When he was 17 years old, Alexei Terentev, then a bookish high school student in Moscow, created what the Russian government has been desperately trying to engineer a start-up with some of that Silicon Valleystyle magic. It was innovative, cleverly marketed and could be run out of his parents' apartment. By June of last year, when Terentev got his diploma from one of Moscow's elite universities, his company was on its way to making him a millionaire. But it was also getting big enough, he says, "to get the wrong kind of attention from officials." So Terentev, now 22, took no chances. One day after graduation, he packed up his laptop and emigrated to the Czech Republic, taking his company with him. He doubts he will ever return.
The reasons for his move, as well as his haste, are the typical worries of the young entrepreneurs Russia is currently hemorrhaging: corruption and bureaucracy, the forces that are driving the biggest exodus since the fall of the Soviet Union. In the past three years, 1.25 million Russians have emigrated, most of them young businesspeople and members of the middle class, according to data released in February by the head of the state's Audit Chamber. That is about a quarter million more than left the country during the first few years after the Soviet collapse, when Russia was a political and economic basket case. Now the country is stable and the cities are thriving. But small-business owners seem to feel less safe than ever.
For those just starting out, the most common fear is not competition or bankruptcy but a visit from corrupt officials, who go around soliciting bribes or offering paid protection, which is known as a krysha, or roof. Last month, the Economy Ministry said that in 2010 alone, Russians paid $581 million in bribes to authorities for "security provisions," an incredible 13 times more than in 2005. As dozens of cases have shown in the past, a business owner who declines to have a krysha can expect to get visits from fire inspectors, tax auditors or the police until the company is overwhelmed with fines and red tape. If the owner still does not cooperate, a minor criminal case can be opened, often under the vague law forbidding "illegal entrepreneurship." A brief stint behind bars then usually does the trick.
Against the most stubborn businesspeople, often the type whose firm is coveted by a well-connected competitor, a corporate raid is a favorite weapon. These have become so common in Russia that a cute nickname for them has entered the vernacular: maski-shou, or "mask show," a twist on the name of an old sitcom. It is when gunmen, usually masked private security or special forces, enter a business and literally take it over, seizing documents and locking the management out. This tactic has been used in politically tainted cases, such as the government takeover of NTV television in 2000, and the 2003 raids against Mikhail Khodorkovsky, the oil tycoon now serving 14 years for fraud and other charges. Smaller mask shows rarely meet the threshold anymore for news in the national media.
But by word of mouth and articles in the online press, such stories spread fast in business circles. For Terentev, the wake-up call came last February, when one of the data centers of Agava, a leading Russian Internet-hosting company, was raided by police on suspicion of hosting an unlicensed video game. Six weeks later, the company's server farm was raided by another police unit, this time on suspicion that one of its servers was hosting child pornography. Instead of taking the server in question, the police shut down all of them, forcing many of Agava's clients off-line. The news caused such an outcry that President Dmitri Medvedev, who styles himself as a techie crusader for the rule of law, personally intervened the next day. The servers were quickly switched on.