Nykyta Izmaylov, CEO and founder of the N1 investment fund, on how to get the first $1M

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In 2012, the financier Nykyta Izmaylov started working at Parimatch, where he became a shareholder and earned his first million in a few years. Today he focuses on his own investment firm, N1. His portfolio includes sportbank, a mobile bank for people who enjoy sports and active lifestyles, Asquad, an innovative payment ecosystem that uses Corezoid technology, and other fintech startups. Besides, Nykyta is the owner of Eat Easy, a producer of organic beverages such as kombucha and tibicos. 

Nykyta  gave a lengthy interview to the Point G YouTube channel dedicated to IT business. We have handpicked the highlights of the interview in this text version: what challenges he faced being the CFO at Parimatch, how big money affected his life, why sportbank turned out to be $10 million more expensive than expected, and how he sees his future.

Material prepared with the support of N1

What does it mean?

The first money he had earned

My first serious job was selling plastic windows. I studied at the Academy of Banking in Sumy and created a small distribution network. I borrowed money from my parents, set up promotional stalls, printed flyers. The idea of the business was to offer passers-by to make measurements and find out the preliminary price of windows. After that, the factory’s expert measurer would visit the customers.

At first, I stood behind the stall. Later, I invited friends from the university. It was quite a profitable business: student work costs a penny, and income was 10% of the order.

Then I launched a student newspaper called “Sumka” [Editor’s note: Sumka is a bag in English]. We have published about 15 issues with a circulation of 10,000 copies. We placed advertisements there and were able to recoup the project. But later, I realized that I couldn’t make a lot of money and build a business on that.

In my fourth year, I switched to the distance learning and moved to Kyiv. I wanted to get a job in a large international company. It required improving knowledge: employers demanded much more than we were given at the university.

At first, I found a temporary job and was selling furniture. While riding the subway for 40 minutes at each end, I read international accounting standards. Six months later, I was able to land a job as an auditor at KPMG. In 2.5 years, I grew to the position of supervisor.

Job at Parimatch

In 2012, I met Serhey Portnov, co-founder of Parimatch. We were introduced by a mutual friend, Ilia Strah, former CMO, now a company shareholder. I didn’t know anything about Parimatch at that time. But Serhey convinced me that developing a business from the inside is much more interesting than auditing someone else’s.

I was offered the position of CFO. I still wonder why I agreed. In terms of money, the difference was minimal, approximately $500. But, apparently, I felt a synergy with the team. I thought that with these guys, you could really achieve something.

At Parimatch, I created a legal structure from scratch: initially, we had only one almost closed Ukrainian limited liability company. So the task was to develop a methodology, algorithms, licensing responsibilities, with what and how we would work.

I also introduced online payments so that users could place bets and withdraw their winnings both at cash desks and through our website. Ukrainian banks had almost no understanding of how card payments should be made at that time. So we focused on the European experience, adapting it to Ukrainian realities. I spent three or four years on these tasks.

Our competitors did not use technologies as we did. For example, they began accepting deposit payments by card one and a half or two years later. And we have gained a critical mass of online users during this time, and in 2015-2016, we became the flagship in the e-commerce industry not only in Ukraine but also in nearby countries.

The biggest fuckup

Things never go without any hitch. Once, the guys from the payment department ran over to me with puzzled looks, “We are missing a quarter of a million. What do we do?”. It turned out that due to technical errors, the same withdrawal was made dozens of times, and the user received $250,000 instead of $25.

In such situations, the only way out is to negotiate with the person to get the money back. It is almost impossible to solve the problem otherwise. Of course, you can try to deny the transaction, but it is problematic.

That client returned $250,000. So we gave him $10,000 as a thank you.

Becoming a shareholder of Parimatch and leaving the company

In 2015-2016, I became a shareholder of Parimatch. When I first started working for the company, I didn’t even think about it, and it seemed unattainable. But Serhey Portnov believed that two or three C-level executives should receive a stock option for their contribution to the business. And I was one of them.

From 2012 to 2017, I grew rapidly as CFO. We entered new markets, created companies, received licenses, negotiated. But gradually, it turned into a routine. For example, I had to explain to banks every invoice: in addition to the contract for advertising services, they asked for screenshots from the sites to justify why we advertise at such and such price with such and such supplier.

Eventually, I realized that it was not for me. I felt a slight burnout. It began to affect my work: I became more passive in my duties; I lost the spark in my eyes. So, I decided to resign as CFO.

Now the guys and I meet every month for unofficial P&L reports. I get dividends. I do not participate in operational activities. But I’m constantly monitoring the opportunities for Parimatch: if I see that a company might get a new contract, it will definitely get it.

Background of sportbank idea

In 2017, when I left the position of CFO, I became interested in monobank, still a startup at that time. They were actively growing; their operational model looked promising.

