Russia’s Latest Hero and the New Wave of Emigration Startups

PHOTO by Anna Liberman’s Facebook
They built smart business and ran for the valleys

I find myself at the foot of a church on a steep hill next to Chinatown. Nearly every conversation in San Francisco led to a puzzling “Have you heard of a Startup Church?” It suddenly clicks.

Most of those arriving at Silicon Valley from Russia know about Pavel Cherkashin, a skilled-laborer, who is now a managing partner at GVA Vestor.In fund and is currently brewing something grand but guised. I sign up for a meeting on Broadway street in the Russian Hill neighbourhood where Molokans, the devotees of a Russian spiritual sect, lived in the first half of the 20th century. A passage in American Road Trip by renowned Soviet satirical writers Ilf and Petrov describes them as having “a symbolic and allegorical interpretation of the Bible".

The GVA Vestor.In office building adjoins Our Lady of Guadalupe, a local Catholic church. It's foundation in 1875 was funded by donations from Latin-American immigrants who sought a Spanish-speaking parish. In 1906 it was razed to the ground by an earthquake, but later reconstructed. When the number of its worshippers declined, it became a Chinese community school. Twenty years later the property was put for sale. “The exterior must remain as it is, although the interior can be altered,” a San Francisco real estate agent's site informs. It was eventually sold for $3.3 million.

So far, the fund has closed a total of seven deals and is worth $30 million. Cherkashin is running late. His assistant welcomes me in and fills me in on the Diamond Foundry startup, a manufacturer of lab-diamonds. “San Francisco is a window that provides a glimpse into the future,” she enthuses. Meanwhile, a cleaning lady in the next room enquires in Russian about the company. “It’s a peculiar place,” responds an employee, “we have an awesome project coming up – a startup accelerator.” Their words fade as I’m steered away by the assistant, who casually addresses her colleague, “What are they talking about? There’s no accelerator.” My glance falls on a church blueprint on the wall.

“We are not ready to unveil the church-accelerator plans,” confesses Cherkashin. “One thing I can say is that a lot people will be coming to the Valley, and they need financial support. We’ll have a platform where they can meet like-minded folks, share their experience and get advice from experts, a sort of international club.”

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Nuestra Señora de Guadalupe Church in San Francisco

Never before has Cherkashin raised capital so quickly for a project.

“The project isn't called the ‘church’, it has a different name,” he corrects. I look up and see a poster with a ‘Startup Temple’ logo. “Why did you pick here?” I ask candidly. My question is met resolutely. “Why not? Investors love quirky settings.”

GVA Vestor.In has been somewhat cagey about its plans. Incubators, accelerators, co-working space, meetups are already old hat, but a ‘startup church’ sounds much more hip and original and is a clever way to generate public interest. Either way, Russian Hill can make its name as a startup hub for Russian migrants.

Historians pinpoint three waves of immigration from Russia in the 20th century. A new wave was sparked two years ago by events in Crimea, East Ukraine, sanctions and anti-Western propaganda. Sociologists agree that Russia's youth are desperate to flee the country, which is handy for the government, who would more than likely be pleased at the emigration of its critical-minded citizens. A number of Internet entrepreneurs, after making fortunes on sky-high oil prices and soaring demand, already crossed the Atlantic in the early turn of the century.

The list of recent settlers in Silicon Valley reads like a who's-who list of influential Russians. Among them are Elena Masolova, founder of educational project Eduson.tv, the Liberman brothers investors Daniil and David, Maxim Nogotkov, founder of Svyaznoy and ranked by Forbes as one of Russia's richest.

Nikolay Dadvydov from Gagarin Capital fund, who also moved here a year ago, estimates the number of Russian immigrants to soon surpass one thousand. Was it the crackdown and authoritarian Russian rule that influenced their decision? Secretmag visited California and examined what tipped the emigration scales.

Immigration Seeds

Every morning Stampsy boss Sergey Poido leaves his shared two-bedroom apartment and heads to Galvanize co-working spot in South of Market, an industrial quarter where local factories were converted to lofts in the 80s and 90s. Airbnb, Dropbox and Pinterest have their offices here. In the evening he will go to a meetup. “It’s an opportunity to get to know people who could help you with a project, a kind of networking,” he explains. “In Russia such gatherings take place two to three times a week. Here you have dozens every day.” Meetups replaced parties, “The first few months you miss the Moscow rhythm. Then you get used to it. Big city residents are constantly struck by the dreaded FoMo (fear of missing out). In Moscow you have to be in the limelight, otherwise you’ll be forgotten. In San Francisco, your project becomes the focus of attention.”

