Oskar Hartmann Ventures Into The Fast Lane

Refined, adjusted, adapted, copied…all words that have been used to describe what entrepreneur Oskar Hartmann borrowed did with a variety of western online retailing websites when he created online shopping club KupiVIP,which looks and feels very much like vente-privee.com and similar sites such as Privalia.

While one could make a convincing argument for each definition, what is undisputable is that Hartmann, a 30-year-old Germanwho has lived in Moscow for six years, has created a wildly successful start-up that has attracted $85 million of venture capitalfrom Accel Partners, Balderton, Bessemer Venture Partners, Mangrove Capital Partners and others.

That was just for starters. Hartmann is copying other successful Western Internet models and adapting them to the local market at an unprecedented clip. Fast Lane Ventures, an incubator he established in partnership with entrepreneurs Marina Treshchova (who is now CEO) and Pascal Clement, has churned out 20 new Russian Internet start-ups in just two years. The most recent, Kommerstate.ru, an online service designed to help commercial real estate market players to lease, purchase and sell properties, was launched on May 10th. Fast Lane Ventures has already exited two of its start-ups: sapato.ru, a Russian online shoe and accessory retailer that is similar to the U.S.’s Zappos, was snapped up by Russian online retailer Ozon in February; and shares in teleshopping channel Shopping Live were sold in April to Home Shopping Europe.

These high-profile moves have earned Hartmann the respect of tier-one venture capital firms. “Oskar is a great mix between a really gritty entrepreneur who believes in his own vision and somebody who is also always trying to see how he can be better by looking at what is happening around the world,” says Sonali De Rycker, a London-based partner at venture firm Accel Partners, which invested in KupiVIP (Kupi means “buy” in Russian).

Taciturn by nature, Hartmann was born in Kazakhstan to German parents. He grew up in Germany, but moved at age 24 to Russia, where he now lives.Hisvaried background affords him an insider’s view on the very different cultures and economies in Germany and Russia, the first established, functional and somewhat static; the other young, freewheeling and constantly changing.

“The key difference is discipline, which is really not inherent here in Russia,” Hartmann says “This has a lot of implications in management.”

While KupiVIP does not release its financial figures, Hartmann says the company is targeting sales of $300 million this year. Hartmann is betting that KupiVIP will be one of at least ten Russian Internet companies racking up $1 billion in sales within five years. If that prediction comes true, it will be due in part to an increasingly steady flow of western venture capital that has given a multitude of start-ups the opportunity to leave their mark.

Not one to shy away from opportunity, Hartmann is doing his best to make sure he is on the receiving end of some of the capital flowing east. Fast Lane Ventures hasattracted near $78 million from a vast base of Russian and international investors who believe in the potential of adapting Western models to the Russian market.

“Following things that have been successful somewhere else is inevitable; it’s not copying, it’s adapting proven models,” said Giuseppe Zocco, a co-founder and partner at venture capital firm Index Ventures, which has invested in Privalia as well as Russian retailer Ozon. “Most of the successful companies online in Russia have adapted western models, but they know the peculiarities of the local market and have adapted the model to chase the opportunities available,” he says.

Not everyone is convinced. Dmitry Chikhachev, managing partner at Runa Capital, a Moscow-based venture firm, categorically rejected the possibility of ever investing in KupiVIP, Ozon or other sites that copy western models. Venture money should go to companies that innovate and want to go global, he says.

But Hartmann, who relishes his role as a national champion, has excluded trying to scale up KupiVIP to expand beyond Russia or the countries that were once part of the Soviet Union. There is plenty of money to be made by concentrating on Russia’s domestic market, now the largest Internet market in Europe, he says. A 2012 e-commerce report by EWDN.com is projecting that the Russian e-commerce market will be worth between $40 and $60 billion by 2020. By spreading his bets between 21 different e-commerce ventures in Russia Hartmann seems well-placed to get a nice cut, earning him his share of admirers.

Further, KupiVIP and Ozon are protected by the high barrier to entry in the Russian market presented by difficult logistics. For this reason Hartmann, KupiVIP’s chief executive, brushes off any suggestion the company’s seemingly rosy future could be threatened by a multitude of possible competitors, including large Russian bricks and mortar retailers that decide to invest aggressively in online sales.

“We are very impressed with Fast Lane Ventures; it shows Hartmann’s not a one-trick pony,” said Guillaume Bonneton, a partner at GP Bullhound, a technology investment banking firm active in Russia. “He is one of the guys who gets the web there. He is definitely a trend setter.”

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