Alexander Galitsky: From Russia With Caution

Alexander “Sasha” Galitsky, a scheduled speaker at LeWeb, is one of the most influential figures in the Russian tech industry. A former researcher for the Soviet Union’s “Star Wars” response program, he has founded and successfully run five tech companies. Galitsky now runs Almaz Capital, a Silicon Valley-based venture capital firm. Its portfolio contains two of the most successful Russian tech companies to date: Yandex, which has a market cap of over $8 billion, and Parallels, a global software automation and virtualization company.

Galitsky: ‘Moscow is now too spoiled’

Galitsky has over 30 patents for numerous inventions in the areas of parallel processing, WiFi and VPN security technologies and was named a global Technology Pioneer by the World Economic Forum in 2000. Recently he was named as the National Entrepreneur of the Year 2013 by EY.

Have you taken companies from the U.S. into Russia? Or is most of your work taking companies from Russia and the CIS into the U.S.?
The tech world has become flat and a great idea can be created anywhere, but this idea can be realized only with a reasonably big market. Having offices in Silicon Valley and Moscow, we are focusing on emerging tech markets like Russia/CIS and Eastern Europe with an idea to create globally-competitive technology start-ups originating in this part of the world.

Right now the most difficult thing for entrepreneurs is talent. Everyone is hunting talent. A company is successful if a company has great employees. We make an investment in companies that were born in the U.S. but we power them by engineers from Russia, Ukraine, Belarus, many of these places. These are places where great engineering resources can be found.

Do you see Eastern Europe and the CIS then just as a place to find talent?
No, there are great opportunities in Russia for the right kind of company. From the point of view of Russia and the CIS, the Internet is bringing a huge opportunity to countries that are well educated but still struggling. It is opening up opportunities for Eastern Europe in comparison to the lazy Western Europe which is become too socialist and too relaxed.

If you are speaking about an Internet site for business, e-commerce, anything related to using the Internet in your usual day-to-day life, of course Russia is a huge opportunity. Russia is a very big country plus you add in the other Russian-speaking countries — that’s a very large population; it is about 270 million people.

But if I am trying to build a systems-driven company, if I am trying to build a giant software company, then I know today I have no other choices but to go to the U.S. The main challenge for all Eastern European countries, including Russia, is to understand how to build global companies, to get industry knowledge and to understand the industry problems. The problem is that Russia doesn’t have companies like Google or like Cisco. We have Yandex but it is just one company. Yandex is doing a lot of good stuff but the point is we need to have more companies to understand the market problems.

You have been investing in Russia and the U.S. for some time. How have things changed?
When I meet people who are older than 30 years old, they grew up in families that were still influenced by the Soviet times. But when you talk to younger people, say 18 or 20, they were born in a completely different environment and they think completely differently. These people are more international. Most of them would like not to be in government jobs and they don’t want to be in official type of companies like [Russian gas giant] Gazprom. They want to build their success through some technological or business opportunity.

Moscow is now too spoiled. It is a megalopolis, it is spoiled by too many opportunities to make quick and easy money. We found that most of the interesting start-ups come from less-developed places in Russia, since people need to work harder to be successful. You get better teams from the regions than from Moscow. Many teams who would like to get immediately into the global market skip Moscow. In Moscow when you find interesting start-ups, it is often people who moved from some region to Moscow — maybe Tomsk or Novosibirsk or perhaps Ukraine or Belarus or Armenia.

The political stuff that is happening right now is making people think harder about what their next step will be.

Have things like the unrest in Ukraine and the increasingly antagonistic relationship between Russia and the West had an impact on your investments?
Of course there has been an impact. For me personally is very complicated and it has had a very big impact. I am a Russian citizen and hold a Russian passport, and I am doing a lot for development of the Russian tech and investment ecosystem, but I was born in Ukraine, it’s my mother tongue, my father is there. But it is not as bleak as people sometimes think. Foreign people who do not understand the culture and who just read the news, they feel pretty unsafe about investing. But we are taking risks and of course it does give us some benefits. We see that people are more motivated to do something and they are more open for open partnerships. We have looked at about 10 deals and have already invested in two and are looking at two more.




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