May 28, 2022

Russia is experiencing an exodus of middle-class entrepreneurs, programmers and other educated citizens as Western sanctions and political instability have made it impossible to conduct international business in the country.

The Russian invasion of Ukraine has forced millions of people to leave their homes in fear for their lives. But the war is also forcing Russians to leave their homeland. I spoke with several Russian entrepreneurs and venture capitalists who spoke about why they left or are about to leave their country. But when they try to start a new life abroad, they will be hounded by anti-Russian sentiment and economic sanctions.

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As Russia continued to amass troops along the border with Ukraine in mid-February, Eugene Konash, whose employees in Russia worked remotely for the London-based game studio Dc1ab, became increasingly worried. But, like many others, he did not expect a large-scale invasion.

His hopes for a quick release of tension faded. When it became clear that Russia was waging a full-scale war against Ukraine, Western countries began to impose sanctions against Russia. Companies immediately felt the effect.

One of Konash’s employees discovered that his bank was under sanctions that blocked international transfers to his account. As the ruble collapsed, long queues formed in front of Russian banks as citizens rushed to convert their savings into dollars, but faced hefty fees and restrictions on the government’s access to foreign currency.

The tipping point for Konash came when investors told him in no uncertain terms that his startup would be uninvestable if he continued to have such a strong presence in Russia. His Russian team agreed it was time to leave.

“Those who, a month ago, said that they would not leave Russia under any circumstances, said that they were packing their bags and literally moving across the land border to Kazakhstan due to the fact that exit tickets were either sold or were too expensive” Konas said.

Like many other tech companies with an international presence, the gaming startup Konash hires developers in Eastern Europe for the region’s affordable and quality programmers. Originally from Belarus, Konash is well aware that the ex-Soviet bloc’s emphasis on science and mathematics education helped create a world-class engineering and scientific workforce.

With the exception of financial sanctions, running an IT company from Russia has become impractical as foreign technical services have either been banned or have begun to be withdrawn.

Google and Microsoft have suspended all sales in the country, and Russia has attempted to block Facebook, Instagram and Twitter despite mixed results. Some users were able to access these American platforms even after the ban, suggesting that Russia could get away with a powerful censorship machine like China. Facebook and Twitter said they are working to restore services in Russia.

“Who knows when development tools like Unity will be locked up?” said a Siberian gambling investor who left the country in 2015 following the annexation of Crimea and subsequent economic sanctions by the West. “No one wants to be in a country without access to the outside world.”

The investor declined to give his name for fear of Russian government reprisals against dissidents.

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Since the invasion of Crimea seven years ago, many Russian companies have begun moving elsewhere to reassure investors about the political risks and optics associated with backing Russian companies. In the past, many of these companies operated only on paper outside the country, often with their teams still operating entirely in Russia. But the large-scale invasion of Ukraine turned the stream into a stream.

“After 2015, companies legally left Russia,” said an investor in a venture capital firm that recently moved its team out of the country to Moscow. Even before the Ukrainian crisis, a company supported Russian startups only if it was founded outside the country and had an international focus.

“Physically, these startups will still be based in Russia. They would do research and development there because the cost of living was lower,” said the investor, who asked not to be named because the topic is “very sensitive” for a company trying to distance itself from Russia.

Nikita Blank, who changed her last name from Akimov four years ago, said that life is a startup founded abroad, but recently, working in Moscow, for all intents and purposes, seemed too easy. His company HeyEveryone, which develops a tool for automating investor relations management, is currently registered in Delaware.

Nikita Blank’s team works in Moscow before leaving the country following the Russian invasion of Ukraine.

The startup never intended to serve only the Russian market, but Blanc and his wife chose Moscow as their base because of the obvious advantage of their parents helping to care for their three-year-old daughter. The Internet at that time in the country was fast, cheap and free; And Moscow was filled with technical meetings where Blanc met with like-minded founders.

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The Blanks’ entrepreneurial life, which had the best of both worlds, came to an abrupt end with Russia’s attack on Ukraine. Three days after the invasion, Nikita’s wife Valentina lay in bed, devastated by the fall of her country. He decided it was time to leave.

“I couldn’t do anything at work. Part of my family is from Ukraine,” she said. “It would be difficult to travel with a child, but I did not think that the situation would change. So, we packed 23 kg of luggage and bought a one-way ticket.

The couple moved with their young daughter to Georgia, which is currently one of the main destinations for the outflow of talent from Russia. It is a popular choice in Turkey, Armenia, Kazakhstan and Thailand as well as in the country as it is relatively inexpensive and easy to use for Russians.

The venture capital fund, which recently left Moscow, has expelled hundreds of Russian citizens in recent weeks, mostly its own employees and portfolio companies. On the Internet, thousands of Russians in Telegram groups discuss exit plans and help each other.

“We are Russian idiots”

Migrants must plan their escape on the spot as sanctions against Russia intensify every day: which countries are still flying Russian flights and how will they transfer money?

Sanctions continue to apply after Russians have fled abroad and even those who left long ago. Well-known financial infrastructure providers such as PayPal, Mastercard and Visa have already suspended operations in Russia, meaning that foreigners using Russian banks will no longer be able to use their cards abroad. Estonia recently suspended e-residency applications from citizens of Russia and Belarus to “prevent sanctions evasion and potentially illegal activities.” EU regulators have reportedly ordered some banks to investigate the transactions of all Russian customers, including EU residents.

The scale of this wave of sanctions is prompting some to give up their Russian passports. Siberian gaming investors are looking for Singapore citizenship, fearing that their Russian citizenship could cut them off from the US dollar-based financial system.

“Ukrainians are accepted all over the world as refugees, and we Russians are idiots,” the investor complained.

Others are betting that crypto can help them avoid sanctions, like Blanks, who invested most of his money in crypto five years ago. Gaming entrepreneur Konash expected bitcoin and ethereum to be the last resort for cross-border payments if his employees were now stuck in Russia.

While major exchanges such as Binance and Coinbase have stopped imposing sweeping sanctions on all Russians, they have followed the restrictions to block targets. The Binance CEO stated that crypto is not a potential fallback route as transactions are recorded on a public ledger and therefore easier for governments to track.

But EU regulators argue that the sanctions imposed on Russia and Belarus apply to all crypto assets, and US lawmakers have called on the Treasury to ensure Russia cannot use crypto to evade sanctions.

“Comfort is the new currency”

Those leaving Russia face obvious hardships away from the families and friends of the victims, but even more fear stems from differences in their perception of recent events.

“Our parents and older relatives tell us to come back and say, ‘Everything is good here. Russia is great,” Blanc said incredulously, but sadly.

These well-trained, freedom-hungry Russian techies are unlikely to look back. The Russians I spoke to, either leaving the country or helping others escape, were surprisingly calm as they explained their country’s troubles, mentally preparing for the inevitable farewell.

“Our SOSV investor has taught us to be cockroaches, to be resilient and adapt to new conditions as entrepreneurs. This philosophy is now helping us get through these uncertain times,” said Valentina Blanc. “The rest is the new currency.”

Immigrants like the Blanks may be the latest wave of Russia’s chronic brain drain that has been going on for decades.

“What strikes me is that if you look at all the brilliant engineering and scientific talent that was born in the Soviet Union and Russia, most of them left the USSR world at every opportunity,” Konash said.

“Who leaves him in the post-Soviet world? For me, this latest wave of brain drain is the death knell for education and cultural-scientific tradition, which is probably one of the few positive things that came out of the Soviet Union.

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