The Russian startup market started to grow actively at the beginning of 2010. However, it is worth mentioning that up to that time, there were a few projects in the country that showed rapid growth and reached the capitalisation of $1 billion and more. Nevertheless, it is about the beginning of this decade, when numerous venture capital funds were created and many development programs for innovative entrepreneurs were launched.

Both governmental and private structures are interested in the regional and global development of the startup ecosystem. For example, in 2017, a governmental corporation Vnesheconombank created an associated company “WEB Innovations”, its aim is to become the single window for contacting the VEB Group on such questions as support for innovative projects. In 2019, the company was renamed to VEB Ventures. The company will earn on investments in companies through joint venture funds with corporations and other market players. By 2024, VEB Ventures intends to invest more than 36.3 billion rubles in the venture capital market.

The development of startups in the subjects of the federation is important for Russia, because most regional economies have some kind of priority. Thus, startups can work to develop this area: in Yekaterinburg — developing innovative solutions for large industrial enterprises, in Tyumen — for oil production.

According to the guide created by the Rusbase portal, at the beginning of 2019 in Russia, except Moscow and Saint-Petersburg, there were 12 complete regional ecosystems of innovative entrepreneurship: in Vladivostok, Ekaterinburg, Kaliningrad, Novosibirsk, Krasnodar, Voronezh, Samara, Kazan, Perm, Izhevsk, Yakutsk and Nizhniy Novgorod. The Association of Innovative Regions has been working in Russia since 1999, it unites 16 federation subjects (out of 85). The aim of the organisation is to help regions-participants develop in an innovative direction.

At the beginning of 2018, a piece of research called “Digital horizons: IT-entrepreneur and startup ecosystems in Russia” was published. In the article, it was mentioned that the startup ecosystem in Russia is characterized by a wide range of formats, variety, orientation on different industries of economy and different business model types.

Below, you can find some interesting numbers from the research.

• At that moment, when the article was published, 700 technological startups functioned in Russia. 62% of them were related to B2C direction.

• There are 6 startups per 1 million city capita in Russia. In comparison to Israel, there are 214 startups per 1 million city capita, in Singapore — 176, in the USA — 160, in Great Britain — 122, in Finland — 101.

• The growth domestic expenditure on Scientific Research and Development and experimental-design works amounts to 1,1% of GDP. To compare, in developed countries this figure equals 2–4%

The results of 2019 for the Russian venture market, according to the Venture Barometer study, can be summarized as follows. First, investment volumes continue to grow and according to forecasts, the positive trend will continue in the next year, investors plan to increase investment in 2020.The well-known rumors about the outflow of investors from the country, which have been particularly relevant recently, are exaggerated — only 5% of potential participants in the study went abroad or decided not to invest in Russian projects anymore. But at the same time, in 2019, investors’ hopes for exits were not met (as 49% of respondents state). The hopes for the participation of state-owned companies as a strategic investor did not justify themselves. But the activity of private corporations is growing: the number of corporate funds is increasing, companies are launching their own programs for working with startups, and creating innovative departments.

More information about the Russian venture industry can be found in the PWC & RBC MoneyTree ™: Venture Market Navigator review.

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Famous projects

Back to 2017, the leading direction for launching startups were e-commerce (15%) and Fintech (13%). According to the “Startup Barometer” research data for 2019, the most popular niche for Russian startuppers is the production of products and services for businesses — 16% of all surveyed startups are working in this direction. On the second place — artificial intelligence (13%), on the third — big data (11%). Next in the list are educational technologies (10%), internet applications and services (9%), internet of things (9%), marketplaces (8%), mobile applications and services (8%), e-commerce (8%), fintech (6%). As we can see, less than in 2 years, the situation relating to niches has dramatically changed.

And what are those Russian projects devoted to that industries are known to the whole world today?