I reached out to Dmytro Dubilet, one of the founders of monobank, and offered to collaborate — to introduce our payment methods, Parimatch co-brands, to launch cards associated with us. But the guys at that time were focused on developing their own business, so they refused.

However, the idea stuck around. I found a group of like-minded people and co-investors, and we launched our own mobile bank, sportbank. It took two years to develop the platform and create the brand. Finally, we broke out from the MVP in October 2019.

Parimatch integrated our product as a payment method. Users pay a fee for withdrawing money to cards of other banks while withdrawing winnings to the sportbank card is free. It is a nice bonus for Parimatch regulars. 

However, as I understand it now, this was too weak a motivation for people to download and use our app. Clients need a full-fledged bank featuring deposits, installment loans, the ability to open a foreign currency account in Ukraine and abroad. And we had very limited functionality at that time. Therefore, the conversion of Parimatch users to sportbank was less than 5%.

Sportbank investments: a $10M miscount

We upgraded the product, added new features, and in 2020 launched an extensive advertising campaign with Andriy Pyatov. We covered the entire city. Our advertising materials were present across all metro stations. It helped us attract 150,000 new customers.

We also launched a referral program, offering customers UAH 50 (about $2) for attracting new users. But we had poor control for the program: it turned out that some even profiteered off inflating the number of new installations. We had to remove fake clients from the database.

However, the main problem was that the advertising campaign brought us mostly debit users: we could issue them a card but could not provide a credit limit. It isn’t easy to make money on such users. Our business model envisaged 40% of credit users while we had half as much in reality. That’s why in the beginning we expected to invest $5 million in sportbank, but we have already invested $15 million.

Currently have issued about 350,000 cards, and the portfolio has already exceeded UAH 600 million. We attract over 700-800 users a day, and half of them are credit users. So it is a good indicator for us. We have almost reached a break-even point with $1 million left to go. Then it will take another year and a half to return the investments.

Hence, today I estimate the value of sportbank at $60 million. I do not rule out selling the project in the future, but first, I want to make an operating profit. Teddy Sagi, an Israeli billionaire, wanted to buy the bank, but I refused. The inner ego says, “Boy, make a profit, let it start paying dividends. After that, the project will be worth much more, and you will praise yourself for having what it takes.

First $1,000,000 and life changes

I earned my first really big money in 2016 after receiving Parimatch shareholder status and the first dividends. The amount was ten times higher than the salary. Somewhere at that stage, I accumulated the first million. But I don’t keep money in cash, and I don’t have $1 million in my account. The money always moves.

All in all, I would not say that it has drastically changed my lifestyle. I still spend most of my time at work.

However, big money brought more opportunities, like traveling and buying big “toys”: a speedboat, a motorboat for wakesurfing. I spent money on entertainment for some time, which was always lacking in my student years, like nightclubs, parties, and more. It kind of balanced things out. It lasted two or three years, then it stopped.

In those two or three years, I overindulged in alcohol and gained weight. Finally, when I turned 30, I realized that something was wrong. I tried different things to make changes: tarot, numerology, gym, and physical activity like gymnastics. 

I found the answer in nutrition. First, I eliminated meat from my diet and got rid of the excess energy that had previously been extinguished by alcohol. Then I gave up alcohol altogether. I discovered long-distance running. I run marathons quite often. During the run, you are alone with your thoughts for four or five hours, and many of the questions inside get processed on their own.

I have been feeling its impact for three years: I wake up in the morning, I have no pain, I can form a clear plan for today in five seconds after waking up. It is of great value. I recently took a body test; my biological age is 26 years, eight years less than my physical age.

Why do I make money

In 2017, my partners and I launched the JKR Foun. It focuses on projects in the field of entertainment: gambling, gaming, etc. Initially, it also included fintech startups, but still, these areas require too many different ways of management.

Then in 2018, I suggested we take fintech projects into a separate structure. We got paid according to our shares, and I founded my own N1 fund. I have recruited former CEOs and network managers of large payment systems and banking, as well as consultants who in the past have helped startups get investments.

Our goal is to help fintech companies and startups get back on their feet so that after that, they give us dividends. In total, I have invested about $10 million in N1, and the estimated value of all the fund’s projects to date is $40 million. 

I believe that the fintech market has great potential. For example, the value of monobank is over $1 billion, and I share the view that Ukraine can accommodate five or six mobile banks. Therefore, there will be enough users and profits for everyone.

Parimatch and participation in technological payment systems form my monthly income. Some startups also make money, but I use this profit to develop other businesses.

I suffer from the fear of missing out. For example, someone succeeds and goes public with a billion-dollar estimated value, and it makes me think: “Why didn’t I do it?” It drives me and forces me to get up and move forward, launch projects, fund things. I get a kick from doing something new.

I had the opportunity to live and work in London and Cyprus, but I decided that my focus was Ukraine for the next five years. I must get a foothold here, set up a few projects that generate profit, and then move on.

Why do I earn? To have the resources to play high-stakes games with a capital of $100 million or more.