January 28, 2009 at 3:55 p.m.Eduard Shenderovich: “Investor must be optimistic”
Eduard Shenderovich - a man of numerous and diverse talents: poet, philosopher, philologist, entrepreneur. And to all this - a successful investor, founder and managing director of the management company Kite Ventures. It is possible that the combination of different and seemingly contradictory abilities allows him to invest in the right projects, at the right time and in the right amount. At his lecture for students of the specialization “Management in the field of Internet technologies”, Eduard Shenderovich spoke the basics of the complicated art of investing.
“Where can I get the investment?”, With this question Eduard Shenderovich began his lecture. To answer the question, he turned to the example of his own company: “In the fall, we launched the Kite Ventures venture capital fund and at the moment we have already invested in two projects, a mobile service and a game. And two more projects are currently under consideration. We have a medium-sized venture capital fund, so for me you can see what the average venture capitalist is doing. I am attracted by the opportunity to invest in projects from 1 million and above. At the same time, with a fund of 30 million, I can not invest more than 10-12 projects. It should be noted that any fund is built so that there is a specific amount of money in the fund itself, some of which is spent on management. The investment strategy is also being built from the size of the fund. General management costs
Any investment fund selects projects for investment among a variety of applications. In his lecture, the managing director of Kite Ventures touched on the scheme of this process and the criteria for evaluating projects.
“A metaphor is often used to describe the process of identifying projects for investment: a Draper rocket. This refers to Tim Draper, a significant venture capitalist, founder of the DFJ fund. For example, first comes to the fund 30,000 applications. Only 800 of them meet with the owners. Then further negotiations are held - with 100-150 projects. And only 10-12 of the total volume of projects reviewed are funded. And in the future, only one of the invested projects will bring significant income. Of course, this is the perfect picture. In Russia, the situation is somewhat different from that described. There are not many projects and it is difficult to find even 1000 to consider. For example, from November 1 to December 1, I met with representatives of only 20 companies. Of course, a decrease in the number of projects also depends on the crisis. By the way, here it pleases
When making investment decisions, we consider projects according to three criteria.
1. People
2. Product
3. Market
In my opinion, the main criterion among these is the market. A company can bring money only if it operates in a market where this money is. Or it can receive money from other markets. Therefore, in any case, one must clearly understand how the product will make money in a particular market. To illustrate, I’ll tell you about two similar products: LiveJournal and MySpace. When we founded SUP, the company's activities began with the purchase of a part of LJ from Six Apart. It was a good start from the point of view that we loudly declared ourselves. There may have been many different errors in the initial period of work. But the main thing was that blogs are very difficult to monetize. Not only LiveJournal and not only in Russia, but in the market as a whole. There are, of course, exceptions, but rather only in certain vertical segments. LJ was originally conceived by the creator as a non-profit project - it was a small handicraft business, not designed for the market, created for friends. And when he became uninteresting - the project was sold. Unlike LJ, MySpace was originally conceived as a commercial project product, the purpose of which was to receive money. Now it has grown significantly and is a fairly profitable business. It is obvious that LJ and MySpace had similar ideas, but the approach to the market was different. This determined the further development of these projects. ” Now it has grown significantly and is a fairly profitable business. It is obvious that LJ and MySpace had similar ideas, but the approach to the market was different. This determined the further development of these projects. ” Now it has grown significantly and is a fairly profitable business. It is obvious that LJ and MySpace had similar ideas, but the approach to the market was different. This determined the further development of these projects. ”
In investing, it is important not only the question of “who to invest in”, but also the question of “when to invest”. Therefore, separately, Eduard Shenderovich spoke about the stages for investing.
“There are various stages to investing in companies, and here, as Charlie Chaplin said, to paraphrase Shakespeare,“ inputs and outputs are important. ” When to invest? There is a classic company development schedule that highlights the stages of the project launch - when nothing is known, growth, stable existence and stagnation / decline. Most investors enter at the beginning of growth and exit at the end of it. The exit is extremely important when investing. Now that the IPO is almost closed for companies, the only way to go is selling the company. The sale occurs when the investor sees that the growth of the company has slowed down and it is more profitable to invest in other projects. ”
Answering the question “where” and “when”, the investor answers the question “how much”.
“An equally important question: how much to invest? The most popular way to determine this is by contract, when both interested companies jointly evaluate the project. At the same time, the usual financial methods are not applicable here. Therefore, in Silicon Valley, a special method was invented - venture capital. The assessment is carried out as follows.
1. The estimated value of the company at the exit, that is, after the expiration of the investment period.
2. A certain “percentage of risk” x (in fractions of one) is determined, which shows the probability that the project may “not fire”.
3. The real value of the company is calculated as the ratio of the predicted value to the amount (1 + x) of degree n, where n is the number of years in the investment period. Of course, this method is not accurate and subjective, but it allows you to have at least some kind of assessment. "
During the lecture, Eduard Shenderovich answered a number of questions.
- What do you think about the monetization of the Odnoklassniki project?
