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To Russia, With Love

So here’s a challenge. Go walk around downtown Silicon Valley, pick up a rock and throw it. I challenge you NOT to hit someone who has some sort of elaborate China or India investment strategy. It can’t be done. These days you need a sharp China or India strategy or else you’re just not with it.We’re pretty with it at Cisco and we’ve also got a pretty good corporate venture strategy for those two countries. But we don’t stay focused only on one place, if you’re going to catch market transitions, you need to start putting money to work in places where other people haven’t. So let me throw this place out for your consideration: Russia.Sure, its one of the famed”BRICs” so its not like no one has given it a thought before. But how many VCs or corporate VCs do you see putting together a really thoughtful approach to capitalizing on the emerging innovation economy happening there.To many, Russia conjures up images of decadent Tsars being overthrown by idealistic but ultimately doomed Dr. Zhivagos. Or the thought of Russia may cause you to harken back to high school literature class, where we’ve all had to wrestle with a 1,000 page tome written by Tolstoy or Dostoevsky. Music, literature, revolutions, and the occasional bit of international espionage intrigue, Russia’s got all that covered. But high tech entrepreneurs? I can see you shaking your heads in collective disbelief.The fact is that Russia has an enormous wealth of unlocked technical and entrepreneurial talent. The first company we’re investing in is Ozon.ru, which is changing the face of book and music on-line retailing across the country. We’ve got a full time manager, Andrew Morozov, on the ground in Moscow hunting around for deals so you can definitely expect more action coming out from him.Russia has as many Internet users, in terms of absolute numbers, as the large Western European countries, but the overall Internet penetration rate is very low. To Cisco, this represents a great opportunity to help develop the market. In emerging markets like Russia, the growth of the Internet correlates with the growth of companies like Ozon. The more Ozon helps drive demand among its customers, the more Ozon helps drive demand for bandwidth and Internet-based services in general across the country.This strategy of using venture investment to drive Internet use in countries is called building the”Innovation Economy.” The strategy was hugely successful first in Israel and is being actively implemented in both China and India, where we have over $700 millions at work funding local entrepreneurs in the two markets.Today we’re announcing Russia and what’s next? Well, to quote the family motto of the famous Cold War British spy who once battled the Russians but now hawks Omega watches,”The World is Not Enough.”

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4 Comments.


  1. I think the comments above point to the challenge Cisco faces of how to role out a thoughtful global investment and M&A strategy. Cisco invests primarily for strategic reasons, meaning there is some IP or market insight a portfolio company has that we want access to.Like many US companies, we began looking for global venture opportunities first in Western Europe. That approach soon evolved to include Israel, which has a very strong R&D culture. With the rise of China and India over the past few years, we’ve shifted our attention there. Now we see things picking up in Russia and we’re also investigating other opportunities in Eastern Europe. So taking even a cursory look around, one finds that there are many companies in many different markets that hold potential. The question then becomes of prioritizing.We generally enter a new market from a venture point-of-view through a regional fund. For example we entered the APAC region as a venture investor through SAIF, the Softbank Asia Infrastructure Fund. Finding the right partner with which to enter into a new market is a long an involved process. It is also worth noting that Cisco makes investments other than venture investments. Money committed to local sales and marketing, channel partners, and capital financing are all examples of the different ways Cisco invests in, and commits to, a particular geographic market.

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  2. I think is more than hope for Brazil in IT. Giving the fact that Brazil invests almost 2 pct of its GDP in IT (well above the 1.3 per cent of Latam average) the country is probably one of the best positioned to gain from the IT revolution. I am in Las Vegas this week at the Cisco Partners Summit. The biggest group of Emerging Markets partners, the ones who install and deploy IT solutions based on Cisco technology, are coming from Brazil. That means that the country is on the right track and is the reason Cisco is investing there. Through Cisco Networking Academies, we have thousands of students in Brazil learning how to build and deploy networks, we invested in Tiradentes, a pilot of Digital City, and we invest on our partners to carry on the task of providing IT solutions for the Brazilian people.According to Cisco Broadband Barometer at the end of 2006 there were 5.753.000 broadband lines, a 40 per cent increase over the previous year. Is there room to grow? Of course. Does Brazil have hope in IT? Absolutely.Cisco Note: Alberto works for Cisco.”

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  3. Hi Ron, You wrote about India, Russia and China. Is there any hope left in IT for Brazil?Regards

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