Kazakhstan needs five-six years to develop strong start-up culture, say experts

By Saltanat Boteu

In November, former Kazakh President Nursultan Nazarbayev opened the Astana Hub, an international technopark of IT start-ups, and the country began intensively developing a start-up culture. Edgekz.com interviewed several IT start-ups in the capital, who noted if the government continues its support, it will see good results in approximately five-six years.

Senim smart wallet

Daulet Yermekov, Head of Senim (trust in Kazakh) smart wallet, noted the idea germinated for 10 years.

“The idea originated with our founder, Marat Nurpeisov, an entrepreneur, the chairperson of the management of an oil company and a mathematician. In 2005, as soon as he defended his doctoral dissertation in Moscow, the idea came to him that it would be good to develop some kind of ecosystem where entrepreneurs could trade among themselves and solve liquidity issues and then, it would help them to work much [more] effectively… At that time, the development of technology was weak. He decided to open this ecosystem in 2015,” he said.

They created the company in 2016 and the following year released the first version of the application, through which people can pay businesses and the businesses should be able to pay their suppliers.

“People link their bank cards in the application. In the future, there will be bonus cards. The smart wallet helps to make your spending more convenient, easier and more economical. Now, people can pay for bus fare and gasoline without leaving their cars, park and buy movie tickets through our application. In the near future, people will be able to pay for courses and additional education. We will also launch a food delivery service. In April-May, we will launch a chat inside our application. It will be possible to write reviews of restaurants. The restaurants will also be able to pay their suppliers for funds transferred to them from customers, without intermediaries,” he added.

ISSU.kz subscription-based perfume service

ISSU.kz is a young, four-person e-commerce project. Founder and head Daulet Aitmakhanov started the company late last year.

“We are the platform where people can easily find and discover new perfumes every month. Our clients do not have to buy large perfume bottles of 50-100 ml,” he said.

ISSU.kz Founder and Head Daulet Aitmakhanov

The project solves several issues in the beauty market, particularly in the perfume industry.

“First, there are modest options and difficulties in choosing perfumes… People have to buy big bottles of perfumes that they might not like after some time. Second, it is expensive, $90-$100 on average. There are also niche products… that cost approximately $400 and higher. The third issue is the inconvenience to transfer,” he added.

The project solves the issues by producing small travel size bottles that work like lipstick cases. The eight millilitre-size is enough for at least one month and the small volume influences the price, making it cheaper and accessible.

ISSU.kz is possibly the only such project in the perfume industry and its website offers more than 300 varieties with detailed descriptions. Its partners are official distributors in Europe and the case is made in China. Everything is gathered in the Astana Hub.

Kompra.kz

Kompra.kz is a service which checks the reliability of Kazakh companies. The firm charges a 500 tenge (US$1.32) fee to gather information from 20 government sources regarding the date of registration, deregistration, activities, full name of the company head, tax deductions since 2013, value added tax, bankruptcy, false enterprises, list of taxpayers at the liquidation stage and other information.

Astana Hub

The above-mentioned start-ups are located in the Astana Hub, which serves as an incubation and acceleration company. The hub has a unique atmosphere that motivates its residents, said the entrepreneurs.

“The Astana Hub creates a start-up atmosphere, the spirit of creativity, speed and enthusiasm. It charges people. It raises a wave of start-ups and this wave spreads further,” said Yermekov.

The hub provides young start-ups with offices in its building free of charge for six months, giving support and educating them about advancing their products to market. Many experts in the field visit and share their knowledge.

“Over the last year, the Astana Hub’s work is visible. There are programmes for acceleration and incubation. The teams with a minimal number of members that simply have an idea are taken for incubation and they implement their idea at the early stages. Acceleration is a programme for a minimally useful product that needs to be introduced to the market,” said Kompra.kz founder Askhat Sergazin.

Astana Hub also provides short programmes, from two days as a weekend course to a year, and helps to create a certain mindset.

