infoShare 2013: Alexander Shulgin - Starting, running and growing new IT companies in Russia [EN].

1. Poland – Russia Creating the Harmony Starting, running and growing new IT companies in Russia
2. Russian IT market 57,8M Internet users monthly 57% Advertising market growth 388,5 M Euro display ads 639,1 M Euro search ads 30% E-commerce market growth 186 M mobile phones – for 140 M people – 1,5 SIM card for 1 person VK – 29 143 000 Odnoklassniki – 25 265 000 My World (Mail.ru) – 22 831 000 Facebook – 15 404 000 Livejournal – 16 139 000
3. Mobile content More than $3 billion overall mobile content market by the end of 2013 78 million internet users by 2015 $23 billion to $30 billion E-commerce market by 2015 Internet & eCommerce Forecast
4. Russia employs over 1 million IT specialists. This is 1,34 percent of the country’s labor force Good education + High salaries City Education Salaries EUR/months PHP lead programmer / C++ lead programmer Moscow 40 un-s providing IT edu 1750 – 15000 / 1750 –10000 Saint-Petersburg 10 un-s providing IT edu 1250- 9000/ 1400-7000 Novosibirsk 3 un-s providing IT edu 940-7000 / 800 –5000 Nizhniy Novgorod 3 un-s providing IT edu 1075 –4000 / 850 –3000 A paradise for IT specialists Low Tax Rates from 6 to 13%
5. Russian hackers are world-known for their expertise. New Russian business: groups of hackers are paid to test the security of IT infrastructures And for Anti-Hackers — Kaspersky lab A paradise for Hackers 300 million end-users 250 thousand corporate clients $612 million – global turnover
6. Yury Milner, co-owner Mail.ru and DST Global Arkady Volozh and Ilya Segalovich, founders of Yandex.ru Evgeny Kaspersky, anti-virus software development company Kasperky Vyacheslav Mirilashvili, co-owner Vkontakte First billionaires from IT
7. 3 ways you may benefit from Russia • Specialize in algorithmic • Truckle big data issues • Usе new solutions from Russian • Health and e-Health 2. Test laboratory: 3. Observatory: Russia has all resources for implementation of your ideas. 1. Pool of experts: • Detect the glitches in your infrastructure security solutions with specialized hackers • Test efficiency new services – quick adoption • Alternative solutions to well-known issues • Intensive use of social networks • Strong growth market • Fast building ecosystem
8. Market Research – find your niche and opportunities ways to go further Define the Idea, what’s next? Local PartnerBy yourself Government • Other rules • Policy may change often • Bureaucracy & corruption OR
9. Top IT Hub cities Number of head offices & remote development centers of companies Moscow Moscow Region — 80 Saint-Petersburg — 46 Novosibirsk — 14 Yekaterinburg — 8 Kazan — 5 Rostov-on-Don — 4 Veliky Novgorod — 3 Nizhniy Novgorod — 2 Omsk — 3
10. •Skolkovo Innovation Center Special Economic Zone Budget allocation — $2.9 billion Supports 700 innovation companies from >30 Russian regions •Ingria Prominent technopark and incubator in St. Petersburg •Kazan’s IT Park One of the largest technoparks in Europe •MSU Business Incubator Incubator based on the well-known Moscow State University Technoparks, incubators and accelerators English-language information sources: • East-West Digital News, a leading resource on Russian digital industries and related venture activity • Rusbase, a startup and investor database • Marchmont News, a biligual resource dedicated to innovation accross Russia’s regions
11. > 25% faster growth of Moscow popularity in Innovation Cities Europe Index in 2013-2018 than in 2008-2012 Increase in creation of innovation workplaces > 5%/year in 2012-2018 > 2 times increase in investments in the implementation of innovation investment projects in Moscow Moscow Government Plans
12. • BIT, the leading innovation contest in Russia and neighboring countries • TechCrunch Moscow, a tech and venture event held in December each year • Web Ready, an international Internet and mobile startup contest held in St. Petersburg in November of each year International tech contests: Internationally oriented accelerators: • Farminers • Plug and Play Tech Center Moscow •Texdrive •TechTour Do local – think global Let’s look at Russia as a Poland local market
13. Do local – think global DST: Impressive portfolio including many of the hottest firms, starting the first bridges between Russian and Western companies
14. Serious challenges Copyright & Copypaste
15. It’s time to create! Without creativity you can’t achieve the harmony
16. BUT Multiplying ZERO If you have a smart idea, you can find a smart money to multiply it. 0 x $1.000.000 = still 0
17. Sustainable business formula Do what you do well and what you can be proud of Do business according moral values
18. DisplAir: first interactive airborne display with multi-touch support Creativity disrupts the market and minds
19. QIWI Provider of payment services across physical, online and mobile channels 11 million virtual wallets 169 thousand kiosks 39 billion cash & electronic payment monthly Held IPO on NASDAQ on May 3, 2013
