From a failed nightclub aged just 19 to a $50M deal | Entrepreneurship with Daniil Shcherbakov

0:28Welcome back to Strategy and Tragedy. probably going to date me. And it was the TGIM, thank God it's Monday podcast by Shopify, RIP, because it doesn't even exist anymore. And it really helped me. These stories of inspiration, these case studies, these other founder interviews just really kind of motivated me. And I thought, this is exactly what I'm doing here for you guys. I know entrepreneurship is so hard. I've been there. I've done that around my own business for seven years. And so that's where the show is born from. I hope you learn something. I hope you find this entertaining. But most of all, I hope you know that you're not alone, that all these difficulties and challenges are absolutely normal.

1:05All right. So I am so excited to welcome my next guest, Daniel. I'm checking my notes because there's a list of accolades that I want to make sure I get right here. Daniel Sherbakov is the chief everything officer and co-founder of TonTon, the games publisher for Telegram. He raised one million dollars in pre-seed investment from Web3 Focus funds in just three months. So, gang, I know you always want to hear all about the investment and fundraising stories. So we're definitely going to cover that with Daniel as well. He is also, of course, a passionate gamer as a gaming founder, startup mentor, which is how we know each other.

1:44We're both mentors with the One Day MBA program, and he is a lecturer at Cambridge. Daniel, welcome to Strategy and Tragedy. Thank you so much for having me. All right, so let's rewind the clocks and start your story with your first failure at age just 19. With great pleasure. First of all, I have to apologize to your audience because of my severe Russian accent. But guys, I'm not going to change it for anyone because this is what makes me, like we've just discussed behind the scenes whether i can do british accent or not i can do it and it's even more hilarious than me talking well now you've mentioned it you're gonna have to show our listeners yeah okay so i could say lovely oh like sorry and of course someone kenyan like you know me and my missus geyser all of those things so just as a reminder to the listeners like my goal for the end of this council podcast to be cancelled at least a few times so so be it i'm here for it daniel you've got my blessing my permission let's go for it let's dive straight in so speaking of my first parking failure so i don't know whether you are becoming or being born as an entrepreneur but if i like dive back into my early childhood what i did is i went with my grandmother with my grandmother to the market square uh when i was like four or five and i was selling plants with her so like you know this is where when it's all started and obviously i was more like a kid but i enjoyed like talking to people getting good prices obviously i never understood what i did exactly but at least i liked it but fast forward when i was i think 16 or 17 i got just into my first year of university my father told me daniel if you would like to go on dates go and get you some money.

3:33You are on your own. I'm not going to fund your affairs. And I'm like, okay. Dad knows how to tap into the motivation of a 15-year-old. Absolutely, absolutely. So I was, and I still is, and actually a lot of my friends saying that I need to, not even grow, but like to change my musical preferences. But I was at that time into hip hop and Iron B I'm still listening to exactly the same music that I did Pharrell Williams, The Clips, Kanye West. And all of those. You're already cancelled. You mentioned Kanye West. Yeah, I know. But like Kanye West, before he became a Nazi. So let me put it this way.

4:15Like, you know, my beautiful Dark Side Twisted Fantasy and earlier than that. This is all my favourite albums. So... Can we name drop Eminem in there as well? Like, we can't talk about rap without mentioning, at least. Here is the funny bit. Now I can listen to Eminem. But if you think about me, obviously not being a native speaker, most of the music that I listened to at that time was primarily because of the music itself. Because I couldn't understand the thing. It's more about the groove. Mom's spaghetti. Now I get it. And now I can listen. But I believe it's just already too late. So I admit that Eminem is a great lyricist.

4:49And I think Kendrick is the one who is taking the stick from him and becoming also great. I'm not taking this from them. but the music that I was born and raised was basically beats done by Timberland, Neptune, so Justin Timberlake, Nelly Fortado, Kelis, all of this, Gwen Stefani, all of that kind of stuff. Yeah, I love it. By the way, to your viewers, I can highly recommend to watch a biopic about Pharrell Williams, which is called Piece by Piece, and it's done in Lego. Okay, love that. Let's connect this back to entrepreneurship. Absolutely. And I told you that I'm going to detour and turn everything into a rant.