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Russian Hill in San Francisco

With time, Poido realized the move to the US made sense. Even if his startup fails, he can always find an office job. Poido says he was never afraid to move. Rather, he had friends ready to help with his papers and accommodation.

Anna Dvornikova, president of business association Ambar, says the influx of Russian entrepreneurs increased two years ago. “As soon as the Ukraine conflict ignited, I took on an immigration consultancy role providing help assisting with lawyers and documents for next to nothing.”

Cherkashin, an investor, reckons California’s history as a haven for ex-pats is one of the reasons startup entrepreneurs flock here. He calls people who come first "the seeds of immigration - they move in, create critical mass and draw others.”

Critical mass started to emerge in 2014. According to Bloomberg and the Federal Statistics Service, by autumn more people emigrated from Russia than in any calendar under Vladimir Putin’s rule. By the end of the year 308,475 people, the majority of them skilled professionals, abandoned Russia - a 65% annual increase. Just under two thousand moved to the US.

“What is two thousand people in the framework of a country? Not a lot,” ponders Nikolay Davydov. “But two thousand entrepreneurs is a huge loss: millions of lost jobs, unpaid taxes and vanished innovations.”

A year ago I decided to leave [Russia]. Our fund, Industrial Investors, were trying to gain a foothold in Silicon Valley and I planned to get an MBA at the University of California. Currently we have three funds here: Nano Dimension worth $150 mln, Industrial Investors and a recently formed Stereo Capital with a value of $225 million. At first we thought about setting up a fund independently but then realized the potential of local partners. We joined forces with Jim Smith, an experienced and well-connected partner from Mohr Davidow Ventures, and Dmitry Dahnovsky, former vice-president of Mail.ru and a successful 'angel investor' [a capital provider for start-up companies - Ed.]. We’re facing fierce competition from other funds, but we have something to offer. Our partners come from Russia, as well as Asia and Europe.

Anton Generalov, Head of Dexter air company, 
industrial investor

Challenges

“Hello, I am Nikolay. President of Bank of Nikolay,” a man with moustache wearing a gold chain in a dimly lit room attempts to convince viewers to deposit money into his bank. “Give me your money and I will take care of it for you no problem. It’s so easy with online. I go on your computer transfer it from your bank to my Bank of Nikolay and put it in my pocket.” As the clip ends, Norton Internet Security, a PC antivirus manufacturer, pleads with users not to confide in Nikolay and avoid murky online transactions.

Every time the topic of Russian investors and money crops up, Davydov, an investor, reminds us of the video. “Americans are told that Russians who have Internet presence are mostly hackers, so when you embark on an investment trail, everyone has questions.”

As an employee at iTech Capital, he used to fly to the Valley three-four times a year, but in 2014 decided to relocate and launch his own investment boutique - Gagarin Capital. “I knew people by the time I moved, so it was easier. Most of the company’s capital is from Russia but we work with credible investors. It’s more important who you are, rather than where you got the money. Yury Milner is a good example. At the beginning he was backed by Usmanov, an oligarch close to the government - not the best start for an IT business. But Yury earned a spotless reputation and demonstrated his wit, charm and skills. You could write a book on each of his deals.” In March 2016 Davydov himself struck gold after selling Belarusian app MSQRD to Facebook. Details have not been disclosed but the deal is estimated at $20 million plus.

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Renting an apartment in San Francisco turned out as rough as gaining the confidence of the locals. “You spend hours on Craigslist, pressing F5 every 15 minutes to renew listings,” remembers Davydov. “Then you write to an agent or owner, attaching a presentation with family photos and trying to convince them how great you are. I listed all my awards, published work, my wife and daughter’s achievements, I even sent a photo of my dog.

"Later you come to an open house along with five or six other couples. Everyone puts down $50 to get their credit history checked. Russians usually don’t have a credit score but still pay the fee. A self-employed Russian with a dog and no credit score sounds like an illegal immigrant. After endless red tape you hope the owner will let you in if you bargain with him. I saw a house listed for $6,200 a month. I offered $7,500. In the end it was rented out for $9,800.”

Davydov spent nearly three months finding a decent place in Los Altos Hills. He lived in hotels, with friends, Airbnb apartments. Before finally landing a lease, he’d checked into 56 houses, received three offers and at long last settled on one.

Getting a visa is yet another arduous task for newcomers. O-1 type is common among foreigners with “exemplary skills”. To demonstrate your unparalleled prowess you have to provide proof of national or international honors, published articles, dozens of recommendation letters, experience from mega companies and what not.

