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Eastern Europe & Central Asia in May 2019: Russian NASDAQ IPO; AI Putin-Style; A Startup for Cash

Crunchbase and East-West Digital News are teaming up to cover key tech and venture trends from Russia other countries of the former Soviet Union. This monthly column by EWDN chief editor Adrien Henni highlights the most notable industry facts and trends from Eastern Europe and Central Asia, as well as promising tech innovations. Below is the review for May.

Russian NASDAQ IPO

The past few weeks were marked by the NASDAQ IPO of HeadHunter Group, the leading Russian online recruitment platform. The company raised $220 million at the upper price range.

Founded in 2000 and owned successively by DST/Mail.Ru Group, Elbrus Capital, Goldman Sachs and Highworld Investments, HeadHunter operates online in Russia and neighboring countries. It is the leading resume database in the region, serving potential employers and recruiters on a paid basis.

Russian IPOs on US capital markets are not frequent, but HeadHunter’s case is not unique. Other NASDAQ-listed Russian tech companies include the Internet giant Yandex, telecom operator MTS, telecom company VEON (formerly VimpelCom), and payment service provider QIWI.

Investment deals and fund creations

Few other significant tech investment news came from Russia this month. Mail.Ru Group announced the acquisition of Worki and invested in ticketing and gaming companies; while medical insurance startup BestDoctor attracted $3 million in a Series A round of funding. 

Also worth of note is the launch of VC fund ‘Terra Fund II’ by Russian venture capital firms Phystech Ventures and North Energy Ventures. This fund will aim to invest $40 in mature projects in the fields of artificial intelligence, machine learning and robotics projects. Among the 24 investors in the fund are large banks, corporations, the Russian state fund of fund RVC, owners of oilfield service companies and international tech entrepreneurs.

From Russia with AI

Artificial intelligence made the news in Russia with Yandex launching AI-powered smart home gadgets and video stream features.

The local Internet giant unveiled what it touts as “Russia’s first smart home ecosystem.” It is powered by Alice, the smart assistant which Yandex launched two years ago and made the news in sometimes surprising ways.

“Alice can now turn on lights, adjust a thermostat, control a TV, or even make coffee,” claims Yandex, which has dealt with such manufacturers such as Philips, Redmond, Samsung and Xiaomi to make their smart home products compatible.

One year ago Yandex launched a Google Home-style smart speaker also using Alice’s AI capacities.

While visiting an IT school in late May, President Putin – who famously stated that “whoever leads in AI will rule the world – reiterated his belief in the prospects of this technology.

“Such mechanisms are unparalleled in history in terms of their impact on the economy and productivity, the effectiveness of management, education, healthcare and daily life,” he said, underlining that a fierce global competition is taking place in this field.

Russia’s Internet isolation law

President Vladimir Putin also signed into law a bill that seeks to establish Russia’s “internet sovereignty.” This legislation is designed to “ensure the safe and sustainable functioning” of the Internet in Russia. It is supposed to defend the country against foreign aggression, serving as insurance in case Russia’s global Internet access is shut off from abroad. 

Critics see in this new law an unrealistic construction and yet another setback for Internet freedom in Russia.

The idea of creating an autonomous system of internet governance originated in China, “but make no mistake: the Russian internet sovereignty law goes beyond anything China has so far attempted,” notes an international observer.

In Ukraine and Belarus

A new fund, Acrobator Ventures, was launched in late May by Bas Godska, a Dutch businessman based in Kiev. Since he moved to Russia, then Ukraine eight years ago, Godska has mentored or invested in nearly 40 startups, mainly from these two countries. His new fund will invest from pre-seed stage to Series A anywhere in the world, but keeping a close look to Eastern Europe.

Since many international investors left the region over the past few years, Acrobator Ventures is the only international startup fund covering the former Soviet Union in its diversity. Some other international funds are considering or preparing similar initiatives across this underserved emerging region – but they are not active yet.

No other major tech investment news came this month from Ukraine, putting aside a $60 million round of funding for Ukrainian-founded People.ai – but this deal took place in the USA, involving top  Silicon Valley investors.

In the Ukrainian capital Kyiv (Kiev), Uber launched a bus service to rival the city’s Soviet-style iconic minibuses. The US company entered the local market back in 2016, with support from the local authorities.

Meanwhile, in tech-friendly Belarus, SAP and IBA Group teamed up with a state university to launch an innovation laboratory, while Gismart, a Belarussian-British musical app company, started developing hypercasual games.

In Central Asia

Kazakhstan’s capital Nur-Sultan (previously known as Astana) was featured in the latest Startup Genome international report as being in the “activation phase,” and ranked in the Top 5 Global Ecosystems for hosting “affordable talents.” Startup Genome sees two reasons to “move your startup to Nur-Sultan:” the “ease of doing business” and “startup support,” which includes tax preference, grants and an easy visa regime.

A few startups from the region made the news in May. Relog, a Kazakhstani logistics startup, acquired local freight marketplace 20 Tonn. The amount of the deal was not disclosed, but the local media reported that the transaction was settled in cash – a paradox for a country which Startup Genome praises for the development of its “fintech sub-sector.”

In Tajikistan, the medical platform Yakdu.tj announced plans to expand to neighboring countries. With little financial means – but leveraging their first-mover advantage and support from the local healthcare authorities – these Tajik doctors-entrepreneurs managed to deploy their platform all across their country in just one year. Now they hope to create a regional leader.

In Uzbekistan, meals delivery Express24.uz – which claims to control three quarters of the local market – aims to do even better than its international peers. It just launched of a 15-minute lunch delivery option across the capital Tashkent, as well as an all-inclusive $3.2 lunch offer.

In a bid to provide better jobs to their youth, authorities in these low-income countries are providing signs of increased interest in tech development an international cooperation. In Tajikistan, the government plans to develop a local IT sector while putting more focus on STEM and foreign languages in education.

Meanwhile, Uzbekistan is launching ‘IT Nation,’ a program that targets all education levels with international support. In just two months, the brand-new Mirzo Ulugbek Innovation Center (MUIC) in central Tashkent was visited by business and academic delegations from Belarus, Finland, France, Israel, Sweden and Ukraine.

Mirzo Ulugbeg Innovation Center

Mirzo Ulugbek Innovation Center, a brand-new tech park in Tashkent, the capital of Uzbekistan. Photo credit: MUIC

Previous Reviews

 

Adrien Henni is the chief editor at East-West Digital News (EWDN.COMUADN.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