Russia may be geographically in Europe – or part of it is, at least – but the world’s biggest country can seem like a different planet for entrepreneurs looking to expand their business. For Damian Doberstein, though, it has always spelled opportunity. The German co-founded the country’s leading e-fashion company, KupiVIP.ru, before becoming founding partner of the Russian arm of VC firm e.ventures.
SILICON ALLEE: How did you end up in Russia?
DAMIAN DOBERSTEIN: I did my civilian service in Moscow after school, working with autistic children in Moscow for one year in 2003. This was before I went to WHU, where I met my now best friend, Oskar Hartmann, who was studying together with me. We went back to Moscow after we graduated. Oscar is half Russian, and he has a Russian wife, family and so on. For us it was a clear decision to start something – I was pretty open; I was also looking at some projects in Berlin but then we came across an opportunity to build the first online shopping club in Russia, and basically also the first fashion ecommerce [startup]. It was such a big opportunity that I immediately thought OK, back to Moscow. And I knew Moscow, so I knew how the life would be. So it was not a complete jump in the cold water.
SA: Was it not a bit of a risky move though?
DD: I moved in 2008 when things were a little bit different. Now, after the [financial] crisis it is pretty normal, with Rocket everywhere in the world, all my friends now spread around the world in Latin America, Asia. That’s pretty normal now. But at this stage in 2008, all my friends called us really crazy. ‘Guys, why the hell are you going to Russia? Why are you not coming to London?’ It was a little bit crazy.
SA: You know the startup scenes in both Berlin and Moscow. How do they compare?
DD: I think, in terms of consumer Internet, Berlin is still two or three years ahead. Because I have a lot of friends in Berlin, I really try to bring as many experts as a I can to Russia for workshops and so on to really transfer the knowledge the German scene has in several areas, like online marketing for example, where we have the best people in the world probably. But if you look at, for example, things like programmers, IT engineers, of course you have a much broader pool of people [in Moscow].
What is a little bit different for Russia in comparison to Berlin is that you really have a chance to create [different kinds of] tech startups or innovation, but then the Russian market itself is in some areas quite limited. It’s a little like Israel in that you are really forced as an entrepreneur to directly focus on the big markets, and it’s much more common for you to directly focus on the US market as soon as you have your product ready. So it’s a little bit different in the thinking.
SA: How can the two scenes become closer?
DD: That’s a very good question actually. There is [some movement]… Rocket is also now in Russia and we are there also, but still the Russian scene is pretty different. They are looking not so much to Berlin, to be honest; when it comes to investors they are rather looking to London and they are really focused on the US.
SA: Berlin is a very attractive destination for foreigners in terms of standard of living and employment potential. Is Moscow also able to attract talent?
DD: That’s a big discussion. The latest trend is that Moscow [is trying] to attract talent with money more or less, or to repatriate with money good Russians who have been working for several years in the US or internationally; professors, or people who did an MBA in the US. They try to bring them back. Normally you see in several areas salaries are actually higher in Moscow in comparison to the US or even London.
SA: So there is lack of talent in Moscow at the moment?
DD: Yes. And in recent times, it’s also a question of resources in general. Russia has the resource money I would say, and of course there is Skolkovo, and I think a whole other entire environment will develop over time, it’s just the beginning. Of course one can argue that it’s not right to do such a top down approach with Skolkovo; it’s of course not like Stanford which evolved from the ground over decades. But still, in my opinion it is better than nothing, so it helps to develop the environment and it’s the same with Rocket in Berlin.
SA: What role does government play in innovation in Russia?
DD: [Russian Prime Minister] Dmitri Medvedev seems to be honestly interested in this space. It’s not only PR, he’s really interested in this. He was pushing it as a president, and now as a premier he is still pushing it. Skolkovo was his initiative, and this includes a tax-free zone for startups in Moscow. There are hundreds of startups already registered so it helps. It helps startups at the early stage, but if you really want to build a big company focused on the Russian market, it does not really help. So for example KupiVIP right now is 1,300 employees because of the operations; we have everything in house so the ops are really big. That means we don’t have any advantages being a startup in comparison to a classical midsize company. We have to face the same bureaucracy, we have to go through the same processes, so we are not privileged here.
SA: Tell us a bit more about Skolkovo.
DD: There are two parts – one thing is Skolkovo University. They aim at becoming the Russian Stanford or Harvard. They have achieved a lot so far; they have a lot of students there, and a lot of US professors are coming over as guest lecturers. But of course even if it becomes a success long term it needs decades to establish a reputation and really to become a top university I think.
The second thing is this startup field, with a tax free zone and very referable terms as co-investors. They match seed investments; you can apply for it and then for several startups they match the investments from other investors without getting any money back. And this for e.ventures is very interesting, it’s a very good source for deal flow.
So the government is doing something, at least in the seed stage, and making it a little bit easier to set up a company. But if you really want to run a bigger company, for me personally it’s doubtful that it will help over the time.