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………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 ••• Expanding to Russia with love


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•••

………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




      This research was conducted in partnership with Orange and East-West Digital
      News, the international resource on Russian IT industries. www.ewdn.com.




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•••
Decades ago, Russian technology began impressing the
world. Now Russia is back!
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                      1956, USSR put in orbit the first ever artificial satellite: Sputnik.



                      1961, Yuri Gagarin became the first man to orbit the Earth.



  In 2010, NASA and ROSCOSMOS agreed on a 1 billion
  dollar deal to send US astronauts to the
  International Space Station using Soyouz on
  Baikonur launchpad.



   Even NASA trusts Russian technology and does
   business with the former "evil empire."

   Why shouldn’t you?

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…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...

•••



So, what does the new Russian
technology sector look like ?
…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
•••

Table of contents
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 1.  The Russian Innovation Model

 2.  A promising economy

 3.  Developing tomorrow’s potential

 4.  The Russian Tech Recipes

 5.  Summary




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•••

Table of contents
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 1.  The Russian Innovation Model

 2.  A promising economy

 3.  Developing tomorrow’s potential

 4.  The Russian Tech Recipes

 5.  Summary




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•••                                                                                    High Voltage Research Installation, Moscow



………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




•••

The Russian innovation model

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•••
Russia has a strong technological and engineering
culture…
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




         Mendeleev, Tsiolkovsky… Russia has a long history
         of scientific research.

         « To catch up, and to surpass! »
         Soviet slogan for Science and Technology, introduced by
         Lenin.

         Based on these pre-existing conditions, the fate of
         Soviet civilization has long been linked to its success
         in its Science and Technology field.


                                                                       The Russian innovation model
                                                                       leverages world-class scientists,
                                                                       famous mathematicians, taught in
                                                                       Moscow or St. Petersburg Universities
                                                                       and science-dedicated schools.


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•••
…in which social networks have and still play a major
role
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 After decades of social atomization under a totalitarian regime, Russians now
 socialize more than ever, using social networking sites.




                                                                                    The internet has become, for all
                                                                                    modern-oriented Russians, the main
                                                                                    free source of information.




 Sources: ComScore, American Journal of Political Science

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•••

  Russian constraints drive usages and innovation
  ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                             1                                                                 2
               80
         million Russian-
                                            Worldwide rank in
                                          time spent on social
                                               networks                                                   Worldwide rank in size


                                                   10
        speaking internet                                                                                   of illegal media
              users                                                                                       sharing ($300 million
         (Russia + Russian diaspora)                                                                         in music piracy)
                                           Average number of
                                          hours spent monthly
                                           on internet social
                                           networks; world
            Physical
            isolation                         average is 5
                                                                                                                  Rough climate

                                   Poor urban                    Mistrust in State-
                                    planning                     controlled media
Sources: EWDN, ComScore
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•••
This innovation model gave birth to Yandex, a true
success story
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




  Founded by two Russian mathematicians.

                                                                                                                               Ilya Segalovich
 They wrote a search algorithm for                                                       Arkady Volozh
 Russian-written files in the early 90s.


  That’s 6 years before Google’s Page
  and Brin started their research at
  Stanford University.




 With that in mind, you might call Google the US Yandex, rather than the other
 way around.
 Sources: EWDN.com, Yandex Corporate Website

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•••

Google’s twin brother…
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                      622 million dollars revenues in 2011

                      60% growth (FY 2010 to 2011)

                      60% share of search-engine traffic in Russia (Google 2nd
                      with 25%)

                      60% share of Russia’s online advertising revenues

                      80 web products in total (mostly the same offer as
                      Google’s)


 Sources: EWDN.com, Yandex Corporate Website

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•••

… that even goes beyond the Google model.
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




         •  Real-time traffic 4 years before
            Google

              #1 Photos Web Portal
              #1 Traffic previsions
              #1 Weather
              …
         •  New products: TV Schedule, E-cards, …


         •  But most of all, a higher precision algorithm than Google’s
            due to the specificities of the inflective Russian language.

 Sources: EWDN.com, Yandex Corporate Website

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…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...

•••



So, what about the much-criticized
Russian « copy-paste innovation »
model?
…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
•••
Copy/paste innovation: a perfectly well-accepted path to
business success
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




   In its initial version, Russia’s leading daily deal site BigLion not only copied
   Groupon’s business model, but they also just ripped the site design and navigation off
   completely, too. The sites looked nearly identical, even down to the smallest details.




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•••
We can find many examples of copy-paste innovation in
Russia…
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




  Web initiatives in Russia are often perceived as pure and simple copies of successful Western
  companies, in which business models, designs and brandings are faithfully replicated.
  Here are a few examples of the most significant ones :


    Original
    company


    The Russian
    copy



                            “The Russian Internet could almost be described as tabula rasa with
                            huge potential for opportunity and growth. [So] we just looked at
                            what had been done in other countries, chose the models that proved
                            their relevance and then adapted them to the Russian market.”

                               Marina Treshchova, CEO Fast Lane Ventures, interviewed by EWDN.COM


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•••

… but they eventually leapfrog their original model.
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........



                      Vkontakte looks and feels very similar to Facebook, but…




      … Vkontakte has developed some specific and local functionalities that might even raise
      strong barriers for Facebook.

      This example testifies of how Russian services can emancipate from the original
      model by leveraging on their own strengths to build a unique capability.

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•••
Beyond a simple copycat, Vkontakte beats Facebook
because of many key features
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  Launched in 2006, it claims more than
    110 million active accounts (vs. 5
    million facebook users in Russia). It is
    the 4th most visited Russian website.

 •  Facebook faces difficulties penetrating
    the market for two reasons:
        •  Facebook's Russian users are
           generally of the wealthier, well-
           traveled, cosmopolitan variety, have
           foreign friends and tend to live in
           Moscow and St. Petersburg.
        •  Facebook does not offer content
           sharing services



 Sources:Les Echos, ComScore, Vkontakte.ru

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•••
Vkontakte created a very efficient network, far from its
model
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  It is the most popular content sharing platform, including many illegal files.
    The search engine also allows users to look for the nearest ‘active’ single
    woman in the region, and escorts.




•  The website also plays its part throughout
   Russian protests through events like
   “Revolution Square Saturday” that took
   place after the December elections




 Sources:Les Echos, Social Times, BBC

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•••

Table of contents
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 1.  The Russian Innovation Model

 2.  A promising economy

 3.  Developing tomorrow’s potential

 4.  The Russian Tech Recipes

 5.  Summary




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•••                                                                                            International Business Center, Moscow



………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




•••

 A promising economy
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•••

Europe’s largest internet market by number of users...
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                             57                                                              42
                      Million Russian                                                 Million French
                       internet users                                                 internet users
                        (Spring 2012)                                                           (Fall 2011)




                                        Strong growth potential.

            e-commerce size: $10 billion                                     e-commerce size: $45 billion
         Online advertising: $1,5 billion                                   Online advertising: $3 billion


 Sources: EWDN .com (2011)

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•••

… and the market has yet to expand!
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                              France

                       Europe
                                                  64%
      Russia                   58%
            39%
                                  Total 2011                                          Evolution of the Internet
                             internet penetration                                      penetration in Russia
                                                                                   (Russian Academy of Sciences)

      •  Almost three quarters of all Russian Internet users live in the European part of
         Russia: a huge market is still to be conquered!

      •  The Russian Academy of Sciences, has given a long-term forecast (2025) of
         130 million internet users. (at 85% penetration rate)
 Sources: ComScore, Russian Academy of Sciences

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…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...

•••



Some Russian companies have already
seized this appealing opportunity…
…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
•••
From a mail-service website to one of Europe’s largest
Internet groups
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 Mixed growth model: from innovation, one
 fusion and acquisitions.

 Multiple sources of investment, both local and
 foreign.



 Official objectives:


                      COMMUNITAINMENT                                      INNOVATIVE SERVICES
                               Communications                                                Improve the
                                      +                                                    Internet market
                                Entertainment




 Sources: Mail.ru Group Corporate Website

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•••

Mail.ru Group: the colossus of the Russian Internet
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




   Email, IM, social                    Games                  Navigational                      Media projects                         E-commerce
     networks                                                   Services


           Mail                        40 MMO                       Search                              News                                 Travel
        Agent (IM)                47 games for social              Answers                             Weather                               Goods
       MyWorld (MIR)                  platforms                      Maps                           Entertainment                           Property
           OK                                                       Mobile                       Hi-Tech, Auto, Lady,                        Money
           ICQ                                                 Rating (Analytics)                    Kids, Health                            Work
          Blogs                                                                                         Cards                              Headhunter
          Dating                                                                                       Mailing                             Free-lance
         Futubra



       $325 million revenue in 2010 from
       diverse sources:
                                                                                           Market leader in display
                            11%                                                            advertising, internet
                                               Advertising
                                  39%
                                               Games
                                                                                           communications, and in
                      20%
                                               Paid services
                                                                                           social.
                            30%                Other

                                                                     Sources: EWDN.com, Mail.ru Group Corporate Website, Mail.ru Annual Report 2010

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•••
Mail.ru has given birth to a top international investment
fund: DST
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 DST then split into a venture arm, DST Global, and a leading Russian internet
 group, Mail.ru Group.

