Buildings in Moscow

From Russia with love

Andrew Hayes
Managing Partner

After the easing of pandemic travel and quarantine restrictions, it was a joy to finally be able to visit clients and colleagues in Moscow earlier this month – after an eighteen month absence.  Whilst of course we can all zoom, you don’t get the all-important ‘smell’ of what is happening on the ground. 

Moscow felt different since early 2020.  Any visitor will be accustomed to seeing yet more new office blocks rising like mushrooms, particularly around Moscow City.  But it was striking to me how fresh and dynamic the city felt.  Everyone comments on the newly paved walkways and abundance of trees now lining wide avenues.  But it was also noticeable how many of the historic building restoration projects have come to fruition, with streets like Petrovsky Boulevard now back to their former glory.  It is also feels like  Moscow has stolen a digital march on London and New York, with enabling technology much more widely deployed: from facial recognition payment systems on the metro to the use of QR codes for public entry.  Restaurants are spawning and packed.  Moscow has a real buzz.

But how were the clients and hopefully future clients we met?  The mood was positive with a strong rebound in growth this year, and the economy now restored to pre-pandemic levels.  Globally, high demand for energy and resources (including recovering oil prices and rising crude production) should deliver GDP solid growth of circa  2.5% in 2022.  But with domestic demand moderating next year, a more cautious monetary policy from The Bank of Russia and inflation at over 8%, the mood is certainly not celebratory.  This is compounded by Russia’s vaccination rates lagging behind the curve and failure to convince citizens of their efficacy – with only around 35% fully inoculated, compared to the G7’s progress to 66% vaccine coverage and UK’s 70% figure.  Whatever the reasons for this distrust, it is well entrenched and will be an additional risk factor well into 2022 and possibly even beyond.

But the most striking feature of my visit was the palpable excitement around the rapidly expanding technology sector with home grown market leaders such as Cian, Yandex, Ozon, Wildberries and AliExpress seeing off global leaders and taking market share from their domestic bricks and mortar players.  As one well know private equity player said to me, Russia is a technology ‘Galapagos’, evolving relatively independently of other territories, for deep seated cultural, infrastructure, geographic and commercial reasons.  As a result, its leading players are not international but home grown, with their own unique characteristics – often more agile and innovative and well-equipped to leapfrog global players.  As a result, the momentum of listings internationally out of the Russian technology sector will gather momentum, with many on the blocks.  We were delighted to be advising on last Friday’s successful listing of Cian on NYSE and MOEX.

At the same time, Russia’s leading banks are snapping up online ventures in a quest to build complete ecosystems that cater to the gamut of customers’ lifestyle needs. All of this has combined to create a very fertile climate for venture capital, which is on the hunt for projects and is spoilt for choice in the largest consumer market in Europe, populated by a talented, highly educated and entrepreneurial population.  And an economy big enough for them to scale to international listing potential.


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