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Russian startups - it's not all about Moscow!

0 17 October 2013

UK tech magazine Wired's November edition will focus on Europe's startup capitals and the most exciting companies in each of them. Unsurprisingly, Moscow is on the list, and you can read what they have to say about the Russian capital here.

It’s not the first time, and it won’t be the last, that the foreign media have turned their attention to the Russian venture market. TechCrunch, The Next Web and the Financial Times regularly write about Russia, and Venture Village and others have also published articles in the not so distant past. 

About once every three months an article appears featuring Russian startups capable of going global, or venture investors ready to invest big money. We don’t disagree with the widely-accepted notion that Russia is a country of opportunity, with no shortage of money and plenty of unexploited niches for business.  

However, we would like to remind the world that Russia isn’t only Moscow - which is all that most Western journalists get to see on their press tours - and that the Russian venture community is more than just a handful of people representing some or other venture fund, most of whom have never actually founded a startup. 

Indeed, the Russian startup community is quite a bit wider than the “traditional” selection. 

Just as visitors to Russia often leave with a Russian doll (matryoshka), a hat with ear flaps (ushanka) and maybe even a balalaika, so tech journalists often leave Russia with the impression that e-commerce, search and gaming are the only significant sectors in the Russian startup market. 

Moscow - not necessarily the Russian startup capital.

Although most venture market events take place in Moscow, that doesn’t make it the undisputed capital of the Russian startup scene. Of course, lots of Moscow-based projects gather their teams from the regions - with techies from Kaliningrad to Vladivostok and Archangel to Sochi moving to the capital every year. However, the startup sector is still, to a considerable extent, de-centralized, and so foreign investors would be well advised to visit not only Moscow, but also St Petersburg, Kazan, Yekaterinburg and Novosibirsk. 

It’s all about technology!

Abroad, the Russian startup sector is often viewed as little more than a collection of clones of European and American services that have managed to attract tens of millions of users. What is often overlooked is that Russian startups are also creating and developing original solutions that are used by startups all over the world - virtual servers, web-software, search algorithms etc. While it’s undoubtedly true that the most famous startups are social media or online retail clones, in recent years the situation has been changing. 

Not all the money is in Moscow!

In Russia, production has tended to take place in the regions, while management is done in Moscow. Almost all funding also traditionally goes through the capital one way or another. So though it is true that the vast majority of the money starts in Moscow, a lot of investments are actually made in the regions. 

Here are our top-10 startups based outside of Moscow.

Ecwid - Ulyanovsk

Investor: Runa Capital

Capitalization: More than $10 million

Ecwid develops e-commerce widgets used by online retailers all over the world. In 2000 a team of three programmers, led by current CEO Dmitry Fazlyev, developed X-Cart, the world’s first PHP platform for e-commerce, which allowed clients to create an online store from a selection of templates. Now the company reckons to be among the top-10 most-used services of their type in the world. Ecwid is also in the top-3 apps for Facebook commerce, and in January this year it acquired its American rival Payvment.

Vkontakte ( - St Petersburg

Investors: United Capital Partners, Digital Sky Technologies

Capitalization: More than $3 billion.

The most popular social network in Russia, which modelled itself on Facebook from an early stage, is now among the most visited sites in the world. From 2004-2006 a team of programmers from St Petersburg State University led by Pavel Durov created an online forum for students to socialise, which developed into a fully fledged social network. Although technologically VKontakte is on a par with Facebook, the site is still run by a small team of programmers in St Petersburg. 

Displair - Astrakhan

Investors: LETA Group, Venture Angels

Capitalization: more than 5 million dollars

Displair is one of Southern Russia’s most impressive tech projects. Their idea - to project an image onto a 4 millimeter thick stream of water vapor to create - an ‘air touchscreen’, is like something out of Star Wars. The project, which is also a Skolkovo resident, has won pretty much all the startup awards on offer in Russia and its first commercially available screens are to go on sale in the USA, the Philippines, Japan and China. Although Displair were not the first to create an air screen using water vapor (a Finnish company got there first), the Russian project’s device is unquestionably the market leader. 

Nginx (Pronounced EngineX) - Moscow

Investors: Runa CapitalMSD Capital, New Enterprise Associates, e-ventures.  

Capitalization: More than $20 million.

Nginx is the third most popular web server in the world. It was created between 2002 and 2004 by a team of developers from Russian search engine Rambler, and is used by Dropbox, Facebook, Hulu, Instagram, Netflix, Pinterest, Zynga and Yandex. It recently released Nginx Plus, a commercial edition of its open source web server software, which it markets as a software alternative to application delivery controllers (ADCs). We’ve included it in this list because, although the company is based in the capital, many of its developers are elsewhere in Russia. 

Excelsior - Novosibirsk

Investors: Private

Capitalization: No data. 

Excelsior, one of the oldest software development companies in Novosibirsk, provides software for creating and maintaining Java apps. Among their clients are Cisco, Boeing, Toyota, Canon, Bosch and British Telecom. At present, the company is developing Java-compatible mobile software, and closely following venture deals abroad which have seen similar services that use different programming languages raise tens of millions of dollars. 

Langprism - Krasnoyarsk

Investors: Private

Capitalization: No data

LangPrism is Russia’s answer to Google Translate. The project has set itself the ambitious goal of becoming a Wikipedia for translation, with translations of thousands of websites. It has already attracted the attention of investors in Krasnoyarsk as it seeks to spread worldwide. 

SPB TV - St Petersburg

Investors: Private

Capitalization: More than $10 million

SPB TV, which split from SPB Software when it was bought by Yandex, continues to develop mobile TV solutions which are used by mobile phone operators all over the world (in Russia they are used by all of the “Big-3” - Megafon, MTS and Beeline). The project still relies on funding from its founders, but the team are open to investment from business angels from Asia, where SPB TV is very popular. 

Oktogo (pronounced OK to go) - St Petersburg

Investors: Mangrove Capital Partners, ABRT, VTB Capital Investment Management

Capitalization: more than $50 million

While successful Russian startups usually have their talented programmers to thank for their progress, some projects have made it largely thanks to the efforts of the businessmen and women who founded them. One of those is Marina Kolesnik’s travel startup Oktogo, which has attracted funding from domestic and foreign investors. In a very competitive sector, Oktogo's success at raising investment shows that non-Moscow startups can get venture funding. 

2GIS - Novosibirsk

Investors: Private

Capitalization: More than $5 million

2GIS desktop and mobile services offer users offline access to city maps with public transport routes and an up-to-date directory of 1.5 million organisations. Having successfully launched in Siberia, the project was extended to European Russia, where it established itself as the market leader. It now has data for over 180 cities, and is moving into Europe. It also has a functioning monetization strategy, through advertising. 

Doroga.TV - Nizhny Novgorod

Investors: Private

Capitalization: No data.

Nizhny Novgorod’s Doroga.TV, a vehicle tracking GPS service, has provided public transport and traffic tracking software to the American cities of New York and New Jersey. At home the company, which was launched in 2007, operates in Nizhny Novgorod, Kazan, Kaliningrad, Tambov, Penza and Irkutsk. However, it has so far shied away from Moscow and St Petersburg due to a lack of administrative resources. 

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