Cashless Tipping: How Yegor Vysotsky Created Netmonet

Contents:

• Why move from a large consulting company to a startup: personal experience
• How to choose a name for a startup to attract Monetochka's attention
• The mechanics of the Netmonet service: who gets the money?
• How did we attract investment for the startup?
• How did we find the first clients for Netmonet?
• Tip analysis: "Generous" Fridays and "greedy" Mondays
• Sales strategy: how to stay afloat
• Strategy for capturing the tip market

Why Move from a Large Consulting Company to a Startup: Personal Experience

In 2018, while working at McKinsey & Company on White Square, I encountered a problem that became the basis for creating my startup, Netmonet. Frequent lunches with colleagues in restaurants often ended with us forgetting cash, making it impossible to leave a tip. This situation affected not only us but also the waiters, who, despite spending a lot of time and effort serving, did not receive due compensation. We realized the need to simplify the payment and reward process, which became the main focus of my startup, aimed at solving the problem of contactless tipping.

The idea for cashless tipping came to me during a vacation after completing a complex project. After discussing it with a friend, we decided it was worth trying to implement this concept. Inspiration struck when we began thinking about how to simplify the process for everyone involved. Cashless tipping can significantly simplify the process of rewarding for services, providing convenience for clients and service workers. This initiative can not only increase satisfaction but also make the process more transparent and secure.

The first steps of our startup were cautious. We registered the company only at the end of 2018 and began to build a team. This process proved difficult, and our main work at McKinsey often distracted us from developing the startup.

The question of when to leave McKinsey became relevant for me in mid-2019, when our product had already reached the stage of readiness. For a long time, I combined work at a consulting company with the development of my own project, dividing responsibilities between partners. One of them helped build a development team, and we offered the participants equity in the company, which significantly increased their interest and involvement in the project.

I first took an extended leave to develop a minimum viable product (MVP), and then returned to McKinsey to complete the final steps before leaving. By early 2020, I had already dedicated myself entirely to my startup, working on its implementation full-time.

This decision was not easy for me. I left McKinsey with a feeling of sadness, hoping that if things failed, I would be able to return. My career at the company had developed successfully: I joined as a student and reached the position of senior business analyst. A stable schedule and familiar tasks provided a comfortable working environment, but the transition to a startup brought a lot of excitement and uncertainty. This step was a significant challenge for me, opening up new horizons and opportunities for growth. Moving from a stable, large company to a startup isn't just a change of job; it's a significant step into a new life, filled with risks and opportunities. Consulting professionals often gravitate toward startups because it offers the opportunity to realize their ideas and gain unique experience in a dynamic and flexible environment. Working at a startup not only develops creative skills but also teaches you how to adapt to change, which is a valuable asset in modern business. Participating in a startup opens up new horizons, promotes professional growth, and helps you find your place in a rapidly changing world.

How to choose a startup name to attract Monetochka's attention

Choosing a name for a startup that will attract a well-known artist has become especially important since Monetochka was designated a foreign agent in Russia in 2023. As we worked to build awareness of our project, we began to consider whether Monetochka herself knew about our existence and how our name could reflect the essence of our business, attracting the interest of such artists. The right name will not only help us stand out from the competition but also create associations with cultural values ​​​​relatable to our target audience.

We initially explored various name options, including the word "tip". One of the first suggestions was "Tipsy", which translates from English as "drunk". However, after careful analysis and discussion, we came to the conclusion that this name did not correspond to the concept of our project.

Inspiration struck in 2018, when Monetochka's debut album was released. I was actively listening to it, and the song "No Coins" became our starting point. One day, while in the kitchen with the team, someone suggested using the name. While I'm not sure it was my idea, I can't say for sure that it was mine alone.

We tried to contact Monetochka's manager to discuss a possible collaboration, but unfortunately, it didn't lead to any results. However, Lisa once tagged our service in her stories, emphasizing that she really liked the name. This indicates that Monetochka is certainly familiar with our project.

How does the Netmonet service work: who gets paid?

The Netmonet service offers an innovative solution for waiters and restaurant customers, simplifying the tipping process. How does this system work? Tips collected through Netmonet are sent directly to waiters, ensuring transparency and convenience for everyone involved. This ensures that each waiter receives the exact amount left by guests, avoiding any potential misunderstandings with the restaurant.

When a customer requests a bill, they are provided with a guest receipt with a unique dynamic QR code. This code is generated for each new guest receipt and allows the bill amount to be automatically retrieved when scanned. This approach simplifies the payment process and minimizes errors, ensuring a more convenient customer experience.

After scanning the QR code, guests are taken to a unique page with information about the waiter. Here, they can see the waiter's name and photo, as well as the purposes for which they plan to use the received tip. The ability to specify your goals allows the waiter to create a more personal connection with customers and improve the level of service.

