Competitiveness of Edtech startups in Saint-Petersburg

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Introduction

A significant number of studies about competitiveness and factors it includes specifically currently exist. From year to year the quantity of these studies increases steadily as I noticed during analysis of the topic in Web of Science. This fact might lead to conclusion that startups also become more competitive and successful from year to year. However is wrong. According to the statistics from 2012 there is 9 startups out of 10 who fail within 3 years after launching the product [Startup Genome, 2012], and in 2019 this statistic is more terrifying: 11 out of 12 startups are closing within 3 years [Startup Genome, 2019]. This leads to question: why startups don't become more competitive and successful while the quantity of researches in field of competitiveness is rising?

This research focuses specifically on startups in Saint-Petersburg. At first step, it is important to define the term “startup” (or “start-up”) for the following discussion. A lot of definitions of “startup” exist, but in this research will be used the Cambridge Dictionary definition: “startup is a new business, or activities involved in starting a new business” [Cambridge Dictionary, 2020]. The goal of startup is to break through “death valley”, this is the period of life of the startup when it loses its resources (financial, intellectual, physical and etc.) and the only goal is to reach the point when it stops losing money and then reach the point when initial investments are returned by incomes. However, usually startups begin with only idea and they got lack of resources. The only way to success for them is to increase competitiveness, be few steps ahead their competitors, be stronger and to pass this death valley as fast as possible. This is the place when theory about competitiveness is needed very strong.

The goal of this research is to discover ways to rise of competitiveness of startups. The focus was made only on Saint-Petersburg Edtech startups because there were a lot of possibilities to meet interesting projects here for me and as Saint-Petersburg is informal culture capital of Russia, Edtech market correlate with this appearance. For reaching the goal of this research the following hypotheses were tested:

a) For achieving success startups have to prefer donations, crowdfundings, 3F-investments (Family, Friends, Fools), bank credits or investing their own money more than venture investments from accelerators, business-angels or venture-investors?

b) It is not important to have a perfect team according to Adizes corporate lifecycle for launching successful startups?

For checking these hypotheses and finding answer on stated questions the following activities were done:

a) Analysis of fundamental approaches to competitiveness, defining specific criteria;

b) Provided questionnaire among Edtech startups based in Saint-Petersburg;

c) Provided interview among Edtech startups based in Saint-Petersburg;

d) Created a list of specific recommendations for startups for improving their competitiveness;

Taken approach may put some limitations on results of this research. Thus, probably results of this research would not be fully applicable by startups other than Edtech and by startups from another regions, cities and countries. Another limit is focus on analysis of modern and popular approaches to analyze competitive field of the company or the startup, but it doesn't try to create a new approach, and there are almost not considered researches about influence of specific factors of competitiveness on whole competitiveness of a company or startup.

The professional significance of this research is high because there are no any other research of this type, which analyzed intersection of startups and competitiveness, focusing on Edtech startups based in Saint-Petersburg, and this gap is now filled by this research. The outcomes of this research may be helpful to startups and possibly owners of little companies. Hopefully, this research will open new horizons for more researches in this field, especially about influence of specific factors of competitiveness of whole competitiveness of the company in Saint-Petersburg or any other country of the world.

This research has the following structure: firstly, there are reviewed the most popular articles about competitiveness, funding (related to H1), startups and teams (related to H2) and intersectional works; secondly, there are questionnaires and interview described, provided and analyzed; finally, there are final conclusions of this research.

1. Literature Review

competitiveness crowdfunding financial

Introduction: Definition of Competitiveness and Its Importance

The term “competitiveness” term can be broadly defined. The most precise for this research is the definition by Feurer and Chaharbaghi (1994): “Competitiveness is explained as the ability of firms, regions, and nations to generate relatively higher income and levels of sustainable employment for the benefit of shareholders at the time that they are exposed to international competition” [Feurer and Chaharbaghi, 1994]. As follows from this definition, if the company is successful in the field of competition, it will achieve the top of the market. As it was stated earlier, there are a lot of studies where authors underline the importance of competitiveness, and in this part of the research I would like to analyze the most famous and popular approaches. However, before getting into details it is important to study background about Edtech market, startups, funding and other issues.

What is the Edtech?

First educational and online projects already appeared in 1990-s, however the began to increase in popularity only after two decades with rising of the internet [Konarchuk, 2013]. The first step in this evolution was appearing of Massive Open Online Courses (MOOC), such as Coursera. Comparing to traditional education methods, learning with the help of online courses gives to people an ability to learn whatever, whenever and wherever they want, which makes it more convenient than studying in classes. As D.S. Konarchuk describes in his research, modern technology platform consists of MOOC (Massive Open Online Courses), LMS (Learning Management System), Ecosystem (represented by Social Networks, Big Data, Content producers) and Infrastructure (mobile devices: phones, PCs, etc.) [Konarchuk, 2013]. These elements create this new platform which highly influenced on Edtech development.

