October 2019 in Eastern Europe: JV proliferation in Russia; a unicorn from Ukraine; weird esports fund in Belarus

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 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 October 2019.

Battle of joint-ventures in Russia

Mail.ru Group, the LSE-listed Russian Internet giant, made the news with several joint ventures projects last month. In early October, the group finalized its e-commerce joint-venture agreement with Alibaba, MegaFon and the RDIF, Russia’s sovereign fund.  

While the Chinese giant presented the JV as “an important part of [its] globalization strategy,” Mail.ru claimed this partnership is opening the way to “building an undisputed leader in Russian e-commerce.” 

Attaining this goal does not look unrealistic as Russian e-commerce is entering a new growth and concentration cycle. The JV can leverage such major assets as the existing AliExpress Russia marketplace, which controls the bulk of e-commerce flows between China and Russia; the VK social network, by far the leader in Russia; and MegaFon’s 77 million customer base. 

Almost simultaneously, Mail.ru announced an agreement with MegaFon, the RDIF, and Alisher Usmanov’s holding USM to create another joint venture. Focused on digital payments, this second JV will integrate existing services controlled by Mail.ru Group – VK Pay and Dengi@Mail.ru – to create a potentially powerful e-wallet company. 

The two JVs will have to compete, however, with serious players. In the field of e-commerce, these are notably Wildberries, the current market leader; Ozon, which considers a Western IPO; and the Yandex Market group of companies, a joint-venture of Sberbank and Yandex. Sberbank and Yandex have another JV in the field of payments, Yandex.Money.

However, the relationship between the two companies seems to have weakened recently as Sberbank began establishing close ties with Yandex’s arch-rival Mail.Ru. Thus, in late October, Sberbank announced its intention to purchase a $170 million stake in Mail.ru Group by the end of the year. The deal, if confirmed, will provide the bank with control of one-fifth of the voting rights and 1.8% of economic shares in the LSE-listed tech giant. 

Sberbank and Mail.ru also have plans to create a JV project covering ride-hailing and food delivery, as announced just months ago. This move comes as a challenge to Yandex.Taxi, the current leader in this field, co-owned by Yandex and Uber, which has grown through a series of acquisitions

Other deals of the month in Russia

A few notable, though less spectacular deals took place in Russia:

Meanwhile, US computer vision startup Occipital launched an R&D office in Moscow, absorbing the team of GeoCV, a Russian-founded 3D visualization startup.

On the corporate side, Orange opened a branch of Orange Fab, its international startup accelerator, in Moscow. The French telco follows the example of a variety of international groups working with Russian startups. 

Netology Group, a property of steel magnate Alexey Mordashov, announced a $10 million acceleration and investment plan for edtech startups.

Also worthy of note is the launch of an international $50 million fund by Efko, an agroindustrial group from Belgorod. This corporate venturing initiative aims to “disrupt the food industry, promote a healthy lifestyle, support the ecology and food security.”

A unicorn from Ukraine

In early 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. Thus, Grammarly became the first-ever unicorn from Ukraine. 

Founded in 2009, Grammarly has developed an AI-powered software to help people improve writing, monitoring in real time errors in grammar and syntax. The company claims to serve more than 20 million active users every day. 

The fact that Grammarly grew outside its home country is no surprise. Promising startups from Eastern Europe tend to move to Western Europe or the United States as soon as they get international traction, since the local ecosystems are not strong enough to support their global development. 

Putting aside Grammarly’s deal in San Francisco, the Ukrainian startup scene was quiet last month. The largest domestic investment deal involved adtech startup RetargetApp. It raised $1.5 million in a seed-stage round led by a TMT Investments, a London-based fund with Russian connections.

Esports fund in Belarus

In Belarus, a local game studio, SayGames, made the news as its hypercasual game ‘Sand Balls’ topped a global ranking in its category. 

Meanwhile, Belarusian entrepreneur Alexey Budyrko began raising a $50 million fund exclusively focused on esports – the largest such fund in the world, according to him. The initiative sounds ironic as Budyrko was the founder of Play2Live, an esports platform which went bankrupt in unclear circumstances just 18 months after raising $30 million in an ICO. 


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  • Originally published November 14, 2019