The CEO of Generation Partners, Sergey Kartashov, took part in organization of Re.Locate.IT conference in 2020 together with Generation Partners. There were speakers who talked about the challenges faced by the IT companies in terms of relocation. They also talked about the important considerations of IT startups related to their relocation in 2020.
The Mindset of Relocating IT Startups
Various factors are considered by the IT startups to relocate effectively. The first and main reason is getting a better environment in terms of the protection of Intellectual Property (IP). The IT startups tend to move towards a country having effective IP legislation.
Sergey Kartashov (Sergejs Kartasovs) says, “Companies are moving to places where their work will be protected first of all and where the project team can comfortably find accommodations.” The IT companies also relocate to a country where they get a better business environment. They always look for an environment where they can perform financial and economic activities easily. Venture funds, angel investors, and mentality are other crucial factors in this regard.
The country that cannot provide these favors loses its position as a favorable location for IT businesses. “There is a recent bad example. Latvia is losing its position as one of the best relocation countries in Eastern Europe. The reason is the tightening of AML (anti-money laundering) rules,” notes Sergey Kartashov.
Preferred Countries for Relocating IT Startups
On the basis of the above-mentioned factors, there are various countries that are favorable for relocating IT startups. However, IT companies have to choose the best among them. Cyprus is the country that has the best IT community of game developers. Berlin has a strong community of machine-learning developers. Estonia is providing the best legislation to the IT startups to get registered. They can register their business quickly and easily in Estonia.
Israel was once considered a great jurisdiction for IT development. However, the prices have gone way up there as compared to places like Cyprus. Malta is also suffering from various crises due to its political instability. It is more likely to enter the grey zone for failing to comply with the EU guidelines. IT companies should consider a lot of factors while choosing a place for relocation.
Dividing a Team between Two Countries
Sergey Kartashov highlights a common situation of dividing a team between two countries. For example, a company can relocate its IP team to a most favorable jurisdiction while keeping the development team in another country. “The companies transfer intellectual property to a place with a more suitable jurisdiction, such as Cyprus, while keeping the developing or manufacturing part of the company in a country with a large choice of personnel, for example, to Ukraine or Belarus,” says CEO Generation Partners.
A company based in Ukraine or Belarus can relocate 20% of its employees to a county like Cyprus to protect its intellectual property. However, different companies face different situations. The managers take a relocation decision considering all key factors into account. Kartashov gives important advice to the IT startups that they should relocate to a place where they have a lot of friends and people who have studied its special aspects. They should have a helping hand in the country where they want to relocate.
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