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May, 2018 www.intellinews.com I Page 3
St Petersburg's start-up scene flourishes on high talent and low costs
Situated on the Neva River, at the head of the Gulf of Finland on the Baltic Sea, St Petersburg is not only the second biggest and most populated city in Russia, but also the fourth largest city in Europe. With population of more than 5mn, the former Russian capital stands above – population-wise – continental hubs like Lisbon, Barcelona, Athens and Berlin.
When it comes to tech, and all the related infrastructure, however, St Petersburg is still lagging behind not only most of the European metropolises, but also its more immediate competitor – Moscow.
Traditionally, St Petersburg has been the center of Russian culture. The capital city of Moscow, on the other hand, is the place where Russia’s political and economic power is concentrated. The same applies to finance. And, what is particularly important for startups, venture capital. Many young entrepreneurs from
other Russian cities, even large cities like St Petersburg, have been complaining about the lack of access to financing for their projects.
This, however, seems to be a general problem in Russia. The country’s startup scene has suffered from a lack of finance in recent years, as western sanctions and the following economic decline and ruble devaluation forced many Russian venture capitalists out of business. And those who survived tend to concentrate in the capital, which, in turn, attracts young talent to Moscow at the expense of other Russian cities.
Hidden treasures
St Petersburg does have one big advantage over Moscow for a young start up though: it is cheap. Moscow’s rents, and the general cost of living, is
much higher than in St Petersburg, which is a sig- nificant factor for the young startup community. The city has also plenty of ties with close neigh- bors in Finland, where the VC landscape is much more developed. Furthermore, St Petersburg has a lot to offer in terms of its tech infrastructure and human capital. St Petersburg-based academic in- stitutions such as ITMO University, Peter the Great Polytechnic and St Petersburg State Institute of Technology offer the local economy a great num- ber of highly-skilled graduates each year.
A case in point is ITMO’s (St. Petersburg University of IT, Mechanics and Optics) continuous success at the ACM World Programming Contest, an annual programming competition among top universities from all around the world. So far, ITMO is the only seven-time winner of the world championship.
One outstanding product of the St Petersburg educational system is Pavel Durov, the founder of the social network VKontakte, commonly referred to as “the Russian Facebook”. Durov graduated from the Philology Department of the St Petersburg State University in 2006. Currently, he and his brother are focusing on developing their next company, Telegram, an encrypted messaging service, which has recently gone public. Apart from the largest social network company in the Commonwealth of Independent States (CIS), St Petersburg has seen the creation of some of Russia’s leading tech brands, such
as Mail.ru Group, DataArt and Reksoft.
The abundance of tech talent combined with rela- tively low wages has attracted some of the world’s largest technology firms, such as Google, Corning, HP Labs or Intel, who have established their re- search and development centers in St Petersburg.
Moreover, to further boost the city’s innovative potential, the government plans to build an arm of the Moscow’s Skolkovo Innovation Center,
a high technology business area built an hour outside of Moscow in 2009, in St Petersburg. The center will be operated by the ITMO and the cost will be RUB41bn, according to Vedomosti.