Mikhail Kulakov is a co-founder of the Weavora company, which became famous by the Everhour time tracker, which is already used by 2,000 businesses. Over the three years of work on Everhour, a company of 7 people without venture financing has entered an annual turnover of $ 1 million. In an interview for The Heroes, Mikhail Kulakov talks about the main mistakes of his business and why it is not worth starting an IT company alone.

- How did you come up with the idea of the product?

- The idea appeared from our own needs. We had an internal problem that we first solved for ourselves, but it turned out that others also needed this solution. The first business I was involved in was outsourcing, we were doing customized product development. Naturally, we had to report to clients for the hours that we spent on the project and to issue invoices. Why did we need a new tool for this, why couldn’t we fill out some Excel tables? In fact, we started from the simplest, then tried different products of companies that later became our competitors. Now, first of all, it’s Toggl, Harvest and, probably, Hubstuff.

At some point, we realized that we can make a product for ourselves that would be better and more convenient.

We tried out some ideas, but we weren’t thinking of our own time tracker, which appeared in the process, at the junction of 2013 and 2014. When we saw that it works well, we realized that we were doing something different than other companies, so we could start with it because we already understood this problem well. There were several publications, and we tried to get some feedback, but it was a free service at the time, and we were still very much focused on outsourcing.

Understanding the problem in our experience worked better than our previous attempts to do business. Before that, we were poking into space without really knowing what the problem was, how to solve it, and why we were better. In September 2015, we decided to make a business out of it. We already had up to 1000 companies that used the service for free. When we decided to make a paid service, we immediately declared a complete rejection of the free service. We didn’t know whether someone would pay or not. And after we introduced the fee, we already had about 5 thousand dollars MRR from the already existing clients. Many have fallen off, but since September 2015 (when the first paid client appeared) till today we are constantly growing 2.2 times every year — and we hope to continue growing like this.

- In your article on medium.com (https://medium.com/everhour/growing-our-saas-company-to-1m-arr-7-people-3-years-no-vc-money-key-lessons- learned-2d53766507d2) you’re discussing venture investment. You’re saying that your company hasn’t attracted investment from outside. Belarusian Mikhail Dubakov from targetprocess adhered to the same model, but among the main mistakes, he names untimely attraction of investments. Aren’t you afraid that competitors will overtake you because they attract investments in order to grow faster?

— I’m not afraid of that, because none of those competitors that I know has attracted investment. Time-tracking tools, unlike project management, is not a sexy market for an investor. In time-tracking, as far as I can see, we are not solving some kind of a global problem. Nevertheless, we provide our own approach to solving a problem that is vital for those who charge an hourly fee — these companies need to keep a record of this time. Investors probably don’t see a super-profitable exit in this industry. Of all the exits that I heard of in time-tracking, only TSheets managed to negotiate a takeover by QuickBooks for $ 340 million. But it’s more like a corporate takeover — the deal suited QuickBooks very well, and they did it. We are not afraid that a competitor will come, who will quickly repeat our features and take our business away from us. It seems to me that there is still so much free space for everyone that even if someone comes and just repeats what we are doing (although it’s not easy), he will also have to attract investments. The repetition of our path will also cost some money, which will not be easy to raise just because it’s not a sexy topic. This can’t be done in a week.

When we entered the market, we offered something unique and immediately focused on it. I understand that we wouldn’t have been able to achieve the current results if we simply made another time tracker without integration.

Integration pushed us hard forward. You can’t outbid the client with a $ 10 discount. Perhaps some individual customers may come for such an offer, but we don’t cling to them.

- What is the approximate portrait of the user of your product?

- Our clients are basically teams. We offer accurate time entry, transparency, analysis of the time that an employee spends on work. Everhour brings benefits only to teams of more than 5 users — teams that need to organize processes. Honestly, we’ve never made up a user's portrait. There are many advertisers and marketers among users, but I can’t say that they are only IT specialists. I would say that in part our users are those who use our integration platforms. For example, Everhour is suitable for those who use Asana, which is our top integration.

- For a long time, you didn’t talk about your product at all, especially in Belarus. Why?

- We didn’t see a sales market here. We didn’t want to try working here, because there was no one to try to work with, so we decided to immediately go globally. We decided not to limit ourselves to the local market, so there was no sense for us to write articles for it either. So far, only 1-1.5% of the total number of our clients is from the CIS, while the majority of clients are in the USA. Now we’ve decided to tell our story locally because we already have some experience that we can share. Not only because it costs us nothing, but also because it’s more pleasant for the team when their friends hear something about the company where they work.

A million dollars a year is not the hugest product, but products don’t start with a million — this is also some kind of growth.

