“We are ready to give innovation partners access to our global B2C sales channels,” Andrey Nikonov, Head of Startup Engagement at Kaspersky, on new scouting projects

The Kaspersky Innovation Hub (iHub) recently announced a new phase of project scouting for its Open Innovation program. It’s Kaspersky’s fifth call for submissions from startups. This time the focus is on B2C solutions in fintech, gaming, and smart homes/IoT. Head of Startup Engagement, Andrey Nikonov, revealed the details of the new selection process in a conversation with Evgeniya Barchenko, co-founder and executive director of the scouting company GoTech Innovation, the program’s scouting partner.

Can you tell us why you’re inviting B2C projects to collaborate and why fintech, gaming, and smart homes have been chosen?

Kaspersky has a B2C marketing department that focuses on new products for clients in the B2C segment. The department is now on the lookout for technology solutions in three strategically important areas (we call them ‘arenas’) — fintech, gaming, and smart homes. This need didn’t arise of its own accord. The department conducted in-depth analysis, closely monitoring these segments. For example, gaming and smart home solutions have been a priority since last year. We already addressed them in our previous selection programs, each lasting two months, but we didn’t find everything we were looking for. The current program is longer — until the end of the year — so we can engage as many applicants as possible, choose the best solutions and launch joint products. However, we encourage companies to apply before July 31, because the first PoC projects will be arranged shortly after this date in August.

For the applicants, it will be an opportunity to present their products to Kaspersky’s partners and global sales channels, and for us it will be an opportunity to offer the market new products capable of improving people’s lives.

Is there a particular product you want in these areas and what hypotheses have you made regarding what you want to achieve?

There are several trends in each arena that served as the hypotheses for joint products. For example, a VPN for gamers, or virtual AI concierge. If we find a suitable company that has this sort of solution, then we’ll work with them to produce a joint product.

You state that you’re looking for companies at the growth stage/investment round A. Why this particular stage?

We need a market-ready product with moderate risks and proven sales. We want to speed up the time-to-market.

As a rule, when startups reach investment round A, they already have a finished product with initial sales that are starting to grow and that’s why we singled out this category. Moreover, when we launch these affiliate programs, there’s no expectation that the selected companies will make significant changes to their products for us. It’s not convenient for either side. That’s why our aim is to take the solution in its current form, with only minimal adaptions in terms of design, without touching the technical part.

Nevertheless, we are also interested in early-stage startups but that’s part of our other selection processes or the day-to-day work of our innovation hub division. If you are an early-stage startup and want to become a Kaspersky innovation partner, apply through our website kaspersky.com/ihub.

Which factors are you interested in besides the growth stage?

Many of these factors stem from the main criterion — the technological readiness of the product and evidence of initial sales. Plus, the composition of the team. It’s preferable if the company has both technical staff and sales specialists. The minimum requirement is for two founders — one for each side of the business. But it’s preferable if there’s a small team of about 10–20 people.

Are there any particular qualities that you’re looking for in a company?

Here, we don’t differ much from a typical venture capital fund and emphasize five attributes. First of all, there’s an assessment of the team. Then there’s the market where the company operates. The third quality is traction: how quickly a company develops its product or acquires new customers, and at what rate that changes over time. Another quality is the technology involved, which we assess, among other things, with the expertise available at Kaspersky. And the final attribute is the product fit: how closely the company’s solution coincides with the hypotheses that we formed at the beginning of the program. Find the initial hypotheses here.

Which of these attributes were the first to catch your attention in the previous selection programs?

Product fit — whether or not the startup fits the profile. After that comes the evaluation of the market, then the technology and the team.

How do you envisage the final result of the program?

The end result is a long-term contract, joint products generating increased revenue, and that revenue being split between Kaspersky and the company. The interim outcome is a successful pilot and testing of the hypotheses (economic and technical). If most of the hypotheses formulated during the pilot stage are confirmed, the result can be considered a success.

We plan to launch the first pilots at the beginning of August.

What are the practical benefits for those companies that reach the final stage?

They’ll receive feedback on the economic and technical aspects of the pilot project from Kaspersky, that will point out specific mistakes and potential areas of growth. The company can also mention that it has experience of collaborating with us in subsequent communications. Yet another bonus is access to customers. Initial access is to a small sample of a few thousand, and then to a larger audience when positive results are achieved.

We compensate the startup by up to $10,000 during the joint pilot. The company can receive compensation for the costs incurred during the pilot: for example, payments for additional server capacity, the use of product licenses in joint box solutions, or visually adapting its product to Kaspersky’s needs.

