Russia is seeing an exodus of businessmen, computer programmers, as well as other educated middle-class citizens as a result of Western sanctions and political instability makes it difficult to run an international business in water is not possible.
Russia’s invasion of Ukraine has forced millions from their homes in fear for their lives. However, the war also resulted in the Russians having to leave their homeland. I spoke with several Russian entrepreneurs and venture capitalists who shared why they left or are in the process of leaving their homeland. But as they try to start over abroad, anti-Russian sentiment and economic sanctions are set to haunt them.
Trigger factors
As Russia continued to build up its troops on the Ukrainian border in mid-February, Eugene Konash, whose staff in Russia worked remotely for his London-based game studio Dc1ab, became increasingly worried. But like many others, he did not expect a full-blown invasion.
His hopes of dissipating tensions soon went up in smoke. When it became clear that Russia was waging an all-out war against Ukraine, Western countries began to impose sanctions on Russia. Businesses feel the impact immediately.
One of Konash’s employees noticed their bank was sanctioned, blocking international transfers to his account. When the ruble collapsed, long lines formed outside banks in Russia as people scrambled to convert their savings into dollars – only to find huge fees and government charges. restrict access to foreign currency.
The tipping point for Konash came when investors told him with certainty that his startup would not be able to invest if it continued to have such a dense presence in Russia. His Russia-based team agreed that it was time to leave.
“Those who even a month ago said they would not leave Russia under any circumstances are talking about taking their belongings and driving to Kazakhstan to cross the land border because the tickets to get out are sold out or super expensive. ,” Konash said.
Like many tech companies with international names, game startup Konash hires developers across Eastern Europe for affordable and quality coders in the region. Originally from Belarus, Konash knows well that the former Soviet Union’s emphasis on math and science education has enabled a world-class engineering and science workforce to thrive.
Financial sanctions aside, it becomes impractical to run an IT company from Russia when foreign technology services are banned or begin to withdraw.
Google and Microsoft suspended all domestic sales, while Russia tried to block Facebook, Instagramand Twitteralthough with mixed results. Some users were still able to access these US platforms after the ban, suggesting that Russia may no longer have a way to have a powerful censorship machine like China’s. Facebook and Twitter said it was working to restore services in Russia.
“Who knows when development tools like Unity might be blocked?” says a Siberian-born gaming investor who fled the country following the 2015 annexation of Crimea and subsequent Western economic sanctions. “No one wants to end up in a country with no access to the outside world.”
The investor, who declined to be named, was concerned about the Russian government’s crackdown on dissidents.
Half a step outside
After the Crimean invasion seven years ago, many Russian-built companies began to link up elsewhere in an attempt to assuage investors concerned about the political and optical risks involved in supporting Russian companies. In the past, many of these companies only operated on paper outside of the country, with their teams often entirely based in Russia. But the full-scale invasion of Ukraine turned a trickle.
An investor at a venture capital firm that recently moved its Moscow team out of the country commented: “After 2015, companies were legally drifting out of Russia. Even before the Ukraine crisis, the company would only support a Russia-based startup if it was established outside the country and had an international focus.
“Physically, these startups will still be based in Russia. They will do R&D there because the cost of living is low,” said the investor, who asked not to be named because the topic was “very sensitive” for the company, which is trying to separate from Russia.
Nikita Blanc, who changed her last name from Akimov four years ago, says life as a startup is founded abroad but operates for all purposes and purposes in Moscow. His company Hey everyoneis building a tool to automate investor relationship management, which is in the process of being incorporated into Delaware.
Nikita Blanc’s team worked in Moscow before leaving the country after Russia’s invasion of Ukraine
The startup was never intended to serve only the Russian market, but Blanc and his wife chose Moscow as the base for obvious perks: their parents could help take care of their three-year-old daughter. ; The country’s internet at the time was fast, cheap, and free; and Moscow is awash with tech meetups, where Blanc finds like-minded founders.
Exit
The Blancs’ entrepreneurial life, enjoying the best of both worlds, came to an abrupt end with Russia’s attack on Ukraine. Three days after the invasion, Nikita’s wife Valentina was lying in bed, devastated to see her country fall apart. She decided it was time to leave.
“I wasn’t able to do anything at work. Part of my family is from Ukraine,” she said. “It’s hard to leave with a child, but I don’t think the situation will change. So we each packed 23 kg of luggage and bought a one-way ticket.”
The couple moved with their young daughter to Georgia, one of the top destinations for Russia’s current talent stream. It is a popular choice of the country, along with Turkey, Armenia, Kazakhstan and Thailand, which are relatively affordable and easy to enter for Russians.
The venture capital fund that recently left Moscow has taken hundreds of Russian nationals, mostly employees and their own investment firms, out of the country in the past few weeks. Across the internet, Telegram groups with tens of thousands of Russians discussing plans to withdraw and help each other have mushroomed.
‘We Russians are fucked’
Countries will likely have to make immediate escape plans as sanctions against Russia intensify daily: Which countries are still using Russian flights, and they will move money how?
Sanctions continue to impact Russians after they have fled abroad and even those who have long left. Notable financial infrastructure providers such as PayPal, Mastercard, and Visa have has been suspended in Russia, which means foreigners using Russian banks cannot use their cards abroad. Estonia recently ban electronic residence applications from citizens of Russia and Belarus to “prevent avoidance of sanctions and possible illegal activities”. Regulatory bodies of the European Union have reported asked several banks to scrutinize the transactions of all Russian customers, including EU residents.
The breadth of this wave of sanctions is causing some people to give up their Russian passports. Siberian-born gaming investor looking for Singaporeans citizenship, fearing that their Russian citizenship might cut them off from the US dollar-based financial system.
“Ukrainians are accepted as refugees around the world, but we Russians are miserable,” lamented the investor.
Others are betting that crypto can help them get around sanctions, such as the Blancs, who put a large portion of their fortune into crypto five years ago. Game trader Konash expects Bitcoin and Ethereum to be a last resort for cross-border payments if his employees are stuck in Russia for much longer.
While major exchanges like Binance and Coinbase have stop at imposing blanket bans on all Russians, they have complied with the sanctions to block the targeted individuals. CEO of Binance maintain that cryptocurrencies are not a likely way out because transactions are recorded on publicly available ledgers and thus easy for governments to track.
But the EU regulators continue argumentative that sanctions imposed on Russia and Belarus extend to all crypto assets and US lawmakers urged Treasury to make sure Russia can’t use crypto to evade sanctions.
‘Calm is the new currency’
Those leaving Russia face the obvious difficulty of leaving family and friends behind, but even greater suffering comes from the difference in their perceptions of recent events.
“Our parents and elderly relatives kept telling us to come back, saying ‘everything is fine here. Russia is great.
These educated and freedom-seeking Russian tech workers probably won’t look back. The Russians I spoke to, who were leaving the country or helping others escape, were surprisingly calm when recounting their country’s woes, in part because they were mentally prepared. for the inevitable parting.
“Our SOSV investor has taught us to be like cockroaches, to be flexible and to adapt to new environments as entrepreneurs. This philosophy is currently helping us through these uncertain times,” said Valentina Blanc. “Calm is the new currency.”
Leaders like the Blancs could be the last wave of Russia’s chronic brain drain, lasting decades.
“What intrigues me is that if you look at all the great scientific and engineering talents that were born in the Soviet Union and Russia – most of them left the Soviet world in every chance,” said Konash.
“Who does that leave in the post-Soviet world? For me, this last wave of brain drain is the death knell of education, and the cultural-scientific tradition is perhaps one of the few positive things to emerge from the Soviet Union.”