On this page, visitors have the opportunity to leave a tip, choosing a percentage of the total bill or specifying a fixed amount. In addition, users can rate the quality of service. Feedback is shared with both the waiter and the restaurant manager, allowing management to effectively monitor service levels. This contributes to the continuous improvement of service quality and increased guest satisfaction.

After payment is completed, funds are automatically credited to the waiter's personal account. The waiter can link their account to a bank card for convenient and quick withdrawals. This streamlines financial transactions and provides easy access to earned money.

The restaurant incurs no costs for using the service, since the main financial burden falls on the waiters, who give 5% of their tips. However, we have implemented an option that allows guests to cover this commission. This makes the service virtually free for employees, which contributes to more efficient and high-quality customer service.

How did we attract investment for a startup?

At the initial stage, many startups in Russia turn to friends and acquaintances for funding. Our story also confirms this trend: investment came through an acquaintance made over a single handshake. This approach is often the first step for startups looking to raise capital and develop their ideas.

Early investors are often viewed as "friends, family, and fools." When my savings ran out, I began approaching acquaintances with an offer to invest in my startup. After several meetings and discussions of opportunities, investors agreed to support my project. This experience confirmed that trust and a clear understanding of the business idea are important factors in attracting investment.

How did you find the first clients for Netmonet?

In search of my first clients, I worked independently, despite having no contacts in the Moscow restaurant industry. My method consisted of actively calling restaurants and visiting them in person. This approach allowed me to establish initial connections and gain valuable experience interacting with potential clients.

Our task was to connect several dozen establishments to test the service. We realized that large chains such as White Rabbit Family or Novikov Group were unlikely to be interested in collaborating at the initial stage. Therefore, we initially focused on small establishments and independent restaurants. This allowed us to gain valuable experience and refine the service's functionality before approaching larger market players.

We trained teams at our first 500 locations, which helped us gain experience and increase confidence in managing various restaurant formats, including budget and premium. Thanks to this approach, we were able to effectively tailor our solutions to the needs of each location, which positively impacted their success and reputation.

Tip Analysis: "Generous" Fridays and "Stingy" Mondays

An interesting trend in consumer behavior is observed: frugality increases on Monday, which gradually disappears by Friday. After the weekend, when budgets are depleted, people again begin to closely monitor their expenses and count every penny. This demonstrates the cyclical nature of financial behavior associated with the workweek and personal finances. Understanding this trend can help businesses adapt their marketing strategies and offer more targeted promotions on days when customers are more likely to save.

There are numerous studies regarding tipping statistics in various establishments. The average tip can vary depending on the type of establishment, region, and level of service. Typically, tips range from 15% to 20% of the bill in restaurants, but in some places, such as bars or cafes, this figure can be lower. In large cities and tourist centers, tips can be significantly higher, as customers often leave more to reward good service. Analyzing the data, you can see that establishments with high-quality service and a unique experience offer higher tips than regular restaurants or fast food restaurants.

Today, we partner with more than 4,500 establishments, including restaurants and beauty salons, allowing us to reach 35,000 active workers, such as waiters and stylists. Based on the analyzed data, we have made a number of interesting findings that highlight current trends in the industry.

• Some industries that I hadn't previously realized actively accept tips. These include, for example, beauty salons and gas stations. Beauty salons in our system receive tips even more generously than the average restaurant.
• If a guest leaves a tip in cash, the average percentage is 7% of the bill. This is due to the habit of rounding up, despite the standard of 10%. However, using the Netmonet service, customers leave an average of 12%, since they don’t need to count—they just choose a percentage.
• Customers follow the recommendations. On our website, you can choose a tip amount from a suggested list: 7%, 10%, 15%, 20%. On holidays, we often add hearts for a 20% tip, which increases the average tip to 14%.
• More than half of the establishments that work with us are located in Moscow—about 2,500. Another 500 establishments are located in St. Petersburg, and the rest are distributed throughout the country. We calculated that the average tip per table in Moscow is significantly higher than in other cities: 400 rubles versus 275 rubles on the platform. This is due to premium establishments such as Novikov Group and White Rabbit Family, where the average bill exceeds 2,500 rubles without drinks. Interestingly, on Mondays, guests leave 9% of the bill as a tip, while on Fridays and Saturdays, this figure rises to 14%. Obviously, at the beginning of the week, we are more reserved, but by Friday, generosity increases. Waiters often depend on tips, which can make up a significant portion of their income. In some cases, tips can exceed 50% of a waiter's total earnings. This practice is common in restaurants and cafes, where customers leave extra money for high-quality service. The tip amount can vary depending on the level of service and the price range of the establishment. Thus, tips play a key role in the financial well-being of waiters and significantly impact their overall income.

