Jake Aaron Villarreal: Welcome to our podcast From the Ground Up where we interview startup founders exploring their journeys, their success, challenges and lessons learned. We hope you'd be inspired in discovering what it takes to build a thriving startup. I'm your host, Jake Aaron Villarreal, and here with us today we have Pavel Ershov, co-founder and CEO of Directual.
Pavel Ershov: Thanks for having me on the show.
Jake Aaron Villarreal: Welcome to the show. Glad to have you here, Pavel. Um as we uh get into this, let me give you a little background of who Pavel is. Uh he leads Directual. It's a no-code platform that helps you kickstart your app's MVP and take it to the next level, handling complex features and heavy traffic before hitting the right groove with the market. Directual went through two pivots and the team managed to secure over $3.5 million in funding along the way. Pavel's your classical or classic serial entrepreneur. Prior to co-founding Directual, he dabbled in a lifestyle mobile app, an e-commerce site, and even dived into the streaming music service scene. A lot going on on the technology side. Pavel, I like your background.
Pavel Ershov: Thank you.
Jake Aaron Villarreal: Um where are you... where... where are you joining us from today?
Pavel Ershov: I'm joining you from Moscow. It's almost night here.
Jake Aaron Villarreal: Oh yeah. Gotcha. Okay. Very cool. Are you originally from Moscow?
Pavel Ershov: No. I'm originally from Chelyabinsk. I grew up in Chelyabinsk, that is the city in the very heart of Russia on Ural Mountains. But 18 years ago I moved to Moscow. So I moved to learn, to study at university.
Jake Aaron Villarreal: Very cool. Well you speak great English, so I'm assuming you've studied English in the process or maybe it was just by doing business internationally. Um before we dive in, you know, a lot of our guests come from different parts of the world and I'm always interested to know what was your upbringing like that kind of led you down the path of being an entrepreneur uh and, and how did you get into technology?
Pavel Ershov: I believe that uh it all started at university. So I studied at Moscow Institute of Physics and Technology. So that is one of the top uh technical universities in Russia and in the world. That is kind of analog of Stanford in Russia. And I dived into the technology there. Plus there are a lot of entrepreneurs who graduated from Moscow Institute of Physics and Technology, so that was a kind of entrepreneurial spirit there. And having the strong background in physics and mathematics, I was able to start my career in IT.
Jake Aaron Villarreal: Very cool. Makes a lot of sense. Um you started in school and in technology, mathematics, that all makes a lot of sense to me. Um talk to me about your startup experience. So you've got various experience as a serial entrepreneur prior to starting Directual. Walk me through a little bit more of the type of products or companies that you were building that kind of led you to eventually get to Directual.
Pavel Ershov: Yeah, thank you for the question. Uh I could say that I'm a typical serial entrepreneur. So I have always been an entrepreneur even working for a bank. My first venture was a kind of a streaming musical service like Spotify. I launched it in 2008 with my technical co-founder, my mate from the university. And we had really big plans. First we decided to create a kind of a operational system in the browser, then we developed it at least an MVP and discovered that we needed to, to focus on something. And we decided to focus on some... some fun and we called the project Fun Space. And we focused it on the single app in that operational system in the browser, musical player. And we managed to agree with the uh content providers uh and launched a competitor of Spotify in 2008. But it was too early for that market. The market was not ready for the streaming service, for the subscription model. So that was a kind of a first try. But uh that was a lovely experience.
And we um started another venture in 2010 with um another my mate. Uh we decided to delve into e-commerce. And we uh created an e-commerce site, we organized the logistics. We uh were selling uh apparel. So different clothes mostly from Asia, from South Korea, from China. Mostly from South Korea to the Russian market. And that was more successful than the first one. And we even uh managed to launch an offline stores, a couple of them. That was a curious experience, but we failed because uh I had little entrepreneurial experience and managing all the logistics, finance was, was tough. We ran out of money.