It seems to me that the majority fails at this stage. Because they misunderstood what the market needs, underestimated costs, didn’t raise a round, etc. Not even because they may have a bad product, they couldn’t overcome some problems. And it seems to us that Everhour’s experience can help other young companies. It seems to me that it would be difficult for us to find investments at the beginning of our journey, also because VC in our region isn’t developed enough. But now, when we already have clear metrics, when we understand how we are growing, even after the article on medium.com, 5-6 investors from the CIS only contacted us and tried to offer investments, but since we don’t need investments now, we try not to waste time on it. But I am sure that this would be much harder to achieve at the initial stage.

- Can you call yourself a millionaire?

- No, of course not.

- But what were the feelings when you saw this figure in your accounts?

- We were just glad that a new round number had appeared. Of course, we are constantly celebrating the milestones with the team. The first 10 thousand MRR — we ordered pizza, 100 thousand were also somehow celebrated. It’s just a mark, an opportunity to realize that we have achieved something and to understand how we grow. We approximately know how much our competitors earn, and we see that we still have room to grow. And it’s a motivation.

- What was the first office when you first started making the product?

- Two rooms in which we made repairs only after the third year. Naturally, even now we are far from companies that can afford investing $ 100 thousand in their repairs. I believe that many companies can afford it, but this isn’t as much a matter of greed, as the need for such investments.

This is how we approached this. If we can make the office a little bit better, it should be more comfortable. The guys spend a lot of time here, it should be nice here. When a person comes in for an interview, he has to see where he will work. If you work in an ordinary office with an Armstrong ceiling and linoleum, your attitude to work won’t be appropriate.

- Is there still 7 people on the team?

- Now the team is compound. 7 people are engaged directly in Everhour, and, besides them, there is a dedicated team in which three people are completing the old outsourcing project. There’s a big client for whom we’ve been working for four years now, and we can’t just say «bye!» to them one day. This is very demotivating for the guys, they feel disconnected from the overall process, but in general, they are aware, we try to pass knowledge about the new project on to them, but this doesn’t happen quickly.

- Why don't girls work for you?

- Currently, there are no girls in the company. Apparently, that’s the normal case among programmers so far. We very rarely hire someone, we have very narrow experience criteria. A content writer Kristina used to work with us, we were very glad to cooperate, but she started her own project and left us. There was a girl-designer, a girl-marketer. At some point, we had girls in the company, but now there are none.

- Have you ever had a payroll job? What are your impressions of this kind of work?

- I was employed by Belgosstrakh when I was still a university student. In the graduation years, about ten years ago, I moved to an outsourcing company, after which I started to do my own business. I received a lot of experience then and I’m very thankful to that company.

I don’t think that working as an employee is worse than working for myself. On the contrary, it’s more difficult. Recently, I asked one of my friends, who holds a very good position in an international holding operating in the CIS, why he hadn’t yet started his own company. He replied that of all his friends, only me and another person had succeeded in doing something. This motivates him to stay employed. But everyone decides for himself — someone wants to risk, someone doesn’t want to risk. This is especially true of people who have worked longer as employees. They already have more responsibility for their family and children, they can’t just leave and go almost nowhere. If you are super rich, you can, of course, take part of the money, invest it and, if everything goes well, leave with minimal risk.

In 2010, I, together with two partners, Yura (Yuri Tolochko, company’s CTO) and Sergey (Sergey Staroverov, company’s COO), started a company to engage in outsourcing. Our first investments amounted to a couple of thousand dollars — office rent for several months ahead, office equipment and first salaries. Since we made our own capital injections, we remain profitable from year to year, the product has been growing twice every year. Therefore, fortunately, we never had to worry that something was seriously failing here.

Before the launch of Everhour, we tried different projects. We made wishlists for social networks — to simplify the selection of gifts for the holidays. It looks silly now, but then it seemed like an interesting idea. We did the implementation over the weekend, we worked it out for about a month. We saw that it wasn’t interesting for us, and we abandoned this idea.

Our second project was a system for maintaining documentation on the API, which didn’t work out for us either. I think that if we hadn’t come up with the Everhour integration and wouldn’t have seen the potential for further growth here, we would be very upset because we had no other idea at the time.

Naturally, we have acquaintances and friends who have not succeeded in something. And, frankly, I would not like to be in their place. Many say that a fail teaches something, but it can also drive depression. And that’s not a fruitful state at all.

- Is it possible to start a business if you are completely alone?

- Good question. I will only talk about IT business because I’ve never done anything else.

I would say that it is very difficult to start alone in IT, I practically don’t believe in such stories.

It seems to me that at least three co-founders are needed in the IT business, because, in terms of skills, of course, you need two people — a tech worker and a designer.

First, you need a very high-level technical specialist, whom you can definitely trust infrastructure issues and who constantly studies this matter. I don’t believe that you can find someone to play such a role in outsourcing. The technical officer on the salary works from 9 to 6. The CTO must be a partner. Here I got very lucky with my CTO and partner Yura, who completely covers the technical front of work.