There are still exist debates between those who vote for Edtech and those who are against it (for Traditional learning). Both sides have a lot of arguments, so it seems that this confrontation will last forever. Some specialists offer to consider another option - blended learning. B.V. Penkov in his article “Discourse of Education: online and blended learning” [Penkov, 2015] studying this option within the context of high schools of Europe and Russia. The first point is that online learning is now part of our lives and we cannot ignore it. The second point is that online learning can make educational process more effective, therefore teachers should learn on how to use it in the most efficient way. Finally, Russia is not far away from Europe and other world in context of Edtech technology. One relevant outcome for this research which can be made from this article is that Edtech in Russia is a part of learning process, therefore there is enough space for Edtech Startups to test their ideas and create new products.

It is hard to underestimate influence of Edtech on society. A.V. Ostrovskiy and M.V. Kudina in research called “New paradigm of learning in digital transformation of the country” [Ostrovskiy, 2020] are providing analysis on how Edtech influence on the world and Russia specifically economically and socially. They came to conclusion that the Edtech market now is almost common thing, market is stable, and it is easier to predict its growth in future. Edtech projects mostly aims not on local, but on global markets, trying to work worldwide via online instead of working in offline for limited part of the market. In context of educational institutions, there are appear a lot of informal institutions, where people can learn anything from astrology to coal mining and working online helps businesses to find their clients. Talking about Russia specifically, even government realise that it is important to transfer modern technologies and adopt them in the country. Therefore, Edtech now is not only the technology, which helps to study online, it is a powerful instrument which can transform educational system of countries, and we cannot underestimate its significance.

In conclusion to this part it is relevant to look at development of Edtech market in Russia. Positive factors were described earlier in the text; therefore it is important to consider negative factors. According to B.J. Tagarov, there are following weak points of Edtech in Russia exist:

a) There are a lot of governmental educational institutes in Russia comparing to private educational institutions. Private sector (in 2016) was in Russia - 8,9%; in USA - 42%; average in Europe - 21%. Low part of private sector leads to low competition and low level of innovations on the market [Tagarov, 2018];

b) High level of black market. It covers about 20% of the market [Uhavon, 2017]. There are a lot of people who create their own online courses and sell via internet directly to customers and do it unofficially;

c) High average age of employees in education industry [Bondarenko, 2017] which makes it hard to implement new modern technologies;

d) Edtech takes very small part of the educational market in Russia, therefore for a lot of entrepreneurs it is hard to earn enough money with educational projects.

These statements seem true, because a lot of respondents of the interview in this research called these reasons of their fails, which will be presented later in the text.

Now when we discussed what is Edtech and how it represented in Russia, the next important step is to learn more about Startups in Russia

Russian Edtech startups

As it was stated in the beginning, 9 out of 10 startups fail within 3 years [Startup Genome, 2012]. The reason for it is that startups have only idea for business, but they don't know for sure will it generate money or not. The purpose of the startup is to find working business model for their idea, which will generate cashflow and bring incomes. So, talking straight, 9 out of 10 startups fail because they didn't found business model for their idea. The place of their death called “The Death Valley”.

Russia is not an exception: almost 10-15% startups were successful in 2013 from all amount [PwC, 2013]. Another specific characteristics of Russian startup industry are described in the research called “Problems of realisation Startups in Russia” [Frolova, 2015]. Author mention a lot of barriers in front of startups based in Russia. For example, there is not enough of transparency on the market, so new startupers can have difficulties with searching of investors and evaluating their projects. One interesting thing about Russian startups is that a lot of successful projects are similar to foreign projects (for example, Google - Yandex; Facebook - VKontakte). Another important problem is that if startup wants to reach international market, it has to compete with other projects, and it is hard to do if you are located outside the market (in Russia). According to RVK research [RVK, 2014], educational system in Russia do not grow people who can work independently, think critically and innovative, be an entrepreneur. Entrepreneurial skills are the least formed competency in Russia (42% stated that).

This article was written in 2015, therefore it is important to update status about these problems. Nowadays the market is still not transparent in question of deals (buying or investing in startups). However, with the help of Edtech there are a lot of entrepreneurial courses exist, which can help to improve entrepreneurial skills and start new project. A lot of startups based in Russia solve local Russian problems and work only in Russian market, while projects who want to reach international markets are free to find accelerator or other institute which will help to reach this goal.

