In the last few years, many RussIan developers and startups have moved to SIlIcon Valley In the hopes of conquerIng global markets as the next Google, Facebook or Uber. But only a select few have had any success.
Sabrina Ellis, Google director of product management, talks about the new Google Pixel phone during a product event in San Francisco on October 4, 2016. Photo: AP
Silicon Valley is a mecca of innovation — the home of thousands of the largest technological companies, startups and investment funds in the world. The GDP of Silicon Valley, the largest center of innovation in the United States, is about $2.3 trillion, which is about half of the GDP of russia. The amount of venture capital investment in Silicon Valley amounted to $50 billion in 2015.
In the last few years, many Russian developers and startups have moved to Silicon Valley in the hopes of conquering global markets as the next Google, Facebook or Uber. But only a select few have had any success.
Despite the illusion many Russians have that in such a place, in such a productive ecosystem, with so much talent, it will be easier to gain success than in their own country, the reality is much more complicated. Russian entrepreneurs and investors face a particular set of challenges breaking into the market, and perhaps not the ones they would expect.
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According to Igor Gonebnyy, the founder of the educational platform Coursmos, “the fact that we are Russian is not an issue. Here everyone is used to foreigners and different accents. If you are here, you are here. It matters little from where you come. It is important to grow your network, find partners, co-workers, lawyers, consultants, investors and make intelligent next steps.”
“One of the difficulties for Russia’s post-Soviet startups is the culture shock, when they try to use techniques from the old country in new environments and expect the same results,” says Igor Shoifot, founder of the “Happy Farm” business incubator.
Anton Yakovlev, founder of Saex, a networking app for sales, believes the greatest impediment to opening a business in the United States is the visa question. “It is a great problem to attain the B1-B2 visa. Many try to open the H1B, L, O. Without the right visa, you cannot start a company, open a bank account, receive or pay a salary, or even receive a drivers’ license,” Yakovlev says.
Life is most difficult for those who do not have a strictly technical background, but rather a Russian education in business, management or marketing.
“Many here learn to become developers, marketers, managers and PR specialists. Russian business education, or degree in social sciences is irrelevant here, it is much more important to have a technical background,” Gonebnyy says.
Building the right relationship
Entrepreneur Renat Gabitov believes the greatest barrier to entry for new startups is finding financing.
“The problem is that in order to launch a startup you often need capital, but the questions is where to get it?” Gabitov says. “In my case, I already had one successful business from which I had money I could invest in another venture. But what if there is no other business? Then you have to be working as you are managing your startup, and that is incredibly difficult.”
Of course, most startups hope to get funding from investors. Pavel Cherkashin, a venture investor who moved from Moscow to Silicon Valley believes that the ability to find necessary connections and get recommendations is key for a startup.
“You have to be able to get an introduction to an important investor. Here investors only receive new faces through recommendations. Otherwise there is no trust,” says Cherkashin.
Investor shoifot sees it differently. “for some reason in russia, all start- ups believe in the golden investor and a good pitch,” he says. “This is very naive. all you really have to do is to find the right person, make your pitch and all will be well. It is an illusion to say that only connections help success here. maybe someone will pay attention to you, but unless your business is growing, no one will invest in you. but it is important where you come from, if you have already accom- plished great things, and have some interesting projects in your past, everyone will want to invest in you.”
Stanislav Shalunov, inventor of the FireChat messaging app, which uses wireless mesh networking technology, has worked in Silicon Valley for many years.
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“Finding a first ‘intro’ to an investor is not the most complicated task for a startup,” Shalunov says. “During the growth process, startups will have to solve many complex problems, and they need to learn how to do it.”
“The entrepreneur needs to be able to overcome the lack of resources,” he added. “A lack of resources — this is an impediment that can be overcome, but a lack of understanding of entrepreneurial culture — this is a more serious issue.”
Shalunov argues that one of the challenges that Russian startups face in finding funding is getting the nuance of speaking to local investors.
“Investors always praise, because they gain nothing by being derisive," he says. "Because later they can lose on a deal if the company does well. Investors want to be able to invest at any time — maybe later if the company begins doing better. This is why you will almost never hear a straight ‘no’ from them.”
Yakovlev agrees. “The atmosphere here is very open," he says. "Everyone is glad to communicate and share information. Everyone is polite, and no one will tell you if you are not making sense. Maybe they even won’t be able to understand your bad English."
Getting on the ground
Taking the plunge and relocating to the San Francisco area is critical, however. “We only talk to the startups who landed at the airport,” says Anna Dvornikova, investor and founder of the Silicon Valley Open Doors conference. “Local investors conduct deals within a few miles of Palo Alto, because here they understand the rules of the game. They need to be able to trust the company and have regular contact with the startup.”
Gonebnyy agrees with this assessment. “No one invests in Russia from here. The company must be located in the Valley, you have to be within the same space as your investors. The team may remain in Russia, but the CEO must come to California, and the price of housing in the Valley is astronomical,” he says.
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Ilya Os, an entrepreneur, echoes this view. To quote him, moving to California is a big personal challenge.
“It is a sort of the marathon,” he says. “You should be super strong, smart, and sturdy to participate in the rivalry. Here you will deal with visa procedures, learn English, and pay bills 10 times as high as in Russia. But in reality, many enjoy the marathon: The payoffs will be high if you succeed and reach the finish line.”
For those who do manage to make it in the Valley, the satisfaction comes from more than just money.
“I began my own startup after being a managing director at Google and Microsoft,” says Konstantin Roslyakov, the founder of Golf Pad, a mobile app for golf players. “One has to work a lot more at a startup and earn a lot less. But it is satisfactory to know that you are working on what you want to do. It is more interesting to work for yourself, you can move a lot faster, and your personal impact is greater. You can gain a lot more, but there are no guarantees.”
Added investor Shoifot, “Those who come here are more successful than the locals. They are not afraid of risk, they have burned bridges behind them, they have to support families, they went through a lot, and are ready to work hard for their results.”
The article was initially published in Russia Direct’s special project “U.S.-Russia Shared Frontiers.”