Recently in New Times Category

Upon toasting the incoming "New Year '08", I was confident and sure it would be a great year. Everything was looking up, I had just collected the funds for one of my projects and planned several trips for each of the 12 following months worldwide to represent my company at professional events.

The trips stopped in the summer, because we experienced insufficient funds and growth stopped. Later I discovered that these were good times, because the need to cut loses appeared. Being behind on the bills became the norm. Personal income decreased and because of the dollar/rubble exchange rate, I started to pay exorbitant interest for my loans based in USD.

I don't want to sound desperate and miserable. Not more than others, anyway. This post is not going be another "Merry Crisis" holiday post, but I would like to say a few words to share my projections for the year 2009.

Recently I read the interview with Richard Branson in the russian business daily newspaper "Kommersant". In the year 2008, Branson launched "Virgin Connect" in Russia (Wi-MAX network), and started selling space trips from "Virgin Galactic" in Moscow.

He, as many other successful entrepreneurs is very optimistic about future revenues in Russia, even though there is a crisis he thinks that "Russia will not be as badly damaged as western states". From the other side, Branson thinks that "it's very bad that for the past two years Russia and the West haven't become closer, but have become even more distanced from each other...". I fully agree with both statements and with his major quote that "Wealth is gained during good times, and the empires are built in hard".

That's exactly the point. So, I'm quite optimistic about this year and lay great expectations for it. To speak from my experience it's easier to be more productive and creative when times are hard and you are starving. So the big time is coming.

Are you ready?

P.S.

Little Red Riding Hood was walking in the forest and chanced upon a wolf.
The wolf said: "You now have only two choices: merger or acquisition".

Since of the economic meltdown begin, the question "how-to-start" your business is more important than ever. While managing the tech business and doing the seed investments in the web services, I'm worried about the startup fund-raising question as is nobody else.

"Venture Capital" has reduced the amount and number of investment deals rapidly. This is due not only to future risk, but also to the fact that VC's returns has decrease dramatically already in Q2 this year.

Additionally VC-firms experiencing problems making "capital call's" from the committed investors for the first time since 2004.

If you have a brilliant idea that could become a great business today, there is still a chance to pass the due-diligence, which is now a very high priority for every venture firm and even the small angels. You'll be never sure that the venture capitalists will produce the money themselves when the "capital call" will come up to date.

Even when the economy had its best times, many of young tech entrepreneurs started on their own, when they failed to raise early capital. I know exactly that "YouTube" and "Facebook" started with credit money from their personal credit cards. They succeeded, but all of the stories that you read about are about the winners. We will never know how many entrepreneurs failed and dug a big hole with credit debt.

Of course it's not the business of innovators to risk their money. I know a better example of young entrepreneurs who were already successful and rich before they raised the money.

To risk your own money or somebody else's? To risk the credit money, the credit you will pay whether you succeed or not - thats the challenge. When you start with your own money or personal credit, in other case, it's the illustration of your complete dedication to the project and it's objectives. Sometimes, therefore it could also be an illustration of your total stupidity...

Based on my experience, I've never faced the fact that I'm sorry that I haven't invested or haven't participated in a specific project, that eventually succeeded. Sometimes, I'm sorry that I haven't made a copycat of "Facebook" or "LinkedIn" in Russia. It's against my morals, but it seems that nobody judges the winners. "Vkontakte.ru" (russian copycat of "Facebook") has millions of users just because they do not have stupid unethical beliefs. Nevertheless the same applies to child porn and drug dealing...

What I remember, that I was several times sad about some of the investments that I made. For example, I'm sorry that I started three projects this year just before the economic meltdown. These projects are already dead or near death because the funds have stopped coming.

From my point of view, it's better "to" than "not to" risk. I started my own business with credit card money. It was very small money, but the only option I had at that time. The sums that are available for russian citizens are funny. I have a credit line of up to 20 thousand dollars. This is a small amount in comparison with the average american citizen. For example, my brother who lives in California told me that as a student, he has more than 100 thousand available from credit cards that the banks have sent to him just like junk mail. It's hard to believe from my side... Here we need several trips to the bank with dozens of documents to receive something like 5-10 thousand and there is still a risk of refusal.

Additionally, the banking regulations in Russia are an evil for normal people. Today the government is going to pass the law of criminal offense for credit fraud. This is not a surprise in a country where every young man aged 17 is obliged to play the national game with the Army Forces Dept. The game rules are: you choose between starting a degree, going to the army, pay a huge bribe, or go to jail for rejection of serving the country. The officials call this action game "serving your country". I call this making slaves from your citizens, but that's a topic for another post.

One of my senior employees (named Alexey) always wanted to be a partner in my business, but his private assets never allowed him to buy a share, and I wasn't allowed to offer him a stock option. When the economy switched on life support, I offered to sell him a share with personal credit at a lower price. The money he could bring into the company was useful and he accepted this proposal with cheerful glee.

The Bank approved credit for Alexey and we agreed on a deal. On the date he arrived with the proper sum of money, we had a splendid conversation concerning the company future. I had a strong feeling that he had doubts about the deal.