As example, there are a lot of businesses in Russia who work in Edtech, such as: Netology; Skillbox; Stepik; Foxford; Skyeng; etc. All these projects were startups earlier, and they grew up into successful business in their motherland - Russia. Conclusion is obvious: there is enough abilities for creating a successful startup both local and international in Russia. The next topic is what types of investments exist for Startups and what is the situation with investments into Startups in Russia.

Venture capital and investments in Russian startups

Startups lifecycle consists of the following steps: seed, startup, early growth, expansion, exit [Evdokimova, Kobisheva, 2017]. Each step has its own methods of getting investments. In this research only seed step will be considered as it is needed for checking hypothesis. On this step startup usually need small amount of money in order to check their business model in real life by checking hypotheses about target audience, supply channels, incomes and costs and others. Main sources of investment on this are personal capital of founders, borrowings from friends and relatives (3F - Family, Friends, Fools), grants from different institutions or funding from business angels [Blank, 2013]. Accelerators or business incubators can also invest into startup, however on practice these institutions prefer not to invest into startups on seed step. In practice using or personal capital or borrowings from third parties put limits on startup growth, so sometimes they take part in special contests in order to win grants. Grants are usually big and startup can check more hypotheses about their business model without losing control over the product [Blank, 2013]. Business angels are also an option, these are people who have a financial capital and usually familiar with startup industry, so they can invest money into startup, but they usually ask for a share in startup, so they could sell it in future and have return on investment [Aliev, 2015]. Accelerators and incubators are also a good option for startups, however only 27% projects in Russia in 2014 were succeed after the program (comparing to 88% in Europe and 87% in USA) [Zubareva, 2014]. Another option of getting money for startup are investment funds. They can be splitted into two categories: Private Equity (PE funds) and Venture Capital (VC funds). They can be governmental, corporate (related to company) and private funds. PE funds can invest into startup on any step of its growth, while VC funds prefer to invest into new companies on early stages of growth [Korshunov, 2016]. One of the most popular options for raise money for startup is crowdfunding. The principle is that startup create page in the internet (usually special websites used such as Kickstarter, Indiegogo, Planeta.ru, etc.) where it tell about its idea and set the sum of money required for launching the product. Then people decide either to invest or not to invest into startup [Sanin, 2015]. Finally, startup can take a bank loan, however this very risky option, because startup doesn't earn money on this stage, therefore they may be not able to payback to bank [Feld, 2013]. There are other methods which can be used by startups for getting money into the project, but they are not so popular, so they will not be considered in this research.

There is an information how these sources of funding in Russia were splitted in whole amount in 2013 [Json, 2014]:

a) Venture funds - 34%;

b) Governmental funds - 19%;

c) Corporate funds - 8%;

d) Business Angels - 23%;

e) Personal capital - 16%;

f) Others - 0%.

In 2014 there was the following situation [Json, 2014]:

a) Venture funds - 26%;

b) Governmental funds - 34%;

c) Corporate funds - 16%;

d) Business Angels - 9%;

e) Personal capital - 8%;

f) Others (incl. crowdfunding) - 6%.

Let us have a look on corporate investments from the point of view of corporations themselves. The article called “Corporate venture capital investment. Synergy of corporate venture capital fund and corporate business incubator” by Zinov V.G. and Eremchenko O.A. [Zinov, Eremchenko, 2019], Assistant of Management department of Financial University under The Government of Russian Federation. Stepan write that the goal of corporates is not to compete with new perspective startups, to use them to increase their competitiveness on current market. Startups usually considered as flexible and innovative structure that can adopt to new conditions fast, while corporations have a lot of resources for growth, promotion, sells and other benefits, so they are considered as slow and sustainable. Startups can use resources of corporation for fast grow, while corporation can use results that startups can bring, usually it is faster way of doing something, making it cheaper or earn more.

There are four types of funding startups by corporation according to the author: potential investments; moving investments; passive investments; developing investments. Moving investments are connecting current business of the corporation with possibilities of startups on high level, which is strategic investment. This type of investments doesn't consider searching for new market possibilities. Developing investments consider funding startups which are not related to current business of corporation, however this synergy can bring complementary benefits which will lead to increase in demand of goods on the market. However, in this case these benefits usually spread on all the market, so competitors may have benefits from it too. Therefore, this type of investments can be helpful only in case if corporation will have more benefits than its competitors. Potential investments are type of fundings when current investment can bring financial benefits, but sometimes it can be not the strategic investment. In this case startup usually bring minor financial help, however it doesn't influence on whole company's strategy. Finally, there are passive investments, when funded startup have not a lot of common things with core activities of the company, but still it can bring financial return on investment.

