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Upstarts: The Russian Connection

Entrepreneurs who've emigrated from the former Soviet Union are shrewdly benefiting from the crumbling economy of that once-mighty empire. And they aren't the first to do so.
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Russian old-boy ties aid software start-up

An immigrant from Moscow enlists programmers in his native land to work at one-eighth the U.S. wage rate

Ratmir Timashev and Andrei Baronov roomed together at the prestigious Moscow Institute of Physics and Technology more than a decade ago. But in 1992 Timashev came to the United States to study chemical physics at Ohio State University, in Columbus. He earned a master's degree and then stayed on, embarking on a career as an entrepreneur. Baronov remained in Moscow.

By 1996 Timashev had found his niche: writing software to enhance the security and performance of Windows NT, the operating system commonly used by large corporations. Baronov, by then, was working for Timashev as a programmer. Soon orders were pouring in, and Timashev needed more programmers in a hurry. He could have recruited them in the United States, but instead he decided to look in his economically shattered homeland, where unemployment even among well-educated workers has remained high.

In effect, he hunted for more Baronovs.

And he found them: 40 programmers in St. Petersburg, and 10 in Moscow, each of whom Timashev pays an average of $650 a month, about one-eighth the U.S. rate. "The development costs are much, much lower in Russia than in the United States, and the quality of the workers is quite good," Timashev says. "We can afford to do much more research and development for less money."

Timashev exemplifies a trend among entrepreneurial immigrants from the former Soviet Union who not only are starting businesses in America but, in doing so, are deriving benefits from the crumbling economy of their once-mighty former country. These immigrants-turned-entrepreneurs tend to be ambitious, highly skilled, and "well aware of the wealth of human and natural resources" in their native land, explains Leon Polott, himself a Russian immigrant and a lawyer at Hahn Loeser & Parks, in Cleveland. Polott's clientele includes Timashev, as well as several other immigrants from the former Soviet Union.

Timashev's company, Aelita Software, is based in the Columbus suburb of Powell, Ohio. Started in December 1998, it is the successor to Midwestern Commerce, which Timashev cofounded in 1993 and later folded into Aelita. Even before coming to the United States, Timashev, now 32, displayed an entrepreneurial streak. During summers in the late 1980s, he managed a business renovating Moscow apartments, and he later worked in Russia as a computer consultant.

Midwestern Commerce initially exported computer hardware to Russia. But it wasn't until Timashev and the telecommuting Baronov teamed up as hackers for hire that the business really took off. It eventually moved into making and selling network-management software for computers using Windows NT for customers like Motorola and Chevron.

That corner of the software market grew 15%, to $1.5 billion, in 1998. Timashev's company accounted for a $1.3-million share, and he's projecting sales this year to at least triple. "They've created a nice package of tools," says Philip Mendoza, an analyst with International Data Corp., in Framingham, Mass. "There's a lot of people talking about them."

But Aelita's Russian advantage--its low programming costs--may not carry the day. Although the company has set prices 30% below what competitors charge, Timashev says he'll raise them once Aelita's market share increases. And the company's Russian advantage isn't without a downside, says Joe Bertnick, a senior product manager at BindView Development Corp., a $38-million software company based in Houston. There's a "synergy between the programming, customer relations, and marketing groups that we wouldn't have if our programmers were in Russia," Bertnick says.

In companies like BindView, Aelita faces well-capitalized competition. Because Aelita lacks a national sales force, it must rely on advertising over the Web and in trade publications to market its products. Timashev says that he'll seek $10 million in venture-capital funds this year, partly to hire 20 salespeople.

Not that the company's U.S. workforce--it has 15 administrative and customer-service employees at its Ohio headquarters--is likely to outnumber its staff in Russia anytime soon. Timashev says the Russian side of Aelita's operations is running smoothly in St. Petersburg under Baronov (who moved there last year) and in Moscow under another old school friend, Vladimir Turin. At least one of the company's programmers seems to agree. Reached by telephone in St. Petersburg, Victor Ozhereliev, 25, says he has no complaints: "By Russian standards, my salary is very good."


A classic borrower

Turkey Red is a wheat strain that helped turn Kansas into the nation's breadbasket. The story of how Turkey Red reached Kansas supports the proposition that few things under the sun are truly new; most are borrowed.

Turkey Red's borrower was Bernhard Warkentine, who came to the United States more than a century ago from what is now the Ukraine. He is unknown to most Americans, even though there's a museum in his honor in Newton, Kans. He's equally unknown among his 1990s counterparts: immigrants from the former Soviet Union who are starting businesses in the United States relying on some connection to their homeland. Yet they're cut from the same mold.

He was one of thousands of Russian Mennonites of Dutch extraction who immigrated to the United States in the 1870s. Warkentine's group settled north of Wichita. Most of the group were farmers.

He longed for the hearty bread made from Turkey Red wheat, a staple back home. He imported a shipload of the reddish wheat and planted it in Kansas, where it flourished and caught on. "He was a major entrepreneur," says Norman Saul, professor of Russian history at the University of Kansas. "He helped bring the best wheat available in the world to Kansas."


Immigrants viewed as 'world-class'

As deputy director of the Commerce Department's Business Information Service for the Newly Independent States, Trevor Gunn has advised scores of immigrant entrepreneurs from the former Soviet Union. He spoke recently with staff writer Marc Ballon.

Q: Are many immigrants from the former Soviet Union starting businesses in the United States?

A: Definitely. We've seen a steady increase.

Q: Can you describe these people?

A: It's mind-boggling how many Ph.D.'s per capita there are. To say that their education level is world-class probably understates things. It gives them a leg up. Many of these people are exceptionally strong in the hard sciences like biology, physics, and chemistry. Many of them are starting software companies and other technology-based businesses. Consulting companies are also very popular.

Q: Is it common for the immigrant entrepreneurs to start businesses tied to the former Soviet Union?

A: Absolutely. They are importing everything from matroshka dolls, those dolls-within-a-doll, to raw materials. Also, I know several entrepreneurs involved with software that are relying on a lot of the programming to be done back in the former Soviet Union, where costs are very, very low. If the work can be done more efficiently, and it costs a quarter or a tenth of what it does in the United States, it makes sense to go to Russia and elsewhere in the former Soviet Union.

Q: Can we look forward to a boom in start-ups by immigrants from the former Soviet Union?

A: I think we'll see a continued stream of well-qualified people into the United States. That all depends on future immigration.


IMMIGRANTS' START-UPS LINKED TO THE FORMER USSR: A SAMPLER

IMMIGRANT/ORIGIN COMPANY/LOCATION FOUNDED BUSINESS
Boris Lelchitski, Russia Sports International Group, Irmo, S.C. 1996 agency that scouts for women basketball players, especially in the former USSR
Boris Mankovsky, Ukraine J.E. International Co., Morton Grove, Ill. 1997 importer of Moldovan wine
Norman Peselev, Belarus International Education Washington, D.C. 1997 provider of tours and seminars Center, for visiting Russian entrepreneurs and executives
Irina Kouznetsova, Russia IBK Corp., East Brunswick, N.J. 1995 exporter of building materials to Russia and Ukraine
Last updated: Jul 1, 1999




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