5:23And I have your opinion, I know how direct you are. And this is how I'm becoming British, because I'm aware and I'm apologizing after it. And I keep doing my thing, but doing apologize, you know? You can do whatever you want as long as you apologize. Do it anyways. I see forgiveness, not permission. So I got into this type of music. And in Russia back then, it was like, I think, 2009, 10. No one was into that kind of music. And if you think, like, no one even globally was aware about Pharrell Williams before he get out with Happy or Lucky with Daft Punk. So it was very, very niche, even in the Europe, like in Western Europe.

5:57It was mostly States, but I got into this music. And somehow in my hometown, Samara, just to give you your audience an idea, this is where all of the notorious cars are coming from, Russian cars that are basically made like a tank to survive the nuclear weapon strikes. So all of those Ladas, all of this hilarious boxy cars, they are from my hometown. town so anyway found these people and we started becoming some sort of a club promoters so we're running parties it was hilarious but it is what it is we were kind of successful and then we decided that gosh let's create our own nightclub uh we were able to get a loan in a bank but this is a funny bit in our mind we were best promoters in the world and perhaps we definitely wasn't bad but we definitely wasn't good entrepreneurs as well.

6:49So our whole idea is that we got a loan, built a nightclub, like construction is a nightmare. That's why I still don't have any kind of property. Don't want to deal with this. Like, although my wife is pushing me to get one, but that's another conversation. Anyway, we opened the nightclub, like put all of our thoughts, knowledge, but you don't have much knowledge by the age of 19, to be very honest. So anyway, we opened it and we shut it down in half a year. At least you didn't waste much more time flogging a dead horse. Hey gang, super quick interruption, but I promise it's worth it. I want to tell you really quickly about One Day.

7:25It's an 18-month MBA program, but get this, you literally start and scale your business for real alongside it. I am a mentor on the program. If you've been following this show for a while, then you may have picked up on the fact that I work there as well. That's one of my other jobs and I absolutely love it. I've been with the business now for two years, probably a little bit more by the time you're listening to this. And that's why I can say with utmost conviction, from being on the inside track how good this program is. So you've got the curriculum, the content, the learnings, the resources, the frameworks that add the structure to the chaos and the mess and give you that much needed direction, how you can move the needle week on week on week and get closer to your entrepreneurial goals.

8:03Beyond the actual content and curriculum, you've got one-to-one mentorship. So with myself, for example, and then best of all, I would argue the community. You get access to other entrepreneurs that are on the same journey that you are because entrepreneurship is tough. And so being surrounded by other people that are on the same journey, who can pick you up when you're down, it can also be helpful in terms of sharing other learnings, resources. Honestly, I cannot talk any more highly about this program. I'm going to drop the link in the show notes. Check it out if you're a first-time founder, if you're considering making that leap into entrepreneurship, or maybe if you tried something before and it didn't quite work out, you realized actually this whole entrepreneurship game is a lot harder than you expected.

8:40One day is the place for you. The frameworks, the guidance, the support, both practically emotionally is just second to none so check it out let me know what you think now let's get back into the episode can i just ask we're going any further what i feel like you know i'm trying to put myself in like a 19 year old russian boys world what gave you the confidence to go and get a bank loan i believe basically because we we won't experience enough that's point so it it it was absolutely the naivety uh and no one stopped us everyone was basically i couldn't say pushing but enabling absolutely to do it and this was kind of cool and we wanted to be liked by girls let's face it and being a 19 year old with a nightclub this is fancy and all of those kind of stuff that's quite a lot of swagger as a 19 year old with your own club that could have um yeah and i have to mention we even recorded some music and by the way it's not shit I can even listen to it now and not be embarrassed by that I'm not turning red after listening to it that is impressive because gang even I do that listening to like early I can't even listen to like early podcast episodes I feel like even my interviewing has got better in two years at least I hope, let me know why did it fail, just didn't make money?

10:00primarily because we were great at promoting parties and the way promotion works you rent out a nightclub You're paying the fees Then you get a portion out of a bar And basically in Russia That was the thing that you also pay for the entrance That's how it works So it's kind of very simple You don't care about the waiters You don't care about alcohol Any kind of operational staff Obviously you get very tight margins But it's economically feasible To do and profitable But with a nightclub As a full-fledged operation It's much more complicated to say at least. I can imagine just so many more overheads, right?

