Dmitry Yurchenko and Irina Linnik were the first to notice a vacant niche in Russia’s mobile medicine market. Their Life Button project – a medical alert system – helps the elderly receive timely medical aid in an emergency. They have saved more than 250 lives in the space of one year. Maria Karnaukh
Life Button founder Dmitry Yurchenko had the idea of a medical emergency alert gadget in 2009, when he was studying full-time for an MBA at the Skolkovo business school. A visiting lecturer from Intel mentioned a mobile vitals monitor that was supposed to be imported to Russia, but the manufacturer had cold feet because of corruption.
“At first, I had to choose between three industries to plunge into: IT, energy efficiency, and medicine,” Yurchenko says. IT spooked him, with its fierce competition and energy and need for capital expenditures. “Eventually, I chose medicine. Russia has low competition and huge segmentation [the top 10 players control less than 15 percent), and there’s an obvious tendency for major investment in healthcare, underpinned by an aging population and a low level of physician’s professional skills.” Irina Linnik, Yurchenko’s classmate in the Skolkovo MBA program, has become his business partner.
An internship as part of his training was very useful. Yurchenko spent two months in the United States, the leader in the mobile medicine field. He studied companies in the industry and talked to their founders. The students returned to Russia with bags of new ideas; they started comparing the potential of successful American business models for the Russian market, on the basis of market potential, entry barriers and technical sophistication.
As a result, the new entrepreneurs chose the Life Button idea. It was to become Russia’s first medical electronic alert system for the elderly and the disabled. The service consists of two elements: a gadget and a call center. The gadget can take different forms—a pendant, a bracelet or a mobile phone. The cost varies between $90 and $310, depending on the gadget type. The device transmits an emergency signal to a call center operated by medics.
While the devices are intended for the elderly, the project targets a younger demographic group of people who live separately from their older relatives but want to have peace of mind about their family members’ well-being. According to statistics, they have a lot to worry about: Russia is home to more than 18 million elderly people, and more than 6 million of them will have a fall during a given year, 3 million will not be able to get back on their feet without assistance, 1.5 million will forget where they live and will not be able to get home, and 2.4 million will be unable to call for assistance.
It took about a year to launch the project, including nine months for project development and sales channel testing. Half a million dollars in financing was raised during that time. “Irina Linnik and I were the first investors [around $20,000], then we borrowed $100,000 from a friend, after which we got the venture fund Venture Angels onboard,” Yurchenko recalls. The entrepreneurs then managed to obtain 35 million rubles (a little over $1 million) from a strategic investor, the IT Group, which subsequently provided additional funding for the project. A total of around $2 million has been invested in Life Button, its current capitalization being in excess of $10 million.
There were setbacks too, but the entrepreneurs’ approach to problem solving kept them going. “There are many difficulties and pitfalls. The life of an entrepreneur is constant problem solving,” says Yurchenko. “Moreover, I believe that a true entrepreneur must be a masochist, getting a kick out of solving problems. That’s the only way to enjoy doing business.” In his opinion, every problem can be broken down into smaller parts that are much easier to handle. “When you’re starting out, there’s one big problem: You want a big and successful business, and it’s just not there. So you segment this problem and resolve it.”
Yurchenko has no doubt that any entrepreneur should be both an optimist and a paranoid at the same time. The optimist dreams, sets goals, gets everybody excited about an idea and builds a team. The paranoid is wary of failure and always acts prudently, takes all potential risks into account and warns the team of them. “Such internalized schizophrenia makes success much more likely,” he says.
Two and a half years after the launch, Yurchenko is confident that his company has outgrown its “startup” moniker. The company operates in seven Russian cities, including Moscow and St. Petersburg. Life Button employs a staff of 24. “The team’s core is me [CEO], Irina Linnik [co-founder and Commercial Director], Maria Karaban [Regional Development Director], plus three people in charge of partner relations and sales, Kuang Nguen [Technical Director] and four techies. The rest are call center operators and employees in the regions,” says Yurchenko.
The co-founders claim that turning a quick profit is not their overriding motivation. They say their key goal is to set in motion an industry inspired by the idea of keeping families safe. “We already are a mature, fast-growing company. We are happy with our performance and even more excited about our ambitious plans,” the entrepreneur says. “There’s also something I’m really proud of: How many of you can say that you have saved even one human life? We have been involved in saving around 250 lives. We were, at the outset, a business that continues to help people. That’s because we are a socially conscious business.”
The company is planning to expand its Russian customer base by improving its service, including its reliability and ease of use. According to Yurchenko, this is the best way to increase capitalization. Immediate plans include tapping overseas markets with an upgraded product. In addition, Life Button’s co-founders are working on a global human weight and activity monitoring service. Another niche they are interested in is parents with small children, and they are planning to develop a special product for children.
Where is seed capital to be found?
It is the classic three Fs: friends, family and fools, and then venture investments if you are lucky.
Is young age a hindrance or an asset?
I’m sure it is only an asset. Ignorance is power. Young people’s maximalism does wonders! After you gain experience and learn the hard way, it gets better.
Were you ever taken advantage of?
I prefer not to dwell on that.
Will you expand internationally?
Yes! Definitely! We have been building a global human weight and activity monitoring service based on the Button infrastructure.
Is there anything to be learned from international business?
A lot. Their entrepreneurial history is much longer, more varied and intensive. One has to break out of one’s comfort zone, travel for study, read books—above all, “Mastering the Rockefeller Habits” and “Lean Startup.”
What mistakes can a foreign entrepreneur make when investing in a Russian business?
I think that, when all is said and done, we are not all that different from other countries in terms of business ethics and the rules of the game. The key problem may be in the culture gap, so more time should be spent communicating and getting to know one another.
What are the moneymaking opportunities in Russia? What niche is still unoccupied?
They say Russia is 20-30 years behind the developed world. Life Button is a perfect example. When I first saw the mobile medicine business in the U.S., it was already 30 years old and making billions for its owners, while there was not a single company in Russia. Then, though, we drew on Western expertise to create an infrastructure that could be the envy of even our Western colleagues. This backwardness is both Russia’s curse and its blessing.
What’s the best way to see if an idea is a dud? Who will admit as much? Who treats you in the most honest manner?
Customers are the best judges. If they aren’t buying, then it’s a dud.
Who is the boss at your firm?
I think I’m the boss. Irina [Linnik, Commercial Director] thinks she’s the boss. We still respect each other. That’s where our strength comes from. I’m confident that, the more people think they own the project, the more responsibility there is and the higher the likelihood that the project will come out big and kind.
How do you spend your weekends?
Right now, I spend all of my free time training for Ironman [a marathon event where participants must swim, bike and run for miles over the course of one day]. In addition, I practice acrobatics with my wife, and we rehearse a joint dance number.
What Russian entrepreneur can serve as a role model?
I respect Tinkov and Vardanyan. [Oleg Tinkov is the owner of the Tinkoff Credit Systems bank; Ruben Vardanyan is co-head of Sberbank CIB].
What’s the most effective advertisement for a business?
According to “Lean Startup,” it’s the one that customers like and that motivates them to buy. I agree with Tinkov that, in Russian advertising, sex sells.
The best partner is a friend, a family member, or a stranger?
Joint business is a test of relationships. If a friend turns out to be a worthy business partner, both friendship and business partnership will benefit. If a family member passes the business test, family ties grow stronger.
What’s the main principle for communicating with partners? With customers?
Love, respect, empathy.
Doing business in Russia—is it dangerous?
Doing business in Russia is exciting and promising.