The heart of tech

This article was published on July 17, 2012


    Issue v0.7: From Russia, with startups

    Issue v0.7: From Russia, with startups
    Robin Wauters
    Story by

    Robin Wauters

    Robin Wauters is the European Editor of The Next Web. He describes himself as a hopeless cyberflâneur, a lover of startups, his family a Robin Wauters is the European Editor of The Next Web. He describes himself as a hopeless cyberflâneur, a lover of startups, his family and Belgian beer. If you'd like to know more about Robin, head on over to robinwauters.com or follow him on Twitter.

    Russia boasts a huge and fast-growing Internet economy, which is spawning an increasing number of technology startups – and they’re far from all clones of successful businesses that were built elsewhere (although there’s that, too).

    Every week, a new Web and/or mobile business incubator seems to pop up, and both local and international venture capital firms are eagerly looking for opportunities to invest in the next big Russian upstart. Even individual angel investors, from the United States (Esther Dyson) to Europe (Fabrice Grinda and Toivo Annus), are taking notice and are actively trying to grab a piece of the action before everyone else finds out.

    Local business angels are a tad harder to find, but one example is ex-Adobe and Siebel exec, and formerly Microsoft Russia’s general manager of consumer and online businesses, Pavel Cherkashin.

    Already, Russia is the largest Internet market in Europe after overtaking Germany in terms of total amount of Internet users back in September 2011, according to GP Bullhound. Even with close to 70 million people online, there’s still room for growth: only about 47 percent of Russia’s total population is currently connected to the Internet.

    Russia’s mobile penetration is among the highest in the world at 159 percent today, compensating for the poor fixed-line infrastructure in the country. Mobile Internet penetration is currently at about 20 percent but growing rapidly.

    Mobile app store analytics company Distimo recently identified the four fastest-growing emerging mobile app markets outside of East Asia, and unsurprisingly listed Russia alongside Brazil, Mexico and Turkey.

    Annual growth rates in those four emerging markets range between 54 percent and 115 percent, and Russia was to be found at the high end of that range.

    To give you an idea of how fast Russia’s mobile economy is ballooning: the growth in revenue from the Google Play (formerly Android Market) mobile app store is a whopping 250 percent – more than twice the growth rate of the United States.

    Russia is home to two of the largest Internet companies in Europe, publicly-listed Yandex and Mail.Ru Group, and there are investors pumping literally hundreds of millions of dollars in promising tech startups you’ve probably never heard of. In fact, the market is big enough for these startups to dedicate 100% of their focus on Russian speakers to grow into a sizeable, if not huge, Internet business.

    There are Yandex and Mail.Ru, which have received attention worldwide thanks to their ability to fend off major Internet companies like Google and Facebook (Mail.Ru owns social network Odnoklassniki and instant messaging firm ICQ).

    But there’s also Rutube, the ‘YouTube of Russia’. There’s OZON, the ‘Amazon of Russia’. There’s VKontakte, the ‘Facebook of Russia’. There’s Ivi.ru, the ‘Netflix of Russia’.

    You could dismiss them as clones because of those classifications, but it’d be a big mistake.

    That’s not to say there aren’t blatant clones, with varying degrees of success. Fast Lane Ventures, a Russian business incubator, is often in the spotlights but also has a habit of kickstarting businesses that are hugely similar to successful US companies.

    A non-comprehensive list of Russian clones, some of them well-financed:

    Travelrent (modeled after Airbnb)
    AlterGeo (modeled after Foursquare)
    Sapato (modeled after Zappos, sold to OZON)
    Eventmag (modeled after Eventbrite)
    Pinme.ru (modeled after Pinterest)
    Kupikupon.ru, Biglion and others (modeled after Groupon)
    Futubra (modeled after Tumblr with a dash of Twitter)
    RentHome.ru (modeled after HomeAway.com)

    But Russia is so much more than clones. Did you know companies like Evernote, virtualization software giant Parallels, backup and storage services firm Acronis and security software company Kaspersky Lab have their roots in Russia?

    And then there’s the new generation of emerging startups that are innovators in their respective fields. We’ve identified some of the most promising ones, across a variety of categories:

    E-commerce

    KupiVIP (an online shopping club, raised more than $100 million to date).
    B2B-Center (e-commerce solutions provider, recently raised $45 million)
    AVITO (classifieds website, recently raised $75 million)
    Clickandpay.ru (cash-back marketplace, raised over $60 million to date)
    – Online goods store Wikimart.ru
    – Shopping cart software maker Ecwid
    – Sporting gear and clothing store Heverest.ru

    Travel

    Ostrovok (online travel and hotel booking site, raised close to $14 million)
    Oktogo (hotel and travel booking site, recently raised $10 million)
    – Travel meta-search engine Jizo.ru
    – Tour booking site Travelata
    – flight search and booking site Anywayanyday

    Gaming

    Zeptolab (of Cut The Rope fame)

    Other

    LinguaLeo (e-learning solutions)
    – Open-source Web server nginx
    – Online payment service provider Qiwi
    – Alternative search engine Quintura

    And then there are nimble, fledgling but undeniably innovative startups like online dating sites Zingl and Teamo.ru, mobile food review service Dish.fm, social network sound Hubbub, VoIP service provider Zingaya, visual resume company ResumUP, daily deals aggregator Zina.ru and

    Now that we’ve established that there’s definitely a thriving startup scene in Russia, where’s their funding come from?

    Here’s a list of the most active and noteworthy startup accelerators and incubators in Russia:

    Global Venture Alliance + Plug and Play
    Skolkovo
    Digital October
    Fast Lane Ventures
    Yandex.Factory
    IMI.VC
    Tinkoff Digital (recently raised $20 million)
    Farminers
    GTI Labs
    Ingria
    TexDrive / Springboard

    Here’s a list of Russian venture capital and private equity firms:

    Runa Capital
    Ru-net
    DST (Airbnb, Facebook, Groupon, Spotify, Twitter, Zalando and Zynga)
    Kite Ventures
    Frontier Ventures
    eVenture Capital Partners
    Baring Vostok
    – New Generation Investment
    Troika Capital
    AddVenture
    ABRT
    Bright Capital
    VTB Capital
    Russian Venture Company

    International investors investing in Russia

    Accel Partners
    Balderton
    United Managers Japan
    Intel Capital
    Index Ventures
    Mangrove Capital Partners
    Qualcomm
    – Tiger Global
    Bessemer Venture Partners
    General Atlantic

    If you’d like to stay updated on Russia’s tech scene, in English, you should read:

    The Next Web :)
    East-West Digital News
    Quintura Blog
    GoalEurope
    Ventures-news

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