Russian tech industry faces ‘brain drain’ as workers flee

In early March, days after Russia invaded Ukraine and began cracking down on dissent at home, Konstantin Siniushin, a venture capitalist in Riga, Latvia, helped charter two planes out of Russia to help people flee.

Both planes departed from Moscow, carrying tech workers from the Russian capital as well as St Petersburg, Perm, Ekaterinburg and other cities. Together, the planes moved about 300 software developers, entrepreneurs and other technology specialists out of the country, including 30 Russian workers from startups backed by Siniushin.

The planes flew south past the Black Sea to Yerevan, the capital of Armenia, where thousands of other Russian tech workers fled in the weeks after the invasion. Thousands more flew to Georgia, Turkey, the United Arab Emirates and other countries that accept Russian citizens without visas.

By Mar 22, a Russian tech industry trade group estimated that between 50,000 and 70,000 tech workers had left the country and that an additional 70,000 to 100,000 would soon follow. They are part of a much larger exodus of workers from Russia, but their departure could have an even more lasting impact on the country’s economy.

The exodus will fundamentally change the Russian tech industry, according to interviews with more than two dozen people who are part of the tight-knit community of Russian tech workers around the world, including many who left the country in recent weeks. An industry once seen as a rising force in the Russian economy is losing vast swaths of its workers. It is losing many of the bright young minds building companies for the future.

“Most Russian tech workers are part of the global market. Either they work for global companies or they are tech entrepreneurs trying to build new companies for the global market,” Siniushin said through an interpreter from his office in Riga. “So they are leaving the country.”

The recent exodus reverses 10 to 15 years of momentum in the Russian tech industry, said Konstantin Sonin, an economist at the University of Chicago’s Harris School of Public Policy, who emigrated from Russia to the United States. “It is now like the ’90s, when whomever was able to move moved out of the country,” he said.

Tech is a small part of the Russian economy compared with the energy and metals industries, but it has been growing rapidly. The loss of many young, educated, forward-looking people could have economic ramifications for years to come, economists said.

“The long-run impact may be more significant than the short-run impact,” said Barry Ickes, head of the economics department at Pennsylvania State University, who specialises in the Russian economy. “Eventually, Russia has to diversify its economy away from oil and gas, and it has to accelerate productivity growth. Tech was a natural way of doing that.”

Workers left the country because they objected to Russia’s invasion of Ukraine, no longer wanted to live under the Putin regime and feared they could not speak their minds if they remained. Working in tech, a comparatively lucrative industry, they had money to flee the country. And like other tech workers globally, they could continue their work from anywhere with a laptop and an internet connection.

Others left because their companies pulled them out.

After foreign governments imposed sanctions on Russia and many US and European companies stopped selling products there or barred access to banking and internet services, some Russian tech workers did not have the tools needed to do their work. Companies struggled to pay them.

Some worked for companies based in Russia and others for companies with headquarters elsewhere. Many startups in the United States and Europe — including many founded by Russian-born entrepreneurs — relied on software coders, engineers and other tech workers in Russia. To Russian entrepreneurs living abroad, these workers were a known quantity, and they were not as expensive as specialists in Silicon Valley and other parts of the United States.

StudyFree, a San Francisco startup that helps students find university scholarships and grants, employed about 30 workers in Russia, but keeping them there became a liability, so the company has moved them out, said Dasha Kroshkina, the company’s Russian-born founder.

“We will not be able to attract as much funding if we still have employees in Russia,” she said.

In March, a group that offered tips and other help for people moving from Russia to Yerevan on the internet messaging app Telegram swelled to as many as 18,000 members. During workdays, Russian tech workers filled coffee shops and other public spaces, and as they jockeyed for places to live, rent prices rose significantly, according to many who worked to find apartments through the Telegram group.

“We don’t have enough quality apartments for highly educated people with high salaries and high standards,” said Aram Shahbandarian, a former Google employee based in Yerevan who is helping many Russians move to the city. “Yerevan is cracking.”

Vahan Kerobyan, Armenia’s economy minister, said in an interview that as a country with a strategic relationship with Russia, it was not marketing itself as trying to pull companies out of Russia but that if companies decided to move, it would work to accommodate them.

“The Armenian tech community is providing support to their Russian friends, and the government is very much worried about giving Russian companies a nice place that is not too expensive where they can work,” he said. Kerobyan estimated that 43,000 people had moved from Russia to Armenia, half of whom hold Russian passports and half Armenian passports.

Miro, a US software company, chartered flights to Yerevan for its Russian employees and moved them into two hotels in the heart of the city, Kerobyan said. X-tensive, a software development company in Russia, has also moved its employees to the Armenian city because its primary client, ServiceTitan, was founded there, he said.

Miro has said publicly that it was moving its workers out of Russia. X-tensive did not respond to a request for comment.

Many of those workers may eventually move on to other places because visa restrictions require them to leave their current home after a certain number of days. Many are unsure where they might go. Others are planning moves to up-and-coming tech hubs farther away, such as Dubai, United Arab Emirates; and Lisbon, Portugal.

Artem Taganov, founder and CEO of a Russian startup called HintEd, said he knew about 70 founders of Russian companies who, like him, had fled to Armenia. If entrepreneurs stay in Russia, he said, their companies can serve only the local market.

“Before all this started, Russia had such a strong technology base,” Taganov said. “Now we have a brain drain that will continue for the next five to 10 years.”

Russia has a tradition of producing talented software engineers and web developers. Noteworthy companies like Telegram and Yandex have come from the country. As sanctions cut the country off from the global economy, tech companies will have to take cues from China, a much larger country, where businesses have succeeded by catering to domestic customers.

The Russian government wants to keep tech workers in the country, offering lower tax rates, preferable mortgages and even the promise that they will not be conscripted into the army, according to state media. Last week, Mikhail Mishustin, the prime minister of Russia, called on Russian tech workers to create “our own ecosystem.”

“The motherland gave you all you need to do your work,” Mishustin said in his annual address to Parliament. “You will be able to work reliably and calmly for your country, for your company, earn normal money and live here comfortably.”

Many will remain in Russia working for state-affiliated companies. But they will face other obstacles.

They may have to rebuild many of the fundamental tools needed to construct modern software and internet services. Crucial computer hardware may become harder to find as sanctions limit availability.

Stepan Pachikov, considered by many to be one of Russia’s first successful tech entrepreneurs after he built Parascript, a company that made handwriting software for Apple machines, said that the smartest tech workers had been leaving the country for years but that the pace was accelerating.

As Pachikov has watched Russia become economically isolated from the world and more restrictive at home, he has little optimism about the future. “It’s devastating,” he said. “If you lose too much blood, it is death for the body. Russia has lost a lot of blood.”

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