How DreamTeam conducted ICO and received $5 million from Mangrove: interview with CEO Alexander Kokhanovskyy
Tell us about the performance of the project DreamTeam now?
We launched in November 2017, with a team of 8-10 people, we started to gain traction and recruit a team very quickly. Now we are closely approaching the mark of a million users – according to our estimates, in December we will reach 1.2 million. This is our first serious milestone. The team has grown from 10 people to 80, and we continue to expand.
What is DreamTeam doing now? The first is a platform for finding teams and players. The second is a service for managing your team. The third is analytics, which we are launching at the end of November, and the fourth is the opportunity to earn and monetize our team, which we will include a little later. If we take DreamTeam as a recruitment marketplace, we have already grown more than all the other recruitment platforms in this area (SeekTeam, TeamFind and others). That is, until the end of the year we will have “recruiting + team management + analytics”.
When launching the project was focused on financial services more, you were positioned as PayPal for gamers, what has changed now?
One cannot exist without another. It makes no sense to try to monetize the service (for example, to build salary payments to players through our platform), if there is no user base. First of all, you need to increase the user base, give users the tools so that they can improve their skills and manage teams, and only after that provide services for monetization.
What’s your source of income now (if you are earning money) and can you provide us with figures on revenue?
At the moment, we still do not have monetization. We start from November of this year. There are two types of monetization: premium accounts (for players and teams), and when the payment gateway will work, we will receive a small commission from 2% to 5% from each transaction.
How did you meet Mangrove and got interested in the cyber-sports project, since this is not quite a traditional area for VC?
Mangrove is not only one of the largest European foundations, I would say it is also one of the iconic investors. Just the other day they had a fourth unicorn in their portfolio, the company WaleMe. They bring exactly the expertise that we lacked, working with subscriptions (SaaS model).
We have never specifically looked for money, and we are not looking for it now either. We already have a list of investors from about 100 companies that have contacted us and who want to invest in us. We are very careful about attracting investors’ money and erosion of shares, we developed on our own after the ICO.
Denis Dovgopolyi introduced us to Mangrove, he wrote to David Varokvir. They were going to invest in another e-sports company back then, but they chose us. It seems to me that we have been chosen because what we are doing is disrupting the largest entertainment market on the planet – the gaming industry. Plus, we are making mass cyber-sports: our services for only $19 a month give the average player anywhere in the world an opportunity to get all the knowledge that I have been extracting for 19 years for millions of dollars. It seems to me that in order to solve them according to our project, traction was also important, and the way we grew, despite the fact that we initially had only one game (and we plan to hook up about 30 games by the end of 2020).
You and your investors are not afraid of the instability of the cryptographic market, don’t you? Yet you attracted the first round of the ICO. And by the way, why did you decide to raise money by ICO?
We were not the first project in which they invested under the “equity + tokens” scheme [Editor’s note: ICO sold utility tokens that can be used on the DreamTeam platform to pay for services, for example, premium accounts, or for all smart-contracts, like payments of prizes or salaries to players, sales of sponsorship packages]. I think that for them it was a reasonable and deliberate act, plus a deal was accompanied by very good lawyers.
We believe that the blockchain really adds value to us in terms of smart-contracts. We have already launched a test smart-contract, tried to pay salaries and compensations to our players. It was a successful launch – more than 35,000 players are now using this smart-contract. We saw that it was possible to raise money through the equity-round, or it was possible to do through tokens, and the ICO scheme fit our product very well, we wanted to build a decentralized system.
We are not afraid of instability in the cryptocurrency market, because the platform does not live at the expense of the market, but at the expense of users. That’s the mistake of many projects that raise money for ICO, and then immediately close: they only count on tokens and their growth in price, but we have the opposite situation here – we know for sure that our tokens will grow if we make a cool product. We assume the opposite, and I believe that this is a strong position.
How ready was the audience for your product? How are you growing now?
The audience was just happy: you can read what people say in the reviews on our platform, they find teams and players very quickly. If the team posted a vacancy, it’s 51% that they will find a player. And this happens not in three weeks, as on other platforms, but in 36 hours, and there is no such thing in the world. Even if you compare us with the usual job search sites and candidates, we have superb indicators.
We see that we need to focus on the European and North American market. We grow by 10% per month.
How much is your project estimated, considering the $5 million round? Where will this money go?
I think everyone can guess the assessment, considering the standard practice of seed-rounds. Count yourself ?
($5 million is not quite a typical investment for a Ukrainian project in the seed-round, according to Dealbook of Ukraine, the average seed in 2017 was $500,000. With seed-rounds, VC usually receive between 10% and 15-20% of the company, so DreamTeam’s score in this round can range from $25 million to $50 million – AIN.UA).
The investment will be spent on marketing and expanding the team, locally in Kiev and in the USA. We do not spend any huge sums for marketing, however, we have a good budget for it, but not millions of dollars over the past year. Since October 15, we are opening HQ in LA, I am moving there, recruiting a state there, starting to probe the market on the East Coast. Now we are also negotiating to enter China, with one of the largest local multi-billion-dollar companies (we cannot name those yet, but I think it is not difficult to guess). We want to go there in a joint venture format. Plans for new games: first of all, we want to add Fortnite, later we will see whether the next one is PUBG or Overwatch.
We are now creating a market that will be used by the entire planet. In 5-7 years, every gamer who wants to become an expert or an amateur from a beginner, will not do without us.