Impact of Ukraine war impacting US:-
How Russia sanctions helped kill 15-minute delivery in New York
Days after the invasion of Ukraine, ultrafast delivery startup Buyk declared bankruptcy and laid off all of its 900 American employees
By Soo Youn
June 2, 2022 at 4:00 a.m. EDT
A Buyk courier on New York City's Upper West Side in November 2021. (Noam Galai/Photographer: Noam Galai/Getty I)
Listen
10 min
Comment
Gift Article
Share
On the morning of Feb. 24, Yusuff Alabi-Ajidagba, the U.S. head of retail operations for ultrafast grocery delivery start-up Buyk, was in a Houston hotel room gearing up for an aggressive expansion plan when he saw footage of Russian missiles attacking Ukraine on CNN.
By 11 a.m., Alabi-Ajidagba said, he was on an all-hands video call in which chief executive James Walker assured employees there would be no financial impact to Buyk — even though the co-founders and parent company were Russian.
“No one was thinking we wouldn’t have a job,” Alabi-Ajidagba said. “I don’t think anyone even knew what sanctions meant. No one believed it was going to impact the world the way it did.”
But within 16 days, Buyk would declare bankruptcy and lay off all of its 900 employees — its rapid rise and even more rapid demise exhibiting a globalized system of start-ups that proved singularly vulnerable to U.S. sanctions against key Russian figures and financial institutions after the invasion of Ukraine.
Russia-Ukraine war live updates
For many Americans, sanctions may conjure images of agents raiding an oligarch’s half-billion-dollar yacht or putting a Premier League soccer team on the auction block.
But economic sanctions can also be a blunt instrument, punishing civilians along with the rich and powerful.
The unprecedented depth and speed of U.S. sanctions for the invasion of Ukraine disrupted not just the lives of average Russians but also office workers and couriers as far away from Moscow as New York and Chicago.
For these workers, sanctions were experienced through mundane actions: a Zoom call, a WhatsApp or Telegram chat, then the lack of a paycheck as Buyk was severed from its financial lifelines.
Buyk, pronounced “bike,” was the U.S. subsidiary of Samokat (which means “scooter”), one of Russia’s most popular grocery-delivery services. Buyk launched in New York City in September 2021 and Chicago in December, with plans to serve Boston, Houston, Miami and Los Angeles by the end of 2022.
Although Buyk was incorporated in the United States, co-founders Vyacheslav “Slava” Bocharov and Rodion Shishkov were also the founders of Samokat.
Buyk started to unravel on Feb. 24 when the United States immediately targeted 10 of Russia’s largest financial institutions, cutting Sberbank, Russia’s largest bank, off from the U.S. financial system.
News of the invasion had caught Alabi-Ajidagba off guard, he said, since he had just been in Moscow two weeks earlier — when Samokat executives had dismissed the possibility of war, insisting Russian President Vladimir Putin was bluffing. Now, on an 8 a.m. call with his Russian colleagues, Alabi-Ajidagba was told there wouldn’t be any impact on the company. After all, Buyk had announced a partnership with Grubhub the day before. His next trip was planned for June.
But the actions against Sberbank would prove fatal, choking Buyk off from a source of cash at a critical point in its development.
Cracks emerge in Russian elite as tycoons start to bemoan invasion
Through a joint venture, Sberbank and Russian Internet company
Mail.ru Group owned 75.6 percent of Samokat.
While Bocharov and Shishkov are not on any sanctions list, the actions against Sberbank affected their ability to continue to fund the business, according to the
Chapter 11 filing on March 17. So did the banking restrictions imposed by Putin on Feb. 28 that banned residents from sending money to bank accounts abroad.
When the invasion began, the founders were providing bridge financing because Buyk was in between rounds of funding.
“The vast majority was tied up in Sberbank,” according to a former employee who spoke on the condition of anonymity because he is negotiating a new job.
Bocharov did not respond to a WhatsApp message asking for clarification on the company’s structure and the funding relationships.
Ahead of its launch, Buyk raised
$46 million from CM Ventures, Fort Ross Ventures and Citius, venture capital firms with Russian ties.
Sberbank was a leading investor in Fort Ross and helped launch the venture capital firm in Menlo Park, Calif., in 2015.
Former Sberbank chief technology officer Victor Orlovski, now managing partner at Fort Ross,
previously told The Washington Post in an email, “We are taking all necessary measures to isolate and stop any relationship with any sanctioned investor if this is mandated by regulation.”
Surviving these sanctions proved harder than anticipated. The United States leveled targeted sanctions against Russia after its invasion of Crimea in 2014. But this round proved to be the “most unprecedented, commercially meaningful, fastest-moving sanctions program in history,” said Crowell & Moring lawyer Dj Wolff, who specializes in international trade, sanctions and embargoes.
A pedestrian walks past a Buyk distribution center in New York in 2021. (Spencer Platt/Getty Images)
Historically, the United States has taken the approach of: Let’s try not to be too blunt, Wolff said. “I, and many others, have been surprised by how far not just the U.S., but the E.U. and the U.K. are willing to go with the blunter parts of their tools. Going after the biggest banks, that hurts the banks, but it also hurts everybody who has an account at those banks, including you and me if we lived in Moscow,” Wolff added. “But clearly the thought process has been: That’s a cost we’re willing to take to try to change Russian decision-making.”
