Investment Businness in Russia? Particular Notes

THIS POST WAS ORIGINALLY PUBLISHED JANUARY 28, 2007

In modern business it is not the crook who is to be feared most, it is the honest man who doesn't know what he is doing.
                                                                                                   William Wordsworth

What is it like – doing investment business in Russia? When you punch this phrase in Google – you get about 4,400,000 hits. So, I guess the subject is fully covered by all – starting from the US State Department to virtually unknown Russian firms. What the hell I am writing about? God knows – but read it. I would like here to pin point some of the ideas that I got from the last 10 years of dealing with Western investors and business partners.
Going back to mid 90-ies we do remember a flood of expats roaming in Moscow. Some of them were really good, some were not. It was really popular at that time to have an expat heading JV or a new company with international business. This is explicitly described in a “DUKHLESS” ('lacking the soul') recent Russian bestseller. You may agree or not with the writer, but I guess, he is right – many businessmen who were unsuccessful in their homeland tried their chances in Russia. I did meet them a lot. I knew an American who was kicked out of 4 or 5 companies in succession, but still wanted to be in Russia. Anyways, whatever business skills they had, but they did a tremendous thing – they brought real western business culture to Russia. For us, who grew up on infamous Russian bureaucracy that was a quantum leap. Russians are fast to learn and we indeed picked up – everything – good and bad. Now, when the foreign investors meet with the Russians, what we, the Russians expect from the westerners? This is what I am talking about.

First of all, a little bit on the business side. It was true in 90-ies, it is 100% true right now – the response time. I did happen to work with the US company - they were trying to introduce new ideas and products – at that time it was brand new here. What was slated for success turned into disaster – the only reason – red tape. Once I had an exciting opportunity for a couple of million worth contract, but the detailed technical proposal arrived to me 4 weeks after I submitted the inquiry. And indeed, my US boss was furious WHY I did not get the contract. The answer was simple – competitors were quick. It is still the same. I met a successful US businessman who runs a chain of restaurants here in Russia – heard the same story - he has to travel personally to the USA just to expedite his requests. So, as Ben Franklin observed long ago - Time is Money – you think too long – you lose opportunity.
Personal and informal contacts, networking - are of a great value. I have witnessed a lot of deals done way more quicker and efficient with informal introduction. This is extremely important for investment business. One of the top investment company reports that they have sent about 600 introduction letters to companies all over Russia and did not get any response. But if the entrepreneur gets the phone call from his contacts – the green light is on for you.
Then, “the Russian tradition”. It happens all the time – many westerners come here and want to live up to that.
In mid 90-ies I was dealing with the President and CEO of one of the US firms who came to Moscow to execute a deal. This was a very intelligent and bright person, but he endeavored on an impossible – try to learn and behave according to this “Russian tradition”. He was like a dry sponge – adsorbing every word, and in most cases misinterpreting. That led to numerous humorous situations that made him rather uncomfortable (to say nothing about drinking contests). Somehow he got the idea that the Russians drink vodka every time when the main course shows up. So, we are dining with a Russian VIP who is ranting about the exquisite French wines, vodka drinking mauve ton etc. And guess what happens – yes, we have main course and our friend suggests vodka. That was really funny – the Russian guy says 'no', so the CEO thinks that he (the Russian) has no money to pay for - “ I will pay”. And he does it. You should have seen the face of VIP when he was disgustedly sipping vodka!!!
It is true - "IF YOU LIVE IN ROME, LIVE LIKE THE ROMANS DO." But here, I guess, be yourself.

The other thing that we expect from our counterparts – portliness. Maybe somewhere in the world the dress code is not important, but here it is. I am not talking about Brioni, Harvie & Hudson and Giorgio Armani type stuff, but at least this should not be casual jackets and shirts.
I was feeling really confused when I realized at one of the meetings a striking contrast between the looks of a Russian client dressed up to the nines and casual images of visiting investment bankers.
“Image is nothing. Thirst is everything”. Here I guess it is not the case.
One more thing. “Shoes play an important part in synchronizing the style” - as one of the top fashion Web-site says. I got to know the son of former Soviet party Politburo member – he told me that his father advised - “always judge the businessman by his shoes”. And this is exactly right – in many cases when you look at the footwear: you get the instant picture.

Other small tips:
    Vacations and holidays. This happens a lot, but the most enduring are New Year (about 10-15 days) and May (usually about 10 days at the beginning). This stalls the business – top management and entrepreneurs go skiing, swimming and what not - all around the world.
    Do not be surprised with the attitude that we here have to birthdays and anniversaries. It is expected that the partners congratulate, visit and send gifts to each other on such occasions, especially anniversaries.
    All of us like gifts, if you are coming for meetings in Russia everyone would appreciate a token gift, especially something that is not available here, like NYSE, LSE trinkets, etc.
    Although it is becoming more and more popular these days, but it is sort of unusual to have business dinners (or what we call here 'a supper'). Many of the Russian partners expect that the visiting westerners will pay on such occasion. It is strange, but as one of my partners notes: “I am supposed to pay for lunches and dinners no matter where we are in New York or Moscow – I am already used to it”.
    Be ready when the Russians ask you to put rubber stamps or seals on paperwork – these are the antiques of Soviet style that we are used to.

These are just a few tips, use Google to find more...