The new business model of the digital cooperatives – Bloomberg interview

 

Recently our founder, Todor Kolev, was invited to the Bloomberg studio to present and discuss Obecto’s new business model and future plans as a digital cooperative. Here is a link to the original video source on Bloomberg’s website: http://www.bloombergtv.bg/video/todor-kolev-za-obecto-i-nasarchavaneto-na-startapite

Below is a full transcript of the interview in English.

Joana: The older brother of startups. This is the way people refer to Obecto. Today I have company’s founder, Todor Kolev.

Hello and welcome! I said a company but actually, this is a developers’ cooperative?

Todor: Yes! Hello!

Joana: You have an extremely interesting business model. One that almost does not have an analog.

Todor: Yes! First, I want to say that we are not the only cooperative.

There are also other cooperatives which are trying to break the status quo and find a better organization model, just like us. But, yes, currently we are noticing significant success with the cooperative model. What is interesting is that usually most of the companies in the IT sector experience troubles employing enough people. In our company, we have a queue of waiting developers who want to join the cooperative, so up until now, we notice great results from this model.

Joana: Actually you are helping startups…

Todor: Yes!

Joana: And the way you work is that many of the developers working for the cooperative, actually have their own startup or working for someone else’s startup. 50% of their time they devote to this project, and the other 50% to the project that Obecto supports and develops.

Todor: Yes. One of the main principles of our cooperative is freedom.

We highly respect our developers’ freedom.  We respect that they are free to do whatever they want. This means that a significant part of them can work on their won startups, another part, for example, are studying. There is also another part which is in a transition between the old working model in a company. Ultimately, the idea is that every person has the freedom to decide.

Joana: Actually this is a very interesting philosophy which most probably will have followers because nowadays most employers are very jealous. This oppresses employees and when they have the chance, they chose another direction. Moreover, currently the stealing of employees is very popular because the market is very narrow.

Todor: Yes! We were part of it. Obecto has been found 2008, so we observed the way the IT industry grew in Sofia and Bulgaria.

We observed this war for stealing employees which, according to me, was really ludicrous. When I was growing as a developer, it was not a high-paid or reputable job. We thought people wanted to be developers so they could work on something cool. It turned out though that the companies twisted that perception. And it became a matter of getting more additional perks and the focus switched from the cool things we can create together.

So we at Obecto, want to get back exactly to this – to do cool things together and to have a fair and transparent way to share this value that we create. Because this is a significant problem. Most people feel some dissatisfaction with their work because they do not see the reason to do it. One works on something small part of something enormous that will be implemented somewhere far away.

Joana: And at the end, there is a visible result either way. Because, besides your philosophy being to work together while everyone keeps his own freedom, you have another philosophy that people come before money. And actually, the selection of the projects your work on, is also based on this mindset.

Todor: Yes, indeed!

To a great extent, we act as an operational investor. We offer startups to develop their products for them. This topic can be further extended because our investment is not an equity one. Meaning we do not acquire part of a company, but rather give them the opportunity to pay for their software on a leasing. On one hand, this limits the resource that we take; i.e. this is not an endless
debt for the startup. On the other hand, the risk for both sides is managed.

Joana: So you cover just the developers’ work…

Todor: Yes, but the idea is that the developers decide for themselves on which startups to work.

And the decision in which startups to invest is the decision which startups will be interesting for the developers to work on. At the end of the day we just provide the infrastructure for this.

Joana: Actually you have been doing this selection since 2016 –
in which startups to invest and to offer this leasing model.

However, this model depends on the startups’ profit. They start paying a percentage of it, paying off the software you developed, just when they start making a profit.

Todor: Yes, exactly.

The idea is that this way we are engaged with a startups’ success; We don’t want to just do some work, get paid and leave. We are engaged with the startups’ success.

However, getting engaged means something different from acquiring a share.Because acquiring a share means one should choose very carefully, with whom to establish a company. We eliminate this way of thinking. We are a partner who, on one hand, is being encouraged by a future success, i.e. And on the other hand, if at some point the entrepreneur decides not to work with us anymore, he can easily exit. Which makes us flexible.

