Massive traction and growth is one of the most exciting and interesting periods of a startup’s lifecycle, but it’s safe to say most founders are unprepared to scale up their product quickly. We spoke with Vitaly Rubstein, a founder and partner at Rubylight, which is a startup fund and services company that works hands-on with companies about to enter this period. They take their experience from building the social networks Odnoklassniki.ru and One.lv.
For a short history, Rubylight was founded by the key architects of Forticom group, which twelve years ago created and ran their first Latvian social network One.lv. After some time they decided to create a “network of social networks” as an alternative to Facebook, which was growing rapidly at the time. There they started to do business in Lithuania, Russia, and Poland, uniting four social networks. Through that, they built Odnoklassniki.ru basically from scratch, which became Russia’s second largest social network.
After Odnoklassniki’s investors decided to invest in Facebook and combine Mail.ru with Odnoklassniki to form more of a Russian social network, a few key people from Odnoklassniki and Forticom decided to break off in January of 2010 to do their own thing.
Below is a slightly condensed version of our interview with Vitaly Rubstein, who will be speaking at the Arctic15.
AS: So you guys are a technology and investment fund, but I hear Rubylight is pretty hands-on. What exactly do you guys do?
Rubstein: We view ourselves as a service company for startups. We focused pretty much on very specific problems that startups face, which came from our own experience. We worked with the best investors in the world like Tiger Global and DST who provided very good support and a lot of money, but never solved the most important problems which we faced. They gave us tools, like resources and money, but the technical and recruiting problems were still left with us.
You can see at our website that at Odnoklassniki we went through hockeystick growth and at that time money is not really a solution. Money is one of the resources but it’s not what you’re looking for. You need quick solutions for stabilization, you don’t want to lose your users, you just need very quick answers and they have to be right.
We had to figure it out all by ourselves and it was tough. So when we started thinking about what we wanted to do next, we thought, “That’s basically what we want to do.” We like that phase and we want to make it a lot easier for startups. It’s right there in that period that we want to be all the time. So we can actually give the solutions, give the people, and also give a lot of money to the startup so they can actually go through those phases very easily and grow to become big companies quickly and without any pain, or losing what they discovered.
AS: Do companies need to be seeing that initial traction then for you to start working with them? When do you like to start working with these companies?
Rubstein: Usually we like to start working with these companies before the hockey stick. I mean, the hockey stick is usually the result of what we do with them. But there definitly has to be some signs of user growth and retention, at least. It could even be flat. But the startups have to show some signs of user retention where users have tried it and don’t go away.
But we definitely don’t invest on the idea level. We’re not an incubator. Like a company may have an excellent idea, but if they dont have the user statistics which we like, then we’re probably not going to invest. If you look at our website we have a very specific areas where we like to invest. Except for the growth, we only like certain areas like consumer internet, business to consumers. Because we feel like if we don’t know something or don’t understand something, then we don’t feel like we can add any value.
AS: What’s the key to cranking up the growth then?
Rubstein: Well the situation is that in today’s world, I don’t know how many experiments are going on. With all these languages like Ruby On Rails, Javascript… Python. All those are very simple languages that arent that difficult to learn. Then there are services like Herouku and Amazon that make it very simple to trial. You don’t need to know anything about hardware anymore. You basically just publish your application and you’re ready to go.
But unfortunately with that, there aren’t too many people that know what to do next. And today there’s a lot of noise if a startup wants to hire a specialist. Most people today don’t know how to deal with terms of scalability, and they rely on the tools that are available out there, like Amazon and the likes. But those tools aren’t focused on the specifics of unique startups which can become multimillion user companies, like Facebook.
Our main sort of value which we offer are proprietary systems that allow huge scalibility at very little cost.
Then we also focus on operations, like what to do first, what to do next, just that kind of general experience. Then the most important part is that we have teams available. When we invest in a startup we give them a team for a year. They can choose who works with them, but we give them a team, which is necessary to scale. So for that one year they can focus on building their own team while everything is being done and taken care of.
And then of course myself, like any other investors, can add value with the business model, monetization ideas, product ideas, brand image. But usually we rely on the founders for that, because we look for founders with strong product vision. So our main focus is technical operations and business operations in order to scale the business.
When you have this cool idea and millions of people like it, you need to know what to do next, and that’s us. We give the money so they can buy something they need to buy, but today they have something to lose; millions of users can disappear if there are bottlenecks in the system.
You can say that we’re like a service company, which doesnt take any money for our service, but gives the money because we believe in the service. We become partners – we take the same risks.
AS: What do you plan to speak about at the Arctic15?
Rubstein: This is actually going to be interesting because we’re going to present one case. We normally don’t reveal our startups, that’s our policy. But this time we agreed with one startup that we will reveal their case, so we will demonstrate how we’ve helped one recent investment – how we worked, what we did, and what the results were. I think this will be exciting because it’s hands on, it’s tangible.
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