To celebrate the 6th BRICS Summit, we’re continuing our showcase of top startups from each country with Russia’s B2B-Center, an online procurement services marketplace. But first, a few words on Russia as a market and as a startup scene.
Russia’s digital landscape & startup scene: local players rule
Being the biggest country and population in Europe, Russia logically has the most internet users of the continent as well, with 75m people connected, and the world record for time spent on social media with more than 12h monthly (the global average is 5h). Interestingly, it accounts for only 53% of the overall population, which means there’s still room for growth.
Startup-wise, the Russian landscape keeps strong local specificities, partly due to the cyrillic alphabet. The top social network remains VKontakte, with 54m daily active users and 240m users overall (vs 12.8m daily active users for Facebook as of October 2013), and the main search engine is still Yandex (with 62% market share).
The local tech ecosystem has been gathering some traction with both “more than 1.000 startups, 236 investors and 101 incubators currently” (stats from Rusbase). In sight, a market size of 150m native speakers (Russia, Bielorussia, Kazakhstan…) and 260m Russian speakers if we extend to former CIS countries of Eastern Europe and Caucasus.
Back from the dead: the success story of B2B-Center, a B2B marketplace for procurement services and public tenders
B2B-Center has been founded in 2002, and the model they represent is not really innovative as such. Back in the 2000s, B2B deals were hot on the radar of VCs and consultancies. For instance Gartner Group was projecting B2B e-commerce transactions to reach $7.3tr by 2004 (Giga OM).
The idea then was that digital technologies could get rid of all the supplier-customer transactions, from retailing to wholesailing or procurement. Alas, the dot-com burst wiped all existing players, from Ariba (SAP group) to industry-based B2B marketplaces such as supplyon.com (automotive) or elemica.com (chemicals).
Just after the bubble, B2B-Center launched its own platform, betting on its knowledge of the Russian context. After a decade of rotting post-sovietism, business in Russia was still pretty corrupted. With an open marketplace and an auction system, B2B-Center created a place where prices were in the open and competition quite lively. Companies turning to the marketplace quickly saved a lot of money. In an interview given to East West Digital News in 2013, CEO Alexey Degtyarev shows that “in 2010, Bashkirenergo saved more than $26 million, Tyumenenergo $81 million and Bashneft over $60 million.”
In 2012, the Federation of Russia passed a law to make electronic auctions compulsory for a wide range of public tenders. From printers to medical services or automotive equipments, all public institutions went to B2B-Center to list their needs and any company could bid for it.
From Russia to Eastern & Southern Europe, B2B-Center’s plans for expansion
And it works pretty well. Overall, B2B-Center got more than $100m in funding, and employs 215 people. For 2012, B2B Center recorded 47 600 deals, generating some $23m in revenues. The business model is a mix of success fee and monthly subscription for viewing or posting a tender ($300 monthly for unlimited access and listing).
With this funding and cash coming in, B2B-Center is now targeting new markets. It has set up foot in Ukraine, Bielorussia, and Turkey more recently. The company holds 40% of the market share in Russia, and has registered more than 230 000 transactions so far.
Again, it’s great to see local startups with such a longevity and success. We’ll continue our BRICS startup series tomorrow with a focus on India. If you missed it, you can find back yesterday’s story on HotelUrbano, Brazil’s leading booking website, which in 3 years was able to beat Booking.com and is now heading for the lion’s share in Latin America.
You can find back our BRICS startups series here, with amazing stories from Brazil, Russia, India, China and South Africa