Joana: There is also an option for recycling the business. Meaning that if there is a good idea but was not well developed by a certain entrepreneur, can be picked up by another entrepreneur who can develop it more successfully.

Todor: This is part of the plan which we still have not seen in action.

Recently we had a similar case – a company, that I personally have a share in, had to go bankrupt while the product works and has users. We had to kill the product because the company is dying together with it. With this leasing model we allow the product to separate from the company, we acquire the intellectual property, if the company fails, and recycle the business; i.e. we will find

With this leasing model, we allow the product to exit a company. We acquire the intellectual property, if the company fails, and recycle the business. Meaning we can find a better entrepreneur who has a similar idea and reuse the software.

Joana: Actually you work mainly on the foreign market.  This is the way you started 2008 when quality was not such a priority for the clients.

Todor: Yes. Before I founded Obecto, I have been working in another software studio. It also worked for the foreign market.

What we noticed back then is that in Bulgaria there was no demand for this quality software we were building. Naturally, we started
targeting the foreign market. Which was not a problem for us because we quickly found our first clients. Afterwards, due to the significant demand in our sector, we always had interest from clients.

Joana: How do you establish the connection to the clients?

Todor: The connection to the clients is very interesting.

We are trying to automate almost everything. We try to do a set up in which we would not have to go and convince every client separately. We have this, the so-called, marketing funnel. We’d like our customers to have the intention to work with us, even before they got in contact with us. We try to automate most of the aspects in our work. The main of them being finding customers and marketing.

Joana: Which areas do you target when you seek customers?

Todor: Currently we aim at a very specific group of entrepreneurs, known as bootstrap entrepreneurs.

Entrepreneurs who are not the usual college dropout, which is the common case for an entrepreneur. Someone who left college and decided to found a startup. Our entrepreneurs are experts from other areas, who have experience and knowledge and even some money saved. Currently, they see an opportunity which they can realize in the newly grown startup economy. These are our target entrepreneurs.

Currently we have one very interesting entrepreneur who is a London-based energy expert. Together we are creating a new type of energy supplier, which allows users to do everything through an app. This entrepreneur has significant experience and is investing a significant amount of his personal money. We are trying to establish a big startup together.

Joana: A platform which manages the electricity trade on a free market?

Todor: Yes. This is an electricity supplier similar to CEZ and the other Bulgarian electricity suppliers but on a liberal market where a person can choose an electricity supplier the way he chooses an internet supplier. One can say I prefer this supplier more than the other one. What we build on top is the ability to manage this through an app. There are no cash desks, queues and stuff like this. Even reporting the electric meter is by taking a picture with your phone camera.

Joana: This project sounds really perspective because even Bulgaria is headed in this direction, despite the slow pace. The energy market liberalization has been realized in many places.

Joana: Still, you also have Bulgarian projects, although they are fewer. How did you establish the connection to your Bulgarian customers?

Todor: Bulgarian clients find us on their own.

Joana: They fall into the marketing funnel.

Todor: Yes, they also fall into the funnel. But the main thing that we currently do is partnering with pre-accelerating programs which allow people who are just entering entrepreneurship to pick up the basis and create their own business. We currently give an award to such programs and we offer preferential terms or even free developing

But the main thing that we currently do is partnering with pre-accelerator programs which allow people who are just entering entrepreneurship to pick up the basis and create their own business. We currently give an award to such programs and we offer preferential terms or even free developing of the first prototype for certain entrepreneurs.

Joana: And afterward, if the project is successful, it will continue developing. If the idea is good but the company is eventually closed, there is, as we said still unrealized, another option. However, it sounds very realistic.

Joana: How is the market developing, according to you? What will be the end result, when you observe all of those models which are different than yours? Are most of the companies going to pick up your philosophy later?

Todor: I think that many of them will pick up our philosophy very soon. This is a longer topic but in general I think that the current capitalist system that we have is very nice. However, it was not around forever. It emerged at some point, it had its alternatives and
currently has many problems. Maybe one of the problems is the growing inequality – rich people become richer, poor people become poorer because currently what matters is the capital.

What we believe is that people and their labour is more important. Therefore, we create this cooperative. This is really a long topic
we could discuss at length, but one of the interesting things is that we are currently finding new models of company ownership. We are currently experimenting with cryptocurrency.

