2019 in Eastern Europe: Russia moves towards digital isolation, neighboring countries export IT services and gifted entrepreneurs

Crunchbase and East-West Digital News are teaming up to cover key tech and venture trends from Russia and other countries of the former Soviet Union. This column by EWDN chief editor Adrien Henni highlights the most notable industry facts and trends of the past year.

Tech stars of the year

Mail.ru Group and Yandex, Russia’s largest Internet companies, as well as Sberbank, the state-owned financial institution turning into a tech giant, made the headlines in 2019. Meanwhile, a few Russian and Ukrainian companies from the e-commerce and online gaming sectors began asserting themselves internationally.


Sberbank is no longer just the good old savings bank that survived all Russian revolutions since the middle of the nineteenth century. It has become a tentacular tech group well beyond financial services.

Last year saw this empire expand continuously. Sberbank’s most notable moves included:

The state-controlled financial giant also launched a variety of tech products from applications for investors, to international blockchain-based transactions, to “Russia’s fastest supercomputer.” 

In February, Sberbank went as far as to launch a neuroscience and human behavior laboratory. This lab will aim to make the results of its research available to Sberbank affiliates “in their everyday practice,” making their products “completely relevant” to people’s needs.

Mail.ru Group

Last year was rich in strategic moves for Mail.ru, the LSE-listed Russian group which controls a large fraction of the Russian social networks, online gaming and other digital resources. 

In addition to its new projects with Sberbank, Mail.ru Group:


Russia’s Yandex also made a series of acquisitions, starting in March with Q&A service TheQuestion. Developing activities beyond online search, its original core business, Yandex also acquired e-ticketing system TicketSteam.

The NASDAQ-listed company was even more active in the field of transport tech. Its taxi-hailing subsidiary Yandex.Taxi – which merged activities in Russia with Uber in 2018 – turned profitable in 2019. Yandex.Taxi made a series of acquisitions in 2018 and 2019 to strengthen its leadership across Russian regions. It also acquired a food delivery startup called ‘Partiya Edy’ (‘The Party of Food’).

Yandex.Taxi’s shareholders announced plans to go public through a dual-listing in Russia and the USA with a targeted valuation of $5 billion to $8 billion. The promising driverless car business will be developed through a separate company, ‘Yandex.SDK.’  

The past year was not entirely rosy for Yandex, however. Its alliance with Sberbank was obviously weakened after Yandex co-founder and main shareholder Arkady Volozh declined, in late 2018, the bank’s pressing offer to buy a major stake in the company. Sberbank’s friendly moves towards Mail.ru Group, Yandex’s archrival, all along 2019, were perceived as a potential alliance U-turn that could deprive Yandex from significant resources. 

Even though some industry observers saw in Sberbank’s moves an “informal declaration of war” on Yandex, the two companies are still tied through two joint ventures: Yandex.Money, a market leader in electronic payment services, and the Yandex.Market group of companies, which operates e-commerce marketplaces. One of these, the Bringly cross-border platform, ceased activities in December 2019 as a consequence of market slowdown (see EWDN’s e-commerce report).

In late 2019, facing long-standing government pressure, Yandex went through a major overhaul of its governance structure. A new “Public Interest Foundation” will be given veto power over significant ownership transactions. Through this and other provisions, the new ownership structure seeks to address the Russian government’s concerns that the NASDAQ-listed company — seen as a critical piece of Russia’s national online infrastructure — could be controlled one day by foreign shareholders.


Playrix – a company founded in Vologda, Russia, in 2004 – made the news several times in the course of the year, asserting itself as a global leader in free-to-play mobile games. In April 2019, its founders Igor and Dmitry Bukhman appeared in Bloomberg’s list of US dollar billionaires. In August, Playrix made an investment in Vizor, a major Belarusian publisher of multiplayer games for browser, social networks and mobile platforms. In November, the company announced the acquisition of Ukrainian game studio Zagrava Games


With yearly turnover growth nearing 80%, this company is the superstar of the Russian e-commerce market. It confirmed its market leadership in H1 2019, generating 31% of the total number of e-commerce orders in the domestic market. In a rare example of international expansion of a Russian e-commerce company, Wildberries announced plans to invest €200 million for EU expansion and launched sales in Poland in early 2020.


