From the idea to the first million - one year. How Competera works — a price optimization platform

Why can the price of the same product vary greatly in different stores? The fact is that most retailers use outdated pricing methods. The founders of the Ukrainian company Competera came up with a solution — the algorithm should be responsible for the price. In this way, a platform for optimizing retail prices appeared. Using machine learning, Competera helps increase revenue by up to 15%, profit by up to 12%, and get market forecasting with up to 99% accuracy.

As part of the "How they work" column, Vector journalist Darya Chernina went to the company's office and spoke with the Competera team. We learned how the company managed to earn the first million in a year, how the optimal price for the product should be formed and why the Competera product is cooler than Excel.

The Competera team

Corporate business, two lost Lexuses and one apartment without repair

CEO Oleksandr Galkin started his first business long before Competera was created. While still a student, he created a small outsourcing company where he made corporate websites. With the advent of the first iPhone and the App Store, he developed an application for enterprise customers.

"It was 2005-2006. Many were engaged in small private trade. Business was normal, - Oleksandr recalls, - you could buy for $7 and sell for $35. Everything was quite convenient, stable and profitable. This is still being done in our country. I'm just fed up."

CEO Competera Oleksandr Galkin

Galkin knew the second co-founder of Competera, Andriy Mykhaylov, from KPI — he studied a year older and lived near the institute. They met on the topic of outsourcing, created several projects and parted ways. Then Galkin went into consulting and corporate business, where he even managed to work in the "big four" - the international consulting company Deloitte. At the same time, he never left the idea of creating his own technology company.

In 2012, Oleksandr found Mikhailov again. "I came to him and said: I have an idea. Let's try to do business again," Galkin smiles. This is where the story of Razom — the online shopping service — began. His decision allowed the brand not to pay for product advertising. Instead, give a discount to users who posted information about the product on social networks.

"I miscalculated. We worked for a year and a half on creating the service before showing it to the user. Then I realized that the marketplace is not a technical business. In fact, this is the purchase and sale of traffic," says Oleksandr. The price of the mistake cost the entrepreneurs like two Lexuses, Galkin jokes in an interview.

It was then that he bought an apartment without repairs in the very center of Kyiv. "The money was running out, the revolution sounded. My wife began to tell me: either I make repairs in the apartment, or I leave. We had to quickly create a product that would bring money," Oleksandr recalls with a smile.

Vector journalist Darya Chernina and Competera CEO Oleksandr Galkin

After Razom, Andriy Mykhaylov founded his own online store. Then Galkin became interested in how retailers set prices for goods. After calling a number of online stores, he realized that there is no unified approach. Someone monitors the market manually, someone sets prices at random, someone increases the price due to rising costs. This is how the problem was discovered.

While working on Razom, Galkin was inspired by Steve Blank's book Startup: The Founder's Desk Book. From her he learned the idea - if you want your product, you should not delay its launch for years. Thus, literally in a few months, a startup appeared, and soon the first client.

How a bug finds a customer

Mikhailov and Galkin spent approximately $26,000 to launch Competera. "After we "invested" more than $400,000, $26,000 seemed like a very good investment in the business," Oleksandr laughs. The first team consisted of Galkin, Mikhailov and a part-time developer.

Then Dima Kondratenko appeared. "He worked as a system administrator in the office above us. Once he just came down to see what we were doing. We immediately asked him: do you have a computer? It is necessary to write one code on a part-time basis. He was confused. He said he couldn't, but he could learn. He did not ask for money. So soon he started working with us as a Data Delivery Engineer and has been helping to develop the company for more than seven years," recalls Galkin.

"We made a test room for 200 products, choosing five top players of the Ukrainian market. "Allo" simply fell out of the general schedule. I remember there was a kettle that cost UAH 1,799, but its price was listed as UAH 17,999. This error has been on the site for about 4-5 days.

We took a screenshot and mailed a solution. This reached them through the chain to the main one, who was the one who issued the American visa in Kyiv. He then said: "Sash, let's meet, and you tell me about your thing." He came to our office, saw that we are normal guys and signed an agreement with us," says Galkin.

Allo offered Competera to monitor 40,000 products. Mykhailov grabbed his head: "Are you crazy, we only have an office for 200 products?" Probably then the longest Skype call in my life took place. Andriy and I discussed for 49 hours how to do it," Oleksandr laughs.