There are a lot of ways for corporation to interact with startups, however the most popular way according to GVA is corporate venture funding into startups, which takes about 62,6% [Global CVC, 2018]. Before investing into startups, corporation should create a system for selection of startups, which may look like that:

a) Searching Startups;

b) Assessment of investment attractiveness;

c) Making a contract with specified terms;

d) Due diligence;

e) Setting KPIs and Funding;

f) Controlling of the project;

g) Exit from the project.

For startup it means that before entering the corporation and asking for funding, they should analyze what benefit can they bring to the corporation and what possible ways of interaction exist between them. This strategy can save a lot of time for startup on searching for relevant corporation, who will most likely fund the project.

If the startup doesn't want to sell its share or have take credit in the bank which is risky option, they can try using bootstrapping approach. Bootstrapping means creating business (Startup) from scratch using only personal resources, without any funding from aside. This approach is convenient for founder who are not sure about the success of their idea and just want to check whether it is true or not. In this case founder doesn't have too much resources to lose and can avoid pressure from third parties. The article “bootstrapping, or business without investments” by Melikova A.S. and Melikova S.S [Melikova, 2015].

Bootstrapping consider following ways of getting money into the project: using personal savings and capital; 3F model (Friends, Family, Fools); working without office; developing startup while working on current job; having goods with possibility to pay after it is sold; getting grants; using barter; paying salaries which volumes connected to financial results of the project; etc.

Bootstrapping have its positive sides and negative sides. Talking about positive sides, founder can have an experience of founding of startup with low level of risk; lack of resources makes founder to look for creative ways to deal with problems; independance; low financial risks. Talking about negative sides of bootstrapping, there is a risk of losing all invested money and resources into the project (however, there is always such a risk, not only in bootstrapping); usually this startup have losses over incomes; with lack of resources there are limits for growth, so it takes a lot of energy and time to grow startup.

The idea of bootstrapping evolved into methodology called Lean Startup, which gives more clues on how lean startup should operate. In this research it is not relevant to describe it in detail, so for more information approach to another sources.

Another popular option of funding the project is crowdfunding. Simply saying, this way of funding helps founders of projects get money from people who are interested in the product, so they can pay for it even before the product appeared. The research called “international crowdfunding as a method of developing investment of project activity in the Russian Federation” by Tatiana E.M. helps to get into details of this topic [Maslova, 2019].

Existing forms of business financing are not always available at the beginning of the project, also have some disadvantages, such as dependence on investors or high costs. With development of IT industry there are a lot of new instruments of funding projects appeared, for example crowdfunding.

While this is new popular modern method of getting financial resources for the project, it has already aroused quite a lot of interest among investors and founders of the startups, representatives of the business world. In addition, when other sources of financing are almost non-existent, crowdfunding may well help a company to maintain its solvency, since one of the reasons for the bankruptcy of small and only organized enterprises is the lack of financial resources at the initial stages [Маслова, 2019]. Crowdfunding helps to get rid of this problem.

In contrast to numerous different types of venture financing, crowdfunding have a wide scope of objectives. Huge numbers of them try to expand the measure of capital so as to begin a particular one-time project (for instance, an event). Progressively, crowdfunding is viewed as a source of startup capital, which permits businesspeople to expand the initial amount of financial resources needed to make another business. In any case, it is not obvious to what degree crowdfunding replaces other types of funding, given that numerous investors in the beginning usually offer substantially more to new startups than financing -- advice and guidance.

Crowdfunding also can be used for showing the interest for the product of startup that will help attract more traditional ways of financing. A model is a savvy from Pebble Technology. This task was at first dismissed for adventure financing, however then arrived at it after the Kickstarter battle. An example is the smart watch from Pebble Technology. This project was initially rejected for venture financing, but then achieved it after the Kickstarter campaign. Conversely, the lack of demand increases the likelihood of failure, if you are not interested in the project, there is no need to invest additional capital [Crowdfund Capital Advisor, 2014].

It is additionally used for showcasing purposes, making enthusiasm for new startups in the beginning periods of development of the product. Therefore, the popularity of Pebble watches urged different engineers to compose applications for this item before they were even released, assisting with making an upper hand over already launched product. In this manner, crowdfunding, as any other different type of venture funding, additionally to capital, offers various different assets that might be valuable for startup founders.

There are three scenarios of using crowdfunding exist.

