Perry Simpson is CEO of 5 StarWeb, an Inc. 500 company specializing in Internet retail, and is a partner in Broadgate Capital, a private asset management company focused on real estate investment and development in Eastern Europe. Contact Perry at [email protected].
I received my first taste of life behind the Iron Curtain nearly 20 years ago. After a hitch-hiking tour of Western Europe, I found myself amid the hostile, gray grit of the Soviet Union in Prague, Czechoslovakia. I recall walking across the infamous Charles Bridge, dismayed by the abandoned shops with blown-out windows and empty shelves.
I never would have imagined that one day I would start a business in the former USSR.
There wasn’t a soul around as I toured America’s nemesis. Rusted, moldy scaffolding stood alongside buildings like creaky skeletons, an apparent sign that much-needed restoration was just around the corner. It was obvious that nothing had been fixed for years— nor would it ever, I recall thinking. And why should it? This was the Soviet Union: Without capitalism, there was little motivation.
Two years later, the Berlin Wall fell and the West came rushing in. I had the pleasure of traveling back to Prague in 1998 and was dumbfounded by the renovation that transformed the city as if by magic. The empty, run-down shops I had passed by a decade earlier had been impeccably refurbished and were bursting with merchandise and trade. Prague had been restored to its old charm and magnificence.
In 2004, I again returned to the former Soviet Union and visited the tiny Baltic nation of Estonia. The energy of the newly minted EU accession country was palpable as tourists flooded the beautiful Old Town. At the time, Estonia had generated headlines when local software engineers created Skype, the Internet telephony company recently purchased by eBay for several billion dollars. It finally occurred to me that the US didn’t possess a monopoly on capitalism.
I vowed to return to Estonia as a foreign entrepreneur.
After a string of lucky breaks and a personal mandate to enjoy the adventure of launching a company overseas – regardless of the outcome – I now own rapidly appreciating properties in Estonia, Latvia and Romania. I am also a partner in a EUR25 million real estate investment fund. Purchasing my first foreign property in 2005 required what one would expect: a ton of research and extensive networking to find the right banking, legal, accounting and real estate contacts.
Though I’ve been an entrepreneur for more than a decade, I’ve never before felt such a visceral entrepreneurial buzz like the one unfolding in post-communist Europe. Given the hundreds of billions of dollars in foreign direct investment and the numerous Fortune 500 multinational corporations that will continue to flood into the region over the next decade, Eastern Europe is turning out to be of one of the most exciting markets of our time. There may be no better place to do business than in countries deprived of capitalism for nearly 50 years.
Not knowing the local language presents no real barriers to doing business in Eastern Europe. I was amazed at how well the locals speak and write in English. Because English is the lingua franca, it was much easier to communicate than I thought. And even though contracts are written in the local language, English translation is the norm.
Insider information is critical. I discovered early on that trying to conduct business in Eastern Europe as an outsider is nearly impossible. It’s not enough to simply hire local attorneys or agents to work for you. It’s critical to identify the right local equity partner so that he or she is motivated to help make your business succeed. In my field of real estate, having
an insider proved vital in securing the best deals.
Do prototype deals first. We initially conducted small deals by buying single apartments, just to get a sense of how business is done in these countries. Once we had conducted smaller transactions, we moved on to larger ones, such as buying land and developing residential and commercial projects.