What's the future for Russian startups abroad?

Which startups made it to the Top 50 and what is their future in the global economy?

Which startups made it to the Top 50 and what is their future in the global economy?

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Early this month, RBTH published Russian Startups Rating 2016 that features the most promising young tech companies for the international market. Which startups made it to the Top 50 and what is their future in the global economy?

While Russia’s economy is shrinking and the ruble is hitting new lows, the country’s hottest startups are looking for access to the international market, targeting foreign investors and consumers. In early February, RBTH published its rating of young Russian tech companies with the most potential on the international market.    

The money issue

Russian tech companies that plan to expand abroad have greater chances to secure investment even within the country, according to Vasily Belov, senior vice president for innovations at the Skolkovo Foundation.

"Venture funds are keen to work with Russian startups that want to take their products and services to foreign markets," said Belov. Skolkovo supports the transfer of Russian technology to the international market. The RBTH Top 50 includes many Skolkovo residents already recognized abroad, such as 3D Bioprinting, and Optogard Nanotech.

Vladimir Mironov, head of 3D Bioprinting Solutions. Source: Press photo

"The RBTH list has startups of various levels," said Dmitry Kalaev, director of accelerator programs at the Russian Internet Initiatives Fund. "There are those who already successfully operate abroad for several years, as well as companies that just started international expansion this year. The first group has already attracted the attention of international customers. Now they have to prove their potential to foreign investors."

Dauria Aerospace. Source: Press photoSpace technology company, Dauria Aerospace, has already attracted $70 million to develop and launch 10 satellites to monitor life in some of the largest cities in the world.

Tesla Amazing. Source: Press photo

Tesla Amazing that developed Magnetic, an innovative sticky note, raised almost $250,000 via crowd-funding in 2015 and secured an exclusive distribution deal from the largest office supply retailer in the U.S. But there are many other Russian startups that have a long way to go and to prove to foreign investors and customers that their ideas are working.   

Looking for the “hacks”

How difficult is it for startups of Russian origin to take root and grow on the international market? Alex Romanenko, CEO and founder at 2for1, a Russian-Ukrainian startup that aggregates the best sale deals of the most-visited online stores in the U.S. and Europe, told RBTH that the strategy depends on the size of the market. 

"In a smaller market you have to focus on grabbing the entire market; in a bigger one you have to differentiate from the competition," Romanenko said. "The main difficulty for Russian startups trying to succeed abroad is a lack of personal connections that local startups have built up for years. Also, we don't have the same knowledge of specific characteristics of the local market. Basically, we have to build everything from scratch."

High competition is another problem. "You are competing with tens of thousands of sites and apps, from multi-billion dollar corporations with marketing budgets of over $10 million per month, to highly aggressive startups with hungry and smart teams," said Romanenko.

How does 2for1 overcome these difficulties? "We are growing our business network and looking for so-called "hacks," which help us grow with a limited budget," Romanenko explained. "We also found local advisors from multi-billion dollar corporations who help us tackle the challenges.”

Startups not impacted by politics

Last year, a number of Russian tech startups were recognized internationally. N-Tech.Lab was the leader in the global challenge in face recognition algorithms organized by the University of Washington, beating more than 100 other systems, including one created by Google. Astro Digital, a platform for accessing satellite data, took second place at Slush, one of the largest events for high-tech companies in Europe.

"Recent international tensions have not impacted Russia's excellent reputation for tech talent, and Russians still win international programming contests, and develop hi-tech products that sometimes are international hits," said Adrien Henni, chief editor at the East-West Digital News, the international media resource dedicated to Russian digital industries.

Startup founders say they do not face discrimination for political reasons. "Our company is registered in the U.S., and our lawyers and bank are based there," said Daniel Pavliuchkov, CEO and founder at Mailburn, a new email technology service. "The fact that our team is based in Russia doesn’t bother anyone, especially the users. Some international investors told us that they’ll give us the funding if we move, for example, to Greece, but we have found other funds and business angels that are investing outside of their countries."

The RBTH rating system was based on criteria such as audience interest, idea originality, commercial potential, and more. The startups had to satisfy certain requirements, such as the number of international customers interested in the service or product, impact on society and the environment, publications in the international media, and much more.

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