Since the future profits from the startups is not for Obecto but for its developers. However, a developer may devote part of his time
to several of the startups, it is not flexible to distribute portions of several companies. That is why we currently have something called phantom share – an opportunity to share part of the future profit using a cryptocurrency.

Joana: The innovative technologies and the innovative companies in this sector are really interesting. They are imposing the new rules. We can see the way Facebook and Google work. A much more flexible way of work. The relations between the founders, the managers and the employees are very interesting. There is some sense of equality, that everyone matters.

Todor: Exactly!

Obecto’s essence is being equal, this feeling of equality. This does not mean an absolute equality but rather an equality before the rules. We have some rules in the cooperative which are something like our constitution.

Joana: How did you resist the temptation, since your profession as a developer is one of the most coveted and courted jobs. We started our conversation there. It is tempting because one can earn a lot of money and develop really quickly.

 

Todor: Yes, this is true. I, personally, am a developer since 1996. Most of my developers friends who I started with, work for Google or other big companies, another part established their own companies. I decided to establish my own company. I believe that my talent as a developer is great but has value in the ideas that I have. What I want to do is to work for my own ideas. On one hand, this is what stopped me continuing on the standard

I, personally, am a developer since 1996. Most of my developer friends who I started with, work for Google or other big companies, another part established their own companies. I decided to establish my own company. I believe that my talent as a developer is great but has value in the ideas that I have. What I want to do is to work for my own ideas. On one hand, this is what stopped me continuing on the standard

I, personally, am a developer since 1996. Most of my developer friends who I started with, work for Google or other big companies, another part established their own companies. I decided to establish my own company. I believe that my talent as a developer is fine but there is value in the ideas that I have as well. What I want to do is to work for my own ideas. On one hand, this is what stopped me continuing on the standard career path. On the other hand, I strongly believe in Bulgaria’s potential. I have never intended to study or work abroad. I do believe that Bulgaria is the place where growth is just starting and I think that I am at the right place at the right time. I do not think it would be better for me to be in the USA or in some other country outside of Bulgaria. I believe that here opportunities are bigger.

Joana: You are in Bulgaria. However, you are working with the foreign market which is a very successful model. In the same time, you are looking around the Bulgarian market and changing many people’s mindset which is really encouraging.

Todor: We are noticing this growth potential.

Bulgarians have a fighting spirit. We achieve many things despite the circumstances. I meet a lot of people who work hard, being focused in a specific area. There are even a lot of people who do not define themselves as entrepreneurs but have many interesting and nice ideas.

Actually, this is what we want to do. We want to give people the opportunity to easily become entrepreneurs. Currently being an entrepreneur is kind of for the elite. For example the Silicon Valley, which is just a 20 km around from Stanford and is considered the entrepreneurship hub.

But for the world to survive, it won’t be enough to have only a small elite of entrepreneurs. We need a way, allowing people to easily become entrepreneurs. And that is exactly what we at Obecto currently experiment with.

Joana: Do you and your team have specific goals for 2017?

Todor: We have many goals for 2017.

Currently our cooperative is developing our own startup. It is a bit strange, how we are organizing the work on a startup without having a customer and we are our own customer. We are developing an interesting startup which is once again in our field. We want to create a marketplace for similar cooperatives. Because we know that we are not the only cooperative, we want to create a platform, where clients can easily find the right cooperative for them.

The main obstacle that we see is the cost estimation of a project. Most of the projects bottleneck at the estimation stage. Currently, we are developing an Artificial Intellect, an AI system which based on the natural language input from the client can return a cost estimation for their project. We are using our old projects database in order to teach this Artificial Intellect.

Joana: When do you expect this startup to start working?

Todor: There are many obstacles but we are planning to have a prototype until March, and to seek the market by the end of the year.

Joana: I hope that your project will be successful and that you will visit Bloomberg once it is already realized in order to introduce it and talk further about your next ideas.

Todor: Thank you! It would be my pleasure.

Joana: Todor Kolev from Obecto commenting on the way entrepreneurship could be supported with the help of a new philosophy in which people and not money come first.