Updates from IBD Germany & Russia – Munich & Moscow

Brian Canty, Nipun Misra, Jesse Tao and Ajoy Vase are full-time MBA students working on an International Business Development project in Munich, Germany and Moscow, Russia.

Week 1 – Germany

Our client is Moscow, Russia based but our first stop and first week was in Munich, Germany to visit a strategic business partner.  Germans have a reputation for punctuality, efficiency, and technical mastery; our business experience in Germany reflected exactly that.

Our meetings were held on the 3rd floor of an office complex about an hour to the northeast of Munich.  We were ushered past a clean and minimalist working space and into a conference room that doubled as a showroom for the company’s products.  A plate of buttered pretzels was waiting for us.

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It was much warmer in the conference room than outside.  We initially wrote it off as inadequate air conditioning for such a sunny day but later learned that the heater was on because the control knob was broken.  Our first meeting was with the CEO, a serial entrepreneur.  About 10 minutes into the meeting, he excused himself for a moment, retrieved a tool kit from his office, and fixed the control knob right in front of us while continuing the conversation.  He then made a comment about how he didn’t want to wait for maintenance to fix it.  I guess the idea that no task is too small when you’re the CEO of a small company is cross cultural.

In addition to speaking with the CEO, we also spoke with the sales and technical teams.  Before officially meeting with the sales team, we had an unofficial business lunch – a reoccurring theme during our trip – at one of the oldest wheat beer breweries in the world.  I’m personally a huge fan of wheat beer so I thought this would be a tourist hot spot.  Surprisingly it was fairly empty during Tuesday lunch.  More surprisingly there was no English menu and the staff didn’t know English.  Fortunately our business contacts translated the menu for us or else I would have just pointed at the most interesting sounding schnitzel on the menu.

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We found our meetings with the technical staff to be very useful.  The sales team validated our research around potential customers, products, and markets.  The technical team provided execution level details about the benefit and limitations of certain technologies and processes.  The diversification of knowledge helped provide more substance to the market research we did.

Back in Munich, our team visited at least one beer garden every single night.  The beer are served in large 1 liter steins and are very easy to drink.  A 2 euro deposit is also charged to encourage customers to return the glassware when done.  In all honesty, after a few beers I was doing a cost benefit analysis in my head and justifying that 2 euros for a stein is quite a steal.  But I remained civil.

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Week 2 – Arrive in Moscow
Upon arrival in Moscow, we were surprised to learn that we had a meeting with one of the largest venture capital funds in Russia the next day.  We were told that in Russia it’s not uncommon for meetings to be booked very close to the actual meeting time, sometimes even morning of.  With the work we did in Berkeley and on the ground in Germany we were prepared.

The next morning we went to the main business center of Moscow, which is an impressive area of newly constructed high rises.  Our guide told us that many large companies have offices in this area to make it easy to have meetings since one would only need to walk to a different building or different floor to meet with another company.

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Our meeting with the investors went well.  We spoke with 2 individuals and there was an obvious element of seniority: the more junior person asked many detailed questions whereas the more senior person only asked a few high level questions. Overall they were interested and impressed by our work and the fact that we were American MBA students.

After the meeting we had lunch with our client contact. He told us that business lunches were very popular in Russia which is why many restaurants offer a special business lunch menu. We compared and contrasted with how in the US, lunches weren’t long and it was not uncommon for people to just get food to eat at their desks and continue working.  We were told that only people who needed to be at their desks, such as traders, would actually do that in Russia.

Over the rest of the week we met with many other investors.  The seniority we noticed in the first meeting continued to be prominent. For example, whenever we met with a more senior person, he would be more interested in high level trends and pushing his point of view. Whenever we spoke with more junior people, they dug into the details more and were more open and receptive towards our recommendations. When we asked our client contact why that is, we were told that Russia is still fairly hierarchical and once you work for a few years and move up, the expectation is to just start delegating work rather than doing work.  This model is not that different from the US model but appeared much more pronounced.

During our initial cultural research, we learned that Russians tend to be more to the point and engage in less small talk.  In almost every one of our meetings, we had some small talk with our counterparts but it was always at the end and felt a bit forced. It wasn’t clear to us if the cultural norm is to talk business first and then have a casual chat or if the investors we were speaking to were just humoring us.

The feel of Moscow was very business focused but we tried to have fun too. During our exploration adventures we met physics and business students from the local Moscow State University.  There was a general fascination that we came from America and we compared perceptions of culture over drinks.  Business was apparently not very popular as a topic of study and most students obtain a technical degree such as math or physics.  Students also often go straight into a higher education program.

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We also met other entrepreneurs since startups and creating your own business is currently popular in Moscow.  What’s interesting though is that many of these Russian startups merely copy successful ideas and apply it to the Russian market.  Ideas like coupons on mobile devices or professional networking using social media exist in the US but because of both the difficulty in breaking into the Russian market as well as the low barrier to entry of copying a successful idea if you’re Russian, many of these startups are sprouting up.  We were even told that the search and maps market leader, Yandex, is just a copy of Google and Google maps.  It was a very interesting type of capitalism and entrepreneurship through copying ideas.

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Week 3 – Startup village

In our final week, we attended the Startup Village event at Skolkovo, which is about an hour to the west of Moscow. Skolkovo Innovation Center is a planned high tech business area that the government wants to turn into the Silicon Valley of Russia.  Despite the billions of rubles spent in developing the area, only a handful of completed buildings.  The remaining area were still working on the groundwork.  We were told that this is just the result of inefficiency and corruption and Russians more or less just accept it even if they don’t like it.

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The event took place at a modern looking 6 story building.  Inside there were demos of ideas and products, classes for students, and a stage for speakers.  A ring of food vendors encircled the building though the most popular stand was probably the one giving away free Angry Birds branded soda.  A temporary outdoor stage was erected as the main stage.  One medium sized outdoor covered area housed many booths for companies to demonstrate their product; our client had a booth there. There were four smaller covered pavilion areas that served as stages and pitch areas for companies focusing on digital technology, health, energy, and high tech manufacturing.  The entire venue was scattered with bean bag chairs, which was fun and added to the startup vibe.

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Speakers came from around the world to talk about startup trends, give advice, or provide interesting insights.  The topic of international expansion was touched upon by many speakers.  The key takeaway many emphasized was to plan and think about what you want to do early in the startup lifecycle. That’s probably easier said than done.

Another major component of Startup Village was the startup pitches.  There were probably more than 50 companies pitching across the various stages.  One startup pitched an idea that was very similar to what we recommended our client to do but, lacking the thorough market research we did, was unable to answer some of the questions from the judges.  Our client pitched well and advanced to the second round of pitching the next day.  At the end of the competition, our client was one of the top finishers and received a notable cash prize.

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There was a surprise visit by Russian Prime Minister Dmitry Medvedev, who listened to a few pitches before making a speech.  As an early backer of Skolkovo, it was rumored he would have appeared.  Traffic and security went through the roof in the hour before he publically appeared.

We also met with 2 new admits during our final week in Moscow.  We had brunch with them and a recently graduated classmate.  During our meal we eased their concerns about moving to Berkeley and finding housing – a daunting task even for someone not international.  Afterwards, they were generous enough to guide us around their city and to Gorky Park.  It was great to connect and meet with some of the incoming class.  We had a lot of fun chatting with them and I’m excited to see them on campus next year.

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