In April 2019, this Ukrainian-owned classifieds platform became an African e-commerce leader by acquiring from Naspers the activities of OLX, its main competitor, on the continent. In December, this “combination of eBay and Craigslist” announced the completion of a $21 million round led by Abu Dhabi-based Knuru Capital. Headquartered in Lagos, Nigeria, Jiji is backed by Genesis, a Kyiv-based company which is behind a variety of Internet and mobile projects.

Deals of the year 

Venture deals

In Russia, where venture activity hardly reaches $1 billion per year (less than 0.5% of the global VC market), few venture deals reached or exceeded the $10 million mark.

The largest investment went to e-commerce major Ozon, which is engaged in a race for market leadership. In May 2019, a $150 million convertible loan was provided by two of its existing shareholders, private equity firm Baring Vostok and LSE-listed conglomerate Sistema, to help the company maintain its current growth rate (nearly 75% a year) and develop its logistic and IT infrastructure.

A month later ivi.ru, a major online video company, secured a $40 million capital injection from an international investor consortium. Russia’s sovereign fund RDIF, Mubadala Investment Company (UAE), Baring Vostok Private Equity Fund IV, Flashpoint VC, RTP Global and Winter Capital were involved. 

Two other deals also marked the year in Russia:

  • In August, Dostavista raised $15 million from Swedish Vostok New Ventures and other investors to assert itself on the global crowdsourced delivery market;
  • In December, online appointment platform YClients secured $10 million from Elbrus Capital and Guard Capital, two major Russian investors.

Several deals involved Russian-founded companies established abroad. One of these is Veeam Software, which raised $500 million in North America in early 2019 – one year before being acquired by US investor Insight Partners for $5 billion. In April, Ride-hailing service Wheely attracted $15 million from UK and Russian investors as it moved its headquarters to London. In December, Russian-founded and US-headquartered Voximplant raised $10 million from Baring Vostok and RTP Ventures, two investors with Russian roots.

Brilliant Ukrainian entrepreneurs also made their way in the US. In May 2019, for example, CRM software startup People.ai secured $60 million round of funding from prestigious Silicon Valley investors. In October, Grammarly, a San Francisco-based startup born in Ukraine, was valued at more than $1 billion as it secured $90 million in a round led by General Catalyst. Grammarly thus became the first-ever unicorn from Ukraine.

The year ended with Snap’s acquisition of AI Factory, a startup with Ukrainian roots that develops image and video technologies. Its founder Victor Shaburov had already sold a startup to Snap in 2015 for $150 million.

In Belarus, few deals attained significant amounts. In August a local fund, Zubr Capital, announced an investment of several millions of US dollars (from $3.5 million to $10 million, according to the local media) in MediaCube, a provider of IT tools for video and music creators.

International acquisitions

Illustrating the talent of tech founders and teams from Eastern Europe, 2019 was marked by impressive exits with international implications: 

In another major transaction, in early 2019, Naspers took full control of Avito, Russia’s leading classifieds site, at a $3.85 billion valuation. The company was founded in the late 2000s by Swedish entrepreneurs and backed repeatedly by Swedish fund VNV. 

A rare case of a Russian acquisition in the US also took place. In August, Abbyy bought TimelinePI, a process intelligence solution provider, for an undisclosed amount (estimated at $20 million). Abbyy is a renowned, Moscow-based software company working on document recognition and language processing.

In Ukraine, international moves took place in the thriving IT service industry. For example, software developer Acceptic was bought by Israeli Yael Group; Core Value by Polish IT Kontrakt; and Onlinico by Swedish Beetroot. In Belarus, IT service giant EPAM announced the acquisition of Israeli NAYA Technologies, a specialist of data and cloud migration.


A few modest IPOs took place in the Russian tech sector. Thus, in May 2019, HeadHunter Group, a leading online job recruitment platform in Russia, raised $220 million on the NASDAQ and saw its market capitalization grow to $787.5 million at the close of the first day. 