“At the beginning many applied for a standard work visa H1B. But officials now have quotas, which complicates the process,” explains Maria Adamian, former curator at Digital October and TechCrunch events organizer, who lives in Palo Alto. “O-1 is harder to come by. It takes months to get all the paperwork ready, but you don’t have to compete with anyone. Your case is reviewed separately, and it could be quite convincing if done right.”

When the crisis struck in 2014, the need to leave became more pressing. It was clear that the whole business world would suffer due to the political climate and work with foreign investors was under strain, running to eastern investors would be a long and painful process. Living in San Francisco, I decided, would be better for personal growth. Russia carved out a path that did not seem beneficial to the future of my children. I planned to send them to the United Kingdom, where I myself had studied, or the United States, but in the end the whole family just moved to the US.

Nikolay Davydov, Managing partner of Gagarin Capital fund

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View of San Francisco downtown

Comfortable Life

“Imagine you’re a painter in a house that suddenly caught fire,” says Cherkashin sitting in his church office. “You face a dilemma: continue painting the burning walls or go and decorate another house for less money but where you're guaranteed your work won't be a thankless task.” Those who don’t want to work in a blazing house, he believes, but prefer to create global IT projects, move to San Francisco. Among entrepreneurs and investors, Cherkashin himself actively advocates for California and influenced Maxim Nogotkov, co-founder of Svyaznoy stores, in his decision to relocate. Cherkashin even offers tours to prospective immigrants from Russia.

But it's not only venture capital and grand ideas that draw people to the Golden State. Life here is pleasant, the weather is more than agreeable and the ocean is never less than nearby. Russians prefer the suburbs. Some blame city the difficulty in finding an apartment and the number of homeless on the streets as reasons for rejecting a move. Living in suburbia is safer and environmentally friendlier. Anastasia Sartan, founder of independent clothing store TrendsBrands, is among those who plumped for countryside.

A return ticket to Sartan’s residence sets me back $15. On my way I pass notable areas – the Facebook offices at Menlo Park, Steve Job’s old house at Palo Alto, the Google headquarters at Mountain View. I get off a train in Santa Clara, take an Uber and in a few minutes I’m at the Starbucks in Los Gatos.

Sartan shows up with her husband and baby. Wednesday evening is traditionally family time. She is dressed in a loose striped vest with a jazzy scarf casually draped around her. “When I moved here, I realized that I do not want to sell useless blouses again,” she says. “I made a list of interesting things and decided I wanted to create real value for people. Perhaps it was the hormones, when you're pregnant you feel the need to sow the seeds of kindness. In the Valley you truly want to make the world a better place.”

“We came here for the birth of our child,” continues Sartan. “It was love at first sight and we didn't want to leave so when an opportunity emerged to do so we took it. Then my friends started moving here, so it was quite cool. Bettering yourself and growing as a person was next to hopeless in Russia. We’re all young and crave inspiration - the Valley is perfect for that.”

As the evening twilight settles, serenity sets the stage. I ask Sartan if she misses the bustling capital. “The first six months I was complaining non-stop. In Moscow I felt like a celebrity, a phone call could solve any problem, everyone knew me. Here you’re on your own. It was a good kick up the backside. I started to appreciate life in the country,” replies Sartan.

Russian Valley residents entertain themselves by relaxing outdoors with each other. The circle of friends is quite fascinating – the Libermans, the founders of Coub Igor and Anton Gladkoborodov, who moved from New York, and a bunch of others. Sartan recalls the last party – a ladies’ night at Marina Davydov’s where they made a traditional Russian salad.

Two years ago it hit me that work in Russia had become tedious. I studied in the US and since the 1990s I've lived between Russia and America. Life in the Valley is more comfortable but Russia offered spectacular career opportunities. In 2008 I headed a student incubator at the Higher School of Economics before moving to Digital October to organize TechCrunch conferences. We coordinated educational programs free of charge, hired the best people, rented stylish spaces and broadcast events. Money was flowing in from private partners and the government.

In 2013 big companies quickly cut their marketing budget. Working with sponsors became more difficult and nearly impossible with the city authorities. The Royal Bank of Canada fund, Moscow Information Government Center and others were still concerned about huge projects but set unrealistic targets. From partners they transformed into clients, heavily betting on PR. Besides, in 2014 politics was getting in the way of work. I was advised against collaborating with our Finnish partners and inviting them to Moscow because they were allegedly after our startups. As a result, the projects became banal. At some point it dawned on me that those years of prosperity had hit a rut.