The first scenario is events related to art and humanities startups. They add to a support model, making supporters altruists who do not anticipate a direct return from their investments [Ishina, 2014]. It is worth mentioning that until the start of 2012 year, the named model was considered predominant within the entire scope of crowdfunding [Ishina, 2014].

The second model of crowdfunding is based on the following idea: people invest money into the startup or the product and are waiting to get something back, return on investments, however these returns may be not financial, usually it is something material. The main advantage for lenders can be considered higher rates, moreover, the possibility of providing a loan in a fairly wide range of industries, but at the same time, the benefit received by the borrower consists in reduced tariffs and various conveniences of obtaining credit funds [Wheat, 2016]. The primary element of this model is a specially created calendar of returning obtained assets to a funders. It tends to be contended that the financial specialist knows ahead of time for accepting his speculations, including the interest indicated in the agreement. Only individuals act as a source of financing.

The third crowdfunding model is the one, which is based on the receipt of remuneration: for the support of the project, investors receive a non-financial or financial award [Ramsey, 2012]. This model is pretty popular all around the world, because Kickstarter, the most popular crowdfunding platform, started to use this model.

Also, there is the other option for of funding called crowdinvesting exist. This model differs from crowdfunding because it is supposed that investor (usually individual) will get financial benefits from investment in future). There are three main model of crowdinvesting exist according to Ishina I.V.:

a) the Royalty model, in which sponsors receive a share of the project's income or profits;

b) public lending, when there is a clear plan according to which the investor returns investments with predetermined interest;

c) joint crowdfunding, when an investor becomes the owner of part of the enterprise, its shares, dividends.

The most popular crowdfunding model nowadays is a Joint-Stock funding, but this form is tricky a little bit. It has a lot of critics because it provides high level of risk and usually make changes in legal form of the company. At the same time, the company's shares, voting rights at meetings of shareholders, dividends or part of its property are at the disposal of investors [Valanciene, 2016].

Nowadays crowdfunding and crowdinvesting are very popular options for getting investments into startup all over the world, so startups should keep these options in mind.

Getting into details of ways how startup can get funding, it is significant to analyse option of entering the accelerator or incubator. The article called “Impact of business incubators and accelerators on the development of small and medium business in Russia” helps to get into details [Kornyshev, 2019]. Business incubator or accelerator are institutions which goal is to create comfort infrastructure for startups who try to create innovative products. Usually accelerators and incubators focus on young entrepreneurs on pre-seed and seed stages. Accelerators and incubators can help to startups by funding money into them, looking for competencies (people), educational programs, providing helpful business contracts and help of experts of different niches in the market.

Incubators have following features: they usually exist on investments provided both by personal and governmental; they don't ask for a share startup; they create working places and help to get team for startups. While accelerators usually have following features: they usually exist on fundings of different investment funds; the usually ask for a share in startup; they help startup to check and find working business model, so the project could have incomes. Author states that business-incubators exist for helping startups on pre-seed and seed stages, while business-accelerators exist for helping startups to grow and scale more efficiently from seed stage to further stages. This differentiation of business-incubators and business-startups is very convenient and simple, so this will help to young startups to choose correct institution in order to achieve stated goals.

The article “effective business training for startups, or what is accelerated in the accelerator” written by Kozlov M.R. helps to get deeper into details about specifics of acceleration programs [Kozlov, 2013].

Accelerators offer help over some undefined time frame -- commonly few months to a half a year. This period of time is chosen because of the decrease in the timespan required for launching an online project, yet additionally because of the making of a high-pressure conditions that will encourage fast development of the product. While various programs usually offer further help to succeed startups, temporarily at their first steps, such organizations consistently communicate more seriously with the acceleration program. Quickening agents normally give a coaching program. Another advantage that can be given by accelerator is mentors program.

Mentors are people who have big experience in business and startups in different markets. Accelerators usually connect startups with appropriate mentor so this synergy could give great result in terms of startup success. Mentors helps to set ambitious goals, helps to analyze positions of the startup and give information which will help them to grow, what startup is doing good and what can be done even greater. Also, accelerators help to startups to create long-term partnership with mentors which can be an advisor for 24 hours each day.

Accelerators also help to founders of startups to build helpful relationships with helpful people on the market, such as representatives of other successful startups founders or representatives of huge corporations. These people can provide feedback so startup from accelerator could become “harder, better, faster, stronger”.

Another accommodating point is support for making the product which is one of the segments of the commitment to expanding the valuation of new projects because of their interest in the business acceleration program. Since most of member of the team in the accelerator are not experienced and are at the beginning of the path, support from professional business creators and other founders of successful startups brings a lot of unique possibilities to make faster progress in the development of the product.