10:39People stealing just to like, and I don't want, let's say, to blame anyone. Like, you know, everyone is trying to survive. I get all that, but all of those kind of controls and like basically dealing with people, which is essentially is entrepreneurship. It's not about tech, AI. No one heard about AI at that moment. But anyway, it's about dealing with people, different kinds of people. And the more complicated the business is, Which obviously promoting a party And having a nightclub with a party Is kind of a different level of complication This is what we didn't really Like thought about Also we were hosting a parties I believe Once or twice Every month Not more than that So basically two days per month Let me say it this way But for the nightclub It is at least every Friday and Saturday And we basically didn't have that many ideas what to do like you know whom what kind of dj to bring and so on so basically organizing r &b party twice a month is a good idea and people are into it but basically having those kind of parties thrown away twice a week this is a bit of pretty quickly yeah it might be a phone overkill and on dealing with people the public it's another level when you're talking about nightclub right because you're a attracting a different sort of crowd potentially but also you have them very lubricated up with a lot of liquor and music and all the rest of it so it does add that extra level of complication shall we say okay hilarious I love you taking us back in time and these first forays into entrepreneurship let's touch on hacking luck taking risks tell us the story as we sort of move along the timeline here when you pitched at your uni open day so you're still at a similar sort of age like late teen I imagine who was the judge on the panel and where that led you to yeah basically the way, these stories are directly interconnected.

12:33So basically, the nightclub failed by the time when I was in the fourth year of my university. And in Russia, it's five years, basically. At that moment, we didn't have the separation between bachelors and masters. It was just, we call it a specialist degree, which is five years. So basically, I had one year before graduation. Nightclub failed. All of my dreams and aspirations of becoming the nightclub, magul whatever you call it vanished like like this and i felt kind of lost because like i had a steady income i believe even more than my parents at that moment had so like you know i and i was living still with them so like i had plenty of disposable income buying clothes going shopping places you name it and then like everything turned into dust and that was some sort of a great lesson that I learned that nothing is forever and you have to always be prepared for some shit coming and this is I believe what kind of made me a better entrepreneur so at that time I was actually thinking okay what else can I do in my hometown although I love my hometown somewhere it's actually over a million uh citizens living there so it's big it's not small just by any means don't get me wrong but still it's not Moscow St.

13:47Petersburg so I was I'm a geek obviously it's kind of visible from the way I look now but I just was thinking okay what can I do and there was nothing to do in my city at least this is like in my own eyes and in my own head and I couldn't see whether it was true or not but I just thought that is the way it is so I thought okay I need to go to master's to get a master's degree in Moscow and I love tech still do and I found a very interesting program which is called master's and e-business and they had so-called winter school So for the promising applicants They basically invite them For a week into Moscow And where they basically Tell them about the program It's basically week long open day Let me put it this way To get a sense of the different type of programs On the faculty Because there was like business analytics E-business, data science Just to help you to understand what it's all about And within this program There was so-called business competition Like business ideas competition or something So Long story short, I won it.

14:50Do you remember? Did you have to pitch a business idea? What was your business idea? It was an e-menu for the restaurants instead of a paper menu. And it was a novelty at that time. So it was like 2013, 2014. So iPads just became usable. Because you remember the first generation, they were kind of laggy with very short battery life. So it was kind of thing. And the whole idea is that let's save the planet. like you know stop using a lot of paper and it's very easy to update the menus that kind of stuff and to order so you see one waiters that kind of it was like it wasn't like a stupid idea but the proof is in the pudding now in present day yeah quite common yes right here now 12 13 years ago so this was quite i imagine very innovative at the time so you won yeah i won and one of the judges was actually an alumni of this specific program that i wanted to get into and he offered me a job.

15:45So before I even get into the masters in Moscow, I already had a job in a startup and I was actually the first employee there. So the startup was all about virtual reality, what was kind of on a rise at that moment. So it was before Oculus, not Oculus, Facebook bought Oculus for$2 billion, I believe. So Google hasn't released their cardboard. So it was like very early, early days. And what I ended up doing at the age of what? 21, 22, I believe I was responsible for launching and creating from scratch in China, in Shenzhen, mobile virtual reality headset. So it wasn't a copycat of some sort of like white label OEM.