Yandex

The first run-time version of the browser appeared in 1993; Yandex was introduced to a general audience in 1997. Today, Yandex is not only a search engine but also many other convenient services including Yandex.Food, Yandex.Taxi, Yandex.Zen, Yandex.Maps, Yandex.Money, Yandex.Maps, Yandex.Music and other multimedia search, cartographic, market search, reference and information, advertising, statistical, social, personalized web services and mobile applications.

In 2010, Yandex attracted $15 million from Baring Vostok Capital Partners fund, Almaz Capital Partners (an international venture fund, its headquarters are in California and Germany) and UFG (headquarters is in Moscow). Prior to this, ru-Net funds (Russia) and Tiger Global Management (an American investment firm) invested in the company in 2000. A fun fact: in September 2019, Yandex announced the launch of a service for the purchase and sale of securities — Yandex.Investments. During an IPO on the Nasdaq exchange, investors acquired 52.2 million shares of the company for $ 1.3 billion.

The company employs up to 9000 employees. As of 2019, the company capitalization amounts to 828.86 billion rubles.

Yandex.Taxi can be called “a unicorn inside of a unicorn”. It was launched in 2011. In February 2018, Yandex and Uber announced the closure of a deal of merging online travel booking businesses in Russia and neighboring countries as part of a new company in which they have already invested $ 225 million (Uber) and $ 100 million (Yandex). Given these investments, cash on the company’s balance sheet is $ 400 million.

Mail.ru Group

The company appeared in 1998. The mail service mail.ru was launched in the same year. Mail.ru Group was founded in May 2005. Since then, Mail.ru Group has launched a number of new services. Today the company owns: the mail.ru mail service, ICQ messengers, Tam Tam, Agent Mail.ru and Myteam, social networks VKontakte and Odnoklassniki, the game brand MY.GAMES, the service Maps.me, the service for searching and ordering ready meals Delivery Club and others Services. According to Russian Forbes, the cost of the project is estimated at $ 5.3 billion. In addition, Mail.ru Group is one of the three most profitable publishers of mobile applications for 2019 according to App Annie.

Avito

A service for sales announcements about new and used goods, rendering services as well as for posting vacancies and resumes. Today, more than 56 million active announcements are posted on the site, 120 transactions are made every minute, and 400,000 new announcements appear daily.

The website was launched in 2007. In 2010, the company attracted investments that amounted to $26 million from a Swedish concern Investment AB Kinnevik and Northzone ventures; their headquarters is also located in Sweden. In 2012, Avito received $75 million more from two investors — Accel Partners (venture fund with headquarters in California, the USA) and Baring Vostok Private Equity Fund (a Russian private investment fund). In 2015–2019, Russian Forbes included Avito in the TOP of the most expensive companies on the Russian-speaking internet segment — after Mail.ru Group and Yandex. In February 2019, the company’s value amounted to $3,85 billion.

Playrix

The leading company in mobile game development in Russia and CIS states, it was founded in 2004 in Vologda. The annual revenue of the company amounts to $1,2 billion. The company exists in 107 cities and 22 countries, and it employs more than 1700 employees, one third of which works remotely.

In September 2016, App Annie, the mobile data and analytics platform named Playrix the most profitable company in CIS countries and Baltics. In 2018, the company entered TOP-20 world largest mobile developers.

Badoo

A dating-focused social network that was launched in 2006. It belonged to the Russian businessman Andrei Andreev and the “Finam” investment holding company, which sold their share to the Blackstone American investment group for almost $3 billion in November 2019. The website and the application are extremely popular in the countries of Latin America and Europe. In 2008, the startup attracted $30 million of investments, in 2009 — $50 million more. At the beginning of 2019, 400 thousand users were registered in the network daily.

OCSiAI

A startup developed a technology of high-quality graphene nanotubes synthesis; the price of the product is 75 times lower than the price of existing analogues. Carbon nanotubes can be used in a range of industries because of their unique qualities. In 2019, the project was valued at $1 billion by the A&NN group, that belongs to the billionaire Alexander Mamut, who bought 0,5% share in OCSiAI from a state-owned company for $ 5 million.