Vova Vysotsky joined the work on the cabinet. "So we stayed awake for 14 days in order to show the result of our work," Galkin clarifies. The order was completed on time. Already in 2014, Andriy and Oleksandr officially registered the Competera company.

COO Competera Oleksandr Sazonov

The third co-founder of the company Oleksandr Sazonov (COO Competera) joined the team in the same year. "I also knew him from KPI. We met at capoeira. When Sazonov saw me dragging papers with reports and acts of completed work, he kindly offered to set up the operating system," says Galkin. Soon, thanks to Sazonov, Competera's first office appeared.

Before that, the team worked in Galkin's office at a consulting company, where he worked in parallel. "It was so cramped that the developer had to sit in the corridor," recalls Galkin.

In the future, Competera's customer base was filled by "word of mouth" — some told their colleagues about the company or simply found the company online. Today, the company has more than 60 clients from 20 countries. Among them are Leroy Merlin, Intertop, Foxtrot, RD Electronics, "Cosmo", Lego, Wiggle, Balsam Brands, Elkjop, Vimos, Robert Dyas.

Customer Success Team Lead Anastasia Vasylynych

If at first the company's customers could be small online stores, then in 2022 it will be only an enterprise with an annual turnover of $100 million or more.

From reactive to proactive pricing

Competera is now a second-generation SaaS product. Its mission remains unchanged — to help retailers set optimal prices for goods.
For this there are:

• Cloud platform for offline and online retail (Competera pricing platform). She provides pricing and promotional recommendations based on brand perception, consumer demand and individual customer business rules.

• Automation of revaluations according to business rules — pricing based on transparent logic. It will help the company to make sure that its pricing strategy is accurately and quickly converted into prices for any number of products.

• Price optimization — pricing based on demand. It's the optimization of existing prices with machine learning for proactive pricing.

For such industries:

• digital and household appliances;

• building materials;

• pet products;

• sports goods;

• toys and hobbies;

• grocery retail;

• fashion (clothes, shoes);

• beauty and health.

At the Competera office

"In the beginning, we just gave our clients information about the market. Later, we were asked to tell them how to use it correctly. Then the clients said: we need rules to set the right prices. And then again: it is necessary to understand, to write algorithms. Isn't there a "generate profit" button ready?

We initially resisted, but soon decided to develop a rule-free price recommendation based on demand elasticity, using machine learning algorithms and artificial intelligence. We are still told that we created it ahead of the market. Throughout 2018-2019, we had to prove that our thing is many times cooler than Excel," Galkin recalls the evolution of the product.

It was in 2018 that Volodymyr Kuchkanov, the current Product Owner of Competera pricing platform, joined the team. Before that, he worked for 10 years in international corporate business. Somehow Kuchkanov realized that he was tired. It was then that the position of Data Scientist gained popularity.

"I quit my job and went to study. After three months, I felt strong and applied to four companies - three of them called me back. HR Competera Maria was among them. She said that they don't have any vacancies for me, but she will definitely talk to the founders. A day later, I was already preparing a case," recalls Kuchkanov, laughing.

Product Owner Competera pricing platform Volodymyr Kuchkanov

Competera pricing platform launched three pilots in 2018. I began to collect the first prototype of the platform from my past experiences. It looked like this: give us a piece of your inventory, we'll run it through our magic accordion and give you a price recommendation. And later you will say whether your sales have increased or not. That's how I created the first statistical models that forecast sales and look for the optimal price," says Volodymyr.

The first pilot did not go completely smoothly and required improvements. "It often happened that everyone celebrates the birthdays that have accumulated over the month, champagne is opened on the balcony with a saber, and Vova calculates the prices on her computer, because she needs to be in time for the client's reassessment," the Product Owner laughs to himself.

Competera today is a 60-day journey into the world of pricing for retailers. This allows you to test the projected growth in profits and margins. Preparation for the pilot consists of 4 steps:

• collection and structuring of historical data from two or more years;

• choosing a revaluation model for sales or profit growth;

• definition of business limitations;

• obtaining and applying recommended prices to achieve set business goals.

At the Competera office

A sales manager communicates with the customer before offering a solution. His goal is to understand if Competera is a good fit for their business.

We have drawn a perfect evolution for ourselves. There is the most primitive stage, when the retailer sets a markup and does not look at anything else. Our bright future is when the price is determined by algorithms. Retailers only deal with strategy. That is, they determine what they need now — profit or profit. We take into account their wishes and outline the sequence of introduction of our products depending on the stage where the retailer is now," Volodymyr Kuchkanov explains the working mechanism.