In October Tinkoff, an innovation-friendly online bank, began trading on the Moscow stock exchange. This secondary listing was designed to help Tinkoff, which has its primary listing in London and is domiciled in Cyprus, secure an estimated $200 million inflow from Russia-focused investment funds.

Fund creations

In Russia

Several large investment funds involving state-backed organizations were launched or announced in Russia, including these ones:

Some initiatives came from the private sector, such as these ones:

In neighboring countries

As Ukraine’s new tech-friendly president took office, the authorities launched a $15 million state fund for startups. This amount may seem modest by international standards, but it is substantial given the size of the local venture market.

In early 2019 Horizon Capital, a US-registered, Ukraine-based fund manager, closed a new private equity fund, the ‘Emerging Europe Growth Fund III’ (EEGF III). Having attracted $200 million, the new fund surpassed its $150 million target, breaking a record in Ukrainian private equity fundraising. Seventy percent of total capital raised was contributed by the US and Europe-based investors, including the EBRD and IFC. The fund targets companies in the fields of information technologies, light manufacturing, food and agriculture, in particular.

Dutch business angel Bas Godska launched a startup investment fund to invest up to €20 million across all Europe – becoming one of the rare Western funds to cover the former Soviet Union. Godska himself made millions by mentoring or investing in more than 30 startups, mainly from Russia, Ukraine and Kazakhstan. 

Venture repellent and digital isolationism in Russia

The year ended on a gloomy note with private equity firm Baring Vostok cancelling plans to raise a sixth Russia fund that could have been worth $1.3 billion. International institutional investors are concerned about “contradictions in Russian and international arbitration law” and the uncertainty regarding the protection of their rights, the firm explained, as five of its senior managers faced controversial fraud changes and languished in prison or under house arrest. 

One of the most established Russian PE firms, Baring Vostok invested in some of Russia’s best tech companies – including Avito, ivi.ru, Yandex and 1C. The firm intends to continue its activities in the country through its existing investment vehicles.

US citizen Michael Calvey, French citizen Philippe Delpal and their Russian colleagues of the Baring Vostok executive team were arrested in mid-February 2019 and initially placed in pre-trial detention. While these events shocked the business community in Russia and beyond, the involvement of Artem Avetisyan, the plaintiff in the case, in an array of government-related organizations raised questions about the intentions of the Russian authorities at the highest level

The developments of the affair made the headlines all along the year. In mid-September, it appeared that the charges against Baring Vostok executives could fall apartdamaging a little more the image of Russia’s legal system and underlining how hazardous for international investors can be Russian business life. Some observers even saw in these developments a signal that Russia “doesn’t care about Western investors” in the current tense geopolitical situation. 

Russian lawmakers’ activity strengthened this feeling. During the summer, a draft law aimed to restrict foreign ownership of significant Internet resources – targeting such western-listed companies as Mail.ru and Yandex. The bill was put on hold when Yandex’s restructure offered guarantees that the company would not fall into foreign hands. 

Also illustrating the authorities’ willingness to control the digital sphere Russia was the adoption of a controversial “sovereign Internet” law. Passed in April and coming into force in November 2019, the new legislation did not have much practical effect yet but provided the government with new instruments to potentially cut access to international resources – including social networks and video platforms which have thus far played mostly into the hands of the Kremlin’s opponents.  

One of the last bills of the year, nicknamed “the anti-Apple law,” targeted manufacturers of smartphone, tablets and other electronic devices. Starting from July 2020, these companies will be forced to pre-install Russian-made, government-approved applications and software onto devices sold on Russian soil. The bill has fueled fears that such companies as Apple could simply withdraw from Russia, which they consider to be a secondary market.

In 2019, Russia’s moves towards digital restrictions and Internet isolation made its stated technological development goals more illusory than ever – and the country is unlikely to take another road in the foreseeable future.  

Adrien Henni is the chief editor at East-West Digital News (EWDN.COM, UADN.NET), an international news and consulting agency dedicated to tech innovation in Eastern Europe. With nearly 20 years of experience in the high-tech and venture businesses, he advises a variety of startups, investors and other organizations. He is a regular contributor to industry publications and speaks at conferences in Western and Eastern Europe, Asia, and America. Contact Adrien at editor@ewdn.com

  • Originally published January 17, 2020