Andriy Zinchuk – a Dynamic Ukrainian Investor, Startup Ecosystem Specialist, and Advisor

Zinchuk

In the process of growing their startup, almost all founders consider requesting third-party assistance. Many find mentors who agree to share their experiences, but usually these mentors have a narrow expertise. In search of comprehensive solutions, startups turn to incubators and accelerators. Andriy Zinchuk is a startup ecosystem specialist and advisor who has shared with us his tips and priorities for startup founders.

Andriy Zinchuk's professional experience is impressive: from leading startups, to working with the Ukrainian Venture Capital Association, to being the Chairman of the Board of the Professional Government Association of Ukraine. He also has extensive experience in strategic management of large teams. Notably, Zinchuk is a co-founder of gamedev studio SLASH GAMES and a founder of the venture fund and venture builder AZ Ventures. 

Until recently, Zinchuk served as Managing Director at the Ukrainian office of the Spanish startup incubator Demium Startups. In two years, up to 1,500 profiles of new companies were reviewed by Andriy and about 400 of them went through the hackathons of the incubator. Andriy ended up selecting and working personally with 20 teams. Five of these teams have already raised the first round, and one of the startups is raising the second round. These experiences led Zinchuk to an understanding of how important the team composition is for startups. 

"Incubators function as places that offer their startup students access to highly specialized knowledge, often difficult to find elsewhere. Demium is one of those incubators, offering an authentic European approach to startup development".

Comments Pavlo Kartashov, Director of the Ukrainian Startup Fund.

Sooner or later, founders require the help of an incubator or accelerator. From a financial point of view, most entrepreneurs start their project relying on their personal savings. Later on, many founders look for external investments, and over a third them get these investments through accelerators. In addition to financial benefits, instead of the startup taking a path that would take 8-12 months, accelerators help them complete the same amount of work in 2-3 months. 

The Demium Startups incubator has a unique feature - they can help create a  startup from scratch, without a pre-existing idea or team. Mentors work with novice entrepreneurs before an idea is formed, and then help with its implementation. They also help form teams from people who meet e.g. at AllStartUp Weekend hackathons, provide them with ideas for projects, and supply the necessary tools to complete them.

The incubator prefers candidates with experience in business or marketing. On the last day of the hackathon event, teams present their startups to the jury and the best of them get selected for a six-month-long incubator program, where participants further develop the business idea, and work on an MVP (minimal viable product), while the incubator provides initial investments. When choosing an incubator, the main decision factor for the entrepreneur should be the people working in it, in particular, mentors. It is important for a startup to choose mentors who can bring specific knowledge and experience, bringing optimal contribution to the project, believes investor Andriy Kolodyuk.

Demium Startups can be thought of as an international startup factory. The company invests in entrepreneurial talent in order to help grow companies that will shape the future.

Prior to his position at Demium, Andriy was the director of business development at the independent law firm Everlegal, where his team provided services to startups. In addition, he was an advisor to startups such as OSA Decentralized and Senstone, and a partner at Krypton Capital and A7 Group.  

After leaving Demium, Andriy is now raising 2 funds - Seed and Pre-Seed - which will work together with his venture-builder company AZ Ventures. Andriy and his partners already have 6 projects that they manage. They find Pre-Seed teams with an MVP product but no sales, and help them develop their business. 

Plans For 2021

The $3M Pre-Seed fund is targeted at startups supported by the venture-builder AZ Ventures, providing funds for startup development anywhere from $50,000 to $150,000. This fund will work together  with Andriy’s second $15M Seed Fund, which will be focused primarily on SaaS, B2C, B2B, marketplaces, fintech startups from Ukraine, the Baltic States, Poland, and Belarus. For the Pre-Seed Fund, the selection criteria will include the uniqueness of the team's IP (intellectual property) and focus on the U.S. market. The Seed fund will require a unique team that is open to opportunities and has great compatibility.  

Both funds are interested in startups that are capable of rapid growth, have a healthy unit economics, and can raise the next round. They also consider whether an exit is possible, since a priority for many funds is to be able to exit the investment when the time is right. Unit economics allows investors to see how much the company earns from a flow of customers, making it possible to calculate the potential profit of a startup. This calculation makes it clear whether it makes sense to scale the business and attract investors. Units that investors pay attention to don’t necessarily need to be paying users - they can be free users or even metrics that are non-user specific at all.  For an online service, units can be the number of subscriptions to a newsletter, the downloads of a demo version of the product etc. 


Learn Directly From VCs and Angel Investors How They View the IT Ecosystem of Ukraine 
How ecosystem participants develop innovations in Ukraine. Moderator of the discussion Olga Afanasyeva - CEO, Ukrainian Venture Capital and Private Equity Association (UVCA) .

As for Andriy Zinchuk’s venture funds, they both strive to provide added value to their startups. The fund’s investors are not passive; they help with strategy, finding skilled workers, entering markets, and building partnerships. Andriy says that investors from Kazakhstan and the United States are also interested in investing in Ukrainian startups.

Tips For Startups

Andriy Zinchuk understands the startup ecosystem well, having been a startup founder himself. Here are his  tips for an early stage startup. 

  1. Think broader. Love your product. Have a clear vision of your goal - what problems will you solve for users? For whom? Pay attention to your customers, try to understand them. Talk to them. Focus on the global challenges you can solve, and the customer needs you can address. 
  1. Review after the first steps. Having a large-scale plan and strategy is important. However, you should finalize your business plan only after you've made the first few steps and have something to base your assumptions on. 
  1. Funds run out quickly. This is a common issue. Therefore, lay out your plan in 2 stages before launching your product to the market: 
  • test the business model
  • achieve product-market fit - measure, scale and double the growth rate
  1. Key performance indicators. It's also important to have the right metrics to measure progress. Understand the value you bring to your customers and create key performance indicators around them (KPIs). However, as long as people use your product for free, positive customer reviews won't mean much. Only when customers start paying, their reviews will become meaningful. 

We thank Andriy for his time and advice for new startups. In future articles we will talk about startup incubators and accelerators and whom they are for. We will also cover how to create a product prototype or MVP, form a team, and prepare to enter your target market.  

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