Alternatively, when a joint product is launched, a division of revenues can be agreed upon between the parties. This condition is discussed individually and depends on numerous factors, such as how the resources of Kaspersky or the startup are used for sales. It can be split either 30/70 or 70/30. It’s a question of who is putting in more effort.

An additional incentive for companies might be the opportunity to enter foreign markets. But in that case, the pilot must be successful, and the product must meet the requirements of the market the solution is entering. We would then be ready to expand the geography of the company’s sales and presence through our local offices and partners worldwide. In other words, by giving access to our channels, we make it easier for them to take the first steps in new markets. Admittedly, practice shows that there are always constraints when entering other countries that involve considerable costs. And that has to be covered by the startup.

On the other hand, because we’re looking for solutions from different countries, a project may be interested in entering the Russian market. In that case, Kaspersky can also help out.

Do you have any priorities in terms of geography?

There are three main regions of interest. They are Russia plus the CIS countries, the European Union, the UK, and Asia. There are other markets of interest such as Israel and North America, but there are very few B2C startups in the former, and in the latter it’s currently difficult to organize an effective engagement process.

What benefits can companies get that don’t qualify for the program?

Everyone who applies for the program remains in our database. Periodically, there are requests from different departments to find different solutions. And in that case, we prioritize the internal database, where we can quickly reach out to the founder and discuss the terms of potential cooperation.

What common mistakes do applicants make?

The main one is a lack of product fit. No matter how good a company is, if it doesn’t solve the tasks we set for it in the selection program, then it has to be rejected. Other mistakes are related to the company being at too early a stage of growth. For example, it’s still at the idea stage or the team is understaffed.

Here I should point out that we give feedback on all the applications. If a startup doesn’t meet our conditions, but still wants to cooperate with Kaspersky, they can contact us via the application form on the innovation hub’s website. I would advise them not to send an irrelevant application to the program; it would be better to take advantage of the opportunities I’ve mentioned. In that case, the startup will also enter our funnel, which we periodically return to.

Can you tell us about the outcome of earlier selection programs?

The first call was launched in late 2019 in the following four areas: the industrial internet of things (IIoT), transportation, blockchain technology and anti-fraud. We chose four projects: Enigmedia, Enigmatos (Israel), Naboo and Sedicii (Ireland). The second call specialized in protection for a person’s entire digital life, including family protection, privacy of personal data online and cybersecurity at home. After the final selection round, the jury chose the four most attractive projects for collaboration: HappyChild Generation (Russia), UnaliWear (USA), Aerial Technologies (Canada), and Minim (USA). The third call was dedicated to gaming technologies. And finally, the fourth call was dedicated to cybersecurity for small and medium-sized enterprises. Kaspersky’s expert jury selected 12 projects to participate in the demo day final: Blaick (Israel), CyberCyte (UK), Cyolo (Israel), Haltdos (India), InstaSafe (India), Polaris Infosec (Singapore), Polymer (USA), Pyxsoft PowerWAF (Chile), Safetica (Czech Republic), WEBGAP (USA), Zecurion Data Loss Prevention (Russia), and Zero Networks (Israel).

The pitch session is one of the main stages and if it’s taking place online, what tips do you have for the participants?

Those who receive high marks for their applications are invited to the pitch session. Altogether, we plan to hold three to four pitch sessions by the end of the year. About 10 startups will participate in each session. This will allow the company’s experts to get all the information about the startups we’re potentially interested in.

When preparing for a pitch session, which will be held online, it’s best to check your audio and video equipment. We plan to use MS Teams. This is important because the experts may not get the best impression of a company if there are online disruptions.

Then there is the internal pilot stage. We hope that about half of the startups that participate in the pitch sessions will reach this stage, where we will begin working with them individually. The pilot itself will be conducted with the participation of experts from the B2C marketing department and our innovation hub team.

Hypothesis testing will take place at this phase. The technical hypotheses will be tested on Kaspersky infrastructure. The business hypotheses will be tested by creating test landing pages, attracting traffic and conversion testing, as well as conducting CustDev through interviews with the target audience and the use of surveys. From the very outset, these tools will help us understand how potentially interesting the product is to customers.

We plan to have a demo day at the end of the program. It will feature those companies that were able to successfully complete the pilot. We plan to invite specialists from our company as well as external experts, including representatives of venture capital funds, startup accelerators and other corporations. This is an additional bonus for the program participants in terms of reaching external audiences — Kaspersky will collaborate with them to openly share the results of successful solutions.