But we didn't survive, uh we didn't surrender and we decided to go into the mobile applications. That was a time when the first, second generations of iPhones appeared and that was kind of a boom of mobile app. And we were impressed by the application named Shopkick in the US and decided to create the similar one for the Russian market. The key thing that uh attracted us, that appealed us, was the technical challenge. There was no uh Bluetooth Low Energy beacons yet and we needed to apply some technology for indoor location. Uh the idea of the app was the following: if a client comes into the store or a cafe, he or she gets some points and then you could get some rewards for that points. And the technical challenge was to check in the client automatically without pushing the button. There were a few options: uh radio waves or the light. And finally we decided to uh base our technology on sound, ultrasonic sound. So we crafted, really crafted some ultrasonic beacons uh that provided some sound. The mobile phone heard it but the person did not because we are not hearing ultrasound, ultrasonic sound usually uh. So that, and we succeeded with developing, with crafting those beacons and the application. We managed to get funding, rather significant, we uh raised half a million in US dollars and launched. So we hired a lot of developers, but the key thing was that the business model didn't work. So we couldn't manage to find the right product-market fit. We could not make our customers, retailers, merchants pay for that traffic. Now, nevertheless, that was another lovely experience.
And the investor was uh one of the uh most uh famous Russian entrepreneurs, Oleg Tinkov. And testing that out and figuring out that the business model didn't work, uh we suggested or we offered the, the investor to pivot into the... in something new. That new was card-linked offers. So Oleg was the owner of a bank, the huge bank, Russian one. And we decided to pivot, we offered Oleg to pivot that mobile app into the card link offering. It means that the algorithm analyzes the transaction history of a client and based on that analysis you could offer some cash back. Uh but that cash back was funded by the merchant because you could offer the merchant the clients of his competitor for example. And that was my first uh experience working for a bank, for somebody, for not for myself. So uh Oleg uh asked me to join his team, the bank. And that was the place where I ran a kind of internal startup inside the huge company. That was the year 2011, 2012. So the project was uh successful. That was a huge success from, from the uh financial point of view. And we launched that card link offering system uh two or three years earlier than all the competitors on the market. And there, working for Oleg, I met my cofounder Nikita. So he was uh an IT architect in Oleg['s bank]. And so when uh the, the project was launched and succeeded, we decided to quit the bank and start our own venture. That was the point where we are talking about Directual, my current company. That was the year 2014.
Jake Aaron Villarreal: Wow, I like that transition. So going from startup to startup that failed, then building a startup really within a big company that's got the funding and you found the right market, product-market fit, and then understanding the process and taking that experience to then build your next startup, which is the one we're going to, about to talk about now. Um, I think the keyword that I heard you talk about in all that was um "not surrender." I think so many leaders of startups, you know, it's really the difference between sometimes you making it, not making it, of deciding do you want to keep fighting the battle? Do you believe that you have the right product? And if you don't, you know, do you have the, the desire to continue to pivot, to change, to make the right uh strategic direction to, to make it successful. So, um, there's a lot of learning that you can get from not succeeding, as, as long as you apply it to your next venture. So excited to hear about directional or Directual. Um walk us through what it is and what inspired you to create it.
Pavel Ershov: Uh so the inspiration was, u- I would say internal. I basically, I'm not a coder. I'm... I could code. So I have engineering background but regularly I don't code. I'm a designer, I'm a manager. I'm product designer. And what... working with uh in, for Oleg with Nikita, my cofounder, there was a kind of a, a pain for me. When I had a product idea, I asked engineers led by Nikita to develop it. It used to take, say, a week in the best case or a month. And uh the idea was the following. So if I had a kind of a process designer that worked... so I craved to design business logic, push play button and uh it would work. That would, uh that was the basic idea. And later it turned out to be called "no-coding." In 2014, there was no such a term "no-coding." That was the basic idea. Uh then we created a kind of MVP, started testing it out, and occasionally we got the first client. The large telecommunication company. And we decided that we should work with enterprise companies. And that was kind of the first part of our company development before the pivot. On the one hand unsuccessful because we couldn't uh develop the company under that enterprise-focused business model. On the other hand successful because that was the background, the base for our future growth.
