You're reading: EastLabs accelerator helps entrepreneurs

Helping young information technology companies get from the “eureka” moment on stumbling across a good idea to actually making money off it, startup accelerators like Eastlabs provide investment, office space, mentoring and business training in exchange for a share in the company.

How successful they will be could determine whether Ukraine remains just a place for cheap IT labor or a real source of innovative companies and business solutions.

The EastLabs business accelerator opened in Kyiv in January and is owned by EastOne, an investment advisory set up by billionaire Victor Pinchuk in 2007.

The main purpose is to draw on the American experience in developing startups, explain Eveline Buchatskiy and the U.S. citizen Hrish Lotlikar, who manage the enterprise. Along with their third partner, Olga Belkova, a former head of international projects at the Victor Pinchuk’s Foundation, they say they’re ready to capitalize on what they see as one of Eastern Europe’s most promising IT markets.

“We understood that here we’ll have better return,” Lotlikar said. “Also we want to (get rid of) the stereotype that Ukrainians are not competitive on the global market.”

Ukraine’s IT sector remains a bright spot amid a drab economic picture. With double-digit growth, particularly in the outsourcing segment, employers complain about labor shortages despite some 16,000 new IT specialists graduating each year.

The rising significance of innovation has also driven the rise of business accelerators that often help young companies start out in return for a share of the business. The first came in 2008 with the GrowthUp business incubator, which has since helped to kick-start some 120 companies. In 2012, Happy Farm opened its doors in Kyiv’s suburbs, as did the Odesa-based WannaBiz startup accelerator.

EastLabs’s operations focus on the entrepreneurship angle. Those skilled enough to pass the rigorous selection process receive office space in the center of Kyiv, advice from a large mentor pool and some cash for each team.

Eveline Buchatskiy

According to Buchatskiy, one of the sector’s main catalysts is the ease of moving projects from paper to practice that the Internet offers – even without wads of cash. Everything starts with an idea, she said, adding that registration is open to anyone at the EastLabs website http://eastlabs.co.

They have looked through more than 260 applications since January and call on the best teams for interviews.

“Now we have eight teams, so the team acceptance range is supposed to be less than 5 percent. That’s because we are targeting the global market and cannot work with niche ideas. Our incubator is focused on those companies that will grow very fast: with the 5-7 percent income (growth) per week,” Buchatskiy said.

Hrish Lotlikar

Since January, four teams have completed their training: video platform RunFaces, voice communication for gaming developer My Team Voice, online gift service Active gift and FindGuru, an online educational program.

Several months back, the FindGuru team changed their name to Preply and found investors in Boston for their platform matching tutors with students preparing for SAT exams, which test readiness for college.
Each program lasts four months and takes places at the incubator’s office in Kyiv.

Each team receives $20,000 for project development, while EastLabs gets 15 percent share of the future company.

Olga Belkova

The actual program starts from crystallizing ideas, learning how to pitch them and focus on their practical aspects, said Belkova, followed by a “building stage” of working with one of the 50 international or Ukrainian mentors.

EastLabs mentors include Jed Sunden (former KP Media owner), Vasile Tofan (investment director at Horizon Capital), John Fanning (founding chairman and CEO, Napster), Viktoriya Tigipko (Director at TA Venture) and other specialists.

Teams are free to pick their mentors, with whom they then focus on the marketability of any idea. Results are measured mid-program, allowing to change the model. Finally teams are expected to be eady to sell their products and face investors – venture companies and business angels. Help also comes in the form of contacts and arranging meetings.

“After leaving EastLabs (the programmers) need to be able to attract some business angel investor, (but) we’ll still be their partners” said Lotlikar. “Such bridge investors are ready to take the project off the ground if they see some potential. And they provide some $200,000-$400,000 in investment.”

The key then is for the companies to get through the “death valley” phase, the Eastlabs experts say, when there is no revenue in sight but costs are already rising fast. But for that there’s no magic recipe – just hard work, persistence and luck.

Kyiv Post staff writer Olena Goncharova can be reached at [email protected].