Raketa: Go All In or Close the Factory

What they had bought, in 2010, was Russia’s oldest factory. What they had inherited was an extinction event in slow motion.

Fifteen workers and five hundred machines

We were faced with a choice: go all-in, or close the factory.

The Petrodvorets Watch Factory had been making things since 1721, when Peter the Great established it as a stone-cutting works for his palace complex at Peterhof. By the Soviet era it had become Raketa (Ракета, “Rocket”) — a name synonymous with functional, affordable timekeeping across a twelve-timezone empire. At peak production in 1980, eight thousand workers turned out five million watches a year.

Then the Soviet Union dissolved, and so did the orders.

The decline was not gradual. It was the institutional equivalent of organ failure. State procurement vanished. Export markets collapsed. The workforce bled out — from eight thousand to a few hundred, then to roughly forty by 2000, when the factory director died and no succession plan existed. The specialists who understood how to calibrate Soviet-era machines, how to temper a hairspring, how to operate the proprietary alloy furnaces — they retired, or died, and took their knowledge with them.

Henderson-Stewart, a British-Russian dual national who had discovered the factory while working on a documentary project, and von Polier arrived to find fifteen workers keeping the lights on. Five hundred machines stood idle or semi-functional. The clean rooms that had once produced precision components were silent. But the machines themselves — massive, analog, built in an era when Soviet engineers overbuilt everything — were still functional. They had survived because no one had bothered to modernize them.

This accident of neglect would later prove to be the company’s salvation.

The mathematics of full manufacture

To understand why the choice that confronted Henderson-Stewart and von Polier in 2016 was genuinely binary, you need to understand what “full-manufacture” means in watchmaking.

Most watch companies assemble. They buy movements from ETA or Sellita, cases from specialist suppliers, dials from artisan workshops. The capital requirements are modest; the barriers to entry are low. A brand can start, pause, and restart without catastrophic loss.

Full manufacture is different. It means producing the movement — the engine of the watch — from raw materials. For Raketa, that meant making 242 components per movement, ninety-five percent of them in-house. It meant maintaining ISO 7 clean rooms. It meant operating the furnaces that process a proprietary Soviet-era alloy into hairsprings — the coiled springs that regulate a mechanical watch’s accuracy and that only three other companies in the world (Rolex, Swatch Group, and Seiko) produce independently.

The hairspring capability was the strategic core. The alloy itself came from a fifty-year Soviet stockpile — material that could not be replicated because the original supplier no longer existed. The knowledge of how to work it resided in a handful of aging specialists who had learned the craft from predecessors who had learned it from theirs, in an unbroken chain stretching back decades. If those specialists retired without training successors, the knowledge would vanish. Not decline. Vanish.

Full manufacture, in other words, is a system that operates as a whole or not at all. You cannot run half a hairspring furnace. You cannot maintain half a clean room. You cannot employ half a watchmaker — a fully qualified Raketa watchmaker requires three years of training at the company’s own school, which itself requires instructors who are already fully qualified watchmakers.

The fixed costs of this system bore no relation to demand. Whether Raketa sold six thousand watches or sixty thousand, the factory consumed roughly the same resources. And between 2012 and 2014, it was losing money every year.

The ruble, the retailers, and the reputational trap

The new owners spent their first six years doing what any rational operator would do: rebuilding capability while seeking customers. They grew the workforce from fifteen to roughly eighty. They hired three Swiss watchmakers — veterans of Rolex, Breguet, and Hautlence — to modernize production methods. They launched the Raketa-Avtomat in 2014, the first new Russian automatic movement in thirty years. They debuted at Baselworld, the global watch industry’s annual showcase.

None of it produced adequate revenue.

The problem was structural, not cosmetic. Raketa had spent two decades as a tourist souvenir — something visitors bought at Moscow airport for a few dollars. Russian retailers associated the name with cheapness. When Henderson-Stewart and von Polier tried to reposition the brand at prices reflecting full-manufacture costs — eighty thousand rubles and above — every domestic retailer refused to stock them. The logic was circular and lethal: no retailer would carry an expensive Raketa because no customer expected an expensive Raketa, and no customer could discover an expensive Raketa because no retailer carried one.