“Many startup founders described the level of quality of mentors and the feedback they received as uniquely high and unattainable beyond the accelerator program, which should be considered one of the significant components of the contribution to increasing the assessment of the cost of startups as a result of their participation in the business accelerator program” - writes in this research Kozlov M.R.

The conclusion about whether accelerators helpful or not can be made basing on evaluation of quality of mentorship program, because mentors is such a unique person who have enough experience for evaluating position of the startup, finding weak and strong points of the project and help to grow faster.

Not considering source of funding, startups are usually evaluated by investors by very different criterias. This problem is well stated by Inshakov M.O. in the article called “innovative startup projects: experience, evaluation, contradictions of implementation” [Inshakov, 2015]. Author says that there is still no existing unified set of criteria on how investors should analyze attractiveness of investing into startups. However, there is statistic exist which can help to realize, what mistakes startups usually do before failure so founders could avoid it. What is more important, professional investors, incubators, accelerators, business-angels, despite their own preferences, are familiar with these popular failure reasons.

One of the most widely spreaded reasons of why startups fail is that there is no need in their product on the market. Simply it means that nobody on the market need the product startup think other people need. It is the reason of failure in 42% of all failures among startups [Barba, 2015]. Famous business angel H. Jacobsson defines this problem as situation, when market don't know about the product, don't understand the purpose of the product or simply don't need the product at all [Jakobsson, 2019]. The reasons that lead to this problem include lack of market analysis, lack of communications with target audience, overvalued size of the target market or not full understanding about the problem which target audience have.

Another wide spreaded reason of failure of startups is lack of resources for development of the product, especially financial resources, this problem lead to failure in 29% of cases [Barba, 2015]. However experienced investors note that it is not the only reason that lead to fail, but one of few reasons.

The third popular reason of startups failure is lack of competencies in team of startup. Technologies, marketing, accounting, management and simply the experience of work in startup's sphere. Lack of such non-financial resources lead to failure in 23% of cases [Barba, 2015]. It can be easily explained, because startup needs time to learn new skills and get new knowledges for successful operations, but the main resource of startup is time, and usually there is no time to learn new spheres from scratch to details.

There are much more reasons about why startups fail but would take a lot of time to discuss them all in details. So finally, the fourth popular reason of why startups fail is bad marketing. Startups should pay as much attention on promoting product, as they pay to development of the product. It is important to find appropriate channels of communication, choose right tone-of-voice, do it efficiently and creatively. It is important because 14% of failures are about bad marketing solutions [Barba, 2015].

In order to get investments successfully, startup founders should know and avoid popular mistakes of startups which lead to failure, and pay attention to personal preferences of investor, business angel or other financial institution so to find correct investor faster.

It is very important to note that these problems can be faced not only by startups based in Saint-Petersburg, but also by startups from any other country. It is interesting how startups from other countries fight with these problems. There is a research related to Japan and Japanese startups called “University startups and ventures and the country's competitiveness: Japan's experience” written by Lvovna I.T. [Lvovna, 2018].

The first problem author states is a problem of getting license on intellectual property. This term includes logotype, name of the company, technology, and many other elements. Japan has the law called The University Technology Transfer Promotion Act, “TLO Law”, which helps to intensify research activities in universities and inter-university research organizations, as well as facilitating the transfer of research results to the commercial sector. In this case TLO is an intermediary between universities and companies who is patenting university research results and then selling licenses to companies. This scheme use intellectual property of startups gives them amount of money for the beginning of the product development, but if startup meets success, it is not able to sell itself to corporations, because there is TLO who takes all the money from intellectual property.

It leads to another important and popular problem: there is not enough funding in Japanese startup market, especially on pre-seed and seed stages. However, the 2016 Japan Revival Strategy, which declares that the era of the fourth industrial revolution is the time of startups, set the goal of doubling by 2022 venture financing of startups (not only university ones) in proportion to GDP [White Paper on Science and Technology, 2017].

Lack of investments on the market lead to more core problem: weak development of venture capital market. It includes not only finances, but human resources too. Human resources include such problems as: organizers of university venture capital companies need to attract staff, not limited to university resources; rules for university professors who are at the same time managers / employees of venture capital companies whose application is unclear; human resources to support venture capital are insufficient. Possible solutions of these problems offered by the author are: studying entrepreneurship by entrepreneurs; encouragement in large companies of part-time work and part-time work; training and engaging professionals who can advise on intellectual property issues and investment strategies. These solutions seem reasonable and logic, because human resources are very important in any human activities, so it is hard to disagree with it [DUCR, 2018].

