How to Run a Tourist Startup on Russia's Sakhalin Island

PHOTO by Romanver / Wikicommons
Becoming friends with local officials

Hiun Kim, creator of RocketGo, a tourist service that helps organise quality tours on the peninsula, shares his experience.

Sakhalin isn't Silicon Valley, and we’re the only startup on the island. Why didn't we go to Moscow? Because we’re waiting for a tourist boom. In March 2016, Dmitry Medvedev signed a decree establishing a special zone at the 'Gorny Vozdukh' (Mountain Air) ski resort. Government and private investments in the tourism industry are set to reach up to 16 billion roubles ($268 million). The number of visitors is expected to grow from 241,000 in 2015 to 328,000 in 2017, and that's not counting foreign tourists, Sakhalin regional officials say.

We’ve made a smartphone app for travellers that helps order any tourist service in Sakhalin at the same price or lower compared to ordering directly. We’re counting on several sources of revenue: ski pass sales, airline tickets (via a partnership with Aviasales), and, most importantly – hotel and tour bookings, taxi orders, restaurant reservations, and everything else you might need as a tourist. Sales of ski passes and tickets are automatic; the rest is done via online chat. Our inspiration came from the American project Magic, where you can order anything via text chat – even a helicopter in half an hour.

The development took two months, after which my partner Vadim Mitkovets and I began to negotiate with local entrepreneurs, offering partnership for 10-30% of their service cost. And that was the problem: no one wanted to listen.

The project's future was in doubt - but then Vadim had an idea. We made an appointment with the Minister of Sport, Tourism and Youth Policy of the Sakhalin region, Anton Zaitsev. He was surprisingly easy to reach.

Things were different with officials of such a high level. When we held a presentation, I opened the slide show and began to explain the idea, but Zaitsev stopped me, saying: "I got it! Next!" This was confusing, and at first I thought nothing would work out. But then, at the end of the meeting, the minister said: "Okay, guys! What do you want? Money?" He advised us to go to the All-Russian 'Ostrova' (Islands) forum, which gathers "talented young people" from all over Russia in search of business project grants. The maximum grant available is 300,000 roubles ($5,000).

This sum still wouldn't make much difference, so instead we asked the officials to simply help us team up with potential partners.

Ski pass sales at 'Gorny Vozdukh' supported us until the sale of other services started to bring in money. In November our revenue was 1.3 million roubles ($21,7); 775,000 roubles ($12,9) of this we owed to the ski resort, even though the slopes were closed when sales began and people were buying tickets in advance. By the end of the season, lasting until April 2017, most of the revenue will still likely be from 'Gorny Vozdukh'. In the future, however, we hope that most of the money will come from other services.

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So, how to get officials' support?

Officials are often thought of as some lucky guys sitting around an office and stuffing their pockets with money. This is a big misconception. They may have KPI for supporting tech businesses, young talent, poor families etc. They must comply strictly with them and report the results. If your idea fits this KPI list - simply make an appointment. We were the only IT-startup on the island, so we could be the cherry on the cake in an entrepreneurship support report.

But it’s naive to assume you’ll get assistance just for a tick in a box on some government report. It's important to convince people you can be trusted. I talked about my work at 'Sakhalin Energy', where in just two months I managed to update the operating systems on 2,500 computers located in the most unexpected places – for example, on an oil rig in the sea, 800 kilometres from Yuzhno-Sakhalinsk. This story impressed the officials, so when we started talking about 'Gorny Vozdukh', they suggested we make an audit of the resort's IT-infrastructure. We identified and corrected some errors for free. After that, we were recommended to management as a partner.

When working with government officials, prepare not to take, but to give. This isn't about bribery. We were able to become partners with the resort without a tender because we covered all the expenses for connecting it to the IT-system, as well as the rest of the costs. No tender is necessary if the state budget isn't involved. Even so, our expenses were so high that we’re unlikely to cover them in the first season – hopefully we’ll start earning money in the next one.