Russian and Ukrainian startups seduce Silicon Valley investors, Telegram gives up blockchain project amid lawsuits

Crunchbase and East-West Digital News are teaming up to cover key tech and venture trends from Russia, Ukraine and Belarus. This column by EWDN chief editor Adrien Henni highlights the most notable industry facts and trends in the second quarter of this year (the Q1 column is available here). 

Big US deals for Russian-born tech companies

Several startups with Russian roots made the news in Silicon Valley this spring. In April, Miro raised a $50 million Series B round involving Iconiq Capital, Accel and several individual investors. The details of the deal were not disclosed, but valuation was probably considerable, a source calling the company a ”soonicorn.”

Founded in Perm, Russia in 2011, Miro is now a profitable business, claiming to serve “80% of the Fortune 100” with some 300 employees in San Francisco, Los Angeles, Austin, Amsterdam and Perm. Demand for its visual collaboration solutions has been skyrocketing amid the coronavirus pandemic, as business and educational customers have been moving from physical to remote work.

In late May, Ecwid, another startup headquartered in California but born in Russia, secured $42 million from Morgan Stanley and PeakSpan Capital. Launched in Ulyanovsk (720 km east from Moscow) 10 years ago, Ecwid quickly asserted itself as a global social commerce major. Since offline merchants can use these solutions to start selling online, Ecwid saw its transaction volume jump by 50% between March and April as COVID-19 stroke the world.

In late June, Russian-founded Intento secured a more modest $3 million in Silicon Valley to scale up AI content processing solution. This seed round was led by Flint Capital – a VC firm with Russian roots – with participation from Berkeley SkyDeck, SmartHub and other angel investors.

Meanwhile Yandex, the Russian search giant, raised $460 million on the NASDAQ – where it has been listed since 2011 – and closed a private placement of around $600 million to finance domestic e-commerce projects.  

While maintaining its IPO plans for Yandex.Taxi, its ride-hailing joint venture with Uber, Yandex conceded that these plans would be postponed. The company is now struggling to remain profitable amidst the pandemic.

In May, investment circles were shaken by Telegram’s decision to give up its widely-hyped blockchain and cryptocurrency projects. As much as $1.7 billion had been raised through a controversial ICO in early 2018 – involving mainly Russian and US investors. In 2019 the Securities Exchange Commission filed a lawsuit against Telegram following this ICO, in which it saw an unregistered securities sales. 

Under a settlement announced in late June, Telegram ultimately agreed to return $1.2 billion to investors and pay a $18.5 million penalty. A part of the investors are nevertheless filing lawsuits against Telegram, whose own mistakes in the course of the project explain much of this blockchain disaster.

On the Russian domestic scene

The second quarter was also marked by large domestic transactions in Russia:

Sberbank, the state-controlled financial and tech giant, continued its buying spree:

Two smaller deals deserve attention due to their unusual international implications:

The atmosphere was nevertheless spoiled by the arrest of Alexander Povalko, the head of Russian Venture Company (RVC), in early June, and his placement under pre-trial house arrest. Established by the Russian government in 2006, RVC acts as a fund of funds and supports a variety of programs, from startup accelerators to industry research and events. The investigation alleges that RVC money was invested in personal projects of its top managers. This might have been the case with the reinvestment of part of the proceeds from the sale of an RVC portfolio company, Soft Machines Inc., to another portfolio company, US company Alion

Several prominent investors publicly shared their concerns about this new high-profile arrest from within the Russian venture scene. The most shocking one was that of US citizen Michael Calvey, the founder of Baring Vostok Capital Partners, under controversial charges, in February 2019. Calvey and his colleagues have maintained their innocence, but they are still under house arrest or in pre-trial detention.

Developments in Ukraine and Belarus

Three major deals (by local standards) took place this spring on the Ukrainian e-commerce scene:

A startup with Ukrainian roots, ClassTag, raised $5 million in Silicon Valley. The platform says it has grown to 2 million users across 25,000 schools in the United States.

DMarket, another Ukrainian-founded startup, completed a $6.5 million funding round led by Almaz Capital with participation from video game company Xsolla. Now headquartered in California, DMarket has developed a platform that “enables transparent and secure buying, selling, and trading of in-game items.”

Meanwhile Sixa, an American startup with Ukrainian founders, vanished after raising millions from top Ukrainian, US and UK investors. These misfortunate investors now doubt that any team or products have remained of this startup.

In late April the Ukrainian Venture Capital and Private Equity Association (UVCA) released an overview of the Ukrainian venture market in 2019. Investments in tech startups and IT companies registered or born in Ukraine reached $510 million, up 50% from the previous year.  This number may seem modest by international standards, but it set a record in the history of this young market – with a 50% increase over one year. 

However, the better part of these deals took place in the USA, involving startups which were born in Ukrainian but moved abroad as soon as they began developing at a significant scale.

A Kyiv-based venture fund, Genesis Investments, led a $1.5 million seed funding round for Vochi. This Belarusian startup has developed an app for creative video editing. Neural networks are used to enable the addition of effects to individual objects in a video on a mobile device – “in real time and without quality loss,” says the startup.

No other major deals took place in Ukraine and Belarus this spring. However, international organizations demonstrated their commitment to support these countries. USAID announced a $10 million program to support startup ecosystem development in Belarus while the EIB, a financial institution of the European Union, provided a €50 million loan to UNIT.City, Ukraine’s largest innovation park. 

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

  • Originally published July 28, 2020, updated August 24, 2020