Jake Aaron Villarreal: That's great. So there's a lot that goes into developing a product when you're trying to solve a problem. So what's the problem that you're solving with Directual today? Is it, is it creating the infrastructure and the no-code based platform that you could take an idea and then plug it into your platform and scale that product or that, whatever that solution you're creating? Uh I'm assuming it's a web-based application, maybe it's mobile, but what is it that, as a, say an interested buyer of your product, they're going to get from you?
Pavel Ershov: So the basic idea of almost all no-code products is uh simple. Developers, coders are expensive and the traditional coding is time, is a time-consuming process. Moreover, for running an app you need not only coding but maintaining the infrastructure. And the idea is that you push one button and you have all the infrastructure including database, API layer, security etc. Then you are designing the logic, user interface, all the integrations visually. And that is it. So you save a lot of time and you get the flexibility so you could test it out quickly. That is the basic idea. And that is the reason why no-code is successful. But there are really a lot of uh no-code products on the market. And we identified the niche. Most of the no-code products have a similar problem. They are okay, they are working for building MVP, for testing some hypothesis. But if you need to scale, if you need to grow from the complexity point of view, if you need some new advanced features, no-code fails. But not all the platforms. Our platform doesn't fail. So you, you could grow easily, you could scale. You could have millions of records in your database, you could connect different external systems. And you could develop your own components, connect traditionally coding parts. So there is no limits on our platform. So you could develop MVP and go beyond.
Jake Aaron Villarreal: So if you are, say, an idea person or a product person, you have an idea, you want to create a startup, you are somewhat technical... I'm assuming you have to be technical for your platform even though it's no-code.
Pavel Ershov: Yep, uh you are right, but uh we call our clients, our ideal client is technical savvy product owner. So uh the person is not, is not a developer. But you need to know the basics of computer science. You need to know what is the database, what is API and how two products could be connected via API. And but know that there are a lot of absolute no-techers in our community, but they needed to spend more time for learning. So if you are not technical at all, probably you'll need say a month to plunge into the topic, to figure out all the details and to compose something. If you have some coding background or at least you're tech savvy, you worked with developers, a week would be absolutely enough to get into all the details.
Jake Aaron Villarreal: That's great. So if you create an MVP... oftentimes we hear companies that, they create an MVP uh to get a product idea into the market. They might even raise capital and at some level use that platform that they've created for some time on their initial customer base. But as they scale, they have to go back and rebuild the whole thing all over again really to make it um more successful to scale um or more flexible to scale. So what you're saying is you could start with your platform, create the MVP, and not have to rebuild anything. Once you begin to get traction, you can just continue to scale on your platform. Is that correct?
Pavel Ershov: Yep, you're right. Technically you don't need to rebuild because Directual is capable, so it's okay for the load, it's okay with the security. Uh but if we say uh, if we are talking about the, I don't know, large companies. Uh really few of them uh build their core technologies on any no-code or other technology because that is their core. That is their IP. And uh no-code platforms are really [the] best choice for, say um, additional modules, additional services, not the core. So if you're launching an MVP, building a startup and you don't have uh I don't know, millions of dollars uh of the revenue, you could build 100% of your company on no-code. But if you [are] becoming a really large company, usually you need to have your own IP. And large companies uh are using no-code platforms for automating side processes, some department-level, you know.
Jake Aaron Villarreal: When you look at the no-code market, uh you know, it's been growing significantly for a long time. Um you know, you can find no-code tools on Product Hunt, various websites. How do you survive on such a highly competitive market, and I guess how do you ensure you've got the right product-market fit?
Pavel Ershov: If we are talking about uh B2C companies... so there are um platforms that are B2B such as um Siemens, Mendix, Appian, etc. They have strong s- salespeople, they are working with enterprise companies. So uh I'm not aware of that market, but I could say about B2C markets such as Bubble, Airtable or Directual. There are two, there are three key things that should be uh for... that should be founded, that should be established. First, the thing is that you cannot build a new no-code platform in a year or in a two, even in three years. You need to invest thousands of uh human hours, coder hours into the product to get the platform which is suitable for building more or less complex apps. So that is a kind of a moat.
