An Insightful Perspective For Navigating Russia's VC Market

Abstract

This paper aims to offer readers ways of understanding and mitigating the risks posed by the current venture capital (VC) environment in Russia, whilst introducing readers to a historically lucrative asset class in a country renowned for its intellectual capital. Amidst often biased and disparate analysis within contemporary literature, we have examined the current research on Russian VC and conducted expert interviews to present a well-rounded, yet distinct perspective on operating in the industry today. We demonstrate that after weighing the primary Russia-specific risks (governmental, legal, operating) and unique selling propositions (technical talent, established scientific initiatives, a burgeoning adoptive middle class), there are two central operational strategies investors should deploy, particularly in the lower-risk technology sector: 1) concentrate on globally-oriented Russian companies utilizing local technical talent to deliver global products, or 2) concentrate on market-leading Russian companies focusing on a particular product or service for local consumption. Despite the added challenges, we believe that if approached properly, the Russian market has substantial opportunities in venture capital for the adaptive investor.