20. YotaPhone Yota (4G internet) is the first Russian high-speed wireless network based on Mobile WiMAX.
21. IP protection in Russia as well as in most European jurisdictions does not match the sophistication of copyright laws in USA Pirated software accounted for 65% of the volume of all software units installed on PCs in Russia Copyright 2nd Worldwide rank in size of illegal media sharing ($300 million in music piracy)
22. Copyright should be ABOLISHED!
23. Because Copyright laws constraint creativity Progress is too fast to be followed by Copyright laws
24. So, what to do? Create open codes Give users access to your product Don’t ask them to pay for the air they breathe Work coopetitive, not competitive
25. 1 : 1= 2! If I give an apple to you, you will have an apple, and I won’t If I give an idea to you, each of us will have an idea!
26. More smart More ethics More up to date New World Copyright Law – Moral law
27. Manual Exchange the ideas Learn from each other Share experience Cooperate Do Market Study Define your niche and idea Use government supported programs Participate in contests Choose the location for growth out of many Russian IT Hubs Be creative! Be ethic!
28. Thank you!

Notas do Editor

(играет музыка) Good evening. You all recognize this is Chopin. In a program it’s written that I should speak about IT business in Russia, however I will speak about Chopin. Ok, I’m just kidding, talking seriously I will speak about the music and Harmony. I remember that in the childhood I constantly tore between music and mathematics. I was playing in a musical band. And at the same time I participated in mathematical contests and competitions. Then I understood Music and Mathematics are two sisters (the ancient Greeks had understood it much earlier than me though). If we take all the great music by Chopin, Bach, Tchaikovsky we will see it has the same golden ratio as mathematics and architecture have. Wherever there is a golden ratio, there is a harmony. The harmony means order, the main law of nature. The harmony produces new ideas. During the whole human history the innovators were those who have blown up the world. And Music, better that anything else, felt the breakthrough of innovation ideas. We got the technologies that have allowed us to create a first church organ => and Bach appeared. New processing of wood and metal resulted in creation of violins, cello and string orchestras => and composers appeared. Innovation helped to manufacture a piano => and Chopin arose. Another step forward in heat of metal - and we had sax and wind instruments. => Few years later we enjoyed jazz. Invention of electricity gave us a possibility to connect guitar to the plug => and we got the rock-and-roll. When we connected piano to electricity we got the dance disco music. One hundred years ago, Russia and Poland were flagships in innovations - as evidenced by Chopin and Tchaikovsky works. We are here today to speak about other innovation. But harmony should always be a part of everything, whatever it is, music or business or information technologies. To find this harmony between our countries we should do 2 important things: 1. First, we should get to know each other and 2. Second, we should be creative.
