Tapping Russia's new nouveau riche
(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."To send a letter to the editor about this story, click here.