Despite facing extensive international sanctions, Russia's technology sector is witnessing a surge in local startup activity, with innovative companies emerging to fill gaps left by departing international firms. This unexpected boom is particularly evident in the field of cybersecurity, where Russian startups are gaining traction both domestically and globally.

As Western companies exited the Russian market due to sanctions related to the Ukraine conflict, the void left behind has created opportunities for local entrepreneurs. "The Russian tech sector continues to grow as local startups fill gaps left by international companies," reportsVedomosti.

Russian internet powerhouse Yandex remains the dominant force in the market, but since its founder and former owner Arkady Volozh completed his exit this year, taking the international assets with him, the Russia part of the business continues to flourish and innovate.

The company has expanded into areas such as self-driving cars, AI, and cloud services. Its technological advancements in machine learning and autonomous driving continue to make it a key player.

Many of these startups are developing products and services that cater to critical domestic needs, from e-commerce solutions to cloud computing.

Among the recent successful startups is InDriver, founded in 2012 in Siberia, which has rapidly expanded into an international ride-hailing service. With operations across more than 40 countries, it has gained popularity by offering users the ability to negotiate their fare with drivers, a unique feature in the ride-sharing market.

Cognitive Technologies is a Russia-based AI-focused startup that has made significant strides in autonomous driving technology, particularly in developing autonomous systems for agriculture and industrial use. Its software is already used in driverless tractors and combines. Agrotech is one of Russia’s stronger suits.

T8 is a leader in fibre-optic technologies in Russia, developing high-capacity systems for telecommunications. The company provides cutting-edge fibre-optic equipment for data transmission and is a critical supplier to Russian telecom firms as part of the Kremlin’s wider import substitution policy.

Zifra is an emerging Russian startup focused on encrypted data storage. As concerns around data security grow, the company has developed a line of secure USB drives and storage devices that use encryption to protect data. This tech is especially appealing to companies and government agencies concerned about cybersecurity.

Cybersecurity, in particular, is benefiting from the effects of sanctions that are driving innovation and investment. The dominant player remains Kaspersky, which found itself under sanctions and lost a large part of its international market, but the international tensions are fuelling a boom in security software, another Russian forte.

The company has launched and supported several tech startups through its accelerator programmes. These initiatives focus on nurturing innovative companies that develop security solutions for industrial control systems (ICS) and Internet of Things (IoT) environments.

Like in China, one of the unintended consequences of technology sanctions has been to spur investment and especially cooperation amongst domestic players to spur innovation that has resulted in accelerated growth and development of domestic firms.

A recent report by the Federal Reserve Bank of New York says the US CHIPS and other restrictions on technology exports to China have backfired and seen Chinese tech flourish, but cut the revenues of leading US tech companies by hundreds of millions of dollars.

“The growth of Russian companies in the information security sector has been highlighted, with firms gaining traction in both the domestic and global markets,” reports Vedomosti.

Positive Technologies is one of Russia's leading cybersecurity firms. It specialises in vulnerability management and penetration testing software. The company has developed solutions that help businesses detect and mitigate cyber threats, especially in critical infrastructure like finance, energy, and government services. Its MaxPatrol and PT Application Inspector are widely used products. Positive Technologies has also expanded overseas to the friendly countries in Asia and the Middle East, despite Western sanctions.

Founded in 2013, Wallarm focuses on security for APIs, cloud-native environments, and web applications. It offers an AI-powered security platform that helps protect against attacks such as SQL (Structured Query Language) injections, cross-site scripting (XSS), and other web vulnerabilities. Wallarm's unique blend of machine learning and security expertise has made it successful, particularly among organisations looking for dynamic, scalable protection solutions.

Security Code focuses on providing cybersecurity solutions for critical national infrastructure. It develops products like cryptographic information security tools, secure operating systems, and network security management systems. The company is particularly strong in addressing government and defence needs in Russia, offering robust solutions for sensitive environments.

Digital Security is a consultancy and solutions provider that specialises in security audits, penetration testing, and security assessments for major Russian businesses and government agencies. The company is known for its expertise in identifying vulnerabilities in IT infrastructure and offering tailor-made cybersecurity strategies.

Russia’s cybersecurity firms are stepping up to provide solutions tailored to local companies and government agencies in the face of an escalating cyberwar that is part of the rising tensions in an increasingly fractured world.

 

ERRATA: this article was corrected to remove Group-IB, which was established in Russia in 2003, but has completely exited from the Russian market on 20 April 2023, and currently does not serve, or have any clients in Russia or any employees working in Russia.