Practical Taskmaster Incurable Dreamer

Alexey Gubarev, co-founder of Palta, a designer/producer of health and wellness apps, talks about its transformation from a venture capital firm to a co-founding company. He also questions whether plugging the talent gap is enough to turn the tech industry into a significant pillar of the Cyprus economy.

By Adonis Adoni
Photo by TASPHO

“Ireally don’t know,” says Alexey Gubarev, when talk turns to whether increasing the pool of tech specialists in Cyprus will accelerate the growth of the local industry. Leaning back in his chair in the conference room of Palta, a company that has adopted an alternative venture capital model, Gubarev shrugs his shoulders before he asks, “It’s one way but would it be enough?”
It is hard to get a read on him and his rather monotone delivery keeps me guessing. He cites Metallica as his favourite band and he owns a collection of some 8,000 pieces of audio equipment, among them some rare finds, like one of only 14 Schimmel K208 Pegasus pianos in circulation. It occurs to me that his office might be an extension of himself. Located on the Oval building in Limassol, with a view of a vast expanse on sea on which a number of huge cruise and cargo ships lie at anchor, Palta’s office embraces practicality with an open-plan arrangement and floor-to-ceiling windows, yet it demonstrates a taste for the lavish. Two life-size statues of roaring lions with leather cushions guard the entrance and an expensive surround system plugs into a turntable in the conference room. One thing is certain: Alexey Gubarev dares to dream big.
Two decades ago, at the age of 22, Gubarev journeyed from Russia to Cyprus with his wife and daughter, as his homeland was proving to be inhospitable to aspiring entrepreneurs. In 2005, he founded XBT Holding, a company offering cloud hosting solutions and web development services, with a healthy appetite for acquisitions – there are currently seven subsidiaries under XBT’s wing, with 37,000 servers and 5 data centres across 3 continents. In 2015, while on a trip to Moscow, Gubarev met Yuri Gurksi, whose ventures had a number of successful exits with the likes of the Mail.ru Group, Google and billionaire Teddy Sagi. “We hit it off immediately,” Gubarev says. Over the next few months, Gubarev and Gurksi decided to pool their assets and create their own venture capital firm (Haxus) and take bets on AI projects such as Prisma Labs, an app that turns photos into impressionistic works of art.
Just before the coronavirus pandemic made its presence known to the world, Haxus went through one of two major transformations. The first was to step away from the venture capital path and became a co-founding company. Haxus evolved into Palta. Venture capital has, of course, been the driving force of the technological era, a cauldron from which some of the biggest innovations and wealthiest individuals have emerged but cracks have started to appear in the model. There is a growing chorus of people criticising the eagerness of VCs to bet on lightweight ideas and the globalisation of venture capital has exacerbated this situation. Of course, this is not to say that a local traditional VC would not thrive in a startup ecosystem like that of Cyprus, where money is hard to come by.
“The traditional VC model has become overrated and there are just too many players in the market,” Gubarev says by way of explanation for the company’s new identity. “Basically, we work as hard as a founder,” Gubarev says. “We don’t only invest in startups but we work closely with them, we have calls every week to discuss strategies and we have our own marketing team.” The company’s family of startups can also tap into Palta Brain, a platform that provides advanced analytical capabilities. The obvious benefit of the co-founding model is that early-stage startups (although, Palta is not averse to taking on more mature ventures) have access to a robust infrastructure that allows their ideas to grow rapidly, true to the startup mantra that velocity equals success. The fact that Palta has experienced tenfold growth since its transformation from Haxus is solid evidence that the model is working. There is also a hidden benefit: having so many talented people working on different projects under the same roof is one, if not the best, way to transfer knowledge and find fast solutions to pain points. This can apply across the board, from improving the experience of apps that offer users a better life to accelerating the growth of an entire industry.
While the company’s first transformation was existential in nature, the second one was strategic. The Haxus portfolio is mostly gone (the remaining startups will follow the same direction in the coming year), so that Palta can become an app maker for health and wellness products. “It turned out to be a smart decision,” Gubarev says. This is an understatement: the company’s new portfolio includes Flo, a fertility focused period-tracking app, which is the most downloaded health app on the App Store by women and the #1 period tracker in the US, closing in 2021 a US$50 Series B funding round at an US$800 million valuation. The end game for Palta is to float on a stock exchange rather than exit via an M&A deal, either as company or through its startups. Although going for an IPO is fraught with dangers, well-being and care innovations have been gathering admirers for years now. A 2021 Deloitte report revealed that the pandemic has made the markets very receptive to health tech IPOs.