Maria Adamian, Former Curator, Digital October

The Coast of Utopia

Russian-born Igor Gladkoborodov, co-creator of video sharing platform Coub, also uprooted and headed to Los Altos. His older brother Anton is currently going through the visa process to move but still manages to divide his time between the two countries. The younger sibling says Anton is getting out of hand – he feeds squirrels on the balcony and the creatures decided to settle there after being pampered so much.

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Coub co-finder Igor Gladkoborodov

I meet Gladkoborodov at a café. There’s a charming food joint next door, only with a 40 minute wait for a sandwich – nothing unusual for a contemporary spot in San Francisco. Coub operates at a loss but keeps afloat thanks to investments. The company received $3.5 million, most of it in 2014, from Vaizra Capital fund owned by Vkontakte co-founders Lev Leviev and Vyacheslav Mirilashvili. Income is earned through special projects like their recent collaboration with Disney on Star Wars: The Force Awakens.

“On the one hand, Russia is under strain, but on the other, startups have never had it easy, they've always had to try their luck abroad,” says Anton, staring at a funky-colored pitaya dessert. “IT startups should make the world better. That’s what we wanted.” Coub moved to the US in April 2015, but for a few months the brothers stayed in the Valley, and its developers still work in Moscow. “We are a tech project and at some point realized this is the place to be. New York is more of a media market.”

“San Francisco attracts even those, who first set foot in New York,” confirms Cherkashin. “In Moscow you’re under impression that New York is the global center but nothing beats the Valley.”

“The nature of migration has changed. People leave Russia without burning bridges, they don’t take on low-paid jobs,” says Igor Gladkoborodov, “Most of them are professionals with awesome ideas.” But he doesn’t have a concrete plan for future. “It’s hard to say where we’ll be, for now it’s San Francisco.”

“I’d been coming to SF for the last five years before I realized I wanted to spend more time here, grow, and do fun projects. I don’t look at it as immigration. I need a visa simply to work in the US and travel freely,” says Dmitry Matskevich from Flocktory, a marketing service. We meet up at his buddy’s place. Dmitry Dumik is a Chatfuel chatbots creator, who took part in a legendary Y Combinator business incubator. I try not to get distracted by the spectacular ocean view outside. Indeed, such a view and comfortable lifestyle would easily induce anyone to emigrate.

Matskevich has stopped in San Francisco for just a few months to get his O-1 visa and find an apartment. “The city is perfect for business, but there are many other problems,” he notes. I ask him to tell me the most peculiar one. “It’s not easy for men to have high self-esteem here,” he responds, “there are not too many women in San Francisco, so the competition is fierce. You start to feel miserable among an overwhelming number of high-fliers. Surprisingly few girls come here. I don’t know why we have a fantastic landscape and successful men galore…”

The City That Doesn’t Exist

“Roman’s unrealized dreams to change the world for the better are being obliterated,” wrote Igor Gladkoborodov on his Facebook page on 28 November, 2015. Two hours earlier, his friend Roman Mazurenko, founder of Stampsy, had been hit by a car. He would die of his injuries. Just six months before, Mazurenko had announced the end of the beta testing phase and the launch of the project in San Francisco. He came to Moscow for just a few days.

In a Newsweek interview last year Mazurenko said the spirit of the Russian capital nowadays just doesn’t fit people who want to keep up with the rest of the world, “Moscow was not on the cutting edge even in 2007, but we had a dream. Now it’s gone. Traveling across the world today is like speeding through time. Some countries are still stuck in the 80s, others are heading there. I'm from Belarus and saw everything there that happens in Russia now.”

After Mazurenko’s death, Poido took over the company. For the last six months the project was in standby mode and the team discussed how to move forward. It was decided to put all the legal documents in order and move on. Mazurenko registered the company in Hong Kong but Poido made a decision to transfer it to the US, where the quantity of investments is far greater.

“Roma’s passing became a metaphor for the death of the Moscow we loved,” insists Poido as we’re walking through the Golden Gates area of the city. We’ve missed the sunset, the main spectacle of the evening. It’s getting chilly, a seagull nearly snatches my corn-dog. Poido breaks momentarily in admiration of this daring attempt before pressing on with the idea of “global Russian”.

“At some point it became clear that Russia doesn’t need people like us. Moreover, we are perceived as dangerous. There’s no point in fighting the government. I look at the people here who are getting settled and think: there’s no way they will return. People who start a new life go through a traumatic experience, moving again is quite difficult. If Russians who came here succeed, they will doubtlessly remain.”

Mazurenko once nailed it down precisely when he wrote: “If someone offends you, the worst curse is to wish them to become successful in Moscow. There’s nothing more dreadful: success means that you'll be stuck here forever.”

Author: Zlata Onufrieva