Why do you need a designer? Now you need to draw a lot. Of course, there are corporate systems whose design is so-so (and this is OK, people don’t care so much about it). But you have a lot of landing pages, you have to stand out. When a client comes to your landing page, he will refuse to register if it looks terrible. The design is very important.

Why should there be three founders? There were several cases in my practice when two founders had different positions on different issues, and a conflict was born. If there are three people in the team, two of them will easily convince the third one. I was convinced of this several times, this rule worked well for our team.

- What is the main lesson you learned from doing Everhour?

- If you want to make a product, you need to very clearly understand what your unique advantage over competitors will be. It will be very difficult to get customers without competitive advantage. The message should be very clear. For us, as I said before, the integrations were a competitive advantage. At the start, we didn’t have a mobile or a desktop application, we didn’t have all the other features that competitors had. But there was the possibility of integration, which set us apart from the crowd and allowed us to compete with other products. And even if 9 out of 10 users refused our services, because their priority was the availability of a mobile application, one of them made a decision in our favour, because he liked this particular feature. Later we began to expand our features, but the first one, which we did very well, pulled us out.

Recently, we had the idea of another product. We brainstormed, but couldn’t understand why we were better, we didn’t have a clear vision of our advantage. We could make a slightly different UX, a slightly different flow. But this doesn’t mean that we have a competitive advantage. Therefore, before you start something, you need to understand what will make you different. By the way, it’s not so difficult to find.

Sometimes there’s one huge player on the market, and everyone around thinks that he already has everything, so it is impossible to compete with him.

But if you have something that makes you technically very different, and it’s not so easy to repeat, it will also be inconvenient for the giant to change something. He can’t change something at once, because it will greatly affect his existing customers. The little one can stand out and feel quite comfortable.

- What is the main mistake you made while doing business?

- I’d say that we poorly delegated our responsibilities, we were doing too many things by ourselves, and because of this, growth took a little longer than it could. You should try to delegate responsibilities immediately. On the other hand, if we hadn’t been involved in customer support for some time, we wouldn’t understand the problems that are important to customers. If this is transferred through another person, he distorts this feedback through his own prism — he sends it to us as he understood it. I also consider a mistake that we were growing our team for too long — growth from zero to a million took us almost three years. Companies that attract investment, ideally, cope with this in a year.

- What is the most annoying criticism you received from your colleagues?

- A great share of my work is design. You think something over, then you draw it, and it seems to you that everything is cool. And then you show it to the team, and they tell you that you did a bad work. Naturally, your hands immediately fall. This is very unpleasant. But over time, I began to understand that this should be treated differently — it’s better to get such feedback from the team than to spend time on development and hear such criticism from the client. Of course, this is still unpleasant for me, but now it happens less often because we have learned to move from big ideas to layouts and designs.

- What new habits did you get as a businessman, and what habits did you give up?

- The childish habit of constantly checking Google Analytics is now gone. This is a painful habit that takes a lot of time. No need to spend a lot of time on unnecessary metrics.

We no longer accept ideas for new features by one person. Previously, I could offer something and accept the sole opinion. Now we discuss such things as a team, discuss them with partners. If you consider the suggestions of other people, it turns out even better. And, of course, making any serious decisions should be supported by data analysis.

- Do you have a feeling that it’s become trendy among people of your age and younger in Belarus to be an entrepreneur?

- I don’t think so. At the same time, if you look at some kind of rating of influence, such as ej.by tops, almost everyone there is self-made businessmen.

We don’t have resource oligarchs; the majority of rich people are self-made.

On the other hand, there is an understanding that if you want to earn a lot and ensure a quality standard of living, you should be engaged in business. I’ve never felt any benefits from the fact that I’m an entrepreneur — you have to work more than usual. When people ask me what I do, most often I answer that I’m a programmer and not a business owner. I don’t know, I guess, I’m shy.

- Are there any entrepreneurs in Belarus who can be considered celebrities?

- Of course, there are, but, again, I'm talking only about the IT business. I am very sympathetic to Mikhail Dubakov. Mikita Mikado from Panda.Doc is another outstanding young guy who shows with his experience how high a startup from here can rise. It’s great that he’s also engaged in social activities, he is quite open to communication. The guys from MSQRD also did very well, although I don’t really know them. I can say that for me, Yuri Gursky is one of the most top-rated and famous people who has become a real serial entrepreneur in various businesses. For me, he is the standard. Repeating such success several times deserves respect.

- Why Gursky could become what he became?