Second, you need to have uh the community. So the community is the basic thing for any mass market no-code platform. If you don't have a community, you could hardly uh design your onboarding process. Moreover, uh community could uh build new features, new modules of the platform. We launched uh features for building plugins last year, and our community members have built more than a hundred new modules for our platform including new UI components, new scenario steps and the whole templates. So the community is the driver. Fortunately today we have a significant community. Uh there are more than 2,000 active members in English-speaking community and uh about the same uh number in Russian-speaking community. So we are working worldwide. Actually we have uh customers from more, more than 30 countries.
Jake Aaron Villarreal: Wow.
Pavel Ershov: And I believe that we need to launch a Spanish-speaking community soon because there are a lot of people from Latin America. So the community is the key and or you could, you could not build that community in a week. You need to invest in that community continuously um, a year, two years, three years to build this strong foundation.
And the third cornerstone of uh the product-market fit of a mass market no-code platform is content. You need to have uh comprehensive uh educational materials, you need to have a lot of examples, you need to have a lot of templates. Moreover, uh the uh curious finding uh refers to the marketing. We tested out almost all the marketing channels including Google, Twitter paid ads. And I will say that none of them works, really. Because they're expensive and you could not uh get a... you couldn't get enough users, visitors from th- those channels at a reasonable price. Probably that happens because such companies as Bubble uh raised hundreds of millions of dollars and they just invested so much money into the brand awareness. So you could hardly compete with them. And the only marketing channel that works for us and for our competitors, I believe, is search engine optimization. That channel works really well. And the basic thing that you should do, that you should have for search engine optimization is content. You need to have a lot of posts on the blog, you need to have a lot of examples, you need to have the community that creates the content, and do podcasts, right? I mean...
Jake Aaron Villarreal: That helps. True thing. You look at the, you know, the no-code industry. How is AI fitting in there and do you, do you see it, you know supporting it, replacing developers including no-code developers?
Pavel Ershov: That is, that is a hot topic. You, you're absolutely right. There were a lot of opinions that AI is going to change everything because AI would code for you, AI would do anything for you. But uh it turned out that AI, say ChatGPT or the peers, could hardly develop a more or less significant and complex product. They're absolutely great in developing, coding some small parts of the product. Moreover, I use ChatGPT regularly for coding some small parts of the platform on JavaScript or on Scala. And uh, so ChatGPT is not replacing coders, they're helping them, they're helping to work uh more rapidly.
And uh speaking about no-code, AI would be a great uh thing, a great combination here as well. That AI would be an assistant for the person who is working with no-code. A couple of months ago, we introduced uh a plugin for ChatGPT, Directual plugin. You could type to ChatGPT what you need to build, from the database to scenarios and interfaces. And ChatGPT plugin connects to your Directual account and develops it for you. So you could accelerate your no-code in- development using AI. Plus, AI would be a kind of a tutor, support assistant. Uh AI could find the needed part in the documentation. So AI empowers no-code, not, does not replace it.
Jake Aaron Villarreal: Yeah, makes a lot of sense. I love that, a true value add. Um you know, you've gone through some pivots and you have experience in what it's like to build companies. The team is critical when you're going through a pivot because some will decide they, they, they buy into the new direction of a company or a product. Some might decide they don't believe in the leadership and might leave and might move on, but team uh strength is very important. What's your... what are some insights you can share with other startup founders that are having to, to make pivots, have made pivots, that you believe helped you successfully make pivots yourself?
Pavel Ershov: Great question. So uh a couple of uh words about our pivots. So we started the company as an agency. So our first model was an agency. We created our own technology and we built the products, some apps on our platform for our enterprise clients. And uh that time we had a team of 50 people. 30 of them were the people who work on the platform and created the apps for our clients. And 20 of them were the engineers. That time we raised more than 2 million uh in funding. And uh our fail was that we were uh too optimistic for the sales process. Just an example. We spent more than uh a year for the project for Vodafone uh in Luxembourg. So we wanted... we offered supply chain management for them. So we traveled six times to Luxembourg. So we almost created the whole app, but at the end uh the process turned out to be simple: Vodafone used such small companies as we were for making SAP provide them with a discount.