When talking about financial problems, author states that there are several major problems in Japan: offering funds between basic research and obtaining a “proof of concept” (PoC) is not enough; the funds required to conclude licensing agreements with the university and provide the university with services are insufficient; organizations that supply risk financing are not enough; prior to gaining access to private funds, the effective use of state support is necessary. Stated problems are not unique, some of them often can be met in any other country, so it is highly important to find solutions. Author offer several ways to overcome these problems: firstly, strengthening the system of financing the shortage of cash resources of companies in the early stages of their development (GAP Fund system); secondly, encouraging universities to acquire university venture stocks. In this way, universities will support venture capital growth and generate revenue; thirdly, promoting collaboration between venture capital companies and universities; fourthly, expansion of the endowment system, raising funds from abroad; finally, encouragement of university-oriented ventures to further use public procurement. These solutions sound clear and efficient, however there is no any data on does they really work or not. There are needed more researches on this topic in theoretical space and of course more live examples of these methods to see whether they really work or not.

While there are a lot of opportunities to get funding to startup, there are a lot of barriers to that. The first reason is lack of business-angels in Russia comparing to business angels in developed countries. Business-angels are willing to invest money on early stages of the startup, pre-seed and seed, the most important first steps of any startup. Statistics says that while there are around 1000 business-angels in only USA, in Russia there is only about 100 or less [Kudinov, 2014].

Another problem of Russian startup market is that comparing to developed countries the average volume of deals here is usually less than 400 000 dollars, while in Europe or USA the same project could get around 1 million dollars [Kudinov, 2014]. It seems unfair, because if startup aims on global market via online, there are the same costs for promotion for both projects, but the startup from russia could exist for few months and the same startup from Europe or USA could exist few years.

Another problem that is highlighted by many researches is low level of transparency on the startup market in russia. There is not a lot information about important deals between startups and corporation [Yanushkin, 2019]. While at the same time there are a lot of famous investors and startups in Europe and USA, whose deal information is widely spreaded and famous.

It is interesting to look at Russian startups by foreign investors eyes. The research called “features of attracting foreign investor to financing Russian startups in modern conditions” written by Polyakova E.A. helps in this case [Polyakova, 2017]. The attractiveness of Russian startups for foreign investors can be explained by low salaries and costs on running business. It plays significant role when it comes to highly professional human resources, because the same set of skills in Russia and for example in USA costs differently. So in this situation of cheap rubble foreign investors get a chance to pay less money than in developed countries, but to earn the same amount of money or even more. However, the risks of making investments into Russian startups are higher, not only because of low level of startup market development, but because of financial risks and uncertainty in whole country [Shevchenko, 2016].

It is stated by a lot of researchers that there are a lot of problems on startup market in Russia in terms of funding of projects. It would be interesting to learn specifics of venture investments in Russia and in foreign countries [Yanushkin, 2019], and article with the same name written by Yanushkin V.A. and Miroshnichenko I.D. can help to make a brief overview of this topic.

The articles tells about new trends in venture funding, defines difficulties the projects usually face in different countries. Both Russia and USA considered in this research. As venture market appeared in USA earlier than in Russia and now it is developed better, it is logical to begin with analysis of USA venture market and then take a look on venture capital market in Russia.

In the USA, investors are not hesitant to put financial resources into risky startups, and this happens because of the improvement of the stock market. Near 3000 organizations are registered on the NASDAQ, the organization's capitalization in 2016 was up to $7 million. On account of venture investments, various organizations became worldwide organizations.

Schools, Universities, business incubators, business accelerators and other institutions of this kind usually have a lot of fundings in USA. Moreover, venture market in USA is the largest market in the world [Yanushkin, 2019]. According to the results of 2018, the amount of venture capital transactions in the whole world increased by 32% compared to the year 3017. The average annual growth rate on the long-term basis of the investment market was 12.2% [Rae, 2018].

In the 1st and 2nd quarter of 2018, AK returned investor confidence due to the growth of indicators. At the same time, in the III and IV quarter, American indicators even surpassed China in comparison with 53% to 21% [Rae, 2018].

Author declares few possible reasons on why Russian venture capital market is not so developed as venture capital market in USA.

The first reason is the mentality of internal and external investors towards the negative advancement of the nation's venture market. Since 2000, with the help of the Russian Venture Company, different improvement establishments have been made, just as adventure assets for the advancement of little and medium-sized organizations. Notwithstanding the crisis of 2008, the state guaranteed stable interests toward venture business. Unpromising unrewarding activities represented over half of the aggregate, and in this way state bolster decreased speculation turnover.