 •  DST Global is a major late-stage investment fund

 •  Invest minimum around $100M, for companies valuated at least $1b

 •  Goal: to give liquidity to tech companies in order to delay their IPO, so that
    they can focus on product development instead of liquidity.

 •  Large network outside Russia via direct partnerships or co-fundings: Facebook,
    Zynga,… Accel, Greylock, Kleiner Perkins…


 Sources: TechCrunch’s 2010 Yuri Milner interview

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•••

DST’s Investments (undisclosed shares)
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




An impressive portfolio including many of the hottest tech firms of the
moment…




      … probably starting the first bridges between Russian and Western companies.

 Sources: TechCrunch, WSJ, EWDN.com

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…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...

•••


These connections with the Western
World raise the question of the
Russian firms internationalization.
…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
•••
With rare exceptions, Russian companies don’t
internationalize
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 But why do firms internationalize?




                      Growth & Performance                                       Ideas & Innovation
                        New clients                                              Exclusive information
                        Tax Benefit                                              Cultural mix
                        Economies of scale                                       Technological advantage
                        …                                                        …


                                   There is plenty of both in Russia!


      Their weak international presence is not necessarily a concern, as many examples show
      that Russian tech companies successfully internationalize when needed…


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•••
VimpelCom a Russian mobile operator that has grown
into a global telco
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                                    A strong international presence, on
                                                                    several continents

                                                                    Europe
•  1 8 1 m i l l i o n m o b i l e                                  Russia, Ukraine, Armenia, Georgia, Italy
   subscribers around the
   world                                                            Asia
                                                                    Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, Vietnam,
•  $10.512billion dollars                                           Cambodia, Laos, Bangladesh, Pakistan
   revenue in 2010
                                                                    Africa
                                                                    Algeria, Burundi, Zimbabwe, Namibia, Central African
•  Based in Amsterdam                                               Republic

•  10 Brands                                                        North America
                                                                    Canada
    Beeline, Kyivstar, djuice, Wind,
    Infostrada, Mobilink, Leo,
    Banglalink, Telecel, Djezzy                                                    VimpelCom is showing that there’s
                                                                                   no such thing as a Russian tech
                                                                                   failure to cross Russia’s borders…
 Sources: VimpelCom’s 2010 Annual Report, Datamonitor

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•••

Kaspersky, a long-date international player
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  One of the world’s leading antivirus research
    and software companies

 •  Founded in 1997 in Moscow

 •  Fast expansion to : India, Germany, France, the
    Netherlands, the UK, Poland, Romania, Sweden,
    Japan, China, South Korea, and the USA.




                                        They recently enrolled Jackie Chan
                                           as their product spokesman in a
                                                    move to conquer China.



 Sources: Wikipedia, Official Website

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•••

Which countries are mostly targeted by Russian firms?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........



4 types of links to Russian companies:


         Historical             Technological                        Strong potential                                       Proximity

•  Both cultural and         •  Example for innovation             •  Market in development                       •  Land connection
   geographical proximity       management                         •  Geographical proximity                      •  Within quick flight reach
•  No language barrier       •  Experimentation                                                                   •  Existing networks from
•  Existing networks         •  Innovation harnessing                                                                other industries



 Ex-soviet countries                   USA                           South East Asia                                        Europe
Examples:




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…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...

•••


Alongside internationalization,
investment power is developing fast
in Russia.
…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
•••

DST is developing, extending its network to Asia
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




      DST Global II



      Raised in May 2011

      A capital of about $1billion to invest

      Expected to be invested in Asia,
      following the path of previous
      investments (Alibaba, 360buy)



           Russian tech investments are not only focusing on high profile Western
           companies, they are also getting key shares in soon-to-be Eastern giants.

 Sources: EWDN.com

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•••

Mass-scale public investment in innovation in Russia
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  120 billion rubles ($3,72b) from the                                 •  State funded venture capital company
    Russian Federation                                                      created in 2007

 •  To give Russia a leading position on the                             •  $1.25 billion capital to fund VCs
    nanotechnology sector while accelerating                                investments using a 5% loan without
    the commercialization of nanotech                                       asking for stocks in the companies.
    products (inside and outside Russia)
                                                                         •  Two goals: Investing in Russian tech
 •  2010: 44 projects approved, 47.1 billion                                while attracting and developing VC
    rubles invested, total budget of the                                    networks in Russia.
    projects 146 billion rubles



 Sources: Rusnano’s 2010 Annual Report, CNET News

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•••

Top VC firms invest in Russia
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




Western VC firms’ investment is clearly expanding to Russia…

 Top 15 VC firms from Forbes 2011 Midas List

                                                                                                         But also…
          Accel Partners                   Kleiner Perkins Caufield & Byers                              Mangrove Capital Partners
          Andreessen Horowitz              New Enterprise Associates                                     Ventech
          Benchmark Capital                Redpoint Ventures                                             eVenture Capital Partners
          Bessemer Venture Partners        Sequoia Capital
                                                                                                         General Catalyst Partners
          First Round Capital              SV Angel
                                                                                                         Tiger Global Management
          FLOODGATE                        Union Square Ventures
                                                                                                         and more…
          Founders Fund                    Venrock
          Greylock Partners                                                                               Already publicly investing
                                                                                                          in Russian startups




                           … a move that we can expect even more thanks to the growing
                           relations with DST.

 Sources: EWDN.com, Corporate websites

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•••

Table of contents
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 1.  The Russian Innovation Model

 2.  A promising economy

 3.  Developing tomorrow’s potential

 4.  The Russian Tech Recipes

 5.  Summary




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•••                                                                            Skolkovo Innovation Center mockup, Moscow



………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




•••

Developing tomorrow’s potential

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•••

Developing tomorrow’s potential
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                      1.  An overview of the Russian innovative markets


                      2.  A strong network of incubators supporting new initiatives


                      3.  The Russian boiling innovative ecosystem: Startups


                      4.  Some barriers to keep in mind




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•••
Up-to-date Russia: mobile phones are extremely
popular…
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 A strong mobile phone penetration


                           186 million
                                                                                Total mobile
                                                                                  phones
                           140 million


                                                                                   Total
                                                                                 population




                      There are 1.5 SIM cards per Russian inhabitant
 Sources: newmediatrendwatch, emarketer, AC&M

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•••

…and are spreading internet technologies!
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 While households’ internet access grew by 10% in 2011, the household
 broadband penetration remained flat: mobile phones internet users
 account for most of the new internet users



 Still, only 7% of subscribers have access to the
 3G network

 Smartphones penetration is still low (11%) but is
 quickly growing: +118% between 2010 and 2011




 Sources: informa telecoms&media, newmediatrendwatch

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•••
Mobile phones are creating an opportunity: younger
users are driving mobile internet growth…
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                       Users by age (Aug 2011)

                  100%

                      90%

                      80%                                                                                                           internet users
                                                                                                                                    mobile internet users
                      70%

                      60%

                      50%

                      40%

                      30%

                      20%

                      10%

                      0%
                             age 12-17          age 18-24          age 25-34              age 35-44              age 45-54              age 55+


 Sources:informa telecoms&media, newmediatrendwatch August 2011

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•••

… creating a fast-expanding market for mobile content
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 At the end of 2010, touch screen phones accounted for about 30% of all phones
 sold in Russia


                                                                                         The Russian mobile content
                                                                                         market could reach as much as
                                                                                         $1.8 billion this year

                                                                                         In 2013, the overall mobile
                                                                                         content market could exceed $3
                                                                                         billion.




 Sources: EWDN.com, informa telecoms & media, newmediatrendwatch

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•••
Even with homemade solutions, the social network
market is catching up fast
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




        LiveJournal.com                                Vkontakte                                                Odnoklassniki.ru
    Blogging, social media                     Russia’s 1st social network                                  Russia’s 2nd social network
      Intellectuals express                      Similarities: facebook                                       Face detection, dating
        themselves freely                        116 million accounts                                        Similarities: Classmates
  30 million monthly in Russia                                                                                       45 million




                             Moi Krug – ‘My Circle’                             MoiMir – ‘My World’
                        Job seeking, pro networking                                   Blogging
                              Similarities: LinkedIn                           Similarities: Myspace
                      1 million users (vs 0.5 on Russian                     20 million visits per month
                                   LinkedIn).

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•••

The e-commerce market is developing
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




      The Russian e-commerce market is still emerging but
      is expected to grow fast in volume and result.
                                                                                                                   $40
                                                                                                                    bn
                                                                             $23                                      to
                                                                             bn                                    $60
                                                                               To                                    bn
                      $8 bn                    $10                           $30
                                               bn                             nb
                        2010                   2011                            2015                                 2020

                                                                                             Forecast
 Sources: 2012 e-commerce report by EWDN.COM

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•••
What will be driving Russian e-commerce in the next five
years?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •      The potential market growth in Moscow and St. Petersburg in terms of new users
        is reaching its natural limit.
 •      Most new shoppers will come from other Russian regions, typically recent
        Internet users from larger cities making initial online purchases.


