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Ilja Laurs: Crisis poses no threat to startup business

Ilja Laurs
Ilja Laurs
Šaltinis: 15min

“One of the greatest strengths of IT startups is that they are more resistant to economic crises than other businesses. If you have a good idea, you'll always find investors,” says Ilja Laurs, 36, one of Europe's successful new businessmen.

His company GetJar distributes free mobile apps and has been lauded as a great success story. Laurs gave interview to 15min, sharing advice on how to start a new and successful business.

- What would you advise to a person who has a good business idea but doesn't know where to start?

- Over the last five years, the situation in the sector of young technology companies has changed dramatically. It has become an established branch of business, enjoying support from both public and private capital.

It is better to try out business prototypes in Lithuania than abroad because costs are lower. Besides, testing new products in a small market is much easier.

But the problem in Lithuania is that there is no consistent framework – they try out many diverging models. If Silicon Valley is dominated by risk capital model, in Lithuania one can find anything from EU-funded programmes to support from private risk capital funds, innovation parks, valleys, starup accelerators, etc.

Facebook and Google were built in Silicon Valley on the risk capital model, so one can say it's a proven thing. In Lithuania, meanwhile, just like in the rest of Europe, they are still experimenting. It is early to say which way is correct and which one is not.

- So the best way is to take your business idea to the United States and try it out there on your own?

- There is no universal recipe for success. I think a lot depends on the project itself, on people, on the idea. Say, whether it is targeted at a local or international market.

I have three general things to recommend for Lithuanians.

First, I suggest you turn to areas where Lithuania has a competitive edge. I won't go into details, but they say that our banking is very well developed, our mobile technologies highly competitive, etc. There are other areas I am less familiar with, but the word has it that biotechnology, laser technology are big here.

Second, one must experiment. It is better to try out business prototypes in Lithuania than abroad because costs are lower. Besides, testing new products in a small market is much easier.

Third, if you find that your project is successful, that it can work in other markets too, it's a good idea to expand your business. Silicon Valley is a unique environment to develop large-scale, high-quality products. One must have a presence there if one has a proven business model.

The main reason why we moved GetJar to Silicon Valley is that it can supply skilled employees. For example, our programmer department is run by a person who left Microsoft a year ago, where he led the entire Xbox Live development. You couldn't find a specialist of his calibre in Europe.

- How to find people who can help you, reliable investors?

- Every business serves its function. For example, banks finance construction but do not build houses themselves. The same goes for risk capital investors – their business is to invest but not to take over an idea and try to develop it themselves. They usually fund young technology businesses.

There are others, specialized funding sources, like “business angels.” These are experienced successful businesspeople that work in investment. I think that the best option for young businesspeople are angel investors or early-stage risk capital funds.

- How to recruit skilled employees?

- A good employee costs big money. But experience shows that top-notch people come to work for companies for other reasons than money. Why do people who've spent ten or more years at Yahoo! choose a small company where the risk of bankruptcy is high and career prospects are low? First of all, because of a promise. In a small company, in addition to salary, one is often compensated with shares. If the company is successful, you can make much more money as a shareholder than a top-paid employee.

Another thing is that an intelligent person cares for something more than money, they want to do something to change the world. Big companies usually don't provide for that because they are like trains. They go along the tracks and do not change their course. In small companies, the reverse is true – you hold the steering wheel in your hands.

- What time is financially favourable to startups? Does economic crisis have a bearing on one's chances to attract investment?

- I wouldn't draw so straight a link with global economic situation. A much more significant moment is a startup's foray into stock exchange. Say, before Facebook did it, general investment moods were much more favourable to startups, since, as you can recall, Facebook did not meet investors' expectations. So now they expect that financing conditions for startups will be somewhat worse in the coming years than before. I'm not saying they will be very bad. Only they were better until now.

Another note on recession periods: The worse capital did in private sector, stock exchange, the more money went to risk capital. There are big funds that must invest money because this is their job. When some instruments failed to give returns during the crisis, they had to look for alternative sources and more money went to risk capital. More risk – more gain.

Temos GetJar, UAB
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