Secondly, it is the administration's power over endeavor financing. Since the antitrust approach has been converted into Russia, the arranged Federal antitrust strategy, remembering the redirection of patent of organizations for the advancement circle to the state, can be referred to for instance.

The third reason is that exceeding supply does not match the demand for innovative products. It should be noted that the presence of great demand for products manufactured by innovative companies is one of the key incentives for development [Rae, 2018].

However, now there are little ray of hope is breaking through the cloudy sky over Russian venture capital market. In 2018, business angels invested more than 26.7 billion rubles in domestic startups. Compared to 2017, it is 10.4 billion more. Since November 2018, open transactions in the Russian investment market amounted to 275 units, and the venture company concluded 229 out of the total according to RVC. Having collected investment data, RVC predicts a market exit from stagnation, despite the fact that companies play a significant role in contrast to the "angels" [Crunchbase, 2018].

Private investors are a closed segment of the venture capital market. Private funds and Gosford surpassed other indicators in the number and the volume of transactions (1.9 billion rubles). Last year, business angels invested about the same amount, but the number of transactions in their segment was 2 times higher [Zokaltsev, 2008].

The segment of corporations in terms of volume of injections grew by more than 7 times, from 1.2 billion rubles to about 8.6 billion rubles. In terms of the number of transactions, this segment doubled, from 23 to 47 projects. It should be noted that M&A transactions are not included, as well as injections into the launch of joint ventures, since the subject of the study is the venture market. M&A deals in this case only act as exits [Inc, 2018].

Let's finalize all that has been written earlier. Venture capital is significant for development of economics in all countries of the world. With its help new technological and innovative startups can growth and have financial support for this purpose. This allows to create new markets and industries. “In Russia, the development of this financial instrument today faces very great difficulties, due to the fact that the activity of venture capital requires a fundamentally higher level of development of many market institutions and (or) significantly greater integration into the world market” - concludes Yanushkin in his article.

Analysis of researches of competitiveness

There are various researches about competitiveness exist. A lot of different methodologies and instruments were developed in order to create a whole structured picture on what competitive factors exist and how they can be classified and combined. However, the main idea which was discovered is the following: there is still no single universally accepted theory of competition, which leads to the fact that scientists and practitioners use different approaches to competition, which sometimes conflicting with each other [Modern competition, 2010]. Therefore, let's analyze existing models of competitiveness.

Many competitive researchers include Michael Porter's researches of competitiveness, so I want to make an analysis of this approach. Michael Porter is famous for the Porter Diamond National Theory of Advantages, also called as the Porter Double Diamond Model or the Diamond Model. This is due to the fact that the factors included in this model resemble the shape of a rhombus. This model helps enterprises to analyze their competitiveness in the global market. This model consists of the following determinants: “factor conditions; related and auxiliary industries; conditions of domestic demand; strategy, structure and rivalry; government; chance events” [Porter, 1990].

Although this model is popular, it has some disadvantages. Firstly, although this model is almost fundamental for finding competitive advantages, it does not help to determine all the specific factors which bring advantages to the company, however it only gives a vector for further searching. Secondly, this model is difficult to implement by startups, since it is oriented to the international market, while for most domestic companies it may be poorly applicable, and even if the startup is international, most likely it is not to have any data in terms of domestic demand, which the model requires. Although some researchers write that “competition is already global” [Kareska and Jovanov, 2016], this is not a confirmed fact.

One more tool for providing analysis of competitiveness by Michael Porter is Porter's five forces, which includes the following: competition in the industry; Potential of new entrants into the industry; Power of suppliers; Power of customers; Threat of substitute products [Porter, 2008]. This model helps to identify specific factors which can be improved in order to create competitive advantage. However, the arguments against Porter's five forces remain the same.

There is exist a theory which helps to avoid competition on the market called blue ocean strategy [Kim, W. Chan Mauborgne, Renйe, 2005]. Existing for years markets usually have strong competition between players, and author calls this field “the red ocean”. However, there are also exist such markets, where competition between players is weak, and author calls this field “the blue ocean”. The strategy author proposes requires entering or creating new markets with low competition among players.

There are few tools author proposes, and one of them is called Strategy Canvas. This tool allows to easily place all important factors where competition is faced (for example, quality of service, price, quantity of sitting places, delivery option, etc.), review and analyze it, and then try to find out ways for differentiation from competitors on the market. This tool focuses on specific factors of competitiveness of each specific market, so there will be different factors of competition in bank and in restaurant industries. However, significant part of this instrument is that it helps to find out new factors of competition which might be important for target audience, but for now are in blind spot of other players on the market. Strategy Canvas might be useful for startups for searching of new markets where it is possible to avoid competition with other players at all.