                                                                          2010               2015
       Moscow+                 Started using internet before              5.6                5.1
                               2011
       St.
       Petersburg              Started in 2011 or after                                      2.5
                                                                                                                                       78
                                                              Total 5.6                      7.5

       Regions                 Started using internet before              8.4                7.6                                million
                               2011
                               Started in 2011 or after                                      13.2
                                                              Total 8.4                      20.8                            Internet users
       TOTAL RUSSIA                                                       13.9               28.3                                in 2015

 Sources: 2012 e-commerce report by EWDN.COM

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•••

Developing tomorrow’s potential
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                      1.  An overview of the Russian innovative markets


                      2.  A strong network of incubators supporting new initiatives


                      3.  The Russian boiling innovative ecosystem: Startups


                      4.  Some barriers to keep in mind




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•••
A network of incubators demonstrating the recent
dynamism of the startup ecosystem
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 A sample of the most active and significant Incubators launched in Russia, that show
 the willingness and dynamism of an emerging ecosystem dedicated to innovation and
 entrepreneurship.




                                                                                                          …
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•••

HSE Incubator
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                                                                                        MOSCOW


      •  Founded in 2006 by students and professors of HSE.

      •  A pool of 6 startups

      •  Startups get an equipped office space as well as administrative and
         consulting support.

      •  HSE(10K) similar to MIT(100K) startup competition

      •  Former incubated startups: SmartKniga, Skillopedia.ru, Native Speakers
         Club, Roomix, PensiaMarket, TimePad. (19 startups so far)




 Sources: Official website

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•••

Academy of National Economy Incubator
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                                                                                       MOSCOW


 •  Founded in 2010 by the Academy

 •  Classic incubator : office, advisors, classes, events.

 •  Provides an “Accelerator” program with early stage funding

 •  Lot of partners ranging from Microsoft BizSpark to Yandex, includes investment
    partners and a huge number of information partners




 Sources: Official website

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•••
Moscow State University
Student Business Incubator
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                                                                                       MOSCOW


 •  Founded in 2010 with a startup competition aiming at recruiting the first batch of
    teams (Webils, Maxigen, Introvision, Idata, Web-constructor)

 •  More than traditional support to its startups, MSU SIB provides exchange
    programs with US Ivy League’s universities such as MIT and Harvard.

 •  Partners have invested more than 50 million rubles in the startups

 •  The advisory board includes representatives from top-level companies and
    funds : Microsoft, Alliance Rosno, Rusnano, Russian Venture Company,…




 Sources: Official website, Direct contact

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•••

Fast Lane Ventures
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                                                                                      MOSCOW
 •  Leading developer of internet companies, Fast Lane Ventures was founded in 2010.
    They target B2C markets.

 •  Has launched 15 internet start-ups,

 •  Fast execution: Fast Lane claims it is able to launch a new internet business within 50
    days.

 •  Has attracted $50M from
    different investors

 •  The team brings together
    700 internet developers,
    and holds classes and
    training sessions along
    with help in finding funds.



 Sources: Official website

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•••

Farminers Startup Academy
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........



                                                                                                                         MOSCOW



    • Founded by former Vice President of Mail.ru, Igor Matzanyuk, in August 2011. The Fund
      invests in Russian projects.

    • Selected projects receive up to $150,000 USD to prepare a project prototype, an office
      space, and computers.

    • After three months, the prototype will help the Farm find investors for the project.

    • Farminers will generate funds for a period of three to six months in exchange for a 40
      percent stake in the project.

    • Targets online projects, compatible with mobile devices, and mass-market.




 Sources: Official website, lenta.ru

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•••

Ingria Technopark Business Incubator
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                                                                         ST PETERSBURG


                                                                                                                  Ingria future technopark
   •  Founded in 2008 by the Inngria Technopark.

   •  Among Top 5 most efficient business incubators
      in Russia (Forbes)

   •  Two programs:
             •  Pre-incubation, 6 months (cost 500 RUR/month)
             •  Incubation, 11-33 months (cost 1500 RUR/month)

   •  Network of partners

   •  70 residents: IT, Ecology, Biotech, Medicine,
      Energy, Material Science.


 Sources: Official website

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•••

Tex Drive
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                                                                                                      MOSCOW

 •  Founded in 2011, TexDrive is a member of the Techstars network, and is supported by
    Springboard, two worldwide well-known start-up accelerators.

 •  TexDrive offers 12-week programs that help start-ups define a business model, find
    investors and solve legal issues. Selected projects get $25K at the start, then $100K at the
    end of the program, while TexDrive gets a small share of the company in return.

 •  Own funds and TexDrive investors network represent potentially $3B in venture capital
    funds. Investors are local wealthy individuals, entrepreneurs and investment managers.

 •  First program launched in January 2012




 Sources: Official website, Marchmont Capital, EWDN.com

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•••

Skolkovo: Russia’s answer to Silicon Valley
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........

•  The Skolkovo Innovation Centre, still under construction and completed by 2014, is the most remarkable and emblematic
   example of the Russian initiatives to foster innovation and put Russia on the global “technology map”.


•  The strategic goal of the Skolkovo Innovation Centre is to concentrate international intellectual capital, thereby stimulating
   the development of break-through projects and technologies. To help Russian innovators liaise with international VCs,
   Skolkovo has also opened offices in UK and in the Silicon Valley.


•  Mainly fund by the Russian government, Skolkovo gathers innovation clusters, a technopark, a university and a city-
   laboratory, near Moscow. The innovation centre cooperates with a number of foreign tech giants, including Cisco, Ericsson,
   Nokia. Microsoft and SAP are launching R&D centres in Skolkovo.



•  The innovation clusters cover the following
   fields :
          •    Information technologies
          •    Energy Efficient technologies
          •    Nuclear technologies
          •    Biomedical technologies
          •    Space technologies and communication

•  At the moment, the Skolkovo Foundation already
   supports an estimated 350 Russian innovation
   companies, with 220 of those coming from 30
   different regions in Russia. Plans are to increase
   the number of residents to 500 companies this
   year.


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•••

Developing tomorrow’s potential
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                      1.  An overview of the Russian innovative markets


                      2.  A strong network of incubators supporting new initiatives


                      3.  The Russian boiling innovative ecosystem: Startups


                      4.  Some barriers to keep in mind




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•••
Already some extremely innovative companies are
coming out of this ecosystem
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




      A selection of some highly innovative start-ups “made in Russia” that
      offer a disruptive value proposition, and testify of the dynamism of
      Russian entrepreneurs.




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•••

Yota
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........


 •  Yota (4G internet) is the first Russian high-speed wireless network based on Mobile WiMAX.

 •  Those actors have entered the telecom market by providing access only, differentiating with disruptive
    distribution models.

 •  Yota operates in Russia, Belarus and Nicaragua.



                          Yota offers fixed, nomadic, and fully mobile wireless
                          broadband Internet access, through dedicated mobile devices.
                          Yota also offes to stream movies, TV programs, and online
                          music in its mobile services catalogue.
                          It focuses on high density urban areas.




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•••

Displair
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




        DisplAir image technology offers a breakthrough in
        static and animated 2D and 3D image display with far
        reaching implications in currently available image and
        screen technologies.

        •  Displair’s interface can be seen,
           heard, smelled and touched in a
           fully interactive 2D or 3D
           experience.
        •  The device shows potential for use
           in advertising, events, gaming,
           education, medicine the mobile
           and the consumer electronics
           industry.
        •  A startup from Astrakhan, Southern             According to Mashable, DisplAir’s 'air screen'
           Russia, Displair won numerous                  technology has made the screenless interactive
           innovation contests. It has become             user interface magic seen with Tom Cruise in
           a resident of both Skolkovo and                Minority Report a working reality.
           Kazan’s IT Park


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•••

ResumUP
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........



 •  ResumUP is a service for personal data visualization aimed to set a new standard in
    career management, online and social recruiting.

 •  Basically, it gathers your data from multiple sources (LinkedIn and Facebook Connect so
    far) and transform it into a clear visualization.

 •  Then with a special algorithm, it can rank your profile and match it to job offers.




 •  ResumUP is expected to launch as a recruiting service but could expand its services as a
    plugin to other websites.

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•••

Good Roads
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




  •  Goodroads is a mobile mapping
     service that collects data about road
     surface quality. The system is paired
     with an iPhone application which
     gathers data and runs an algorithm that
     evaluates road conditions.




                                                                The project was launched in 2011 and won
                                                                the Opera Software Startups Award.

                                                                The site was created by a team of students at
                                                                the St Petersburg State Polytechnical
                                                                University, helped by the QD incubator.



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•••

Developing tomorrow’s potential
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                      1.  An overview of the Russian innovative markets


                      2.  A strong network of incubators supporting new initiatives


                      3.  The Russian boiling innovative ecosystem: Startups


                      4.  Some barriers to keep in mind




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•••
The Russian Business “Folklore” : myth or reality ?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                      Elvira Nabiullina, Russia's minister of economic development, left, and Pascal Lamy of the
                      W.T.O at a ceremony in Geneva, on December 6th 2011.