A waiter's income in a restaurant depends on the level of the establishment. In the premium segment, tips can account for up to 80% of total income, while the fixed salary is typically minimal, accounting for only 20%. In lower-end establishments, tips account for a smaller share, and fixed payments become more significant. This ratio emphasizes the importance of service quality and its impact on waiter income.

In the mid-range restaurant industry, waiter income is split equally: half comes from tips, and the other half is the fixed salary. In the lower-end segment, for example, in chain restaurants, where the primary focus is on attracting customers, tips play a negligible role. In such establishments, the bulk of their income comes from a stable salary.

Sales Strategy: How to Stay Afloat

Six months after launching our project, we realized that our initial assessment of the e-tipping market was significantly underestimated. Based on official revenue data, we underestimated its potential by a factor of ten. This mistake led to a rethinking of our strategies and approaches to business development, which, in turn, opens up new opportunities for growth and expansion in the market. Now we can more accurately assess prospects and adapt our services to meet the high demands of our users.

You recently sold Netmonet to Alfa-Bank, valued at $4 million by Forbes. Please share the sales process: did you initially plan to sell the business, or was this move unexpected?

When developing the project, I conducted detailed calculations and concluded that by reaching a 25% market share, we could earn about a million rubles in tips daily. However, this model showed that real income would only be 600-700 thousand rubles per month. This amount of funds is hardly enough to support the team.

In 2020, it became clear that Netmonet was capable of occupying a significant niche in the market, transforming from a small project into a serious player. At the initial stage, we had no intention of developing the business with the goal of selling it; we didn't even imagine that anyone might be interested in acquiring it.

As our service began to grow rapidly, we focused not on finding buyers, but on attracting corporate investors. Our primary focus was on banks and companies operating in the restaurant industry.

Our investors consulted with Alfa-Bank, during which we realized that more efficient business management was possible with a single owner. Our company had five shareholders, including myself. Following negotiations, the bank acquired Netmonet, while keeping our team in their current positions and maintaining our motivation. We no longer have shares, but we will receive a percentage of the profits, which will ensure a stable income and allow us to focus on business development.

We negotiated with several potential buyers. Alfa-Bank offered a favorable price and a convenient transaction structure, which completely satisfied our team. The negotiation process was efficient—less than three months passed from the first meeting to the signing of the documents, a record for the Russian market.

What's next? Will you continue to manage the Netmonet project?

The Netmonet service is not being integrated into the Alfa-Bank structure, but is being completely transferred under its control. I remain the company's CEO, and all aspects of operational management remain under my leadership. It was critical for us to maintain our flexibility and freedom, which have always been our greatest strengths.

We created a board of directors to make key decisions. An Alfa-Bank executive became the chairman. The first meeting was held today, and it proved to be very productive.

Strategy for capturing the tipping market

A significant redistribution of the tipping market is expected in the next few years. Our company strives to take a leading position in this dynamically developing area. We are ready to adapt to changes and offer unique solutions that will meet customer needs and market trends. Innovative approaches and attention to service quality will allow us to become a reliable partner for users and increase customer satisfaction.

What are your plans for 2021? This question is on the minds of many, as the new year opens up new opportunities and prospects. It's important to think ahead about your professional and personal goals. Identify key areas you plan to develop, whether it's career advancement, learning new skills, or improving your health. Consider opportunities for travel, expanding your horizons, and personal growth. Set specific, measurable goals to help you stay on track throughout the year. Thoughtful plans for 2021 will help you maximize your time and resources to achieve your desired results. We strive for active growth, recognizing that the tipping market will undergo significant changes in the coming years. We are currently adding approximately a thousand new establishments monthly. Our ambitious goal is to accelerate our market penetration, especially in the regions. In collaboration with Alfa-Bank, we plan to launch two to three new products on the Netmonet platform, covering both the restaurant sector and related industries. We are confident that these steps will help strengthen our market position and offer our clients more diverse solutions.

Our team is actively developing and strengthening its position in the market. In the coming months, we plan to expand our staff, which will allow us to increase the volume of work and improve the quality of services provided. We are committed to attracting talented professionals who will help us implement new projects and improve the efficiency of our operations.

We are actively seeking new talent, including developers and specialists for our operations team. Positions are open for client managers, IT experts in restaurant management systems, and so-called "connectors" for new locations. A connector is a specialist who trains restaurant employees to work with our platform and helps them master all available functionality. If you want to become part of our team and contribute to the development of the restaurant business, join us.

Our team of IT specialists and "connectors" plays a key role in accelerating the onboarding process for new locations. We're also actively seeking professionals to help attract clients to our services. To successfully compete in the tipping market, it's important not only to increase the number of offers but also to create strong demand for our services. This will allow us to strengthen the company's position and ensure sustainable growth in a competitive environment.