From Russia with money: Silicon Valley distances itself from oligarchs
Rival delivery start-up Fridge No More, which also had Russian founders and investors, shut down March 10, laying off all 600 workers.
On March 3, one week after the invasion, Buyk’s director of learning, Saren Stiegel, toured eight stores in Chicago. News of the invasion hung like a “dark cloud” over the company, she said, because there were Ukrainian and Russian workers. But, on that Thursday, she noticed Russian team members leaving group messaging chats.
Alabi-Ajidagba, who was also in Chicago on a business trip, also noticed the Russians leaving the 35 to 40 group chats for employees on Telegram. When he reached out individually, he said, he was told they were clearing out old chat groups, which he found puzzling.
In Chicago, Samuel Sanchez Jr. was six weeks into his job as a Buyk courier. A 26-year-old former mover, he enjoyed zipping around the city on one of the company’s e-bikes at 25 or 30 mph. But he had noticed he was getting less busy. There were fewer delivery calls, and his hours were cut.
Twenty-four hours later, all three were all furloughed, along with 98 percent of the rest of the company’s employees. For Stiegel, it was shocking — she had just been promoted two weeks earlier. She couldn’t see the connection between Buyk and the invasion.
“We're an American company, right? The money in Russia? It has nothing to do with the oligarchs,” she said.
In a companywide Zoom call, Walker, the chief executive, told workers he was trying to find funding to save the company.
On Saturday, March 5, supply chain consultant Brittain Ladd, who had always been bullish on Buyk, started an intense conversation with Walker and an investor, Stefan Schimenes, with whom he was already working on a parcel delivery company, in the hope of buying or investing in Buyk, he told The Post.
“James was in need of $20 million immediately,” he said.
Walker had also approached Grubhub to invest — but Buyk collapsed before a deal could be finalized. “Given Buyk’s news, we ended our project,” Grubhub said in a statement. “When we made our announcement, the timeline to add their locations to our marketplace was at least a few weeks out, so none of their locations were ever live on Grubhub.”
After 72 hours of talks, Ladd said, he backed away because he could not raise the $20 million quickly enough and the owners were unwilling to sell.
Another investor passed, partly over concerns about connections to Putin’s government, according to a person briefed on the discussions who
previously spoke to The Post on the condition of anonymity because the matter was confidential.
On Wednesday, March 9, Stiegel attended a Zoom farewell with her Russian team.
“Wait, we don’t know if Buyk’s going to fail yet,” she remembers thinking. She had struggled to overcome the cultural differences and miscommunications between the Russian and American employees and the company’s murky reporting structure, and she said she was heartbroken to come out the other side and hear the Russian members tell her: “Imagine if the world had learned to integrate the way we did it. We really were onto something here.”
On Friday, March 11, Walker laid off the employees and told them the company was filing for bankruptcy. It filed for Chapter 11 reorganization on March 17, citing the impossibility of receiving the funding from its founders.
“Sanctions were not the issue, as none of our investors, banks, or either of our founders were directly sanctioned. Rather, it was Putin’s restrictions on Russian banks being able to send money outside of Russia that impacted our funding,” Walker wrote in an email to The Post.
While legally the distinction is important, it seems moot to many of the employees.
“If you’re a delivery worker making $17 an hour, you don’t care if it’s U.S. or Russian sanctions,” Alabi-Ajidagba said. “It’s been painful and chaotic.”
Since the company’s collapse, he has stayed active in group chats of the teams he managed, in some cases making connections for employees at other companies. Still, for the majority, he said, losing their jobs has meant a loss of child care, loss of transportation, not being able to pay rent.
Tens of thousands of Russian gig workers left behind as tech platforms pull out
Some employees have shown articles about the company’s collapse to landlords in the hope of gaining an extension on rent.
Alabi-Ajidagba said he has had to alter his lifestyle and dip into his savings as he job-hunts: “Trips, restaurants, all the bougie things.” He has had to stop sending money to support his family in Nigeria.
There’s also the specter of potential anti-Russian sentiment that is affecting the job prospects of some former employees.
“The attitude is changing right now, obviously,” Yana Pesotskaya, Buyk’s other head of U.S. operations who is a Russian and French national, said at the beginning of April when she was looking for another job. “It’s not aggressive; it’s a very cautious attitude right now [from prospective employers]: ‘Better not to go with that,’ rather than anything to do with my skills or who I am as a person.”
Ladd said he also noticed an anti-Russian sentiment among potential investors.
Many of the Buyk employees interviewed for this article are still trying to find jobs.
Sanchez, the courier in Chicago, went back to working as a mover but had to take out a loan and still owes back payments on rent. Alabi-Ajidagba said he is holding out for the right opportunity.
Stiegel, a single mother who is drawing on savings, is starting her own company, Vokly, to train employees, rather than work for another start-up. She said she had been in a state of shock immediately after the company folded. “The wrong people lost their jobs.”
You as a Westerner will live a much better life without Capitalism imposing on you everyday.