                 WTO membership is expected to shine light on the regulations
                 and corruption that dog the Russian economy.

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•••
Business in Russia still faces many challenges
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




  Foreign investors and business developers are often prejudiced by the historical
  barriers that are still attached to the common image of the Russian economy :
            •  “Rules of law that fail to match countries such as the U.S. and Western Europe”;
            •  Bureaucracies are confusing and cumbersome;
            •  Corruption is still a common practice;
            •  Powerful oligarchs dominate key industries;
            •  Few Russian people actually speak English;
            •  And secrecy in R&D is the norm…”


 Even if those challenges are still somewhat a reality, it’s yet possible and attractive
 to do business in Russia.

 Thanks to public and private initiatives to align with Western standards and
 enable Russia to attract foreign investors and develop international partnerships,
 those barriers have been substantially lessened.

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•••

Legal Framework
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 The Russian legal framework is
 undergoing severe and major
 improvements.

 But Russia also exhibits a significant
 implementation gap, meaning that many
 laws on the books are poorly enforced.




 Sources: The Global Integrity Report 2010

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•••

Intellectual property
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........



 •  Since the dissolution of the Soviet Union, the Russian Federation has sought to address
    important issues surrounding intellectual property and its protection. In a number of areas
    these efforts have led to greater recognition of intellectual property rights and now
    provide for a greater degree of protection.

 •  Although the level of IP protection in Russia does not yet match the sophistication of most
    European jurisdictions, fundamental IP rights are recognized in Russia. A substantial
    basic regulatory framework exists within which companies may attain protection of their
    intellectual property assets.

      The case of pirate softwares

      Pirated software accounted for 65% of the volume of all software units installed on
      PCs in Russia for the year — down 2% from 2009 but nevertheless representing a
      commercial value of approximately $3 billion.

      A survey conducted by BSA as part of its study of piracy levels in Russia indicates that
      the majority of Russian respondents understand the benefits of licensed software,
      including the factors of reliability (86 percent) and access to technical support (69
      percent). However, more than half of Russian respondents do not have a clear
      understanding of what constitutes legal and illegal use of software.

 Sources: Business Software Alliance (BSA) in its 2010 report on global piracy.
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•••

Russia’s Underground e-market
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  Russian social networks host the biggest illegal media library in the world. Experts estimate
    that Majors are losing up to 10 million dollars per day on that market. The website was
    sentenced to fines at the beginning of 2012 for copyright infringement.


                                                                                           Informal
  •  Vkontakte groups enable illegal                                               Commercial Vkontakte groups
     trades and e-commerce. 150 informal
     groups have more than 100,000                                                                               Dec 2010                 Nov 2011
     members on the website.
                                                                        Mobile devices                                170000                   256000
  •  Oborot.ru, Russia’s leading online
     resource and event organizer for e-                                Fashion                                       105000                   170000
     commerce, announced in October 2011                                Watches                                       102000                   150000
     the creation of the Electronic
     Commerce Association, which aims
     “to facilitate the development of online                           Children's goods                                80000                    16000
     retail businesses and define the                                   Cosmetics                                       70000                  105000
     principles of civilized business.”
                                                                        Services                                        55000                    83000
                                                                        Jewelry                                         35000                    74000
 Sources:Les echos, 2012 e-commerce report by EWDN.COM, thecmuwebsite

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•••

Payments are still an issue
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  While the Russian economy is still dominated by cash, electronic payments
    are on the rise; but due to a lack of standardization, Russia may appear as a
    payment jungle.
 •  Russian online businesses face a lack of user trust. Cash-on-delivery is the
    rule in e-commerce as far as physical goods as concerned.

 •  A Russian invention, cash payment terminals (e.g. Qiwi) are widely used,
    essentially for services or virtual goods.
 •  The e-currency market has been so far dominated by domestic players
    (Yandex.Money, WebMoney), but PayPal announced it will come to Russia in
    2012.

 •  Mobile payment offers have developed to a considerable exent over the last
    few years, with commission fees now suitable for all types of goods and
    services.
 •  No universal recurring payment solution has been available so far, making
    impossible the localization of some business models in Russia.
 Sources: EWDN.com

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•••

Corruption still dogs the Russian economy
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




                                                                                147th
                                              25th
                      24th
                                                                                                 75th




                               73rd




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•••

Table of contents
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 1.  The Russian Innovation Model

 2.  A promising economy

 3.  Developing tomorrow’s potential

 4.  The Russian Tech Recipes

 5.  Summary




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•••                                                                                                Caviar, the luxurious Russian Specialty



………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




•••

The Russian Tech Recipes

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•••

What is specific about Russia?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 Russia has a strong scientific culture.

 Russia is the largest country in the world: with very diverse density
 of population… and has still to complete the equipment of its low density
 areas.

 Russia is facing a social and technology gap inherited from more
 than half a century of communism.

 Russia is well-known for its extremely
 tough weather.




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•••

Lots of constraints means a lot of creativity
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........



                                                                                   A sense of emergency in
                  Brilliant mathematicians                                         bridging the technology gap




                  Grigori Perelman, the mathematician                             Constraints and speed lead to technological
                  who solved the Poincaré Conjecture.                             breakthroughs such as Displair.



                                                                                                         New ways to reach
Intense indoor usages                         Health issues                                              underdeveloped areas




Russians digging a passage to their           Alcoholism is still a major issue in                       A railroad near Baikal Lake.
home after a snow storm.                      Russia, reducing male life expectancy.




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•••

Brilliant mathematicians create an expertise in algorithms
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........



 The crafting of high precision algorithm is one of the most mathematical part of IT
 Services.
 In Russia, the training of top-notch mathematicians in specialized schools has
 permitted the emergence of a field of expertise in algorithmic.

      For example: Yandex’s search algorithm is said to be better than Google’s.


      Why ?

      Due to the specificities of the Russian language (strong inflectivity of the language), they had to
      devise a way to understand the meaning of a sentence by splitting the assembled words and
      then read each one of them.




      Results ?

      Even though this technology is not required in Western languages, it has proved to be more
      efficient on research. Something Google lacks in its Russian search.


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•••
Brilliant mathematicians know how to crack the code…
and protect it!
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........



 The expertise developed by Russian mathematicians in algorithmic is not only used in data
 analysis, it has been used for a long time in cryptology and hacking.

 Russian hackers are world-known for their creativity and expertise.

 And when it comes to data security, who is the most relevant expert if not the person who
 knows how to hack into your system? Even some cryptographic technics are named
 after Russia: Russian copulation, for example, is a method of rearranging plaintext before
 encryption.

 It is now a business in Russia: groups of hackers are paid to test the security of IT
 infrastructures.




 Examples of Russian cryptography and hacking expertise:




 Sources: Friedrich Ludwig Bauer, Decrypted Secrets

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•••
Crypto AG is a Swiss-based company, but Russian-
based technology
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........



 •  Crypto Telecommunication Security is «the preferred top-security partner for civilian and
    military authorities worldwide ».

 •  Its business office are located in Switzerland, but its technical teams are based in Russia,
    tapping into one the best security experts pools in the world.

 •  They conceive and commercialize top-security communication solutions.




 •  They are about to launch a new product: Nume. It will allow mass market to benefit from
    encryption-based technology to secure their personal lines.

 •  Nume is certified on multiple Defense standards across the globe (China, South America,
    Indonesia, India, Middle-East,…).




 Sources: corporate website

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•••

A company specialized in hackproofing: StopTheHacker
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  StopTheHacker’s proprietary technology helps solve web-scale security
    problems involving malware on websites, hacker attacks and other types of
    online abuse.




 •  It uses machine learning (ML) and artificial intelligence (AI) techniques, which
    are monetized on a SaaS model.

 •  StopTheHacker has just received a $1.1 million initial funding from a group of
    Russian investors but also Brian NeSmith (CEO of Blue Coat Systems).




 Sources: EWDN.com

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•••
Telecom sector proves Russian ability to adapt to
important constraints
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  Even with the high demand of Russian population for telecommunication
    infrastructure, telecom companies were facing two main issues in their expansion:
           •  Low solvability of the majority of the population
           •  High cost of implementation due to
                      •    Ancient buildings
                      •    Foreign and isolated Russian backcountry


 •  Russia now seems to have tackled these issues and numbers of landlines,
    internet users and mobile users are skyrocketing.



 Examples:




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•••

Inango devised a new way to cut implementation costs
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




      •  Inango offers complete solutions for service providers
         looking to connect entire communities to the Internet.



 •      Inango solutions are targeted at populations living in higher density areas
        (high-rise apartment buildings) and where sensitivity to cost is high.

 •      They connect to a high-speed backbone at a local point of presence (typically
        based on optical fiber) and provide ways of connecting to each individual house-
        holder.

 •      They use a simple yet efficient technology: they transmit and receive data
        over existing coaxial cables.




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•••
Vimpelcom’s rise shows the effiency of Russian
infrastructure development strategy
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  In 2001, their strategy was to expand Vimpelcom’s infrastructure in all the regions of Russia.

      They quickly became one of the largest carrier in Russia in terms of subscriber base.
      They eventually used this experience to expand to emerging markets.