16:24We created really from scratch and we ended up distributing over 50 ,000 units worldwide. And we were available at Amazon, Best Buy, Media Markt, Saturn in Germany, HMV in the UK and many other places. So I'm kind of proud of it. You should be proud of it. And what this leads to is competing against the giants. Like you mentioned Google before. You've got, what was the other one as well? Yeah, Oculus. Oculus. Samsung, absolutely. So take us to that business decision at that point with those huge competitors. So I think as many things in life, there was a lucky coincidence. So the way the company started by the founder, he had a gaming studio before.

17:03And actually at the time that he created this kind of a spin-off. and this gaming studio just just out of fun created a virtual reality roller coaster for smartphones which wasn't shitty and at that time trust me there were a lot of very poor quality content for the vr and eventually and even suddenly they got one million downloads out of nowhere so completely organic traffic and it showcased them that perhaps there is a demand for it and there was no proper headsets at the moment so basically our pitch to the retail chains and stuff that you're not only getting the headset you're also getting a bunch of games developed by us as a developer so at a certain period of time Fibrom that's the name of the company was the biggest mobile virtual reality developer in the world with over 25 million downloads worldwide without a single cent spent on advertising.

18:00So by the time, and we basically got like, you know, I believe success is a product of luck when you're not only doing the right things, but you have to be in the right place at the right time. This is what happened. So we were already in the virtual reality industry at the time that hype happened and everyone got into this industry and so on. and so forth. So when all of those big players like Samsung, PlayStation, Google, HTC, you name it, got into the market, we were already there. And what we decided, we decided to do a teeny tiny pivot. Obviously, it was major for me, but very logical from the business side.

18:41So I supported it. So we shut down the hardware department. So basically, we did not produce the second version of our headset. And we focused primarily on the software. And right now, I believe today, we are the only one Eastern European developer of the virtual reality games that are available everywhere. PlayStation VR, Oculus, HTC Vive and all of the other headsets. So we are kind of became universal. So we just adjusted by the market. And we weren't delusional thinking that we could compete with those company budgets. Like, you know, if you cannot win, just become an ally. Yeah, yeah, I love that.

19:23And that is kind of a snippet of inspiration to our listeners for that strategic decision making in business, because you entrepreneurship is a world of contradictions, right? Like you've got to be deluded enough to like go after something and have this like BHAG, this crazy goal that you go after. I can do it. I can do it. And like have that sort of motivation. But at some point you've got to face facts and sort of see when the writing is on the wall. And when you've got such huge competition, that crossroads that you guys arrived at reminds me of the Netflix story. I always use this example, but where they were at a crossroads.

20:00Again, we all know now the humongous success. Of course, hindsight is a wonderful thing. But there was a point where they had to decide, do we continue retailing DVDs, which at that point was successful and revenue generating and profitable? or do we double down on this other direction that seems enticing and interesting to focus on this kind of streaming side of things the rest is history of course but I think it's such a common trap that founders fall into like the freedom trap and I think especially if if any of you have come from like employment and you're making that leap I definitely know for me at least anyways there's almost this abundance of options there's always this freedom I can do all these different things I can do this do this and and it I think it's really challenging for entrepreneurs to kind of get that focus to make those decisions even the word decide it the side in it comes from like homicide suicide it comes from actually killing off and when you decide it's actually more about strategies and what you say yes to is what you say no to so i love that you did that that's why i believe it is so important to have a north star yeah so like me as an entrepreneur i'm absolutely fine with strategy being constantly changed yeah what i'm not very happy with is when you don't have any strategies so you're basically doing everything and you don't have a judging point so what is good and what is not so and i believe founders they kind of consider their products as babies and when you have a baby you cannot be non-biased to it so you don't see a lot of red flags that you might see being an external observer and this is why having an oar star so basically an ability to make a distinction between what is good and what is bad for your business helps that much.