Then the ruble collapsed.

In late 2014, Western sanctions over Crimea and falling oil prices sent the Russian currency into freefall, losing roughly half its value in months. The domestic luxury market — already sceptical of Raketa — contracted sharply. Von Polier’s earlier observation about Western sanctions took on an unintended irony: “I lost nothing, because I didn’t sell anything in the West.” He had nothing to lose in Western markets because he had never gained entry. But the domestic market where he did sell was now in crisis.

By the summer of 2016, six years of investment had produced a factory that could make world-class watches and a market that would not buy them. Revenue from 2012 through 2014 showed consecutive losses. The Baselworld debut had generated press coverage but not purchase orders. The Swiss watchmakers they had hired at six-figure salaries were training a workforce to make watches that had no confirmed buyers at the price required to cover production costs.

The financial logic pointed in one direction. The cultural logic pointed in another. And in August 2016, these two logics collided.

August 2016

Von Polier described the moment with the economy of a man who has rehearsed the sentence many times: “In August, the company almost closed, but was saved by a last-minute investor stepping in.”

He declined to name the investor.

The ambiguity is itself revealing. In the small world of Russian luxury manufacturing, anonymity is either a preference or a necessity, and sometimes both. What matters is what the investment enabled: not a pivot, not a restructuring, but a doubling down.

The owners went all in. They had to, because the alternative was not downsizing — it was destruction. Close the factory, and Russia’s last full-manufacture watchmaking capability dies permanently. The hairspring specialists retire without successors. The Soviet-era alloy sits unused until its properties degrade. The three-year training pipeline at the Petrodvorets Watchmaking School produces its last graduate. Five hundred analog machines, irreplaceable because the Soviet engineers who designed them are dead, fall silent.

Consider what closure would have meant in practical terms. Raketa was one of roughly four companies on earth that produced its own hairsprings — the others being Rolex, Swatch Group, and Seiko. The proprietary Soviet alloy used in those hairsprings existed as a finite stockpile; the original supplier had ceased to exist with the Soviet Union. The specialists who understood the metallurgy of that alloy — its tempering characteristics, its tolerance ranges, its behaviour under the specific conditions of the Petrodvorets furnaces — numbered in single digits. Each year that passed without training successors moved the knowledge closer to extinction.

The binary nature of the choice was determined by physics and biology, not finance. A hairspring furnace does not hibernate. A master watchmaker’s hands do not pause for a decade and resume. The knowledge either transmits or extinguishes.

This was not a turnaround scenario where management could cut costs, find efficiencies, and wait for the market to recover. There was no middle option — no “restructuring” that preserved the hairspring capability while reducing headcount, no “strategic pause” that kept the furnaces warm while the owners sought new capital. The factory’s value was indivisible. Reduce it and you destroy it. The unnamed investor who stepped in understood this, or at least was persuaded of it, and their capital bought not a conventional recovery plan but a reprieve — time to prove that the market would eventually recognise what the factory could do.

They chose transmission.

The all-in playbook

The post-crisis strategy had five elements, each addressing a specific failure of the previous six years.

Monobrand retail. Since no multi-brand retailer would stock Raketa, the company opened its own boutiques. This eliminated the intermediary whose brand associations were the primary obstacle. A customer walking into a Raketa boutique had already self-selected; the souvenir stigma did not follow them through the door.

Price repositioning. The watches moved from tourist-souvenir pricing to a range reflecting full-manufacture costs — a hundredfold increase over Soviet-era levels. This was not aspiration; it was arithmetic. Full manufacture requires a price point that covers full-manufacture costs.

Talent independence. The Petrodvorets Watchmaking School, which Henderson-Stewart and von Polier had established, broke the factory’s dependency on poaching experienced watchmakers from competitors who did not, in Russia, exist in meaningful numbers. The school’s three-year programme created a self-sustaining pipeline: graduates became workers, senior workers became instructors.