                             Russia                                                            Vietnam, Cambodia,
                      Ukraine, Kazakhstan,                                                        Laos, Algeria,
                      Uzbekistan, Tajikistan,                                                 Bangladesh, Pakistan,
                        Armenia, Georgia,                                                      Burundi, Zimbabwe,
                           Kyrgyzstan                                                        Namibia, Central African
                                                                                                    Republic


   Example of a successful expansion in Cambodia:

   May 2009:                    Launch of commercial operations (9th entrant)
   December 2010:               80% of total population covered
                                650k mobile subscribers (3rd largest operator)

 Sources: 2010 Annual Report
••• faberNovel 2012                               Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com   82
•••

The Health sector is proving Russia’s ability to catch up
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  The Russian Health sector has been facing many issues:
           •  A low male life expectancy
           •  Under utilization of the primary health care system by adult males
           •  A low quality of pre-natal and natal care
           •  High abortion rates, most of which performed outside health care facilities

 •  The Russian government has now seized the issue with multiple plans to
    modernize the sector.
           •  Part of which is a 1 billion-dollar bill to digitalize the public health-service.
           •  And a partnership with the U.S. on health issues


 •  Many private initiatives have emerged from these opportunities.

 Examples:




                                                                                                     InErPharm

••• faberNovel 2012                                 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com   83
•••

Maxygen Mobile DNA Tests
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...........




 •  Maxygen develops a technology of mobile DNA
    testing that can detect any infectious disease only
    in 10 minutes only for $10 with the use of a simple
    small device and a single-used cartridge.

 •  Part of MSU SBI, the three founders are alumni of
    Moscow State University. Valery Ilinsky, CEO, has
    a degree in Virology from MSU, and has multiple
    experience abroad, including the Institute of
    molecular Cancer Research (Zurich), Department
    of tropical and infectious diseases (Washington).

 •  The startup has ranked very well many
    competitions, including a second position in
    Intel’s Global Challenge.




••• faberNovel 2012                          Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com   84
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
Russia's Promising Tech Sector
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Russia's Promising Tech Sector

