Tapping Russia's new nouveau riche
By Michael V. Copeland, Business 2.0 Magazine

(Business 2.0 Magazine) -- Moscow's status-conscious upper crust deserves a MySpace of its own -- and you could be the one to build it.

Investment level: $500K-$1 million

Risk level: High

Russia's economy may be slowing, but not for its upper class. With oil money having flooded the nation during the 1990s, Moscow now boasts the highest concentration of billionaires of any capital city in the world. The nation's population of millionaires grew 17 percent last year and now tops 103,000, according to a recent study by Merrill Lynch.

These increasingly flush Russians, who enjoy subsidized housing and low taxes, have disposable incomes that dwarf those of Westerners. That's made the nouveau riche a fat target for Web investors - but in an economy rife with corruption, how best to reach them?

"We're spending a lot of time trying to figure that out," says Danny Rimer, a venture capitalist at Index Ventures in London and an early investor in Skype and MySQL, among other successes.

With low credit card penetration and an unreliable postal service, Russia isn't friendly to e-commerce. And programmers have already cloned popular Web-based services like Flickr and LinkedIn.

Few Web services, however, cater to the Russian elite, which is why several VCs and other tech players in Russia believe the time is right to create a social network through which members could buy and sell everything from Ferraris to art and network with their fellow ultrarich.

"Russians are incredibly status-oriented," says Max Skibinsky, a Moscow native and CEO of Hive7, a Web-based startup in Moscow. "A social network would be an easy way to let them show it off."

Finding talent is easy: Good developers in Moscow cost less than $40,000 a year. The key is to hire a handful of wealthy socialites to spread the word. "Russia is ripe," Rimer says. "There's more opportunity here than in most places, but it's like the Wild West. Be ready for that."  Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.