May 25, 2014

Tech Startups and $150 billion in capital are fleeing Russia this year

A wave of small and large businesses pulling out or reducing their presence in Russia. Western sanctions over Russia's invasion of Crimea and Russian efforts to insulate the country against economic warfare make doing business in Russia too risky for a globally oriented company.

Andre Eggert, a managing partner at Berlin tech law firm LACORE Rechtsanwälte, says Gouchtchina of ZeeRabbit is one of 10 Russian tech entrepreneurs who turned to the firm for moving help in the past three months. While the number is small, "The fact that there were none before — we thought it was important," Eggert says.

"Most of them are hoping for additional finance rounds with U.S. and Western European investors, which will not be happening anymore if sanctions or tensions between Russia and the West become more severe," he says.

And these tech companies' employees, mostly young educated and single, Eggert says, want a freer environment to live in, like Berlin, Silicon Valley or Tel Aviv.

The small tech companies are leaving the country together with an projected $150 billion in cash expected to flee Russia this year, while large U.S. manufacturers are cutting back or quitting the Russian market


The Russian central bank last month said $63.7 billion left Russia in the first quarter, equal to all capital lost in 2013. The World Bank estimates this year's total could reach $150 billion.



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