- If everyone could so easily understand and repeat his success, we would have a lot of millionaires. For me, it’s a mystery. I think that a huge part of his success is luck. It is important that everything worked out for him correctly at some point. It is very important to do the right things at the right time. Gursky began to work with mobile phones, he jumped into the first car, now this car is the last. Of course, you can still jump into it, and maybe you will even gain some success. But the guy did everything on time, made the right acquaintances, got the right knowledge, some initial capital. There were many factors, but luck is also one of them.

- Do you consider yourself a lucky man?

- Yes, I think that we are very lucky — me and my partners, the team is very lucky. Yes.

- Does an entrepreneur have to pay taxes and do something other than making money?

- Taxes, of course, have to be paid. Moreover, Belarus has such conditions in the High-Tech Park, that I don’t know what sense it is, in general, not to pay them. The state is very good at presenting this opportunity. If you earn a lot, you should enjoy the fact that you can manage this money.

If you don’t pay taxes, you have to somehow hide it, you worry. It makes no sense, it’s better to pay. We must understand that a lot of this money goes to really useful things. If you live and want to live in a city that you like, you have to be a part of it.

Therefore, I am very positive about this. The state did a very proper thing through the HTP — they made the salary competitive, and we don’t have the same outflow of personnel that exists in Russia or in Ukraine. Young people are now joining the HTP, and it is difficult for small companies to pay taxes. The park gives them the opportunity to save money, but at the same time it teaches them to do business properly, teaches them to respect the limits of the law. These people simply won’t understand that this can be done differently. It seems to me that this experience will extend to others, too.

- The HTP was initially criticized for creating conditions for a very limited group of people, for a particular type of business. Wouldn't the creation of such a Park for one industry be a disappointment for entrepreneurs who would like to develop in other areas?

- It’s hard to say. At some time, the HTP was not suitable for everyone; not everyone was taken there. But such things can’t be rightly done right away; some time is needed for evolution. We also didn’t immediately join the HTP, but the conditions have changed. Of course, we did a great job during the preparation for the entry, but now we feel very comfortable. When the HTP just appeared, we didn’t think about it and, it seems to me, we didn’t feel deprived. In addition, the HTP is a small environment in which you can try out some experimental things. No one has yet said that these conditions will not be transferred beyond. If it works there, the state will see that it has a positive effect, and this project or some of the projects can probably be transferred to other industries.

Naturally, those who are engaged in some other business may say, «Of course, they feel good at the HTP, there’s no income tax, naturally, they will live well there. On the other hand, we must understand that IT companies have to compete with a large number of competitors, with the whole world, in this sense, it is more difficult for them.

If these conditions hadn’t been created, the state would have lost many specialists and businessmen altogether, they would simply have gone to another country. Through the HTP, we tried to keep those we could in Belarus. In addition, the main cost in IT business is wages. To pay the same taxes that are paid by a company where there’s a raw material cost of production, it would probably be unfair for IT. In general, I don’t think that the state has cheated anyone here. Anyway, we also pay big taxes.

- Businessmen of the «old school», if I can call them so, tend to hide their capitals. Are businessmen from IT, who earned money in the last 5-10 years, also afraid to say that they are rich?

- Honestly, I don’t see any trend to become more open here, in Belarus. There have been so many loud deals lately, all of which are closed. No one knows how much MSQRD costs, no one knows how much Apalon costs, no one knows how much AIMATTER costs. Gursky's Viaden deals are also non-public transactions. And how much did Maps.me cost? Nobody knows, and this is indecent information, so to say. It also happens that entrepreneurs might want to announce the price of their companies, but the investor doesn’t want this. Take targetprocess — they don’t disclose such financial information, although Dubakov is always open. Globally, more and more people are sharing information about how they have grown to a million and beyond, but it always depends on the choice of a person, I think. There are entrepreneurs who are just as closed as they used to be, but there are people who are becoming very transparent. The Buffer company publishes the income of each employee. The Baremetrics startup publishes MRR, ARR and all financial information for all of their clients. If you want, you can become an open startup — roughly speaking, just tick, and you will appear on their dashboard, and everyone who enters their landing page can see your earnings. There is such a movement now, but I hadn’t noticed this in Belarus.

We opened some information, but we are so small that someone can say that some cafeteria’s turnover is bigger than ours. The scalability may be slightly different, the number of people is different, but, indeed, there are cafeterias with a $ 2 million turnover. This transparency, of course, is worth respect, and this is an opportunity for communication to be more interesting. Because we have already grown to a certain level with the company. But in order to discuss growth from a million to fifty, we need completely different skills and very different processes.

When we grow to a certain level, we can share the experience. But if I’m interested in talking to someone with MRR of a million or more, they may not be interested in me. If you're the smartest person in the room, maybe you’re in the wrong room.

But, you know, if I were one of the people who earned $ 10 or 100 million, I would also think twice before talking about it.