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. Last Updated: 07/27/2016

Forum Sees Tech Potential in Russia

A few came with gimmicks. Mikhail Ryzhkin, vice president of development at Storactive, which sells backup software in the United States, carried around a vibrating back massager marked with his company's logo.

But the sales pitch from most presenters was rattling off their achievements, revenues, big-name clients and assurances to potential investors that their company does have an exit strategy.

The Russian Technology Investment Forum on Monday and Tuesday brought together some 30 Russian information technology companies and a handful of representatives from domestic and international venture capital funds, with the former petitioning the latter for cash and expertise to enlarge their businesses.

Each company's 15-minute presentation was followed by questions from the audience, some on their first trip to Russia, most of whom sifted through the technical terms to get down to the basics: So what exactly do you do? How exactly does this work? How do you make money?

'This is talent that needs to be transformed into enterprise.'
— Giuseppe Curatolo
Yet another question on several minds was whether Russia's IT and software industry could ever turn out to be as successful as those in India, Israel, Ireland — or even Silicon Valley.

"It was very much like this in my own country in 1990, when our company had revenues of $1 million, but it was the 15th-largest software company in India," said Saurabh Srivastava, executive chairman of IIS Infotech, a U.S.-listed software company now worth $60 million.

The featured conference speaker Monday, Srivastava painted a short history of India's emergence into a billion-dollar software market, which includes big successes in offshore programming. He offered up only a few cautious comparisons to Russia's future opportunities, admitting he knows very little about this market.

Watching two days of presentations and speaking with the companies, most of them software, product and application developers rather than Internet companies, did give him a sense of what's needed. "They are focused on technology, and they are good at technology. But to create a successful business, other things also come in. … Some have yet to understand the business aspects of being an entrepreneur."

Srivastava said having a good product is a first step, but that is also where the problems start. "Just because it's good doesn't mean people will line up and buy."

Draper Fisher Jurvetson, a U.S. venture capital fund, was not there with cash in its hand, but to observe.

"The world recognizes Russian technology minds to be very adept," said Draper Fisher's Giuseppe Curatolo. "This is talent that needs to be transformed into enterprise."

That transformation, he said, should be guided with expertise and cash from domestic venture funds rather than international ones, which have less knowledge of the market. "When there are 20 software developers in Kiev, what can I do for them?" Curatolo said.

While several smaller matchmaking events with entrepreneurs and investors have taken place in Moscow over the last few years, this forum, hosted by Innovative Ventures, was the largest to date and the first to attract the big Western names of venture capitalism.

Alexander Andreyev, financial analyst at Brunswick UBS Warburg, estimated that venture and private equity capital put in the Russian IT market was only $150 million to $200 million in 1999 and 2000, the majority of that coming from Russia-specific funds.

"Generally you see more business-minded people in the old economy, opposed to IT … and that's one of the main reasons holding back investment."

So it wasn't just thick wallets that the presenters were seeking (requests ranged from $500,000 to $20 million) — bringing in an outside expert also puts experience and connections into the corporate mix.

Serving as a model Russian entrepreneur was ABBYY Software and Cybiko founder David Yang, one of Monday's speakers. Asked what are the ingredients to a start-up's success, he offered a short list that began with "management, management, management."

In agreement, Salavat Rezbayev, managing director of the Vesta Eurasia technology holding company, said his criteria when analyzing potential companies is first and foremost management.

"The biggest disenchantment is when they realize that having the technology is not enough."