Heritage narrative. The communications strategy shifted from competing with Swiss brands on technical grounds — a fight Raketa could not win — to owning a story no Swiss brand could claim. Three centuries of continuous operation. Peter the Great’s founding charter. The only factory in Russia still making watches from raw metal. The narrative was not invented; it was excavated.

External validation. In 2018, the company sought an additional five million euros of investment for a twenty percent stake — pricing the entire enterprise at twenty-five million euros. This was not just capital-raising; it was a market signal. A valuation creates a reference point. It tells suppliers, retailers, and future investors that someone with money believes the operation is worth preserving.

The sanctions paradox

The strategy might have produced steady, unremarkable growth. What it actually produced was a case study in the perverse economics of geopolitical disruption.

The revenue trajectory after the binary choice told a story of accelerating momentum: 54 million rubles in 2016, 228 million by 2021. Respectable growth, but not transformative. The factory was still operating well below its capacity of ten thousand watches per year, producing roughly six thousand. The monobrand boutiques were working, the heritage narrative was gaining traction, but the fundamental challenge remained: Russian consumers who wanted luxury watches still defaulted to Swiss.

Then, in 2022, Western sanctions over Ukraine forced Swiss watch brands — Rolex, Omega, Patek Philippe, the entire industry — out of the Russian market. Overnight, the competitive landscape that had made Raketa’s positioning so difficult — explaining to Russian consumers why they should buy a domestic watch when Swiss alternatives were available — simply disappeared.

Raketa’s revenue doubled, from 228 million rubles in 2021 to 434 million in 2022.

Henderson-Stewart’s reflection on the factory’s Soviet-era machinery took on strategic significance: “If we had modern Swiss machines, they would have stopped; we couldn’t repair them.” The analog machines that international consultants would have recommended replacing were the machines that sanctions could not touch. Every component was Russian-sourced. Every spare part was fabricated internally. The vertical integration that had made the factory ruinously expensive to operate in peacetime made it functionally immune to economic warfare.

The irony was structural. The very features that had made the all-in bet so expensive — maintaining Soviet-era equipment, training watchmakers internally, refusing to outsource component production — were precisely the features that insulated Raketa from the supply-chain disruptions devastating imported luxury goods. A watch brand dependent on Swiss movements would have faced an existential crisis in 2022. Raketa faced a windfall.

By 2024, revenue had reached 452.6 million rubles with net profit of 93.9 million. The workforce stood at 104 specialists — up from fifteen at the nadir, though still a fraction of the eight thousand who had worked there at the Soviet peak. Geneva Watch Days — the industry’s premier showcase since Baselworld’s decline — had included Raketa since 2022. The factory was exporting to sixty countries.

What the binary choice proved

The Raketa story is not a parable about courage. It is a lesson in constraint analysis.

Henderson-Stewart and von Polier did not choose total commitment because they were brave. They chose it because they understood — eventually, painfully, after six years of losses — that their constraints were also their moat. The vertical integration that made the factory expensive was the same vertical integration that made it irreplaceable. The Soviet-era machines that no modern technician could service were the same machines that no Western sanction could disable. The hairspring capability that required continuous investment was the same capability that placed Raketa in a club with three members: Rolex, Swatch Group, and Seiko.

The binary choice succeeded because closure would have destroyed what competition could not replicate. When partial operation is impossible and closure is irreversible, the only rational response to capital starvation is total commitment — not because the odds are favourable, but because the asset’s strategic value increases with every disruption that eliminates alternatives.

For founders in emerging markets who face the same arithmetic — fixed costs that dwarf revenue, markets that refuse to recognise their product’s value, and capabilities that cannot survive interruption — the Raketa lesson is specific. Do not ask whether you can afford to continue. Ask whether anyone could rebuild what you would destroy by stopping. If the answer is no, the choice is already made.

Last updated: April 5, 2026