Jake Aaron Villarreal: Oh wow.
Pavel Ershov: So that was just one of the sides of that enterprise sales process. Nevertheless, there were the enterprises that really wanted to work with us, but the duration of the process, it, it could took almost two years. And that is hard. That is agency business, it's hard. And we ran out of money. The reason of pivoting was simple. And that was kind of a crisis. That was the very end of 2019, early 2020. And that was the time when we had to decrease our team, so to keep only the engineers. Moreover, we needed to motivate the engineers to pivot, to work even harder. And uh that was the time when my co-founder Nikita and I uh were pondering over the very basics. And uh before that moment, we uh had uh we uh considered the key question to be what we were doing. But that crucial moment, critical moment, turned our mind into another, to another question: why we were doing what we were doing. And that was the moment when we identified the mission of the company. We decided, we realized that our platform was a simple tool for people. Imagine 100 people who, who have ideas of the products. How many of them could really develop a product based on that, her or his idea? Three people out of 100. That's not too much. Uh and we uh decided that our idea would be letting people create. So we let the person who has an idea to bring his idea into life. Uh doesn't matter if he or she is a developer, designer, if he or she has money for hiring developers, you have the no-code platform, you have the idea, and you could uh turn that idea into... bring into that idea into life. And that was our mission.
So we identified the mission. We discussed it with the guys from the team. Some of them quit. That is absolutely okay. But some of them supported us. And that was the... again a vertebra of our company. So we uh finally got the vertebra of the business, of the team. So we were optimistic about the future because we realized why we were doing something. And then we needed approximately a year to uh roll out the first cloud version of the platform. We uh supposed that that would be a pure backend platform. And the second pivot, smaller one, was to turn into the full-stack platform. Yeah, and finally the, the first proof that we were right was that we managed to get the Product of the Month on Product Hunt easily. So we didn't invest into any marketing or anything. We just rolled out the product, our cloud platform into the Product Hunt in 2020, and got the Product of the Month. And that was a kind of positive feedback from the market, from the world, that we were doing right.
Jake Aaron Villarreal: Yeah, that's great. Congratulations. That's a really cool story. It's... you don't always have the right destination as you're building. You hope you do and you kind of build and you have to make changes and pivots, and uh validation in the market. It's, you know, the best-case scenario that you can get once you're building a product. And the second one, maybe even the first, is getting paying customers that actually are going to pay you for what you created. So for the listeners out there, what... give us an idea what's the structure, what's the business model, what's the price to pay to use a product like yours?
Pavel Ershov: Uh so usually uh there is a complex pricing model because you could not provide the client with a flat price because the app produces some load, and that load leads to our costs on cloud infrastructure. And most of no-code platforms has more or less similar pricing. You have some basic fee. So if you have the uh small app, an MVP or something, you could get the startup plan, pay $29 monthly and uh enjoy all the features. But if the load of an app uh hits the limit (so there could be the number of requests, the number of processing operations, the amount of data uh, there is a list of those uh numbers), you are paying as you go. That is an extra limit consumption. And there is a certain price for extra resources. And as high your plan is, Startup $29 monthly, Pro plan $99 monthly, or Business pricing plan $300 monthly, uh there would be the cheaper on-demand resources plus... So that is a basic licensing. Plus you, we have uh the marketplace. Users could develop new features, new modules, new templates. Sell those templates and modules on marketplace and get the reward, and we have the marketplace fee around 20, 20%.
Jake Aaron Villarreal: That's great. Really cool. I like that. It doesn't sound like a lot of money and you have to have a sustainable business model where as the costs go up for the usage of CPUs or whatever the, the API calls or however it adds up on the, on the infrastructure side, you know, it's got to be covered. That sounds pretty normal, but I think getting into the platform sounds reasonable. And as they scale, if they're successful, you know, it's just a line item on a monthly invoice you pay and scale it and hopefully you have a lot of success in the process. So that sounds great. Um, uh let's uh talk just briefly here about 2024. Um, as you look at this new year that's starting, what's on the horizon for Directual and what is it that you are, you know, on the road map?
