Death of Russian startups: why young entrepreneurs are leaving for Europe

Talent drain: why entrepreneurs are leaving Russia

The main reason for leaving is access to the market. V

In Russia, most regions are ossified and notnew players were allowed in, and the domestic market was seized by monopoly companies. In Europe, the situation is different - there are laws regulating the competitive environment. Therefore, the European market is more suitable for novice startups and entrepreneurs.

This law also implies a broad competitivesupply chain. There is no monopolist, so many companies appear on the market that sell one product. Because of this, every businessman works to gain an advantage over others. This allows aspiring startups to buy the parts, products, and supplies they need at lower prices and cut costs. It doesn't work in Russia because of the monopoly companies.

Most European countries have specialstartup visas, they allow founders to receive bonuses for a certain period. For example, a startup either pays no income tax at all, or pays at a reduced rate.

Another problem is investment.The founding Russian investor is the state, not private companies and people interested in the product. Because of this, the estimated cost of a business in Russia is 10–20 times less than in Europe, and 100 times less than in the United States. An investment of 3 million rubles is considered large, although it is only $ 50 thousand, that is, the average salary of a good specialist in the United States for 2-3 months.

Entrepreneurs themselves choose directions, notof interest to investors. For example, services based on artificial intelligence and Big Data Science, technologies for education and online platforms. And according to a study by the Startup Barometer, venture capitalists usually pay attention to markets where they can make money. These are fintech, retail platforms, marketplaces, foodtech and logistics services.

Unfortunately, now there is not a single science-intensivea startup that is doing well in Russia. Entrepreneurs have been waiting for investments and government contracts for years, while their colleagues in Europe and the United States launch pilot products.

What Russian hardware technologies are most successful in relocation?

  • Antilatency (ALT) is a technology company,which has not been relocated, but it has offices in several countries. The focus of the team is the development of tracking systems for the AR / VR markets. The main product ALT was shortlisted for the best VR gadgets at E3 2017 in Los Angeles.
  • Marine Digital creates a device thatautomates the fuel consumption of the ship. Now supply tanks and tanks are placed for each engine or boiler separately. Because of this, problems arise: it is impossible to send fuel from one engine to another, and unused tanks have to be constantly ventilated - the fuel evaporates quickly, there is a high chance of an explosion. The Marine Digital device solves these problems - the flow in all tanks occurs evenly and without human control. The innovation helps to optimize the route taking into account fuel consumption. This is how Marine Digital creates a new technological trend - the digital ship.
  • Zerion develops a platform for decentralizedfinance (DeFi). He wants to create a place where people can use financial products without the help of banks and processing companies. Its creators are Evgeny Yurtaev, Alexey Bashlykov from Moscow and Vadim Koleoshkin, a native of Odessa. The headquarters is located in New York. During the Series A investment round, the company raised about $ 8.2 million in investment.
  • Zelf is a digital bank that focuses ongeneration Z. He does not have a banking application and debit cards - he works through popular instant messengers. Users can transfer money, pay for purchases and accept payments using the chatbot. For this, the service has voice control using artificial intelligence. At the end of February 2021, Zelf raised $ 2 million in investment following a pre-seed round.
  • FIXAR was launched in 2018 by VasilyLukashev. The startup raised $ 600,000 in investment from The Untitled Ventures in its early stages, which allowed the company to develop an industrial drone. By 2021, the company has attracted approximately $ 12 million in investments from several business angels, including $ 620 thousand invested by members of the Russian investor club Angelsdeck.
  • Point-X started developing its first product in 2020year. The project received StartUP status in Latvia and was supported by a local investment and development agency. Point-X is a B2B2C product. It is a platform where brands and consumers can collaborate and get to know each other. Everything is based on smart contracts and blockchain technology that make data safe, transparent and up-to-date. The startup is bringing blockchain closer to the mass market.
  • Mission Space, a system development startupspace weather forecasting, chose Latvia because it became a member of the space agency, and these are grants and benefits. Mission Space has developed a satellite prototype, now it is one of the most promising projects in the field of deep technology.

What will happen next: a fall to the bottom or the great formation of the market for hardware startups?

Coronakirisis has touched hardware startups more thanthe investors assumed. These businesses have a research and development (R&D) cycle and a sales cycle that take many times longer than other businesses. The main reason is to create pilot products, and due to coronavirus restrictions, production around the world has slowed down.

But some destinations due to coronavirusonly won. For example, 25% of respondents from education and online education startups (EdTech) noted the positive effects of the crisis. In the financial segment (FinTech) such 11%, and in HR-tech (e-commerce and solutions for personnel management) - 5%.

In 2020, the Russian startup ecosystem enteredin the world ranking of StartupBlink, a research center specializing in the global startup movement. Moscow became the center of Russian innovation - the capital was ranked ninth in the ranking of cities with the best climate for startups, leaving behind several American megacities, London, Beijing, Tel Aviv and Berlin.

Since the end of 2020, the government in Russiaapproved subsidies for the accelerated development of IT projects. From 2021 to 2023, the state will allocate 750 million rubles. Investments will help developers bring products to the domestic market and provide acceleration support. New entrepreneurs will be helped by a system of grants and direct financing of "end-to-end technologies". They want to allocate 46.3 billion rubles for it, of which 12 billion rubles will be spent on artificial intelligence.

Most likely, already operating companies thatinitially focused on the home market, they will not go anywhere, since they will receive increased support from the state. But novice startups, who most often offer breakthrough ideas, will leave for Europe and other countries - there are more subsidies, market conditions and benefits for them there.

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