Russian-speaking entrepreneurs in technology from Eastern Europe are recognized as being among the most technically proficient people in the world.
Courseras 2020 Global Skills Index showed that Russian learners were the most proficient in data science and technology among 65 million learners from 60 countries. The levels of entrepreneurship are also high, and they continue to grow.
Aside from their entrepreneurial skills and technical ability, the question is: Are they investable.
According to estimates, there are approximately 17,000 Russian-speaking entrepreneurs in key hubs across the U.K. and Europe.
Many people are unaware that Telegram, Revolut TradingView, PandaDoc and Preply are high-profile success stories. Companies founded by Russian-speaking entrepreneurs sold to U.S. entities in 2019 for over $12.5 billion. The Veeam sale to Insight Partners for $5 billion, MagicLabs $3 Billion sale to U.S. investment manager Blackstone and DXC Technology's acquisition of Luxoft for $2 billion by DXC Technology were some of the most notable deals.
Leta's funds have supported international startups, such as the sale of Bright Box HK and Zurich Insurance Group in 2017, and WeWorks acquisition and sales platform Unomy.
Despite their track record of success, I think Eastern European entrepreneurs, even if they are operating in their home countries, are still undervalued and overlooked by investors.
The stigma of Russian heritage
There are many reasons for this, including cultural differences, trust, confidence and lack of understanding. Unfortunately, there is also greater risk aversion that is likely to be fueled by stereotypes about Eastern European and Russian cultures. Many entrepreneurs will go to great lengths to minimize their history and heritage in order to be equal with Western counterparts.
Our analysts recently conducted research that showed that a large number of Eastern European entrepreneurs still find it difficult to attract investors. They are also having difficulty raising seed capital.
They have raised Series A, Series B, or seed funding where they have been successful. This is a significant difference from their U.S. counterparts and more than 40% from U.K. and EU entrepreneurs. This is nearly 2x the average U.S. or U.K. funding per employee. The ratio of acquisition events is approximately 5%, as opposed to 17% and 20% respectively for U.S. companies and EU companies.
Do we accept that these companies are not as successful, or have different growth characteristics?
However, this is not true. Our analysis shows that entrepreneurs and companies are far ahead of their peers in terms both growth and investor returns. They generate stronger growth than their peers (especially at the Series A and seed phases), have lower burn rates, and are more efficient in converting investment returns into profit for investors.
There are many opportunities.
Despite the success stories, many Eastern European startups remain undervalued and overlooked. This represents an enormous untapped opportunity for investors.
I am an IT entrepreneur and have been blessed to be able to invest my money in helping others succeed. I also see it as my mission, to help other people succeed and bring about disruptive technologies and companies to the world.
We also believe in working with other investors, who may need more comfort and convincing to understand and navigate this important and exciting segment of the market. This is based on our analysis and the performance and return of our funds.