21:59Yeah, that's a great tip. Thank you for sharing that. So you mentioned something earlier about you can do the right things, but it's right time, right place, i.e. luck that enters the equation. So I want to double click into this. I have been working on this talk called Hacking Luck, and I'm obsessed with the ways that we can still stack the odds in our favor. It's true that there are things outside of our control. There are externalities that have a bearing on our success or failure with that in mind you have to tell gang this is a good one i'm very excited about this you have to tell the story of stacking the odds in your favor by taking a flight to silicon valley and pitching to the head of eventbrite by the way i believe this story perfectly bridges the gap with netflix story because if you think about netflix and their competition with blockbuster netflix was an outlier and they had nothing to lose and i believe when you're an outlier and you're in this position, you basically are way better positioned to make and take risks.

23:05And this is why I believe they did what they did. I believe if they were an industry leader at that moment, they are very unlikely to do this and they might be disrupted by third players. You never know, but that's it. You've got nothing to lose when you've got nothing to lose. Absolutely. So this is what happened in the story that you wanted me to share. And by the way, this is, I believe, a great example of what good business development is all about. Because I believe people always mix up business development with sales, with accounting, but business development is all about opening the doors.

23:38Basically sticking your foot into the door other than basically once you're already in and you do something. It's all about the opportunities at the end of the day. So what happened? Right after Fibram, I was invited to lead the international launch of the marketing platform for the event organizers. So the whole idea is that as many industries out there, event industry is not digitalized at all. A lot of things are manual, always a lot of the legacy solutions. And what's more, for the small and medium event organizers, at that time, there was absolutely no solution for managing your current audience.

24:23And as we know from basically one-on-one marketing, it is six times cheaper to retain your existing customer than to find a new one. So this was the whole idea of the tool, that you get a snapshot, a dashboard, and a CRM that has all of your audience. You can segment them, send targeted email communications. So basically imagine a male chimp on steroids and specifically for the event industry which is basically natively integrates into your existing ticketing solution. Nice. So that's kind of simple pitch. Yeah, it was a gap in the market. So we get the solution. It was a spin-off of the successful Russian ticketing solution that created that kind of a tool for their customers.

25:07And I was invited to launch it abroad to the States specifically. and after some research and there was no charge of petitions at the moment so I had to do everything on my own and by the way I always say that Google is the main reason why I'm successful in life relatively successful but still that's why I'm here now because I just know how to Google and like you know it's easier to say than to master trust me a lot of the people have no idea that you can just ask Google and as you know Google know all of the secrets so like anyway it's amazing how far we've come in a very short space of time, right?

25:41Because you could, this is almost reminiscent of like previous generations. You can talk about like going to the library and having to like find a certain book and like read through the book to find the certain information. And then we could just Google and now we have got, to your point, chat GPT or perplexity. And it's like this crazy exponential growth in recent years. Anyway. But I still do, I want to make a small detour because there is kind of a hot topic about that one team unicorn, one team member unicorn is coming. Yeah. I completely disagree with that. Okay, let's have your hot take.

26:16Yes, I will explain to you. So a lot of the, like, there are a lot of snake oil sellers that's selling that's saying to you, like, buy my course and you'll find out how to create a successful business just using AI with no team members and stuff. Or a lot of, let's say, articles on, let's say, the one team member unicorns are coming. And anyone could beat. I can create I completely disagree with that because in the current level of AI technologies development, only the people who know how the end result should look like could really take advantage of it. So I will give you an example. If you don't know how does a good cold email should look like, you will think that chat GPT or perplexity or whatever else, Grok, give you a great basically cold email.

27:03But they do not. And so it's a great partner. so I believe if let's say an extremely experienced founder that know it all like have been several times into zero to one process one to ten ten to hundred he could basically speed up a lot of the processes by instead of hiring people doing these processes on his own but it's not for the people who have no idea about entrepreneurship and basically trying to pursue the fast money and thinking that they're going to get filthy rich just because they're going to create that does make sense what you call to mind there is you still need like the prompting the checking you still it's almost like we talk about building a business not a prison and so many entrepreneurs make that mistake as well where they create this bottleneck and you're still reliant you can't go on holiday you're chained to your laptop because you still need to be managing this co-pilot the costs rack up as well i mean i know like it's still cheaper than i guess like a full-time salary but But like all the AI tools I'm using, they've all got upgraded plans.