Pavel Ershov: Uh so uh our road map is community-driven. So we have uh the public road map and each and every person from our community could request a feature, report a bug and vote for any feature from the road map. Uh so thanks to that, we are aware of what the community needs. Uh moreover that road map is built on our platform so anyone could build a similar road map in no time. Uh so that is the way uh we got to know which features we need next. We have a strate- strategical view on implementing AI into our platform. So as I have just said, the AI and no-code is a, a great combination. So we are going to integrate AI into the platform itself. So now you are chatting with ChatGPT on that app and that app connects to... is connected to the platform. So this year we'll introduce the fully functional AI assistant into the platform, uh so you could uh onboard easily, quickly, and build more and more complex apps just typing to the AI assistant what you need. Plus uh, our community and we are going to introduce more and more uh templates, features, and we are going to become the platform, uh the only platform that you need to build a startup, to launch your side hustle. Including infrastructure, including all the features, including the integration with say payments. Uh with regular payments such as Paddle, Stripe, or with uh uh crypto payments.
So uh one of the uh topics that we invested in was web3 field uh last year. Uh we announced that Directual became the first no-code platform fully functional for web3 apps. That means that we just introduced uh a few integrations with the blockchains, with wallets. So you could introduce the authorization via the crypto wallet for your end app. And I could not say that uh it was a great success. Web3 was a, a hype, but uh few people, people from web3 community really could do something. Most of them are just chatboxes. Nevertheless, uh web3 topic uh still is a great source for the traffic for us. If you type "web3 no-code" on Google you'll see that uh the first line would be Directual.
Jake Aaron Villarreal: Oh wow, that's really cool. Yeah we've had...
Pavel Ershov: Have those, those integrations. You could connect crypto payment if you need to your app.
Jake Aaron Villarreal: That's really cool. Yeah, we've had some recent guests on that are in the, in the web3 space. And um it's a real community. I mean it seems like when you're in that web3 space, I mean you're traveling around the world to go to certain events and different countries and talk about innovation that's happening you know. Whether it's blockchain or cryptocurrencies or whatnot, there's seems to be a lot there that's of interest. But yeah, the fact that you say "chatter boxes" is interesting because we've heard that too where there's a lot of talking but actually doing is something different. So anyway that's great. Well as we wrap up here um Pavel uh if companies wanted to find you or find Directual, where would they go?
Pavel Ershov: They would go to directual.com. And uh there is a link to our community. You could type into Discord, Facebook group or just send a message to team@directual.com and I would answer with pleasure. So don't hesitate to connect us.
Jake Aaron Villarreal: Great. Well Pavel, thanks so much for joining. I really uh thank you for having the courage to come on and share your story. And hopefully you'll get some visibility out there in your own community about uh what you're doing, coming from the CEO. And also listeners that might be interested, maybe they'll use your product in the future as well. So um I want to thank you and also thank the listeners for listening. It means the world to me that they've spent their time with us today uh to hear this message. Um and my name is Jake Aaron Villarreal signing off for now, but look forward to catching up with everyone on the next episode. Until then, take care.
Pavel Ershov: Thank you, that was a pleasure.
Jake Aaron Villarreal: Jake, before we wrap up I want to give a big shout out to all the entrepreneurs that have joined to make this podcast possible. And for all the listeners for listening, it means the world to me that you chose to spend your time with us today. I'm your host Jake Aaron Villarreal, signing off for now, but can't wait to connect with you all soon on the next episode. Take care.
This show is sponsored by Match Relevant, a company that helps venture-backed startups find the best people in the market. And they do it in three simple steps. First, they sit down with founders to understand their story. Second, they tell their story into multiple candidate channels. And third, they schedule interviews within 48 hours. Find us at matchrelevant.com to learn more about how we do it.
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