Let’s start with knowing each other. Here is the overview of the Russian It market: Russia has one of the world’s largest online populations, the number of Russian-speaking Internet users - 59.7 million, representing 3% of all users in the world, 9th place in the world. By the number of Russian-language content - 4th place with 4.8% 1 Worldwide rank in time spent on social networks (10 Average number of hours spent monthly on internet social networks; world average is 5) In March 2013 it was announced that Russian is now the second most used language on the web. Mobile phones penetration is also very wide – each Russian has about 1,5 Simcard. That also means another opportunity for spreading internet technologies All these factors result in fantastic growth of advertising market and e-commerce! You may see the figures in the slide.
And it will continue growing. With further Internet penetration and expected 78 million monthly users by 2015, the e-commerce market can reach the 30 million dollars barrier by 2015. Since potential market growth in Moscow & SPB in terms of new users is reaching its natural limit, such increase will happen thanks to the new shoppers from other Russian regions. The overall mobile content market will pass the 3 billion dollars mark by the end of this year.
Such an active development of Internet would not be possible without the development of information technologies. For the moment, Russia provides very good education in this sphere – only in Moscow there are 40 universities training IT specialists. All of them are required by the market, since we employ over 1 million people. As you can see, the salaries are quite competitive, for example PHP lead programmer in Moscow can earn up to 3000 euro per month.
At the same time Russia is a motherland of the world-known hackers. But the coin has another side – if you know how to crack the code, you know how to protect it. Many Russian businessmen found the way to turn it to their account. Now groups of hackers are paid to test the security. This has also led to the development on anti-hackers. For example, Kaspersky which is one of the four leading producers of software solutions for Endpoint Protection. They have more than 300 million clients all over the world. Their global turnover for 2011 amounted 612 million dollars.
So, do you want to be in a list with these guys? I can tell how Russia may help you in this.
If you already have your own business here are few points useful for IT companies. You may use our pool of experts, specializing in algorithmic, truckling big data issues. You may benefit from Russia as from a test laboratory where you convert the potential of our hackers to your own benefit. At the same time you may test the efficiency of new services. And you may also look at Russia as at an observatory through a combination of new approaches, development of social networks, rapid market growth and fast ecosystem building. In other words, Russian IT resources are very good for outsourcing model and capable for implementation of new ideas.
Now let’s talk a bit more about ideas. Where could you get the idea that will make you a millionaire? Probably you should start with a market research. Do rigorous reading, identify not fulfilled needs of of the market, find your niche or create a new one. Once you get the idea you should choose how you will proceed. Three major ways are: to go by yourself, to find a local partner or to use government programs. If you decided to go by yourself or with a local partner I should worn you about some challenges you will face. Russia has other rules, which is sometimes not so easy to understand even for myself. Regulations may change very often. And of course, corruption and bureaucracy are two biggest Russian problems. I need to say that there is significantly less corruption in IT industry than in any other offline business, but still Or you can go under the umbrella of Technoparks and Special Economic zones, supported by Government and enjoy the simplified regulations.
Here are some of Russian top innovative cities with major technoparks. Government strongly supports the development of IT sphere at the national level. The state has recognized the importance of maintaining technology parks as effective forms of organization of innovation. Unprecedented conditions are provided for Russian and international software development companies. All these measures have also led to the formation of many incubators and IT Hub cities in Russia. According to the most recent surveys not only Moscow, St.Petersburg, Novosibirsk and Yekaterinburg, but also Voronezh, Rostov-on-Don, Velikiy Novgorod, Kazan, and Omsk are among the Top 10 Russian software development destinations. Moscow and St. Petersburg are named among the top worldwide locations for product development, engineering, healthcare services and games development. Technoparks, incubators and accelerators have sprung up for the last few years, with dozens of such structures now competing in Moscow alone. Many of them seek to attract foreign entrepreneurs, solving the sourcing issue and offering co-investment opportunities. Let me be more specific and show you examples of IT-parks and accelerators.