28:04And yeah. And they are cheap now. They're cheaper now. Yeah. Well, we've seen the ChatGPT PhD level service. But just the last one before I forget is to your point on the different functions and areas of expertise as well. So to your point on like you need to know what a good cold email looks like or what a good HR plan or whatever the different function is. So you have to be in those situations to be able to basically cut the corners and use AI instead of hiring someone. Exactly. And a core ingredient of being a good entrepreneur is the humility as well, right? The humility to know that you don't know everything, that you're always learning.

28:41So how can you simultaneously be the expert in that subject matter, that domain, to be able to manage an AI effectively? Okay. Getting back to our point. Once again, I'm very sorry for the audience, all of my inappropriate comments. And this is my British nature is basically speaking right now. After five years in the UK, I believe, like, you know, you could never become British. I'm well aware of that. So the best I can be is to be genuinely curious alien here. So, like, I'm well aware of that. Genuinely curious alien. All good, all good. You don't need to apologize. Yeah. All right. So let's get back to you flying over the valley.

29:18After research, we realized... Thanks to Google, that's where we go. Yes, thanks to Google. Yeah, okay. After research, I realized that most of the small, medium event organizers are using Eventbrite as a core platform for their events. So the most logical next step would be to get an API synchronization with Eventbrite so we can get the data and then we could sell our solution to the Eventbrite organizer. So easier to say than to do. But anyway, they had an open API. but in order to get into the system, you need to have some sort of a, I don't know, check on the end that everything is working.

29:53They had an email there that, let's say, once you are done, here is our documentation, message to this email, and we will turn on the integration on our end. So we did everything. Then I messaged to the email, no response. So I was bombarding them with emails, I believe, for a few weeks. And at that time, I was kind of hopeless because no response. and it was nothing to do with me being Russian or whatever. I don't want to play any kind of nationality card. No, it's just like how big businesses work. If you don't have any external push or let's say any person inside, it's very hard to get into.

30:30And we were kind of nothing to lose at that moment. And I created a plan, a very strange, not like strange, but like a desperate plan. Let me put it this way. It's a creative plan. It's basically the lack of my vocabulary. So I just, you know. I'll fill in the gaps then. It says the way it is. But anyway, I created a plan, a creative plan, that a founder of the Even Brighton, and at that time the chairman of the board, Kevin Hartz, he was holding a public masterclass in one of the conferences in Silicon Valley and Palo Alto. And I just decided, gosh, I have nothing to lose. I'm going to fly into the US.

31:09I had a visa and I'm going to meet him at the registration desk and pitch him our idea. because like you know it won't be worse than that. Listeners take note. So this is what I did. I remembered based on his photo how he looked like. Then I was strategic in two ways. First of all if you have been to kind of this mogul entrepreneurs and Kevin Hartz is from PayPal Mafia just to make it very clear so he's like from that time those kind of people right after their speeches finished they're being basically surrounded like rock stars by a lot of the entrepreneurs giving their business cards so they might give the entrepreneurs the business cards and never reply to them ever again and blah blah.

31:50So I knew that this is not going to be the way. So I remembered how he looks like and I was waiting for him at the registration desk for an hour with my laptop with all of the tabs of our tool open because internet at the conferences sucks. So I had to be prepared and also I prepared a pitch but not how a solution is cool but how our solution could help even bright to make more money. This is also kind of important if you think, because when you create a product, you always think that your solutions go, or your features going to sell your product, but nope, your product, when it's being sold, it's because it makes the life of a user better in any way, financially, in any other way around it.

32:31So Kevin Hartz came with his assistant, so I pitched him with even more horrible Russian accents, obviously it's slightly improved after five years in the UK. But anyway, we had a proper conversation. I remember for 12 minutes, and by the end of this conversation, he had a call with the chief strategy officer of Evenbrite, because Evenbrite's headquarters is located in San Francisco. And we actually had a meeting next day with chief financial officer and chief strategy officer at Evenbrite headquarters. And from that, it all started. We ended up being not just partnered, but integrated as a white label into the event organizers account and we were available to 10 ,000 event organizers worldwide.