The Russian entrepreneurial ambience in Dubai
Four years ago, the Russian Centre of Digital Innovation and ICT was opened in Dubai by a series of Russian diplomats to facilitate collaboration between the UAE and Russia. This space provided businesses from Russia with the opportunity to explore the Mena area while also stimulating Emirati investors to start seeking investment possibilities in Russia’s technology sector. But unfortunately, owing to the emergence of Covid-19, the Centre had to be closed down (though there was no response when this was enquired). Similarly, with Ukraine’s war breaking out shortly afterwards, it diverted Russia’s priority such that what the Centre couldn’t do was finally realized – i.e., drawing numerous Russian startups towards Dubai. During the past year or so, many founders and investors from Russia have migrated to the Emirate forming their operations there in order to evade the unpredictability in their own nation. According to what can be seen now, as compared with most Western countries, UAE has not enforced sanctions on Russia thus resulting in firmer economic relations between them as well as Dubai becoming a safe haven for affluent Russians.
Throughout the past 12 months, there has seen an inundation of entrepreneurs and investors from Russia in the emirate, setting up businesses outside of their home nation’s uncertain climate. As opposed to the West, the UAE has not imposed any restrictions on Russia, which has consequently contributed to stronger financial links between them, making Dubai an ideal refuge for affluent Russians. According to Egor Klopenko – originator of IT Leaders VC – “Nowadays Dubai is one of the premier spots for the Russian public. Substantial opportunities to conduct business can be found here and this is something that Russian citizens like a lot.
Alexey Milevskiy, founding partner of investment firm Multiplier, explains that Dubai has a great deal to offer for several different reasons. The city provides substantial capital through sovereign funds and private fund involvement, allowing for logistics and growth. There is also a selection of people from around the globe who can visit here as well as its safety and year-round sunshine to enjoy. Hundreds of Russian startups have relocated their headquarters because of this appealing atmosphere, however not much crossover has occurred between local businesses and the newly arriving ones due to them hoping to continue normal operations instead of finding a new potential customer base in the United Arab Emirates.
Outside of the native country
A larger number of Russian entrepreneurs are utilizing the United Arab Emirates as a portal to the entire region. With many keeping their businesses in Russia to focus on that market, they also create a headquarters in the UAE for access to both regional and global markets. An example is Sellematics, a B2B Software-as-a-Service aimed at marketplace vendors created by Daria Tkachenko. Her business began in China and she returned to Russia when COVID struck but recently moved to the UAE before war broke out, setting her up better than ever to benefit from the steady growth of e-commerce.
Acknowledging the potential of the enterprise and emerging markets, they chose to pursue opportunities in Russia and the Middle East and North Africa (Mena) region. Despite the sanctions from the West put on Russia, as well as its floundering currency, many Russians have taken to using cryptocurrencies. Consequently, a great number of crypto-based and Web3 businesses have resumed residence in Dubai, strengthening its credentials as a Web3 hub.
Nikita Yuzik, co-creator of the blockchain-based proptech business known as ROI Estate, claims that Dubai is unparalleled when it comes to fostering startups. The city combines innovation, modern strategies, and startups. Additionally, the investment potential is extremely high due to Dubai’s Web3 sector. People have found a secure option in the cryptocurrency market because of the difficulties interacting with banks and funds removal from different countries.
The monetary funds of Russia
Yuzik’s startup, located in Latvia, drove him to travel and explore Dubai. He hopes to get funding by doing so. A number of Russian angels investors have relocated to Dubai in the past year, with a majority investing only in Russian or Russian-speaking founders. These foreign investors see the region as a good source for Limited Partnerships (LPs). However, Milevskiy states that he is targeting global markets rather than the Middle East because it lacks enough sectors to produce successful unicorns.
Most Russian investors in the UAE express this opinion, with some showing an interest in Mena-based startups. However, a limited number of entrepreneurs interviewed by Wamda indicated that founders from the region are not keen on getting investments from Russian investors. Reasons for declining their investment include worries over lack of transparency and visibility over where the funds come from, as well as wanting to steer clear of US sanctions, especially when they have connections with or investors from the West.
Klopenko states that the UAE is an ideal place for Russian investors because it allows them to be part of the international market. As a result, he is now able to get a better understanding of markets such as India, which were previously not on his radar. Because of this, he can easily contact and collaborate with startups from any country from his office in Dubai.
Founders of Russian startups tend to have a shared global view, viewing the UAE as their headquarters and having their teams located in cheaper destinations. Milevskiy notes that many of these founders who shifted to the UAE are second-time founders who already have an exit under their belt and financial comfortability. While initially, first-time founders gravitated towards the city for raising investments from Russian investors, most companies only keep top-level staff based in Dubai due to the high cost of employees compared to other regions such as Armenia, Kazakhstan, Georgia, or Serbia.
Talented individuals working in the field of technology
As a result of the conflict, over 100,000 Russian IT specialists have left the nation. Most of them relocated to territories such as Georgia, Armenia, Kazakhstan, Turkey and the United Arab Emirates city of Dubai. Many global companies that normally operate in Russia – similar to Google, Goldman Sachs and Boston Consulting Group – sent their employees to Dubai for temporary residence. This location did not stay a short-term solution; Dubai unexpectedly became a permanent home for a huge number of Russians. Experts assume these new citizens will bring outstandingly positive developments to the UAE society, says Milevskiy.
Milevskiy predicts that, given time, Russian founders will team up with local talent to create startups, pointing to an example being fintech tabby’s COO Daniil Barkalov. Barkalov was a Russian who co-founded buy now pay later startup with Hosam Arab in Dubai in 2019. However, when the war initially began, people were hesitant to work with Russian entrepreneurs, according to YallaHub CEO Leo Dovbenko. Nevertheless, this outlook has changed as of late.
Individuals were apprehensive about doing business with Russians due to the uncertainty of what might come to pass as a result of the sanctions. However, now we are aware that nothing will transpire. Russians have capital and sound business strategies, but they need assistance from native partners. These teams up shall happen and also bear much fruit. Furthermore, their advanced technology could also help enhance the level of tech startups in this sector.
June 2, 2023
