5 Insider Stories From Russia's Fledgling Start-Up Market
Published: June 9, 2014 (Issue # 1814)
Start-ups, business angels and venture funds — these terms have become part of the Russian language, although just a few years back they were almost completely absent from the local dialect.
High-tech business in Russia is expanding rapidly and being part of it is now considered "cool" as thousands of young entrepreneurs flock to venture funds with ideas and hopes of one day making their first million dollars. However, its growth has been stunted by excessive bureaucracy, the tiny domestic market for high-tech products and the slim chances of launching an IPO on the Moscow Exchange. The political standoff between Russia and the West over Ukraine has made things worse still.
According to a recent joint report prepared by the Russian Venture Company and the PwC Center for Innovation and Technology, the amount of "exits" from Russian start-ups — when a venture fund sells its stake — in 2013 amounted to $2 billion, fives times more than in 2012. The volume of investments channeled into the sector in Russia in 2012 was greater than that received by Israel, a developed venture industry country. More than 80 percent of all investment last year, or more than $600 million, went into the IT sector, as was the case in 2012.
The results are encouraging, but the few who have been in the industry long enough to have set up companies and sold them on for a hefty sum are not so optimistic about its short-term prospects.
The St. Petersburg Times has asked several Russian businessmen who are prominent in the start-up industry to share their views on the current investment climate in their sphere. The interviews have been edited for length and clarity.
1. Alexander Galitsky, co-founder of Almaz Capital Partners. Founded in 2008, it has raised more than $100 million and invested in companies such as Yandex, Nival and Parallels:
Russia is not among the global leaders in innovation technology, but no country is currently capable of rolling out products that have been fully conceived and manufactured within its own borders, and that includes military hardware.
Technological integration is highly developed, so Russia needs to find its own niche where it can make its own contribution to the world of innovation technology.
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