Startups in Russia have been facing a litmus test since the start of the war in Ukraine, with foreign direct investments drying up, particularly from the West. The situation has been further dragged down by the mass mobilisation drive recently implemented, after which several entrepreneurs claimed they or their employees had received mobilisation orders.
To escape these challenges, startups are increasingly moving their headquarters and parts of their teams to other countries including the UAE, which has become one of the preferred destinations for Russian founders.
One investor, who did not wish to be named, told Wamda that there will likely be an influx of Russian startups either launching or expanding their businesses in the UAE.
"I saw a lot of people moving there in the past few months," they said, adding that the overall expansion efforts undertaken by local startups can be touted as a means to secure funding, which will be far easier to do outside of Russia.
One such startup is Flowwow, a Russia-rooted and now Budapest-headquartered online marketplace, which announced plans to scale its business across the Middle East and North Africa region (Mena) with its Dubai office. It relocated its headquarters to Hungary in May this year.
"[The] UAE is emerging as the next big marketplace hotspot. More customers are looking for quick, safe, intuitive and personalised experiences on niche marketplaces rather than large merchandise platforms like Amazon or Alibaba,” said Slava Bogdan, CEO and co-founder of Flowwow. “It opens the opportunities for peer-to-peer marketplaces that popped up over the years."
The startup has also set its sights on other markets in Mena including Saudi Arabia, Qatar and Egypt, as part of a $6 million international expansion strategy. Besides Mena, Flowwow is also focused on growing its business across other regions including Europe and South America.
"One of the reasons why we're going after other markets is that we are too big for just one country. And because of the war that started six months ago, we started targeting other countries to serve more customers. It's not possible to do it from Russia nowadays," Vera Modenova, chief operating officer of Flowwow, told Wamda.
She added: "Prior to the war, Ukraine was our second largest market, followed by other Russian-speaking countries such as Georgia, Armenia and Belarus. Russia remains our biggest market, but we still receive orders everyday in our Russian-speaking markets. We're trying to change the situation and be more serious on Western markets and the Mena region. So that's our plan."
Flowwow was founded in 2014 by Bodgan, Andrey Makeev and Artem Gambitski, and started off as a flower delivery marketplace. In 2019, it started to focus on other gifting products such as cakes, handmade items, jewellery and vintage clothing, bringing on independent suppliers for each category. It is currently present across more than 950 cities worldwide, and says that it competes with the likes of Etsy and WayFair.
The startup's software is configured based on each market's needs, making it easy for local stores to offer their services on its platform. Operationally speaking, navigating the cultural differences while localising its product has so far been one of its key challenges.
"Ensuring convenience of the service on our website and our app is the most important thing for us, because it makes our conversion rate bigger and the cost of the client acquisition smaller. When we're going to your market, we need to localise our product. And it's not only about translation,” said Modenova. “For example in Germany, people like to pay with PayPal, and it's not usual for Russia, so we need to integrate a new kind of payment method just to make the service more reliable for people. And there are lots of different things for every region, including Mena, so it's a big product challenge for us to make our service convenient for the Arab world.”