2020 April-May Analysis

What Georgian startups can take away from Silicon Valley

Georgia’s fastest growing car repair service, designing a spacesuit for humankind’s first steps on the moon and phubbing on Phubber – three Georgian startups share some of their most important take-aways from their time in Silicon Valley.

What can Georgian startups learn from Silicon Valley? The question may sound rhetorical to some, but innovation and entrepreneurship still mean drastically different things in the Bay Area’s tech Mecca than in Tbilisi.

In February, a group of Georgian startups got on a flight – just weeks before the Coronavirus would turn our world upside down! – and made the transcontinental trek to San Francisco. Some went to participate in Startup Grind’s annual Global Conference, while others attended a USAID-sponsored four-week acceleration program conducted by the US Market Access Center.

Investor.ge sat down with three of these homegrown startups to talk about their companies, the challenges of finding investors in Georgia, what to expect when courting US investors and what they’ve brought home to share with other aspiring entrepreneurs.

The Caru platform allows car owners to effortlessly connect with service professionals whose ultimate responsibility is not merely to fix a break or pump a tire, but to oversee the entire process of car repair – from pick up through repair and return.

“We’re the Uber of car repair service”, says Nika Abashidze, the founder of Caru, Georgia’s fastest growing car maintenance company, which in early March began its expansion abroad in Ukraine.

Caru is convinced it has the ultimate formula for car service and maintenance to become the car repairman of not only the region, but of garages as far afield as the US – Caru founder Abashidze’s target market.

“The US market is attractive for a number of reasons: the market is bigger, businesses are more scalable. In Georgia, the problem is we have great ideas, but local investors are after quick returns – they want to see that the business will be self-sufficient within Georgia itself. But that’s difficult: the Georgian market is small. Another thing attractive about the States is that if we can get set up there, a US investor won’t ask for 50% of the company. In Georgia, investors can ask for too much, and can suck the motivation or enthusiasm out of the company by taking too big a stake in its ownership”, Abashidze says.

Going by your experience in the US and speaking to investors there, what is the moment in the relationship when you can ask for a dollar?

“That moment comes when a potential investor becomes your ‘cheerleader’ – your supporter. When they start caring about you and your endeavor.

“To do that, you need to build trust, and that’s a feat in itself. My favourite quote is ‘A reputation is something you build in 20 years, and takes just five minutes to destroy.’ As a startup, you must take into consideration that your goal is not to give investors a reason to say ‘yes.’ Your goal is not to give any reason for an investor to say ‘no’. That’s when you’ll find support – when not giving you money is a crime.”

What would you tell startups just getting on their feet?

“Two things. The first is: do you really want to? If you stop to think about what it will really involve, there is a 99.95% percent chance that you, in fact, don’t want to do it.

“The second: forget fear. Making a mistake, getting beaten by a competitor – forget about it. You must think like one of the ‘craziest’ men on earth. Forget restrictions, and have the ability to pursue your project your way. Even if 100 experts and experienced people come to you and say ‘don’t do it like this’, you must have the ability to follow your gut feelings.”

Crazy things is just what Elven Technologies is looking to do: by aiming to be the company that designs and produces the spacesuit that will accompany humankind to Mars in either 2024, if Musk has his way, or in 2040, with NASA’s more conservative estimate.

“As it stands now, we’ve nothing in which to send people to Mars.” Elven Technologies CEO Vamekh Kherkheulidze told Investor.ge.

“The issue is this: the current spacesuits weigh up to 200 kg – that’s alright on the moon, where gravity is just about one-sixth of that of earth, or in space, where there is no gravity. But Mars has about a third of earth’s gravity – so that’s one problem. Another is that the suit has to be able to handle a slew of additional issues, amongst which is the fact it has to be able to handle high temperatures, as well as low ones – you could feasibly have a situation in which the rays of the sun are heating suits to 100 C + on one side, while the back will be – 40 C.

“To get there, we’ve decided to start with a product that will be commercially viable on earth – a suit that could be used by firefighters to withstand flames, and something that can keep them cool as well.”

What surprised you the most about Silicon Valley culture?

“One thing that got me was that everybody’s in flip flops! Personal comfort is so important there, and is maybe even a determinant of success. If you’re happy all the time, the likelihood you’ll be motivated to achieve great stuff is much higher. This freedom to be comfortable, and the individual’s pursuit of happiness, is so important in the US.”

The most important thing you’d tell young startups?

“Always be truthful first to yourself, and then communicate that truth to others. The idea of failure is so dramatic and traumatic that you don’t want to experience it. You automatically defend yourself, and try not to experience it. You lie to yourself that everything is going to be OK. But actually, there is absolutely NO WAY everything will be OK. If you’re truthful, you can see the challenges you might have in the future, so you can plan accordingly. If you are truthful, then you have a higher chance of success, because you can plan truthfully. This is also important of course when it comes to investors – lying kills a relationship in the very beginning”, Kherkheulidze says.

When Giorgi Chugoshvili and Anano Dolaberidze launched secondhand retail app Phubber, they felt they were not kidding themselves when they thought it would be an achievement to have just 10,000 users in Georgia.

They hit that number in the first 10 days of launching their app, which connects sellers of clothings and accessories to buyers. Now, they say they are the largest online clothing and accessory website in Georgia.

“We never thought it would reach the scale that it has”, co-founder Giorgi Chugoshvili says.

Phubber capitalized on the fact that in Georgia, most people were selling and buying secondhand clothing and accessories via Facebook groups, where buyers and sellers were faced with a slew of issues when it came to shipping, verifying product authenticity and payment. The market was a mess.

Having realized the value to be found in bringing people together more effectively, Chugoshvili says that during his one-month stay in San Francisco to participate in the US Market Access programme, he was most interested in how willing and eager people were to cooperate and network.

“You never know who’s sitting next to you in Silicon Valley. Be it in a Starbucks, at a traffic light. They might be dressed worse than you, but be significantly wealthier than you are. Everyone is doing something in Silicon Valley. Everyone has some interesting idea, and you never know who it is.

“What this means is that there is a culture of helping one another – it’s rare that someone won’t give you at least 15-20 minutes to talk, to hear you out. Sometimes this can open very unforeseen doors”, Chugoshvili says.

And that’s partially because of the fear of missing something big – like a unicorn:

“While we have this culture of helping our friends and family in Georgia, it is limited to close friends and acquaintances. That’s not the case in Silicon Valley – people really just want to help. If you don’t give people the time of day, you can miss out on big opportunities.”

It seems clear what an investor might be looking for in you as a company – but what does your company look for in an investor?

“We’re currently reinvesting our revenue into our development, so what we’re looking for is not just money. In our case, we want to be in 10 countries within five years, which will give us a base of several million people. While we’ve expanded here, doing that abroad will be harder. What we want to find is a partner who could help us expand our base, not just give us money.

“Also important to us is our potential partners’ willingness and excitement to continue with Phubber as it is, and not to try to change it according to their own understanding of what our product should be”, Chugoshvili says.

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