Wildberries

An online hypermarket of clothes, shoes, accessories, home goods. The project appeared in 2003, the founders are Tatyana Bakalchuk and Vladislav Bakalchuk. The company is developing at the expense of its own and has borrowed funds without attracting an investor. The company employs 20,000 people. According to the Russian Forbes, in 2019 the company’s value exceeded $1,2 billion.

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Infrastructure: incubators, accelerators, technology centres

According to the data of the Russian Association of accelerators and business incubators (AABIC), in 2018 there were 260 functioning business incubators. Where 151 of them were working in regions and 91 were created on the university bases, 13 incubators were working in clusters and technoparks. Considering accelerators, according to the data of the AABIC, in 2018 there were 103 accelerators. Where 26 of them are private, 22 are corporate and 19 are university-based.

Here is a short overview of the largest incubators and accelerators.

1. IIDF accelerator. It has been working since 2013 and more than 500 startups accomplished their program. Main working directions are software and the internet of Things. Among their projects, there is VisionLabs, whose team has developed a face recognition system used in a number of Russian banks. The accelerator runs several programs a year with various participation options for startups — participation in the program can be paid for in money, or you can pay a share in the project — from 3 to 7% depending on the terms of participation. The duration of the program is 3 months.

2. “Skolkovo” startup academy. It is founded in 2012. main directions are telecommunications, human services, constructions, marketing and etc. Among famous graduates, there are BelCar car-sharing service, Lucky Child — an online store of children wear. All participants pass the selection process. The tuition fee is from $ 11,900 to $ 12,700 in equivalent, depending on the draft. The duration of the program is 5 months. Teams from abroad can also undergo training in the Startup Academy.

3. Global Venture Alliance. It has been working since 2011, and it has offices in Moscow and San-Francisco. More than 550 startups have gone through GVA programs, and in general, they have attracted $30 million. main directions: IT, software, mob mauve and ecological technologies, EdTech, industrial innovations, entertainment technologies, marketing. Among graduates, there is YouScan — a service for monitoring and analysing mentions in social media. All projects that have passed the selection, take part in the program for free. The duration is 3–4 month. Startups from abroad can also apply to the program.

4. GenerationS. A corporate accelerator, that has been working since 2013. Its founder is RVC. More than 500 startups went through the accelerator, the participation is free. The platform is interested in partnership with any technological startup without accents in specific directions. One of the accelerator graduates — an automated scooter rent Samocat Sharing. The duration is 3 to 6 months, and international startups can also participate in the range of acceleration programs. In particular, they are currently recruiting for the STLC accelerator, where projects from around the world are being considered.

5. “Fintech Lab” — an organiser of such programs as Banktech, Insurtech, Investtech, it prefers fintech-startups. Among accelerator projects, there is Qrooto — a cashback service based on the mobile application. Before drafting to the program, all projects pass a two-stage selection, the participation is free. The duration of the program is 12 weeks.

6. Sberbank Accelerator and 500 Startups — a program for the development of IT companies. Accelerator industries of interest include e-commerce, e-health, telecommunications, professional & support services, educational & HR services, lifestyle, e-marketing & e-advertising, e-auto, fintech, logistics, cybersecurity, cloud services, big data and other technologies. All projects participating in the acceleration receive up to 6 million rubles (± $ 100 thousand) of seed investments for a 5% stake in the company, access to the partner network of the accelerator and the Sberbank ecosystem. The process of working with startups is 9 weeks of acceleration in Moscow with 500 Startups.

7. The Moscow Accelerator, organized by Yandex together with the Moscow Innovation Agency and the Moscow Innovation Cluster Foundation. This is a free equity free accelerator, the duration of the program is 10 weeks. The winners of the program are divided among themselves 10 million rubles (± $ 160 thousand). Focus areas: LogTech, PropTech, EdTech, RetailTech. Minimum requirements for participants: the finished product or MVP, customers and an experienced team of two people.