The FreshOffice replaces such features as file storage, chat, card file, finance management and transactions. Source: Press Photo
In the mid-2000s Igor Sugnach, a programmer from St. Petersburg, was working at a large European holding company. He noticed the difference in the operating activities between Russian and European medium-sized businesses. The West already had complete solutions for automating small enterprises, while Russian SMEs were still using Excel.
"The large enterprises used SAP, Oracle, but the niche of programs for small and medium businesses was practically nonexistent," says Sugnach. "There was no advantage for world giants to promote their products to offices with five to 15 employees."
Sugnach began working on the FreshOffice project and in 2012 launched the beta version. In 2013 he started selling the software. Initially the program was a CRM system, but gradually Sugnach added new functions: financial analysis, inventory management, office employee control and telephony.
FreshOffice can be installed on smartphones. Source: Press Photo
FreshOffice currently consists of two versions: the classic application, which is installed on computers and smartphones, and the cloud. Recently the company opened an office in Singapore, where Microsoft promotes the FreshOffice solution for small and medium businesses as part of the go-to-market program.
One solution for all
Sugnach and his management team made the first sales through cold calling and personal meetings. In one year he was able to hold 300 presentations in Russia's largest cities. In 2014 the company started selling its services online (SEO, contextual advertising in the Russian Yandex search engine and Google AdWords). Currently, the cost of bringing in one client is slightly above $20.
The FreshOffice replaces such features as file storage, chat, card file, finance management and transactions. In Sugnach's words, in Russia the service's rivals are Bitrix24 and 1C, finance and accounting programs that do not offer a complete solution for managing an entire business. Currently, FreshOffice is used by 20,000 managers in 1,200 companies that have an average staff of 50 people. Among them are nearly all major Russian radio stations, the Laura car dealer network, the KIT investment bank and others.
The company makes a profit by selling the license for the program or through user subscription. The monthly payment for the cloud application for a single Russian user is roughly $16. The price of a license for one computer or smartphone is $312. Sugnach says that by using FreshOffice the client saves time and $50-60 a month on human resources.
The conquest of Asia
In August 2014 Sugnach opened an office in Singapore with an investment of $450,000. "The click-through rate of our internet projects in Singapore is the same as the one in Moscow and St. Petersburg. But don’t forget, Russia's two largest cities have almost four times as many people as Singapore," says Sugnach.
Microsoft is helping to promote the startup among small and medium enterprises in Singapore. FreshOffice keeps its data in the Microsoft Azure data center. The company pays $50,000-70,000 a year to use the service, and for a "cloud" this is serious money. "Microsoft is interested in continuing our cooperation in world markets," says Sugnach.
In 2011 FreshOffice received development money from the St. Petersburg Preplant Investment Foundation and in 2013 it received 37 million rubles (about $740,000) from the Imperious Group Venture Foundation. Sugnach believes that in 2015-2016 the project will have 100,000 users and 500,000 by 2017. The explosive growth will be the result of anticipated development in Asian markets. The capacity of the Russian market is estimated to be about 100,000 users.
In 2015 the company plans on opening offices in Hong Kong, Indonesia, Malaysia and India. Afterwards, depending on how FreshOffice performs in Asian markets, Sugnach intends to market his product in the U.S. In his words, American companies are wary about unknown Russian startups.
Alexander Anastasyin, managing partner at StarCatalyst, says:
"Every year the number of companies that use alternative (cloud) systems to automate business is growing. Therefore, the selected market is well targeted. Also, Russia has strong and confident local players and there are always localized versions of foreign products. Here the most important thing is the functional convenience and customer service. If FreshOffice is able to make the first as thoughtful as possible and the second the best, then the prospects are good. We must keep in mind that the Russian small and medium businesses are very conservative. Even offering a modern, innovative and useful product, you can come across a client who is unwilling to make any effort to implement changes. Large companies are even less inclined to do so. There is more competition in foreign markets. But the conservativeness, which hinders growth, is lower. Overall the product is attractive, the design and the solution are logical and thoughtful. If it all works as good as it looks, then the team will be successful."
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