used by smaller companies, while larger corporations prefer to integrate API platforms into their own solutions to receive more advanced metrics and data.
We’re closely integrated with other services for the most part. This is an advantage that allows us to acquire even more clients, – says Mikhaylov.
Client accounts are taken care of under the watchful eye of the Customer Success Manager. His task, among other things, is to make sure Competera’s solutions are used in the most effective way possible for each customer, taking individual needs into account.
Product managers that use our tools are generally four times more effective than those who don’t. Our platform empowers managers and analysts to save time and increase data accuracy. This allows for much better decision-making. Before working with us, a manager from a large retailer might have had to spend hours or days re-evaluating prices in the store. With us, it’s a much easier process that can be done several times a day, – says Galkin.
Clients and budgets
Competera is a B2B product. The startup works with medium and large online retailers, as well as with large enterprise companies (via subscription). The rates depend on the volume and amount of data that needs to be monitored by Competera’s tools. The average costs also vary based on the clients location.
We have clients that pay tens of thousands of dollars per month. But we also have smaller businesses that pay several hundred dollars, – Galkin notes.
Annual contracts with large clients amount to hundreds of thousands of dollars, but small retailers might pay only several thousand per year. 80% of Competera’s clients are corporations of considerable size, however.
Galkin explains the reasoning: Nearly all of our clients are large online retailers or branches of global brand networks, since large volumes of transactions benefit more from the efficiency of our solutions. When we enter a new market, we go straight to the big players. When we were just starting out, we had an experiment with online stores of a more modest size. Some of them are still with us, they have small SaaS deals with us with a rate of up to $100. But these clients amount to less than 5% of our base.
The startup decided to stop operating within the field of small and individual businesses due to pragmatic reasons, as Galkin details:
We did a bit of analysis and realized that most of these stores exist from 5 to 8 months. If you go to Hotline [the Ukrainian price aggregator website for electronics] and look at the stores that are selling cellphones for example, the big picture will be quite different from six months ago. 10-15% of the small retailers will survive, the rest will disappear. The math just doesn’t work out for us with clients like that.
Beyond that, smaller online retailers often don’t bother with analytics. That’s something that you start caring about when your company grows. Small businesses are content with using Google Analytics to track website visits, – adds Mikhaylov.
Team and global presence
Competera initially targeted the markets of the U.K., the U.S. and Europe. But to get its first serious paying clients, the startup knew it had to be active on its home turf first.
Time will show whether this was the correct decision and whether we should have bet it all on black and tried to enter the U.S. market at any cost. But with level of salaries that we have, we wouldn’t have been able to accomplish in America what we were able to do here in Ukraine Mikhaylov says.
Currently, Competera works with businesses from 12 different countries. Less than half of them are from the post-Soviet CIS region. The company has three physical locations: the main HQ is based in Kyiv (Ukraine), and two sales support offices are located in London and St. Petersburg respectively.
Galkin elaborates on Competera’s global presence: We plan to expand our presence in external markets. A U.S. sales support office is in the works at the moment. Our U.K. representative office will grow as well. It’s easy to set up a meeting with nearly every global retail network in London, so that’s extremely convenient.
The development team and the operational management are all based in Ukraine. The total staff of the company has reached 35 people and is expected to reach 50 by the end of the year. The main recruitment focus is on R&D, but the sales department is getting some reinforcement as well.
Mikhaylov notes: As Competera grows, our data processing volume increases. Consequently, we need to be more and more effective in our analytics and data gathering. We began with tens of thousands of prices per day, now we’re working with tens of millions.