When setting the optimal price for a product, the Competera pricing platform is able to take into account approximately 20 price and non-price factors, including seasonality, logistics and demand characteristics in a particular country. The price of a contract for services varies from $150,000 to $200,000 and above.

Make a million without marketing

The founders of Competera like to joke that the company had no marketing strategy for three years. The first PR activities included two industry conferences in 2013. The marketing department was formed only in 2015. In 2017, the current CMO Competera pricing platform Hanna Butz joined the department.

CMO Competera Hanna Butz

"When I arrived, we were working on Competera 1.0 - data monitoring. We faced an important task: to increase the conversion of the funnel from Western markets. The current advertising strategy supports the company's mission. We aim to convey to more and more of our target audience that Competera products save time and effort. We help pricing managers free themselves from routine tasks and deal with the most important issues," explains Hanna Butz.

Venture capital = sale of company

Since its foundation, Competera has survived a number of crises — the collapse of the hryvnia in 2015 and the pandemic of 2020. One of the first investors was Ukrainian entrepreneur Ruslan Savchyshyn (founder of MagneticOne Group). In the future, Competera was supported by two venture funds — the Ukrainian SMRK VC Fund and the British Flyer One Ventures, as well as English investors from the USA.

"We raised a total of $4.3 million. There was only one official seed round at Competera - with SMRK. The $1.5 million we raised in 2021 is a safe note. That is, we have not yet sold a share of the company," clarifies Oleksandr Galkin.

It is noteworthy that in addition to investments, Competera also uses credit funds. According to the CEO of the company, this option is much more profitable and cheaper than venture money.

"We managed to find a credit organization in the USA that is ready to allocate a credit line at a loyal annual interest rate. We are going to use this money to develop the marketing department, hire sales managers and expand the team.

Heroes of the series "Friends"

During the interview, the team constantly joked and poked fun at each other. At one point, employees of neighboring offices even began to ask us to behave more quietly. "That's who we are," Hanna Butz whispered with a smile. "In that case, I would be Joey," said Oleksandr Sazonov, who came to the office before the end of our filming, laughing.

Therefore, new members of the Kompeter team are treated with all seriousness. The interview with the candidate takes place in several stages:

• Primary touch is a basic stage lasting about 45 minutes. On it, the HR department tells more about the company, history, founders. Up to 15 minutes are allotted for communication with the applicant at this stage.

• Hiring manager interview. This is an interview with a person who is hiring a new person for their department. At this stage, there can be various types of test tasks and assignments.

• HR interview — a conversation with an applicant lasting one to one and a half hours. At this stage, the presence or absence of the candidate's necessary soft skills is being checked.

• Final interview. This stage is for team leads or key vacancies in the company. Oleksandr Galkin takes part in it. It is he who checks the candidate for "DNA compatibility" with Competera.

"It is important for us that a person is the author of his life. We are interested in purposeful. Any position of victimhood is not about us. Such a person will be simply uncomfortable with us. We also look at proactivity - the candidate must be able to make decisions, offer new ideas," explains People Operations Lead Kateryna Tsiapusta.

People Operations Lead Kateryna Tsiapusta

As a rule, the vacancy is carefully worked out before the launch. However, there are exceptions. "If we find a good specialist, we can find a role without an open vacancy," adds Kateryna Tsiapusta.

"For us, it is a good sign if the candidate does not talk about money at least in the first two interviews. There was a case with Anya Bilous (ex-SMO Competera). After the last interview, she literally ran away. I shouted: "Anya, money, money"! And she: "Well, you'll pay me something - that's fine." This is a good sign. It turns out that the candidate is looking for development, not a place," concludes Oleksandr Galkin.

Becoming a unicorn is a matter of time

According to Oleksandr Galkin, this is the strategic goal of the company. Currently, the company's valuation ranges between $100-120 million.

Allo store became Competera's first client. They stopped at it by accident.

Among the immediate plans is to scale the sale of the product, expand the geography of offices and teams abroad. Today, only one person works in the United States.

Also, CEO Competera announced a pilot project in the SMB direction. In addition, the company plans to develop its pricing community in order to organize large-scale industry conferences in the future. "We have already started holding business breakfasts in Kyiv, London and New York. Based on them, in the future we will form a conference for our customers and experts in the field of pricing. My dream is to make Competera the industry standard. We plan to achieve this in three to five years," Oleksandr Galkin shares.