The Startup Ecosystem of Russia

Russia has been trying to overcome the perception of a closed startup ecosystem and open itself to international markets for a long time. Unfortunately, this changed as the war in Ukraine has further deepened divides with the West. Amid a complicated geopolitical situation, Russia’s startup ecosystems have become even more isolated. These events increased the brain drain phenomenon in Russia as entrepreneurs and tech professionals have relocated.
Russia has a large pool of technical talent, but the challenge has always been keeping talent in Russia. Some of the founders of Telegram, Google, Revolut, and Ethereum were born in Russia, showing the lost potential when more ambitious Russian entrepreneurs move to other startup ecosystems. Some massively successful Russian startups and unicorns have transitioned their official headquarters to other countries while keeping most of their operations and development in Russia. Building a Russian startup targeting the international market is especially challenging, if not impossible, with its disconnection from the global financial system due to sanctions on the country and its banking system following the war in Ukraine.
However, the Russian startup ecosystem retains some advantages. Russia has a big enough market to allow its startup founders to create substantial revenue by building high quality technology exclusively for Russian buyers. As international isolation reduces competition from global solutions that are no longer available, Russian startups have more opportunities to corner domestic markets across the economy. It should also be noted that the Russian economy so far has been surprisingly resilient. This, however, can only push the local startup ecosystem to reach a certain distance, as the local economy is not as large as other closed ecosystems like China. Despite the current situation, we should also note that the public sector in Russia has been successful in building highly involved corporate accelerators, led by the Skolkovo center, an outstanding large scale tech center.
Unfortunately, Russia is a textbook case of massive but unrealized potential due to events beyond the control of its talented entrepreneurs.