Russia’s technoparks are a good option for foreign entrepreneurs. With its’ massive subsidies and tax cuts for innovative projects. The first example is Skolkovo, the giant tech hub in southwest Moscow, has already attracted dozens of global venture funds and high tech firms. To tap Russia’s innovation potential outside Moscow, foreign entrpreneurs may cooperate with other progressive regions. The incubator of Ingria, a prominent St. Petersburg technopark, includes >100 resident companies, employing more than 500 people in various technological fields. In Kazan, the capital of the autonomous Republic of Tatarstan, IT Park stands as one of the largest technoparks in Eastern Europe. Another example is creation of a business incubator based on the well-known Moscow State University. It was founded in 2010 and had more than 1,6 million dollars investments. It helps young innovators to develop, present and implement their projects in various branches of science and business: from medicine to the technologies of augmented reality and the platforms for creation of mobile applications. Below there are few informational sources which will be very helpful for you to get to know more about Russian entrepreneurship ecosystem.
Here I’d like to make an emphasis on Moscow. I’ll repeat, dozens of entrepreneurship structures are now competing in Moscow. And Moscow Government gives a strong support to the growth of such competition. It leads incubators and accelerators to be more and more professional. So, from day to day Moscow becomes more attractive for entrepreneurs and investors from all over the world. Some specific Moscow objectives for the nearest future: Increase in the investment attractiveness of Moscow for the innovative business Changes in the number of high-performance jobs, created as a result of implementation of the Moscow CID programs for governmental support to innovation, should be at least 5% a year in 2013-2018. Investments (from all sources) in the implementation of innovation investment projects in Moscow should be at least 2 times higher than the amount of expenses of the Moscow CID on implementation of appropriate programs of governmental support to innovation.
Now let’s speak about growing of your IT company. And my main thought here is that Russian market should be perceived by you as your local market. When you go to Russia, you are not expanding, it’s your local market. Historically happened that two our nations are very similar to each other. Russia is just a little bit bigger and that is why it can be a better jumping-off point to make you company global. So, once you are ready to go global Russia can offer you a bunch of internationally connected contests and accelerators. On the slide you may see some examples of international oriented competitions. Participation in such contests can give you not only solid prizes, like money grants, investments, free residence in incubators, mentorship, etc. But also it is very useful for getting the word about your company out. Same with accelerators. Among international oriented accelerators are Farminers, which brings its startups to San Francisco’s RocketSpace; the Moscow Plug and Play Tech Center, which operates jointly with the famous Californian accelerator of the same name; TexDrive, co-founded by UK startup accelerator veteran Jon Bradford; And Techtour,that develops European regional Tech Tours and Industry Summits to bring together the entire technology ecosystem of local and global players.
In fact, today’s Russia presents a lucrative market to IT players, especially those who have been successful in their home markets and are looking to international expansion. There are many examples of such breakthroughs – like DST that successfully built bridges between Russian and Western companies.
But when you go global you should be aware of some serious challenges that you might face. They are copyright and copypaste. Let me tackle these issues on at a time. And I will start with copypaste. Many of huge Russian internet services (you see examples on the slide) are just copy/paste models and became quite successful, however the time of copying is about to end. This model is not sustainable and not working for going global. Now is coming a new time, time of creativity.
I was talking about this in the beginning and I will repeat once again, without creativity the harmony cannot be achieved. Of course we need the Technical knowledge to work in IT industry, which is a must-be. But another ‘must be’, another pillar is Creativity. Only by combining these two components we may achieve the perfect balance.
The lack of creativity is one of our main problems. If your idea is zero you will always get zero as a result. This is one of the main math rules, which is sometimes being forgotten. The lack of creativity is so dramatic that I am even planning to open Moscow Academy of Creative Entrepreneurship. If it happens , I know that I will make an offer to be one of the tutor and mentor to the great and talented polish character, my friend Mirek Wasowitz , who is one of the best creative person I met.
And here you may see my formula for creating sustainable business. At the first glimpse, It looks very simple, but in real life it is not. However, I believe that only this approach will allow us to invent new creative technologies and products. On next slides I will give a few examples of how it may work.
