Russian giants look beyond their borders

By Lucian Avadani on December 12th, 2012

Gone are the days when, in the need of some technical task or service, one would search the internet for a killer but dirt-cheap developer in Russia, Ukraine, or Romania. OK, maybe those days are not gone for good, but at least they’re on the way out. As the cost of outsourcing in those regions increases, the need to be more product-oriented grows as well, breeding new generations of entrepreneurs in the process.

The transition began a few years ago, enhanced by a growing and untapped market, which stretches from Russia to Ukraine and from Kazakhstan to Armenia. The former USSR has over 100 million people online, but there’s still plenty of room for growth, since every country in the region has an internet penetration rate under 50 per cent.

Newly formed internet companies here have tended to focus on domestic markets, because our command of unique linguistic and cultural characteristics in the region makes rapid success more likely. This is how Yandex, Russian’s leading search engine, and my own employer uCoz, a website builder, were born. But, after years of growth and after reaching a solid development point in a leading emerging market like this, the need to “go global” is now being felt.

Yandex has now launched in Turkey, taking on Google’s monopoly in that country, while we have localized into several European languages and are stepping up our game in Brazil, whose internet economy is flourishing.

Start-ups from central and eastern European countries like Romania, Serbia and Hungary have started to think outside their national borders to. The vast majority, if not all, now launch in English, neglecting the large, emerging market from the East. This is happening even though most Eastern European countries share many cultural characteristics with the Russian market, only differing in language.

What about funding from those famous Russian big guns, the so called A-players? Well, there are several Russian-based VC houses that have the power to back great ideas at massive scale, like Ru-net, DST, VTB and Runa Capital. All these investment machines support companies that tackle both the Russian and international markets.

So the signs are that Russia and the countries in its orbit are starting to extend their influence elsewhere, even if that trend is not yet reciprocated.

Recent happenings in Eastern Europe are promising, though interest towards the giant in the East remains close to freezing point. The last few months have been chock-full of events like the Girls in Tech, Startup Weekend and, probably the most representative, How to Web, sometimes called Eastern Europe’s LeWeb.

TechCrunch’s War and Peace event, which is to be hosted in Moscow 9-10 December, will be the last of the tech reunions in eastern Europe for 2012.

These type of gatherings are regional musts, since attending conferences in western Europe and north America is prohibitively expensive. What in the west is a ticket price for a major conference is closer in the east to a chunk of seed capital.

A recalibration is needed, to reflect the fact that eastern Europe is beginning to send its innovations west. And, for western entrepreneurs frustrated by saturation in their local markets, the otherwordliness of China and the distance of south America need not trouble you: look no further than Russia, where much of the internet remains to be invented.

I’m thinking particularly in terms of games companies. Because it’s colder here. People need things to do indoors.

Lucian Avadani is International Development Manager for uCoz, a Moscow-based internet company.