This week and next, East-West Digital News reviews the most important developments on the Russian high-tech scene in 2015. Today’s article highlights the attitude of international players towards the Russian tech market.
In spite of the international tensions, sanctions and retaliation measures that followed the Ukrainian conflict, Russia’s tech markets kept some appeal in the eyes of a number of foreign players — even from western countries.
In April 2015 Cybernaut Investment, a major Chinese fund that invests in early- and growth-stage companies, agreed to finance a $200-million venture fund in association with Skolkovo, the international tech hub under completion on the outskirts of Moscow. The parties also agreed to build a large R&D business incubator to house Skolkovo resident companies operating in the fields of IT and robotics, space, energy-efficiency technologies, and new materials. Meanwhile, a robotics center will be created in China with the help of Skolkovo’s Robotics Center.
Cybernaut also committed itself to inject $70 million in a satellite project led by Dauria Aerospace, a Russian space technology company, with a joint venture set to be created in Hong Kong. The project aims to monitor life in some of the largest cities in the world, primarily those located on a new Silk Road. Inked in October 2015, the agreement came as part of the Urban Observer project to conduct daily imaging of the world’s 100 largest cities.
That same month, Rex Global Entertainment, a Hong Kong-based investment company, acquired a 64.9% stake in Russian smartphone manufacturer Yota Devices for $100 million. In addition, Rex committed itself to invest $50 million in Yota to develop the product line, including a new YotaPhone 3.
Even more impressive was the acquisition of Avito, Russia’s leading online classifieds, by Naspers. In October the South African group put no less than $1.2 billion to become the largest shareholder of the company with a 67.9% stake. The deal, which valued Avito at some $2.7 billion, came as one of the largest European VC-backed company exits ever.
Attracted by Russia’s 80 million Internet users (EWDN estimate as of late 2015 based on FOM data) several US and European tech companies developed activities in Russia, regardless of the economic crisis. Such established players as AT Internet, Bla-Bla-Car, eToro, Criteo and Uber – with the support of Sberbank – launched or continued their projects in the country.
In the meantime, Netflix prepared its market entry, which took place in January 2016.
Smaller players like Kameleoon, a French provider of A/B testing solution, Target2Sell, a Paris-based provider of recommendation engines, and Lituanian public transport app developer Trafi, invested resources to develop in what they considered to be a promising market.
UK logo startup Withoomph, US booking app Hotel Night and US interior design community Houzz localized their sites, while Vans and H&M launched online stores in Russia.
However Spotify, which had registered a subsidiary in Russia in 2014, cancelled plans to open an office and launch its video service in the country.
Western venture funds, which had shown growing interest in the Russian startup scene until 2013, practically ignored Russia in 2015. One of the rare exceptions, in February, was an investment by Siguler Guff and CapMan, two international private equity firms, in Russian educational test service provider Maximum Education.
In September, US accelerator and seed-stage fund 500 Startups appointed a senior executive to manage operations in Russia and other Eastern European countries, but no deal in Russia has been announced so far.