This is the perfect case how creativity can disrupt the market. This is a company called Displair. It was founded in a small Russian town (even not Hub) by two young talented guys. They created an interface that can be seen, heard, smelled and touched in a fully interactive 2D or 3D experience. It is able to capture user’s hand movements to manipulate objects in free space. According to Mashable, DisplAir’s 'air screen‘ technology has made the screen less interactive user interface magic seen with Tom Cruise in Minority Report a working reality.
Here is another example - Russia’s leading provider of next generation payment services QIWI QIWI has deployed over 11 million virtual wallets; over 169,000 kiosks and terminals; It enabled over 40,000 merchants to accept Fover RUB 39 billion cash and electronic payments monthly Over 65 million consumers using QIWI’s network at least once a month. QIWI’s consumers can use cash, stored value and other electronic payment methods to order and pay for goods and services across physical or online environments interchangeably. The company has recently held IPO on NASQAD And it shows that creativity can be not only in product by itself, but in the way how it is marketed.
• One more success story is Yota that entered telecom market by providing access only, differentiating with disruptive distribution models. Now it operates in Russia, Belarus and Nicaragua and focuses on high density urban areas. It offers fixed, nomadic, and fully mobile wireless broadband Internet access, through dedicated mobile devices. It also provides stream movies, TV programs, and online music in its mobile services catalogue. And now creates a new archetype of Smartphone! With two different displays. They invented an absolutely new way of interaction with a phone. (YotaPhone is an Android with a high-resolution liquid crystal display on one side and an electronic paper display on the other. It allows you to effortlessly stream information to the electronic paper display, without draining battery power or having to wake up the phone.) So, after so many great examples, we are close to another problem, which is very important for the whole world.
I am talking about copyright and intellectual property protection . This topic is very familiar for me as: Author, Composer and IP holder The subject is particularly relevant for Russia, where the volume of pirated software installed on PC is up to 65%. IP protection here does not match the sophistication of copyright laws in USA So, what to do? How to protect the author rights?
My response – we should abolish, cancel, annul, repeal and abrogate copyright laws.
There are many reasons why it should be so. But the two global ones are the following: 1.Copyright limits people from creation. 2. And copyright is not able to perform its function anymore, it can’t follow the progress I also have my own reason: I really don’t want to fight for every cent each time someone is listening to my songs. And talking about Internet, it’s a new reality, with different rules. It’s ineffective, not to say, stupid to fight the rules by creating another rules. You should benefit from them and not to struggle with them.
So, what to do? – Live according to other rules! Unlock the copyright handcuffs Throw off the shackles of IP I mplement joint cooperation projects Internationali ze , shar e access to other markets Interact t echnological ly and organizational ly with other companies Reach a higher value creation if compared to the value created without interaction, and struggle to achieve competitive advantage.
Even math sometimes may work differently in regard to creativity and ideas. If you divide an idea between two people, as a result you will not get half of the idea for each of them, you will get two ideas!
I think this is the new law we need. When it happens, I will become the first member of this new World community. With new technologies the world has no borders and boundaries anymore. We are all globally minded persons. So, it doesn’t matter where we live or work. The World is flat, the world is Open.
Here I’d like to sum up what we were talking about. In order to open a company in Russia you should ( смотрите слайд, правая часть) But in order to open a successful company in Russia and make it global you should not only do these steps, but also employ creativity and moral values. You will benefit from only if you: cooperate, and not rival, share experiences and ideas, and not hide them, and learn from each other In current reality there is no other way of doing business.
In current reality innovation is like a modern rock-and-roll. We should be looking forward, but learning from the past, from the epoch when Poland and Russia created their great innovation. Now we need new Chopins. And we must help them. That means we should cooperate between our countries and our communities. Let’s build a new bridge for new Chopins and Tchaikovskies to go across it! And these new Chopins might be YOU! (Играет музыка!)

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