Why Young Entrepreneurs Are Fleeing Russia

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Petr David Josek / AP

A Russian restaurant in Prague. In the past three years, 1.25 million Russians have emigrated, most of them young and members of the middle class, according to data released in February

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But the damage to the industry's confidence had been done, says Terentev. "The Agava case shook everyone awake." Even before that, he says, "it was becoming clear to people in our industry that websites are being very actively shut down. Anyone can do this. A competitor can pay police to take your server and pass on your entire database." Terentev's hosting company, NKVD.pro (whose name is a wink at Stalin's secret police, the NKVD), has tried to innovate around that problem. All of its servers are housed abroad.

And the way things are going, the same may soon be true for much of Russia's middle class. A survey released June 10 by the state-run pollster VTSIOM found that 21% of Russians want to emigrate, up from 5% in 1991, the year the Soviet Union collapsed. The largest portion of them were found to be young, educated and Internet-savvy — exactly the kind of people Medvedev has been counting on to help develop a Russian version of Silicon Valley. Known as Skolkovo, the planned technology hub has been the center of Medvedev's economic policy, but it has struggled to mimic the alchemy of the original Silicon Valley. The problem? Finding enough start-ups to populate the place.

So far, the state has created three huge corporations to help fill that void, like Rosnano, which focuses on nanotechnology. This year, the corporations even set up a joint office in California's Menlo Park, down the road from Stanford University, to attract young talent and technology back to Skolkovo. But that has been a hard sell. "You need an entire ecosystem to support innovation," says Alexandra Johnson, a venture capitalist in Silicon Valley who has been advising the Russian corporations. "You need [business] incubators, entrepreneurship, managers to run the businesses. You need the rule of law. Many elements of this ecosystem are still missing in Russia," she told TIME in San Francisco.

In theory, Skolkovo is supposed to create this ecosystem. It could provide, among other things, a kind of super-krysha to guard young businesses from the protection rackets of corrupt officials. "It's no secret," says Alexei Sitnikov, the head of international development at the Skolkovo Foundation. "Police [are] often more of a threat than protection in Russia." So the new innovation hub is working with the Ministry of Interior to hire and train a "separate" police force for the center, and similar plans are in place for its sanitary inspectors and other rent-seeking bureaucrats. "They will not be able to come in and say, 'O.K., shut down your business,'" Sitnikov says.

But even when Skolkovo is completed (so far it is an empty field near the Skolkovo School of Management), it will still be a very exclusive club, big enough to house only the couple of hundred ventures now being handpicked by a team of experts. So far about 120 have been chosen, while many others, like Terentev's, are fleeing to the West. And they seldom look back.

Last year, the Russian émigré Andre Geim, who won the Nobel Prize in physics in 2010, was asked by a Russian reporter what it would take for him to return to work in the motherland. He answered: Reincarnation. Terentev says he agrees. "Maybe by the time I'm 30 the system will have changed. The risks will be different. But who knows? The Soviet Union lasted 70 years. Our country does not obey the laws of logic." Nor of Silicon Valley.

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