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No need to panic - investors and entrepreneurs on the weak ruble

0 5 March 2014

The rouble hit record lows this week, with the USD rate rising to 36.9 rubles and the Euro rate going above 50 roubles for the first time. 

Russian business news site RBC Daily asked investors and startupers to comment on the effect that the weak rouble is likely to have on their projects. 


Investors


Maksim Shteigerwald

Investment Director at FRII (Internet Initiative Development Fund)

Overall imported goods have quite a big share of the consumer market, and are also important in supply chains for Russian manufacturers. This will increase fixed costs for practically all manufacturers. The only startups that will avoid these increases are those whose principal costs go on salaries (particularly if those salaries aren’t particularly high). Companies which depend on imported goods or which have debts in USD are likely to suffer the most, while companies with significant revenue in foreign currencies are likely to benefit. 

Oleg Seydak

Partner at Flint Management

The falling rouble will reduce consumer demand and cause the economy as a whole to stagnate. Of course, this will be reflected in the income of projects oriented towards the domestic market. The exchange rate could also have a negative impact on the valuation of companies when investors aim to exit a project. Russian companies oriented towards foreign markets are likely to benefit, as their main costs are incurred in roubles, but their income is in foreign currencies. 

As for the Flint Capital fund, our portfolio includes projects operating in different countries, and so we expect that any negative effect in connection with the falling rouble is likely to pass unnoticed. 

Elena Volotovskaya

Director at Softline Venture Partners

A sharply falling currency is, in any case, likely to have a negative effect. It is possible that investors will decide to put a temporary halt to expanding their portfolios and to try to invest in less risky projects. With IT-projects, it depends on the type of products/services the company offers, and in which markets it operates. Entrepreneurs should try to keep their costs and revenues in one currency, in order to nullify the effect of fluctuating exchange rates. 


Startupers


Felix Shpilman

Vice President with responsibility for strategy at hotel search and booking service Ostrovok.ru

In terms of income, the falling rouble has a neutral effect on our company because we have a diverse tourist flow based on hotels in Russia and neighboring countries. In terms of spending, it also has a neutral effect, because most of our spending is in roubles. 

Dmitry Saushkin

Founder of p2p clothing marketplace Boommy

The falling rouble won’t have a catastrophic effect on our sector, because the items sold via our service don’t belong to us and we, happily, don’t have to worry at all about customs or exports. If anything the falling rouble, if it makes people think more carefully about how they spend their money, could boost services like ours.

Konstantin Ivanov

Founder of personalized 3D printing service 3D-Printus

We are building an internet company, but our business is also directly connected to manufacturing. As the value of the dollar rises so will our COGS (cost of goods sold), because a significant proportion of the parts needed for 3D-printers come from abroad.

Denis Kutergin

Co founder of task-outsourcing service YouDo

The higher the unemployment rate in the country, which could rise as a result of the falling rouble, the more people that are likely to want to work as YouDo task-doers. As a person’s income financial situation becomes more unstable, the more they think about different ways to top up their earnings. At the same time, most of the people ordering services via our service are people with above average salaries who are unlikely to be so affected by the falling rouble that they choose to stop using an outsourcing service they are already accustomed to. 

Simon Proyekt

Founder of Flocktory, a referral marketing service for online retailers. 

In the short term we haven’t noticed any negative impact, as the ongoing stable growth of the e-commerce sector continues to benefit our biggest clients. However, we are carefully monitoring the situation, in case it begins to affect the marketing budget of our clients, and we continue reduce our exposure by diversifying our currency portfolio.

Ekaterina Panchenko

Founder of children’s goods delivery service Dvye Ladoshki

Overall imported goods have quite a big share of the consumer market, and are also important in supply chains for Russian manufacturers. This will increase fixed costs for practically all manufacturers. The only startups that will avoid these increases are those whose principal costs go on salaries (particularly if those salaries aren’t particularly high). Companies which depend on imported goods or which have debts in USD are likely to suffer the most, while companies with significant revenue in foreign currencies are likely to benefit. 

Source: RBC Daily

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