7 Things Every Entrepreneur Should Know About Russian Startup Scene

    This is a post written by our new regional guest blogger from Moscow, Viola Serdiukova. Serdiukova covers monthly the most interesting news from Russian startup scene. Photo: Shutterstock

    The rules and context for growing enduring startup brands in Russia are likely to be considered as exotic, unstable and not transparent, but only if you glimpse at them unthoroughly. The Russian startup alchemists are quickly adapting to emerging trends, and what is more, the “going global” strategy is getting associated with the success.

    Moscow is the 13th city on global startup ecosystem ranking. No surprise – the startup drive runs here. But is it so exotic to the world?

    Skip the prejudice and experience the Russian startup DNA from seven main aspects.

    1. Pivoting Globally

    The world famous contests and accelerators are experimenting with new locations and Russia is an appealing place to experience and disrupt. Mass Challenge (USA), Tech Crunch (USA), Startup Sauna accelerator (Finland) and Seedstars World (Switzerland) are making a move to find the best Russian startup teams, see the true value in their ideas and offer the international connections, coaching, hands-on help.

    Talking about the difference between the 2015, 2014 and 2013 applicants from Russia, the CEO of Startup Sauna Jaakko Hynynen says that “the teams in Russia getting in a program are more progressed, they already doing their products with actually paying customers.”

    “The founders themselves are a bit more from the technical side. Here the ideas come from the technical people, while in Western Europe or the US there are a lot of situations when ideas come from the business or design mind person,” Hynynen continues.

    The technical education in Russia makes it real for startups to think bigger, go global and reach great success. The case of GetIntent (the company focused on programmatic advertising, that accounts for 45,0% of the US digital display advertising market, hitting $10 billion in 2014) clearly illustrates the situation:

    The Russian founders with the mechanics and mathematics background started their own company in 2013 and already in 2014 relocated the headquarter to NYC – the place that has traditionally united tech startups with the city’s publishing, media, design and entertainment fields.

    The technical part of GetIntent’s team – R&D, developers and data scientists – work in Moscow, while marketing and sales departments operates in NYC.

    2. Startups’ Profiles

    The Russian companies have intensified the efforts to go global, searching for international investors and markets. But the local venture market shows quite a disbalanced situation with the priority of IT industry in the distribution of capital supply (IT 94%, Industrial Technology 4% and Biotech 2%).

    Moreover, the majority of local business incubators and techno parks (50% of the total number) are specialized on IT, outstripping hardware, financial, biotech and other technologies. The top hottest Russian startups are also originated from the IT field.

    But the recent startup’s success (Seedstars World Moscow 2015) shows the pivot to hard technologies with Texel – a software developer and manufacturer of professional 3D scanners for acquiring 3D models of people and large objects – winning the Russian round of the international contest.

    The Investment company Starta Capital that works primarily with the Russian startups marked the trend that there is a gradual shift in distribution of deals flow. Nevertheless, mobile apps and ‘not sophisticated internet services’ are left behind – and the focus is on hardware technologies so industrial technologies are considered to be the backbone for the economic development of the country.

    3. Corporate Accelerators

    Multinationals in Russia have been actively experimenting with different formats in building relations with startup-teams and moving towards the open innovation mindset.

    The hackathons serve as an alternative to launching an accelerator for Microsoft, Intel and other companies in Russia. Photo: HSE Business Incubator

    Especially Aerospace, Oil&Gas, Robotics, Telecommunications and Power&Energy technologies are promoted by the large Russian enterprises in a close partnership with the government within the framework of Generation S program.

    The FinTech potential of the local founders can be enhanced by Qiwi Venture program – the Russian company that conducts electronic online payment systems.

    4. Legal Framework

    The market success is underpinned by a clear confidence that the legal norms are taken seriously and well-understood. While the Russian legal system endures the long period of change, the startups can ask for a lawyer counsel to leverage the costs and cushion any possible hurdles.

    Legal Space startup offers a platform to connect a startup team or a large enterprise with a lawyer in a place to start or relocate the business. More than 50% of inquiries come from the Russian startups thinking about going global (mostly to the US market), 20% encompass the requests for Asian lawyers, 10% for European lawyers and 20% are left for the Russian and foreign startups looking for a lawyer counsel in Russia and the CIS region. The vast majority of the company’s clients are IT-minded startups.

    ​5. Nurturing Startups

    On the whole, the Russian University-based business incubators (that are successfully benchmarked with the global incubators/accelerators by UBI Index) champion the development of business competencies and entrepreneurial mindset in the students’ community. Talents and money are the best sources to make a startup flourish. The former aspect is proved by the leading positions of Russia in the global rankings. To provide the talent pipeline and market-adjusted education is the main issue for the Russian Universities.

    The Business Incubator at the National Research University “Higher School of Economic” has also pivoted to the global track, providing the platform that connects international coaches with the Russian startup teams.

    With a prevalence of IT projects, the incubator also develops the educational programs in the social acceleration and hardware technologies, thus making its product line more diversified and targeted for different audiences.

    The European accelerators are inclined to expand their focus to the Russian market since the tech savvy and bright ideas attract them. That was demonstrate
    d by the opening of
    the French accelerator NUMA in Moscow, thus providing the Russian startups coaching, connections and a perspective on going global.

    6. Russian Millennials

    Russian millennials in their 20s disrupt the local tech communities with enduring brands that get recognition globally. The young founders are technology and social media natives. While some startups are on the early stage of getting consumers trust and loyalty such as Stellar and Netbell (the finalists in the Russian round of Seedstars World contest) – others have already got noticed by the market.

    The first communication app Chill! finally makes sense for wearables and leaves a big footprint on the Russian startups record list. The founder Krill Chekanov started his first business at 14 and at 17 launched Hippflow – a new format of sharing data with mentors, investors – and in 2013 updated the app for Google Glass.

    7. Events Vibrancy

    “Silicon Valley is not a place, but a state of mind,” says Timothy Sprinkle, the author of “Screw the Valley”. “It is a like-minded community with a non-stop stream of tech events.”

    The more events are being organized, the more vibrancy and strong connections are being created.

    The international contests, hackathons held by the large tech companies (such as Windows Camp and Intel IoT Roadshow), local meetups, open days, hands-on workshops and the national awards (Startup of the Year) – All that intensifies the startup drive in Russia.

    Nominees on stage at Russian Startup of the Year Awards Photo: HSE Business Incubator

    At the end of the day, there is no easy answer in a what trajectory the Russian startups will evolve – But the capability to think globally is the pillar for building up successful startups.