  • 1. ••• ••• ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... ••• Expanding to Russia with love ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com
  • 2. ••• ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... This research was conducted in partnership with Orange and East-West Digital News, the international resource on Russian IT industries. www.ewdn.com. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com
  • 3. ••• Decades ago, Russian technology began impressing the world. Now Russia is back! ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1956, USSR put in orbit the first ever artificial satellite: Sputnik. 1961, Yuri Gagarin became the first man to orbit the Earth. In 2010, NASA and ROSCOSMOS agreed on a 1 billion dollar deal to send US astronauts to the International Space Station using Soyouz on Baikonur launchpad. Even NASA trusts Russian technology and does business with the former "evil empire." Why shouldn’t you? ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 3
  • 4. …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………... ••• So, what does the new Russian technology sector look like ? …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
  • 5. ••• Table of contents ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1.  The Russian Innovation Model 2.  A promising economy 3.  Developing tomorrow’s potential 4.  The Russian Tech Recipes 5.  Summary ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 5
  • 6. ••• Table of contents ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1.  The Russian Innovation Model 2.  A promising economy 3.  Developing tomorrow’s potential 4.  The Russian Tech Recipes 5.  Summary ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 6
  • 7. ••• High Voltage Research Installation, Moscow ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... ••• The Russian innovation model ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com
  • 8. ••• Russia has a strong technological and engineering culture… ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Mendeleev, Tsiolkovsky… Russia has a long history of scientific research. « To catch up, and to surpass! » Soviet slogan for Science and Technology, introduced by Lenin. Based on these pre-existing conditions, the fate of Soviet civilization has long been linked to its success in its Science and Technology field. The Russian innovation model leverages world-class scientists, famous mathematicians, taught in Moscow or St. Petersburg Universities and science-dedicated schools. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 8
  • 9. ••• …in which social networks have and still play a major role ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... After decades of social atomization under a totalitarian regime, Russians now socialize more than ever, using social networking sites. The internet has become, for all modern-oriented Russians, the main free source of information. Sources: ComScore, American Journal of Political Science ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 9
  • 10. ••• Russian constraints drive usages and innovation ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1 2 80 million Russian- Worldwide rank in time spent on social networks Worldwide rank in size 10 speaking internet of illegal media users sharing ($300 million (Russia + Russian diaspora) in music piracy) Average number of hours spent monthly on internet social networks; world Physical isolation average is 5 Rough climate Poor urban Mistrust in State- planning controlled media Sources: EWDN, ComScore ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 10
  • 11. ••• This innovation model gave birth to Yandex, a true success story ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Founded by two Russian mathematicians. Ilya Segalovich They wrote a search algorithm for Arkady Volozh Russian-written files in the early 90s. That’s 6 years before Google’s Page and Brin started their research at Stanford University. With that in mind, you might call Google the US Yandex, rather than the other way around. Sources: EWDN.com, Yandex Corporate Website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 11
  • 12. ••• Google’s twin brother… ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 622 million dollars revenues in 2011 60% growth (FY 2010 to 2011) 60% share of search-engine traffic in Russia (Google 2nd with 25%) 60% share of Russia’s online advertising revenues 80 web products in total (mostly the same offer as Google’s) Sources: EWDN.com, Yandex Corporate Website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 12
  • 13. ••• … that even goes beyond the Google model. ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Real-time traffic 4 years before Google #1 Photos Web Portal #1 Traffic previsions #1 Weather … •  New products: TV Schedule, E-cards, … •  But most of all, a higher precision algorithm than Google’s due to the specificities of the inflective Russian language. Sources: EWDN.com, Yandex Corporate Website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 13
  • 14. …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………... ••• So, what about the much-criticized Russian « copy-paste innovation » model? …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
  • 15. ••• Copy/paste innovation: a perfectly well-accepted path to business success ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... In its initial version, Russia’s leading daily deal site BigLion not only copied Groupon’s business model, but they also just ripped the site design and navigation off completely, too. The sites looked nearly identical, even down to the smallest details. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 15
  • 16. ••• We can find many examples of copy-paste innovation in Russia… ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Web initiatives in Russia are often perceived as pure and simple copies of successful Western companies, in which business models, designs and brandings are faithfully replicated. Here are a few examples of the most significant ones : Original company The Russian copy “The Russian Internet could almost be described as tabula rasa with huge potential for opportunity and growth. [So] we just looked at what had been done in other countries, chose the models that proved their relevance and then adapted them to the Russian market.” Marina Treshchova, CEO Fast Lane Ventures, interviewed by EWDN.COM ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 16
  • 17. ••• … but they eventually leapfrog their original model. ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Vkontakte looks and feels very similar to Facebook, but… … Vkontakte has developed some specific and local functionalities that might even raise strong barriers for Facebook. This example testifies of how Russian services can emancipate from the original model by leveraging on their own strengths to build a unique capability. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 17
  • 18. ••• Beyond a simple copycat, Vkontakte beats Facebook because of many key features ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Launched in 2006, it claims more than 110 million active accounts (vs. 5 million facebook users in Russia). It is the 4th most visited Russian website. •  Facebook faces difficulties penetrating the market for two reasons: •  Facebook's Russian users are generally of the wealthier, well- traveled, cosmopolitan variety, have foreign friends and tend to live in Moscow and St. Petersburg. •  Facebook does not offer content sharing services Sources:Les Echos, ComScore, Vkontakte.ru ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 18
  • 19. ••• Vkontakte created a very efficient network, far from its model ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  It is the most popular content sharing platform, including many illegal files. The search engine also allows users to look for the nearest ‘active’ single woman in the region, and escorts. •  The website also plays its part throughout Russian protests through events like “Revolution Square Saturday” that took place after the December elections Sources:Les Echos, Social Times, BBC ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 19
  • 20. ••• Table of contents ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1.  The Russian Innovation Model 2.  A promising economy 3.  Developing tomorrow’s potential 4.  The Russian Tech Recipes 5.  Summary ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 20
  • 21. ••• International Business Center, Moscow ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... ••• A promising economy ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com
  • 22. ••• Europe’s largest internet market by number of users... ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 57 42 Million Russian Million French internet users internet users (Spring 2012) (Fall 2011) Strong growth potential. e-commerce size: $10 billion e-commerce size: $45 billion Online advertising: $1,5 billion Online advertising: $3 billion Sources: EWDN .com (2011) ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 22
  • 23. ••• … and the market has yet to expand! ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... France Europe 64% Russia 58% 39% Total 2011 Evolution of the Internet internet penetration penetration in Russia (Russian Academy of Sciences) •  Almost three quarters of all Russian Internet users live in the European part of Russia: a huge market is still to be conquered! •  The Russian Academy of Sciences, has given a long-term forecast (2025) of 130 million internet users. (at 85% penetration rate) Sources: ComScore, Russian Academy of Sciences ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 23
  • 24. …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………... ••• Some Russian companies have already seized this appealing opportunity… …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
  • 25. ••• From a mail-service website to one of Europe’s largest Internet groups ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Mixed growth model: from innovation, one fusion and acquisitions. Multiple sources of investment, both local and foreign. Official objectives: COMMUNITAINMENT INNOVATIVE SERVICES Communications Improve the + Internet market Entertainment Sources: Mail.ru Group Corporate Website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 25
  • 26. ••• Mail.ru Group: the colossus of the Russian Internet ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Email, IM, social Games Navigational Media projects E-commerce networks Services Mail 40 MMO Search News Travel Agent (IM) 47 games for social Answers Weather Goods MyWorld (MIR) platforms Maps Entertainment Property OK Mobile Hi-Tech, Auto, Lady, Money ICQ Rating (Analytics) Kids, Health Work Blogs Cards Headhunter Dating Mailing Free-lance Futubra $325 million revenue in 2010 from diverse sources: Market leader in display 11% advertising, internet Advertising 39% Games communications, and in 20% Paid services social. 30% Other Sources: EWDN.com, Mail.ru Group Corporate Website, Mail.ru Annual Report 2010 ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 26
  • 27. ••• Mail.ru has given birth to a top international investment fund: DST ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... DST then split into a venture arm, DST Global, and a leading Russian internet group, Mail.ru Group. •  DST Global is a major late-stage investment fund •  Invest minimum around $100M, for companies valuated at least $1b •  Goal: to give liquidity to tech companies in order to delay their IPO, so that they can focus on product development instead of liquidity. •  Large network outside Russia via direct partnerships or co-fundings: Facebook, Zynga,… Accel, Greylock, Kleiner Perkins… Sources: TechCrunch’s 2010 Yuri Milner interview ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 27
  • 28. ••• DST’s Investments (undisclosed shares) ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... An impressive portfolio including many of the hottest tech firms of the moment… … probably starting the first bridges between Russian and Western companies. Sources: TechCrunch, WSJ, EWDN.com ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 28
  • 29. …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………... ••• These connections with the Western World raise the question of the Russian firms internationalization. …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
  • 30. ••• With rare exceptions, Russian companies don’t internationalize ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... But why do firms internationalize? Growth & Performance Ideas & Innovation New clients Exclusive information Tax Benefit Cultural mix Economies of scale Technological advantage … … There is plenty of both in Russia! Their weak international presence is not necessarily a concern, as many examples show that Russian tech companies successfully internationalize when needed… ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 30
  • 31. ••• VimpelCom a Russian mobile operator that has grown into a global telco ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... A strong international presence, on several continents Europe •  1 8 1 m i l l i o n m o b i l e Russia, Ukraine, Armenia, Georgia, Italy subscribers around the world Asia Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, Vietnam, •  $10.512billion dollars Cambodia, Laos, Bangladesh, Pakistan revenue in 2010 Africa Algeria, Burundi, Zimbabwe, Namibia, Central African •  Based in Amsterdam Republic •  10 Brands North America Canada Beeline, Kyivstar, djuice, Wind, Infostrada, Mobilink, Leo, Banglalink, Telecel, Djezzy VimpelCom is showing that there’s no such thing as a Russian tech failure to cross Russia’s borders… Sources: VimpelCom’s 2010 Annual Report, Datamonitor ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 31
  • 32. ••• Kaspersky, a long-date international player ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  One of the world’s leading antivirus research and software companies •  Founded in 1997 in Moscow •  Fast expansion to : India, Germany, France, the Netherlands, the UK, Poland, Romania, Sweden, Japan, China, South Korea, and the USA. They recently enrolled Jackie Chan as their product spokesman in a move to conquer China. Sources: Wikipedia, Official Website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 32
  • 33. ••• Which countries are mostly targeted by Russian firms? ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 4 types of links to Russian companies: Historical Technological Strong potential Proximity •  Both cultural and •  Example for innovation •  Market in development •  Land connection geographical proximity management •  Geographical proximity •  Within quick flight reach •  No language barrier •  Experimentation •  Existing networks from •  Existing networks •  Innovation harnessing other industries Ex-soviet countries USA South East Asia Europe Examples: ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 33
  • 34. …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………... ••• Alongside internationalization, investment power is developing fast in Russia. …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………...
