IT Business in Belarus: Salaries, Taxes, Venture Capital and Legendary “Exits”
Everhour was born here. This article is my personal experience of building two IT businesses in Belarus. Existing conditions for this in the country and success stories.
My first company was opened in 2010. It was a small outsourcing studio — Weavora. 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 Everhour crossed the $1.3M ARR mark.
We have accomplished all that working in Belarus, without external investor and with a small team.
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 of Ernst & Young, this number is about 115,000 people in the information and communications technology (ICT) sector.
The median average developer salary is $1,500. Employees with an experience of 5 years or more receive on average $2,500 — $3,500. 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%. If the company’s annual revenue is small — approx. up to $900,000 — the company can apply a simplified scheme when the tax is paid at a rate of 3% or 5% 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.
The HTP resident company is fully exempt from corporate income tax, instead, it pays 1% of the turnover to the park administration. Income tax is also paid at a reduced rate (9%). The same applies to the dividend tax. And the rate on them is flat. In addition, deductions to the Social Security Fund are significantly reduced (up to 5 times). The savings are huge.
You can read more about taxes on the REVERA law firm website.
Payment gateways
Another important question for any SaaS business is receiving money.
Unfortunately, the most famous payment gateways, such as Stripe or Braintree doesn’t work in Belarus.
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 to 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 US.
Venture capital in Belarus
The venture ecosystem of Belarus is at the stage of “infancy” and is oriented on pre-seed/seed startups. For example, 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 look close at the Belarusian market: Gagarin Capital, Flint Capital, Buran Venture Capital, Digital Future.
Some startups immediately go for investments in the USA. PandaDoc has raised $15 million in their Round B, and the total investment attracted by WorkFusion exceeded $120 million.
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.
Success stories
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, Itransition.
USA Inc.5000 (fastest-growing private companies in the US) in 2018 included at least six companies with Belarusian roots: Intellectsoft, PandaDoc, HQSoftware, iTechArt Group, Oxagile and Coherent Solutions.
Mobile applications created solely by the residents of the HTP, uses more than a billion people in 150 countries.
Developed by Wargaming game World of Tanks is one of the five most profitable MMO games with over 140 million registered users.
There were 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), Mapdata (acquired by Mapbox).
Last but not least to mention, Belarus is in the first place in the overall Google Code Jam rating since 2011.
Finally
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.
I’ve originally posted it on Entrepreneur.com
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