The next morning I was awakened by his call, he wanted to cancel the deal and meet again. When we met he told me a story... He had a friend in the USA (named Philipp)
who graduated from Harvard, and when he was a student, another guy (named Mark) offered him a web business. The problem was that they needed money and they didn't have any. As the project was too risky for investors, the only chance for them to raise capital was to borrow the money from the bank. Philipp refused to borrow money from a bank. Later he understood that he refused to be a co-founder of Facebook...

Aleksey said that by telling me this story he want's to show me that he properly understands the risk to lose his chance too, but he won't take the risk now and that's why he canceled the deal. It's his decision.

How often, when you plan to change your life entirely, do you promise to start from monday. Whenever you decide to quit smoking or loose weight and start going to a gym from monday you failed, and "Mondays" come and go over months and then years. It is still good enough if "the door is open" and you can implement the changes you desire and you look ahead with aspirations, even if you have failed to start from monday, you still have a dream, whatever it is...

I got a call from my friend who does not work in the Internet industry. The following story is from an anecdote, but his story is not funny...

Two entrepreneurs who were friends, met for lunch

-  "How has the crisis affected your business, buddy?"

- "I've terminated all of my employees to cut expenses, but they still go to work..."

- "That's ridiculous, but I have a business idea for you - just charge them an entrance fee to come to work!"

Two weeks passed and they met once again

- "So, how is your business? Was my proposal effective?"

- "Yes!"

- "Did they stop going to work?"

- "No!"

- "Did they pay you at the entrance???"

- "Yes, but they are cheating me!!! They come on Monday morning and leave on Friday evening!!!"

My friend told me a quite similar story. He has a problem finding money to fuel his car (an expensive one). He has recently terminated most of his staff and is going to continue to do this in order to reduce expenses. Some of his employees have started to work for free.

Now the economic crisis in Russia is a shock and a panic for the majority of people. I usually reply to my EU and US friends who ask "how is it going in Russia?", that Russian people are always in crisis - so they are prepared. Maybe now they are not as prepared as before...

The crisis in Russia, unexpectedly began in the Fall of this year. For the past five years there was fantastic economic growth, real estate prices were soaring, and consumers were spending money like there was no tomorrow. Moscovites had the feeling of being on top of the world, as they were contemplating their next "Lexus" or "Infiniti" purchase.

Now the business radios are reporting that there are up to 30% staff reductions in reputable companies. Food, real estate, and retail are facing problems with operations. What is bad news for me is that a great number of establishments have stopped accepting bank cards. For example, I was dining in a restaurant and then the waitress said "Oh, we have a problem with the machine...". Always bullshit of course, but I've never seen the machines stop working as often as now and just when you need it the most. Ridiculous but true, restaurants are protecting themselves from possible bank liquidity problems.

Two days ago, I was meeting a friend of mine and he told me that he had lost two million rubbles ($80k) from his business bank account when one of the banks crashed a month ago and he has no expectations of getting his money back.

I called my friend who works at this bank now (it was already bought by the other bank and works as usual) - she said that it just can't be true and maybe there is just a delay. However, I'm experiencing strong problems in my own business (particularly in sales). I don't have a clue about what I would do if all of my money vanished from a busted bank.

When the money came to this country capitalist consumer discipline did not evolve and develop. For example, the mentality is that if you have money today - spend it now, don't wait until tomorrow.

The Russian society was lost between the soviet and capitalist transition, and it also was not receptive to both the East and the West, but pretended to become a major player in the world economy.

The Putin's wealth epoch was crushed by Bush's economic crisis and left no chance for the country's economy to maintain steady growth and prosperity.

Looking out at the always grey and dreary St. Petersburg sky, today is Saturday, what should I start from Monday?

Tired of the financial crisis or hearing about it? Are you facing real problems (like me) and need to change your business-models or even your life-style?

Usually when something fails and we are obstructed from achieving our personal goals - we are stressed and frustrated.

It usually increases our anger and disappointment, and as stress is high pressure, you feel tired and drained and it influences your daily life. So, should one buy antidepressant pills, or maybe try something new - how about "mind mapping"?

A mind map is a sort of graph or a diagram that represents your thoughts  and ideas in words and items. It links to an arranged radially around a central key point. "Mind maps" are used in science and business to structure, classify, and visualize. I will mainly speak about it's other useful proposes such as problem solving and decision making.

Usually pressure causes stress, external problems cause frustration and fear causes depression. All of this is bad, but it needs to be fixed.

We fear the unknown, what we don't understand or see, and it could be psychological. Fortunately, unconscious fears can be reduced by writing them down and visualizing them. This is where "Mind Mapping" will help, especially when you need to find a solution for your business or family.

Sometimes the solution is hiding just inside of your mind and you just need to dig a bit to find a proper decision. Hopefully you'll feel better. It has been tested by me dozens of times!

I try not to use "Mind maps" to just generate and classify, when I need to make a list of things or structure a presentation or document, I use ordinary outlines.

By the way, along with fixing your mood and presenting ideas in a radial, non-linear manner, you can experience an unorthodox brainstorming approach of "mind mapping", and generate a really brilliant idea.