  • 35. ••• DST is developing, extending its network to Asia ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... DST Global II Raised in May 2011 A capital of about $1billion to invest Expected to be invested in Asia, following the path of previous investments (Alibaba, 360buy) Russian tech investments are not only focusing on high profile Western companies, they are also getting key shares in soon-to-be Eastern giants. Sources: EWDN.com ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 35
  • 36. ••• Mass-scale public investment in innovation in Russia ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  120 billion rubles ($3,72b) from the •  State funded venture capital company Russian Federation created in 2007 •  To give Russia a leading position on the •  $1.25 billion capital to fund VCs nanotechnology sector while accelerating investments using a 5% loan without the commercialization of nanotech asking for stocks in the companies. products (inside and outside Russia) •  Two goals: Investing in Russian tech •  2010: 44 projects approved, 47.1 billion while attracting and developing VC rubles invested, total budget of the networks in Russia. projects 146 billion rubles Sources: Rusnano’s 2010 Annual Report, CNET News ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 36
  • 37. ••• Top VC firms invest in Russia ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Western VC firms’ investment is clearly expanding to Russia… Top 15 VC firms from Forbes 2011 Midas List But also… Accel Partners Kleiner Perkins Caufield & Byers Mangrove Capital Partners Andreessen Horowitz New Enterprise Associates Ventech Benchmark Capital Redpoint Ventures eVenture Capital Partners Bessemer Venture Partners Sequoia Capital General Catalyst Partners First Round Capital SV Angel Tiger Global Management FLOODGATE Union Square Ventures and more… Founders Fund Venrock Greylock Partners Already publicly investing in Russian startups … a move that we can expect even more thanks to the growing relations with DST. Sources: EWDN.com, Corporate websites ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 37
  • 38. ••• Table of contents ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1.  The Russian Innovation Model 2.  A promising economy 3.  Developing tomorrow’s potential 4.  The Russian Tech Recipes 5.  Summary ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 38
  • 39. ••• Skolkovo Innovation Center mockup, Moscow ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... ••• Developing tomorrow’s potential ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com
  • 40. ••• Developing tomorrow’s potential ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1.  An overview of the Russian innovative markets 2.  A strong network of incubators supporting new initiatives 3.  The Russian boiling innovative ecosystem: Startups 4.  Some barriers to keep in mind ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 40
  • 41. ••• Up-to-date Russia: mobile phones are extremely popular… ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... A strong mobile phone penetration 186 million Total mobile phones 140 million Total population There are 1.5 SIM cards per Russian inhabitant Sources: newmediatrendwatch, emarketer, AC&M ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com
  • 42. ••• …and are spreading internet technologies! ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... While households’ internet access grew by 10% in 2011, the household broadband penetration remained flat: mobile phones internet users account for most of the new internet users Still, only 7% of subscribers have access to the 3G network Smartphones penetration is still low (11%) but is quickly growing: +118% between 2010 and 2011 Sources: informa telecoms&media, newmediatrendwatch ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 42
  • 43. ••• Mobile phones are creating an opportunity: younger users are driving mobile internet growth… ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Users by age (Aug 2011) 100% 90% 80% internet users mobile internet users 70% 60% 50% 40% 30% 20% 10% 0% age 12-17 age 18-24 age 25-34 age 35-44 age 45-54 age 55+ Sources:informa telecoms&media, newmediatrendwatch August 2011 ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 43
  • 44. ••• … creating a fast-expanding market for mobile content ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... At the end of 2010, touch screen phones accounted for about 30% of all phones sold in Russia The Russian mobile content market could reach as much as $1.8 billion this year In 2013, the overall mobile content market could exceed $3 billion. Sources: EWDN.com, informa telecoms & media, newmediatrendwatch ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 44
  • 45. ••• Even with homemade solutions, the social network market is catching up fast ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... LiveJournal.com Vkontakte Odnoklassniki.ru Blogging, social media Russia’s 1st social network Russia’s 2nd social network Intellectuals express Similarities: facebook Face detection, dating themselves freely 116 million accounts Similarities: Classmates 30 million monthly in Russia 45 million Moi Krug – ‘My Circle’ MoiMir – ‘My World’ Job seeking, pro networking Blogging Similarities: LinkedIn Similarities: Myspace 1 million users (vs 0.5 on Russian 20 million visits per month LinkedIn). ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 45
  • 46. ••• The e-commerce market is developing ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... The Russian e-commerce market is still emerging but is expected to grow fast in volume and result. $40 bn $23 to bn $60 To bn $8 bn $10 $30 bn nb 2010 2011 2015 2020 Forecast Sources: 2012 e-commerce report by EWDN.COM ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 46
  • 47. ••• What will be driving Russian e-commerce in the next five years? ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  The potential market growth in Moscow and St. Petersburg in terms of new users is reaching its natural limit. •  Most new shoppers will come from other Russian regions, typically recent Internet users from larger cities making initial online purchases. 2010 2015 Moscow+ Started using internet before 5.6 5.1 2011 St. Petersburg Started in 2011 or after 2.5 78 Total 5.6 7.5 Regions Started using internet before 8.4 7.6 million 2011 Started in 2011 or after 13.2 Total 8.4 20.8 Internet users TOTAL RUSSIA 13.9 28.3 in 2015 Sources: 2012 e-commerce report by EWDN.COM ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 47
  • 48. ••• Developing tomorrow’s potential ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1.  An overview of the Russian innovative markets 2.  A strong network of incubators supporting new initiatives 3.  The Russian boiling innovative ecosystem: Startups 4.  Some barriers to keep in mind ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 48
  • 49. ••• A network of incubators demonstrating the recent dynamism of the startup ecosystem ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... A sample of the most active and significant Incubators launched in Russia, that show the willingness and dynamism of an emerging ecosystem dedicated to innovation and entrepreneurship. … ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 49
  • 50. ••• HSE Incubator ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... MOSCOW •  Founded in 2006 by students and professors of HSE. •  A pool of 6 startups •  Startups get an equipped office space as well as administrative and consulting support. •  HSE(10K) similar to MIT(100K) startup competition •  Former incubated startups: SmartKniga, Skillopedia.ru, Native Speakers Club, Roomix, PensiaMarket, TimePad. (19 startups so far) Sources: Official website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 50
  • 51. ••• Academy of National Economy Incubator ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... MOSCOW •  Founded in 2010 by the Academy •  Classic incubator : office, advisors, classes, events. •  Provides an “Accelerator” program with early stage funding •  Lot of partners ranging from Microsoft BizSpark to Yandex, includes investment partners and a huge number of information partners Sources: Official website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 51
  • 52. ••• Moscow State University Student Business Incubator ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... MOSCOW •  Founded in 2010 with a startup competition aiming at recruiting the first batch of teams (Webils, Maxigen, Introvision, Idata, Web-constructor) •  More than traditional support to its startups, MSU SIB provides exchange programs with US Ivy League’s universities such as MIT and Harvard. •  Partners have invested more than 50 million rubles in the startups •  The advisory board includes representatives from top-level companies and funds : Microsoft, Alliance Rosno, Rusnano, Russian Venture Company,… Sources: Official website, Direct contact ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 52
  • 53. ••• Fast Lane Ventures ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... MOSCOW •  Leading developer of internet companies, Fast Lane Ventures was founded in 2010. They target B2C markets. •  Has launched 15 internet start-ups, •  Fast execution: Fast Lane claims it is able to launch a new internet business within 50 days. •  Has attracted $50M from different investors •  The team brings together 700 internet developers, and holds classes and training sessions along with help in finding funds. Sources: Official website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 53
  • 54. ••• Farminers Startup Academy ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... MOSCOW • Founded by former Vice President of Mail.ru, Igor Matzanyuk, in August 2011. The Fund invests in Russian projects. • Selected projects receive up to $150,000 USD to prepare a project prototype, an office space, and computers. • After three months, the prototype will help the Farm find investors for the project. • Farminers will generate funds for a period of three to six months in exchange for a 40 percent stake in the project. • Targets online projects, compatible with mobile devices, and mass-market. Sources: Official website, lenta.ru ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 54
  • 55. ••• Ingria Technopark Business Incubator ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... ST PETERSBURG Ingria future technopark •  Founded in 2008 by the Inngria Technopark. •  Among Top 5 most efficient business incubators in Russia (Forbes) •  Two programs: •  Pre-incubation, 6 months (cost 500 RUR/month) •  Incubation, 11-33 months (cost 1500 RUR/month) •  Network of partners •  70 residents: IT, Ecology, Biotech, Medicine, Energy, Material Science. Sources: Official website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 55
  • 56. ••• Tex Drive ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... MOSCOW •  Founded in 2011, TexDrive is a member of the Techstars network, and is supported by Springboard, two worldwide well-known start-up accelerators. •  TexDrive offers 12-week programs that help start-ups define a business model, find investors and solve legal issues. Selected projects get $25K at the start, then $100K at the end of the program, while TexDrive gets a small share of the company in return. •  Own funds and TexDrive investors network represent potentially $3B in venture capital funds. Investors are local wealthy individuals, entrepreneurs and investment managers. •  First program launched in January 2012 Sources: Official website, Marchmont Capital, EWDN.com ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 56
  • 57. ••• Skolkovo: Russia’s answer to Silicon Valley ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  The Skolkovo Innovation Centre, still under construction and completed by 2014, is the most remarkable and emblematic example of the Russian initiatives to foster innovation and put Russia on the global “technology map”. •  The strategic goal of the Skolkovo Innovation Centre is to concentrate international intellectual capital, thereby stimulating the development of break-through projects and technologies. To help Russian innovators liaise with international VCs, Skolkovo has also opened offices in UK and in the Silicon Valley. •  Mainly fund by the Russian government, Skolkovo gathers innovation clusters, a technopark, a university and a city- laboratory, near Moscow. The innovation centre cooperates with a number of foreign tech giants, including Cisco, Ericsson, Nokia. Microsoft and SAP are launching R&D centres in Skolkovo. •  The innovation clusters cover the following fields : •  Information technologies •  Energy Efficient technologies •  Nuclear technologies •  Biomedical technologies •  Space technologies and communication •  At the moment, the Skolkovo Foundation already supports an estimated 350 Russian innovation companies, with 220 of those coming from 30 different regions in Russia. Plans are to increase the number of residents to 500 companies this year. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 57
  • 58. ••• Developing tomorrow’s potential ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1.  An overview of the Russian innovative markets 2.  A strong network of incubators supporting new initiatives 3.  The Russian boiling innovative ecosystem: Startups 4.  Some barriers to keep in mind ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 58
  • 59. ••• Already some extremely innovative companies are coming out of this ecosystem ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... A selection of some highly innovative start-ups “made in Russia” that offer a disruptive value proposition, and testify of the dynamism of Russian entrepreneurs. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 59
  • 60. ••• Yota ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Yota (4G internet) is the first Russian high-speed wireless network based on Mobile WiMAX. •  Those actors have entered the telecom market by providing access only, differentiating with disruptive distribution models. •  Yota operates in Russia, Belarus and Nicaragua. Yota offers fixed, nomadic, and fully mobile wireless broadband Internet access, through dedicated mobile devices. Yota also offes to stream movies, TV programs, and online music in its mobile services catalogue. It focuses on high density urban areas. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 60
  • 61. ••• Displair ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... DisplAir image technology offers a breakthrough in static and animated 2D and 3D image display with far reaching implications in currently available image and screen technologies. •  Displair’s interface can be seen, heard, smelled and touched in a fully interactive 2D or 3D experience. •  The device shows potential for use in advertising, events, gaming, education, medicine the mobile and the consumer electronics industry. •  A startup from Astrakhan, Southern According to Mashable, DisplAir’s 'air screen' Russia, Displair won numerous technology has made the screenless interactive innovation contests. It has become user interface magic seen with Tom Cruise in a resident of both Skolkovo and Minority Report a working reality. Kazan’s IT Park ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 61
