Challenge:

After the fall of the Soviet Union, many people emigrated to the West in search of a better life. Many years later, I was approached by a Russian friend who wanted to return to Russia and start a business, given that conditions there had improved. He was looking for potential investment capital, specifically for a possible trucking company. The trucking company that he was looking to start was intended to operate from a certain rural city in Russia all the way to St. Petersburg. According to my friend, this was a route with no regular service. With the strength of the dollar, it was an opportunity to maybe invest in Russia with very little capital (in American terms). Doing business in Russia has many different challenges, and even more so when operating in a rural environment. The legal environment is not secure, and enforcing one’s rights in court is a hit and miss proposition, especially for a foreign investor.

 

Action:

I arrived in St. Petersburg and drove out with my friend to the rural area to meet with the various people who would be working for him. These were people that he had known and gone to school with from his earlier life in the Soviet Union. I observed the quality of the roads, the industry in the area that would create possible demand for the trucking service, as well as the perceived character of the people he would be working with.

 

Result:

Ultimately, this wasn't an opportunity that I decided to invest in. Although I trusted my friend, it wasn’t clear that he had the connections necessary to make a business like this successful. During this period, trust was key as the legal environment and accounting practices were somewhat murky. This was not only true for a foreign investor, but also for a Russian citizen. To be successful in Russia, connections are everything; not only to ensure the success of your business but also protect it from other people who would take it from you. As it wasn’t clear that my friend was connected enough to operate in this environment, I decided against investment.

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