What It's Like to Start and Grow a Tech Business in Belarus
Here's an overview of the Belarus tech ecosystem based on my experience of starting two companies in the country.
My first company opened in 2010. It was a small outsourcing studio called Weavora. With an outsourcing business, it is much easier and faster to organize than a profitable product. A few years later, we thought about launching a SaaS product -- Everhour -- and a part of the profit was reinvested in its development.
We signed our first paid client in September 2015. Today we have crossed the $1.3 million annual recurring revenue mark (growing at 2.2 times per year), and 2,200-plus companies from 70 countries use our product. We have accomplished all that working in Belarus, without external investors and with a small team of seven people.
Here are a few things to keep in mind if you are interested in starting a SaaS business in Belarus.
IT specialists and their salary in Belarus
The main resource of any IT company is people.
There are no open statistics on the number of IT specialists in Belarus. But, according to a conservative estimate by Ernst &Young, this number is about 115,000 people in the information and communications technology (ICT) sector.
The average developer salary is $1,500 a month, according to Dev.by, the largest IT portal in Belarus. Employees with an experience of five years or more receive on average $2,500 to $3,500 per month. And people are used to speaking about a salary size as after-tax income, i.e. already after deducting all taxes.
There are many good programmers on the market, but at the same time, there is some shortage of professional marketers, salespeople and a number of other positions necessary for a product company. This is due to the fact that most companies on the market are engaged in outsourcing. Product companies have been gaining popularity only in recent years.
Taxes and special treatment for IT companies
For any startup (especially at an early stage), salaries make up the lion's share of costs. Also, as soon as the business starts to make a profit, an adequate tax rate is very important.
In the typical case, the corporate income tax in Belarus is 18 percent. If the company's annual revenue is small -- up to approximately $900,000 -- the company can apply a simplified scheme when the tax is paid at a rate of 3 percent or 5 percent of the turnover (depends on whether you pay VAT or not).
In addition, Belarus has a preferential tax and legal regime for IT companies provided under the High Technology Park ("HTP"). Our company became a resident over a year ago. An HTP resident company is fully exempt from corporate income tax, instead, it pays 1 percent of the turnover to the park administration. Income tax is also paid at a reduced rate (9 percent). The same applies to the dividend tax. And the rate on these taxes is flat. In addition, deductions to the Social Security Fund are significantly reduced (up to five times). The savings are huge.
However, at the initial stage, it is possible to dispense with incorporation somewhere abroad. You can find an intermediary who has a Stripe account and enter into treaty relations (license agreement) under which this person will distribute your software and pay you a remuneration (royalty).
At the initial stage, you should focus on the product and growth. You can change jurisdiction later (at the stage of attracting an investor), or use the Stripe Atlas program and register your own company in the U.S.
Venture capital in Belarus
The venture ecosystem of Belarus is at the "infancy" stage and is oriented on pre-seed/seed startups. Firms with this focuse include Bulba Ventures, Haxus and Angels Band. But, there are also larger equity funds, like Zubr Capital and the European Bank for Reconstruction and Development (EBRD).
Some VC firms from neighboring countries, like Gagarin Capital, Flint Capital, Buran Venture Capital and Digital Future, look closely at the Belarusian market.
We developed our product without any venture capital by using our personal finances and the operating revenue from the other business (bootstrapping model). This is also a fairly common approach here.
And although we do not plan to attract investments in the short term, investors periodically write to us and offer to discuss possible options. So, I can tell you for sure, if you have a worthwhile product, money will find you.
According to the already mentioned Ernst & Young report, six companies from the Global Outsourcing 100 ranking have R&D offices in Belarus: EPAM, Bell Integrator, IBA Group, Ciklum, Intetics and Itransition.
The report also shows mobile applications created solely by the residents of the HTP are used by more than a billion people in 150 countries. Developed by Wargaming's World of Tanks is one of the five most profitable MMO games with over 140 million registered users.
There have been multiple high-profile exits: MSQRD (acquired by Facebook), AIMatter (acquired by Google), Viaden (acquired by Israeli Playtech), MAPS.ME (acquired by Mail.Ru Group), Apalon (acquired by IAC) and Mapdata (acquired by Mapbox).
Last but not least to mention, Belarus has been in first place in the overall Google Code Jam rating since 2011.
And although Belarus still plays a very modest role in the global IT industry, we have our own way. The main thing is that the transformation is underway, and the government contributes to this. We are very young but ambitious.