  • 62. ••• ResumUP ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  ResumUP is a service for personal data visualization aimed to set a new standard in career management, online and social recruiting. •  Basically, it gathers your data from multiple sources (LinkedIn and Facebook Connect so far) and transform it into a clear visualization. •  Then with a special algorithm, it can rank your profile and match it to job offers. •  ResumUP is expected to launch as a recruiting service but could expand its services as a plugin to other websites. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 62
  • 63. ••• Good Roads ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Goodroads is a mobile mapping service that collects data about road surface quality. The system is paired with an iPhone application which gathers data and runs an algorithm that evaluates road conditions. The project was launched in 2011 and won the Opera Software Startups Award. The site was created by a team of students at the St Petersburg State Polytechnical University, helped by the QD incubator. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 63
  • 64. ••• Developing tomorrow’s potential ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1.  An overview of the Russian innovative markets 2.  A strong network of incubators supporting new initiatives 3.  The Russian boiling innovative ecosystem: Startups 4.  Some barriers to keep in mind ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 64
  • 65. ••• The Russian Business “Folklore” : myth or reality ? ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Elvira Nabiullina, Russia's minister of economic development, left, and Pascal Lamy of the W.T.O at a ceremony in Geneva, on December 6th 2011. WTO membership is expected to shine light on the regulations and corruption that dog the Russian economy. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 65
  • 66. ••• Business in Russia still faces many challenges ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Foreign investors and business developers are often prejudiced by the historical barriers that are still attached to the common image of the Russian economy : •  “Rules of law that fail to match countries such as the U.S. and Western Europe”; •  Bureaucracies are confusing and cumbersome; •  Corruption is still a common practice; •  Powerful oligarchs dominate key industries; •  Few Russian people actually speak English; •  And secrecy in R&D is the norm…” Even if those challenges are still somewhat a reality, it’s yet possible and attractive to do business in Russia. Thanks to public and private initiatives to align with Western standards and enable Russia to attract foreign investors and develop international partnerships, those barriers have been substantially lessened. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 66
  • 67. ••• Legal Framework ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... The Russian legal framework is undergoing severe and major improvements. But Russia also exhibits a significant implementation gap, meaning that many laws on the books are poorly enforced. Sources: The Global Integrity Report 2010 ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 67
  • 68. ••• Intellectual property ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Since the dissolution of the Soviet Union, the Russian Federation has sought to address important issues surrounding intellectual property and its protection. In a number of areas these efforts have led to greater recognition of intellectual property rights and now provide for a greater degree of protection. •  Although the level of IP protection in Russia does not yet match the sophistication of most European jurisdictions, fundamental IP rights are recognized in Russia. A substantial basic regulatory framework exists within which companies may attain protection of their intellectual property assets. The case of pirate softwares Pirated software accounted for 65% of the volume of all software units installed on PCs in Russia for the year — down 2% from 2009 but nevertheless representing a commercial value of approximately $3 billion. A survey conducted by BSA as part of its study of piracy levels in Russia indicates that the majority of Russian respondents understand the benefits of licensed software, including the factors of reliability (86 percent) and access to technical support (69 percent). However, more than half of Russian respondents do not have a clear understanding of what constitutes legal and illegal use of software. Sources: Business Software Alliance (BSA) in its 2010 report on global piracy. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 68
  • 69. ••• Russia’s Underground e-market ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Russian social networks host the biggest illegal media library in the world. Experts estimate that Majors are losing up to 10 million dollars per day on that market. The website was sentenced to fines at the beginning of 2012 for copyright infringement. Informal •  Vkontakte groups enable illegal Commercial Vkontakte groups trades and e-commerce. 150 informal groups have more than 100,000 Dec 2010 Nov 2011 members on the website. Mobile devices 170000 256000 •  Oborot.ru, Russia’s leading online resource and event organizer for e- Fashion 105000 170000 commerce, announced in October 2011 Watches 102000 150000 the creation of the Electronic Commerce Association, which aims “to facilitate the development of online Children's goods 80000 16000 retail businesses and define the Cosmetics 70000 105000 principles of civilized business.” Services 55000 83000 Jewelry 35000 74000 Sources:Les echos, 2012 e-commerce report by EWDN.COM, thecmuwebsite ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 69
  • 70. ••• Payments are still an issue ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  While the Russian economy is still dominated by cash, electronic payments are on the rise; but due to a lack of standardization, Russia may appear as a payment jungle. •  Russian online businesses face a lack of user trust. Cash-on-delivery is the rule in e-commerce as far as physical goods as concerned. •  A Russian invention, cash payment terminals (e.g. Qiwi) are widely used, essentially for services or virtual goods. •  The e-currency market has been so far dominated by domestic players (Yandex.Money, WebMoney), but PayPal announced it will come to Russia in 2012. •  Mobile payment offers have developed to a considerable exent over the last few years, with commission fees now suitable for all types of goods and services. •  No universal recurring payment solution has been available so far, making impossible the localization of some business models in Russia. Sources: EWDN.com ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 70
  • 71. ••• Corruption still dogs the Russian economy ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 147th 25th 24th 75th 73rd ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 71
  • 72. ••• Table of contents ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... 1.  The Russian Innovation Model 2.  A promising economy 3.  Developing tomorrow’s potential 4.  The Russian Tech Recipes 5.  Summary ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 72
  • 73. ••• Caviar, the luxurious Russian Specialty ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... ••• The Russian Tech Recipes ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com
  • 74. ••• What is specific about Russia? ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... Russia has a strong scientific culture. Russia is the largest country in the world: with very diverse density of population… and has still to complete the equipment of its low density areas. Russia is facing a social and technology gap inherited from more than half a century of communism. Russia is well-known for its extremely tough weather. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 74
  • 75. ••• Lots of constraints means a lot of creativity ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... A sense of emergency in Brilliant mathematicians bridging the technology gap Grigori Perelman, the mathematician Constraints and speed lead to technological who solved the Poincaré Conjecture. breakthroughs such as Displair. New ways to reach Intense indoor usages Health issues underdeveloped areas Russians digging a passage to their Alcoholism is still a major issue in A railroad near Baikal Lake. home after a snow storm. Russia, reducing male life expectancy. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 75
  • 76. ••• Brilliant mathematicians create an expertise in algorithms ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... The crafting of high precision algorithm is one of the most mathematical part of IT Services. In Russia, the training of top-notch mathematicians in specialized schools has permitted the emergence of a field of expertise in algorithmic. For example: Yandex’s search algorithm is said to be better than Google’s. Why ? Due to the specificities of the Russian language (strong inflectivity of the language), they had to devise a way to understand the meaning of a sentence by splitting the assembled words and then read each one of them. Results ? Even though this technology is not required in Western languages, it has proved to be more efficient on research. Something Google lacks in its Russian search. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 76
  • 77. ••• Brilliant mathematicians know how to crack the code… and protect it! ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... The expertise developed by Russian mathematicians in algorithmic is not only used in data analysis, it has been used for a long time in cryptology and hacking. Russian hackers are world-known for their creativity and expertise. And when it comes to data security, who is the most relevant expert if not the person who knows how to hack into your system? Even some cryptographic technics are named after Russia: Russian copulation, for example, is a method of rearranging plaintext before encryption. It is now a business in Russia: groups of hackers are paid to test the security of IT infrastructures. Examples of Russian cryptography and hacking expertise: Sources: Friedrich Ludwig Bauer, Decrypted Secrets ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 77
  • 78. ••• Crypto AG is a Swiss-based company, but Russian- based technology ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Crypto Telecommunication Security is «the preferred top-security partner for civilian and military authorities worldwide ». •  Its business office are located in Switzerland, but its technical teams are based in Russia, tapping into one the best security experts pools in the world. •  They conceive and commercialize top-security communication solutions. •  They are about to launch a new product: Nume. It will allow mass market to benefit from encryption-based technology to secure their personal lines. •  Nume is certified on multiple Defense standards across the globe (China, South America, Indonesia, India, Middle-East,…). Sources: corporate website ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 78
  • 79. ••• A company specialized in hackproofing: StopTheHacker ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  StopTheHacker’s proprietary technology helps solve web-scale security problems involving malware on websites, hacker attacks and other types of online abuse. •  It uses machine learning (ML) and artificial intelligence (AI) techniques, which are monetized on a SaaS model. •  StopTheHacker has just received a $1.1 million initial funding from a group of Russian investors but also Brian NeSmith (CEO of Blue Coat Systems). Sources: EWDN.com ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 79
  • 80. ••• Telecom sector proves Russian ability to adapt to important constraints ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Even with the high demand of Russian population for telecommunication infrastructure, telecom companies were facing two main issues in their expansion: •  Low solvability of the majority of the population •  High cost of implementation due to •  Ancient buildings •  Foreign and isolated Russian backcountry •  Russia now seems to have tackled these issues and numbers of landlines, internet users and mobile users are skyrocketing. Examples: ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 80
  • 81. ••• Inango devised a new way to cut implementation costs ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Inango offers complete solutions for service providers looking to connect entire communities to the Internet. •  Inango solutions are targeted at populations living in higher density areas (high-rise apartment buildings) and where sensitivity to cost is high. •  They connect to a high-speed backbone at a local point of presence (typically based on optical fiber) and provide ways of connecting to each individual house- holder. •  They use a simple yet efficient technology: they transmit and receive data over existing coaxial cables. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 81
  • 82. ••• Vimpelcom’s rise shows the effiency of Russian infrastructure development strategy ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  In 2001, their strategy was to expand Vimpelcom’s infrastructure in all the regions of Russia. They quickly became one of the largest carrier in Russia in terms of subscriber base. They eventually used this experience to expand to emerging markets. Russia Vietnam, Cambodia, Ukraine, Kazakhstan, Laos, Algeria, Uzbekistan, Tajikistan, Bangladesh, Pakistan, Armenia, Georgia, Burundi, Zimbabwe, Kyrgyzstan Namibia, Central African Republic Example of a successful expansion in Cambodia: May 2009: Launch of commercial operations (9th entrant) December 2010: 80% of total population covered 650k mobile subscribers (3rd largest operator) Sources: 2010 Annual Report ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 82
  • 83. ••• The Health sector is proving Russia’s ability to catch up ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  The Russian Health sector has been facing many issues: •  A low male life expectancy •  Under utilization of the primary health care system by adult males •  A low quality of pre-natal and natal care •  High abortion rates, most of which performed outside health care facilities •  The Russian government has now seized the issue with multiple plans to modernize the sector. •  Part of which is a 1 billion-dollar bill to digitalize the public health-service. •  And a partnership with the U.S. on health issues •  Many private initiatives have emerged from these opportunities. Examples: InErPharm ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 83
  • 84. ••• Maxygen Mobile DNA Tests ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………........... •  Maxygen develops a technology of mobile DNA testing that can detect any infectious disease only in 10 minutes only for $10 with the use of a simple small device and a single-used cartridge. •  Part of MSU SBI, the three founders are alumni of Moscow State University. Valery Ilinsky, CEO, has a degree in Virology from MSU, and has multiple experience abroad, including the Institute of molecular Cancer Research (Zurich), Department of tropical and infectious diseases (Washington). •  The startup has ranked very well many competitions, including a second position in Intel’s Global Challenge. ••• faberNovel 2012 Follow us on twitter @fabernovel ••• Visit our website and discover what we do: fabernovel.com 84