Gap Between St Petersburg and Moscow Narrowing – But Funding Still Miles Away

15.12.2015 Interviews

When Pavel Durov was dismissed as CEO of Vkontakte, the social media platform he had founded in 2006, last summer, Saint Petersburg’s tech community lamented the loss of its most enigmatic character, at the helm of its most successful brand. But there’s far more to the city than Durov, who chose exile on the Caribbean island of St Kitts over Russia, which he complained was “incompatible with internet business”, or VK, whose 71 million daily users and 280 million registered accounts make it the most popular Russophone social media. Russia’s second city has all the foundations to become a key player in the tech world. Its problems, however, lie 400 miles southeast, in Moscow.

Michael Pogrebnyak has spent over a decade developing software in Russia, the E.U. and U.S. Since 2011 he has led Kuznech, a visual search solution that for several years has been listed among Russia’s top startups – despite being headquartered in California’s Sunnyvale. Pogrebnyak doesn’t necessarily believe in the “dreamland” of San Francisco many of his compatriot entrepreneurs are sold. But finding investment in Saint Petersburg “sounds today like a fairytale for kids… in 99% of cases it’s impossible”.

Russia has suffered an exodus of tech stars, not only like the debonair Durov but angels and other investors, as Russia has endured the double ignominy of a crashing currency and international sanctions. That aside, Saint Petersburg has suffered in the shadow of its larger capital city across the East European Plain – whose startup scene has flourished in recent years. “In terms of the startup ecosystem more than 90% of VC funds, angels and other incubators are located in Moscow”, says Pogrebnyak. “Also, the way of doing business in Moscow is more energetic than in Saint Petersburg”.

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