Gubarev has adopted Cyprus as his home. He is one of the founding members of the TechIsland Association, a non-profit organisation that has managed in a matter of months to bring together around 140 technology companies operating in the country with a singular mission to speed up the growth of Cyprus tech industry. Indeed, a larger tech market will not only do wonders for the economy, but also for companies like Palta, especially for convincing those few specialists that Cyprus is the place to be. However, unless my instincts deceive me, there appears to be genuine emotion behind Gubarev’s mission to transform Cyprus into a tech hub, mainly expressed through his exasperation with the fact that things are not moving as fast as they could. In November 2021, the Government invited the leading lights of the small local tech scene to a closed-door event led by Finance Minister Constantinos Petrides, at which it announced a new plan, which was intended to make their lives easier. Gubarev was one of the people who had worked relentlessly behind the scenes to make this a reality. The new plan, among other things, sought to plug the talent gap in Cyprus, so the naturalisation period was shortened from seven to five years, a digital nomad visa was introduced and the archaic embargo on spouses of non-European nationals entering the local labour force was abolished. Still not enough, it would appear.
“Cyprus is losing this game,” Gubarev sighs. “The companies that are moving here usually bring only 20-30 people because there is no market for them.” This does not apply to Palta, though: it employs 150 people locally, and with Russia declaring war on Ukraine, the company has decided to make room in Cyprus for 128 of their people (and their families) who worked in Ukraine, Russia and Belarus. “And, the big problem here is education,” he goes on. “Ask any Cypriot parent what they want their kids to be; they’ll say lawyer, doctor, accountant, or government employee.”
Why do so few students in Cyprus universities want to chase a tech career? Indeed, there are simply not enough opportunities in the country; a large tech market would most likely result in an uptick of ICT undergraduates. The harsh reality, though, is that Cyprus universities cannot alone cover the needs of an industry that has the potential to push the country’s GDP up by several percentage points. For Gubarev, the target should be to have a market of 100,000 tech specialists in ten years’ time. “If we do this, then Cyprus will be very successful,” he says. This is by no means an easy feat, which naturally leaves him with more questions than answers. “Is there any methodical approach to achieve this?” he wonders. He is particularly concerned that Cyprus lacks the infrastructure to support the needs of a larger tech market, from things like private schooling and lifestyle options to poor waste management practices. He takes out his phone and shows me photos of a Limassol street corner. “Garbage is everywhere; will people really stay when they see all this?” he asks. Gubarev also has a bone to pick with the civil service and the glacial pace at which it moves. For the past year, he has been waiting to receive approval for a rather spectacular, one-of-a-kind museum that would house his extraordinary collection of audio equipment. “In other countries with a digital government, you get approvals for permits in six months and for simple projects in 45 days,” he says. “And, OK, Cyprus is changing a lot, but couldn’t we do it faster? The process should be more transparent, with a much more professional handling of cases.”
It is fair to say that Gubarev walks a fine line between practical taskmaster and incurable dreamer; while listing things that stand in the way of Cyprus transformation into a tech hub, he never suggests that it is impossible. In August 2021, Palta raised US$100 million in a Series B round led by VNV Global, Target Global and existing investors, which is further proof that what it is doing is working well. The money was used as fertilizer for its health and wellness apps, which also include Simple, a fasting app with over seven million installs, and Zing Coach, an AI-powered fitness coach, as well as planting the seeds for new ideas to grow. This will inevitably bring more talent into the company, which will in turn accelerate its growth. It is very tempting to draw parallels between Palta and the Cyprus tech industry as a whole – there is every reason to believe that, in both cases, an expanded talent pool will lead to soaring success. However, an industry has a lot more moving parts than one single company does. So, one question still persists: would it be enough?