Kompra.kz founder Askhat Sergazin.

Kompra.kz founder Askhat Sergazin

“To understand the development of the start-up culture, it is important to realise that out of 70 projects in the Astana Hub, even an average result shows only 10-12 projects and this is a good indicator. In the failed projects, there are smart people who have just not found their product yet. It is thanks to failed start-ups that the correct culture and thinking is laid out, which means in a start-up people can try, make mistakes and through many attempts come to a product that will become large and scalable,” he added.

Start-up culture in Kazakhstan

Kazakh start-ups are not a completely new phenomenon. Companies such as Chocofamily, Kolesa.kz and Ticketon already existed, but the culture is a recent phenomenon.

“The sphere of start-ups, as products that are scalable in new areas and extreme conditions, has existed for about 10 years. Now, it is a transition period for the start-up culture in Kazakhstan. There used to be a culture of nuggets, when companies survived because of the personal qualities of their managers, and now, the government and business are trying to create a critical mass of start-ups and lay the foundation of culture so that there will be more such initiatives,” said Sergazin.

The entrepreneurs noted several issues and offered long-term and short-term recommendations to develop the nation’s start-up culture. The former are related to education.

“The first is education. There is a shortage of developers, programmers and active start-uppers. It is necessary to inculcate this culture from school to children. We must develop programming and robotics in schools. It must be integrated into the subject. For example, the student is undergoing some kind of laboratory work and he could simulate it in the software… This will motivate children to do programming and they will learn the subject. A student can continue to model his studies [in school] at a university,” said Yermekov.

He also proposed expanding grants in higher education institutions to attract students.

Another long-term solution is related to legislation. The entrepreneurs stressed the laws should be formed to support start-ups and existing mechanisms such as tax deductions should be guaranteed.

“There are different benefits, but they are implemented slowly… They are discussed by different ministries and overgrown with some additional things that reduce benefits and, in the end, it may turn out that no one wants to use these benefits. This is the direction that needs to be improved… There must be a guarantee. If there is a decision that the company falls under the benefits, then this decision should not be reviewed after some time. Investors always need such guarantees,” said Yermekov.

The short-term issues are related to business strategy. Start-ups should learn to research their clients and their agenda, followed by the issue of executing their products, noted Sergazin.

“At first glance, there are a lot of promising start-ups that are falling apart, because there is no proper management of the start-ups, a team or of the work with clients,” he said.

Aitmakhanov also emphasised the importance for the country to develop venture capital investment. As these types of investments imply high risks, only a small number of individuals are interested. With government and media support, more will be attracted, he noted.

Other incubators and successful start-ups

Among start-up incubators, the entrepreneurs noted BI Group’s work, Smart Point in Almaty, MOST Business Incubator and Nazarbayev University’s business incubator.

They indicated several start-ups and websites such as Arbuz online supermarket, Clockster fingerprint time and attendance systems, СТОgram car repair parts, Eventum tickets and Partzone for purchasing special vehicle equipment. The entrepreneurs also emphasised the role of several individuals including Alexander Doroshenko, a founder of the Wooppay electronic money system who is developing the start-up culture in Karaganda; Alexei Li, head of Arbuz and Iman Rakhmetullin and Yerzhan Ryskaliyev, founders of Clockster.

“When Aviata merged with Chocotravel, its Chief Executive Officer Alexei Li decided to leave Aviata and invested and then bought the Arbuz start-up. The strength of this start-up is in the figure of Alexei Li, who worked with seven different start-ups, including Aviata and Ticketon,” said Sergazin.

“Maybe the general public knows little of them, but I can tell you about companies that are really strong. These are Yerzhan Ryskaliyev and Iman Rakhmetullin, founders of the Clockster company. Their main product is fingerprint identification equipment and face recognition. They put it in Kentucky Fried Chicken (KFC), for example, and expanded abroad. The CTOgram start-up is good. They made an application through which car owners can find parts and repair shops,” said Yermekov.

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