- An interesting situation has developed with them. At first it was a service made in the likeness of Classmates. Then they began to use another scheme and technology developed by one Latvian company. When they realized that they had a lot of traffic, they started trying to monetize it. And now they are doing this, admittedly, quite successfully. At the last CIB, Albert (Popkov) said that 25 million should be earned in 2008. I can’t judge how true this figure is, but the fact that they earn a lot at least on those paid services with which each account is hung is undoubtedly.
- Is an ideal investor a pessimist or an optimist?
- Of course, the investor should be optimistic. Otherwise, he will not invest in those projects that are just starting to develop.
- What, in your opinion, is the main mistake of startups when trying to get investments?
“It seems to me that the main mistake here is to arrive too soon.” After all, a startup will have only one chance.
“Where can I get the investment?”, With this question Eduard Shenderovich began his lecture. To answer the question, he turned to the example of his own company: “In the fall, we launched the Kite Ventures venture capital fund and at the moment we have already invested in two projects, a mobile service and a game. And two more projects are currently under consideration. We have a medium-sized venture capital fund, so for me you can see what the average venture capitalist is doing. I am attracted by the opportunity to invest in projects from 1 million and above. At the same time, with a fund of 30 million, I can not invest more than 10-12 projects. It should be noted that any fund is built so that there is a specific amount of money in the fund itself, some of which is spent on management. The investment strategy is also being built from the size of the fund. General management costs
Any investment fund selects projects for investment among a variety of applications. In his lecture, the managing director of Kite Ventures touched on the scheme of this process and the criteria for evaluating projects.
“A metaphor is often used to describe the process of identifying projects for investment: a Draper rocket. This refers to Tim Draper, a significant venture capitalist, founder of the DFJ fund. For example, first comes to the fund 30,000 applications. Only 800 of them meet with the owners. Then further negotiations are held - with 100-150 projects. And only 10-12 of the total volume of projects reviewed are funded. And in the future, only one of the invested projects will bring significant income. Of course, this is the perfect picture. In Russia, the situation is somewhat different from that described. There are not many projects and it is difficult to find even 1000 to consider. For example, from November 1 to December 1, I met with representatives of only 20 companies. Of course, a decrease in the number of projects also depends on the crisis. By the way, here it pleases
When making investment decisions, we consider projects according to three criteria.
1. People
2. Product
3. Market
In my opinion, the main criterion among these is the market. A company can bring money only if it operates in a market where this money is. Or it can receive money from other markets. Therefore, in any case, one must clearly understand how the product will make money in a particular market. To illustrate, I’ll tell you about two similar products: LiveJournal and MySpace. When we founded SUP, the company's activities began with the purchase of a part of LJ from Six Apart. It was a good start from the point of view that we loudly declared ourselves. There may have been many different errors in the initial period of work. But the main thing was that blogs are very difficult to monetize. Not only LiveJournal and not only in Russia, but in the market as a whole. There are, of course, exceptions, but rather only in certain vertical segments. LJ was originally conceived by the creator as a non-profit project - it was a small handicraft business, not designed for the market, created for friends. And when he became uninteresting - the project was sold. Unlike LJ, MySpace was originally conceived as a commercial project product, the purpose of which was to receive money. Now it has grown significantly and is a fairly profitable business. It is obvious that LJ and MySpace had similar ideas, but the approach to the market was different. This determined the further development of these projects. ” Now it has grown significantly and is a fairly profitable business. It is obvious that LJ and MySpace had similar ideas, but the approach to the market was different. This determined the further development of these projects. ” Now it has grown significantly and is a fairly profitable business. It is obvious that LJ and MySpace had similar ideas, but the approach to the market was different. This determined the further development of these projects. ”
In investing, it is important not only the question of “who to invest in”, but also the question of “when to invest”. Therefore, separately, Eduard Shenderovich spoke about the stages for investing.
“There are various stages to investing in companies, and here, as Charlie Chaplin said, to paraphrase Shakespeare,“ inputs and outputs are important. ” When to invest? There is a classic company development schedule that highlights the stages of the project launch - when nothing is known, growth, stable existence and stagnation / decline. Most investors enter at the beginning of growth and exit at the end of it. The exit is extremely important when investing. Now that the IPO is almost closed for companies, the only way to go is selling the company. The sale occurs when the investor sees that the growth of the company has slowed down and it is more profitable to invest in other projects. ”
Answering the question “where” and “when”, the investor answers the question “how much”.
“An equally important question: how much to invest? The most popular way to determine this is by contract, when both interested companies jointly evaluate the project. At the same time, the usual financial methods are not applicable here. Therefore, in Silicon Valley, a special method was invented - venture capital. The assessment is carried out as follows.
1. The estimated value of the company at the exit, that is, after the expiration of the investment period.
2. A certain “percentage of risk” x (in fractions of one) is determined, which shows the probability that the project may “not fire”.
3. The real value of the company is calculated as the ratio of the predicted value to the amount (1 + x) of degree n, where n is the number of years in the investment period. Of course, this method is not accurate and subjective, but it allows you to have at least some kind of assessment. "
During the lecture, Eduard Shenderovich answered a number of questions.
- What do you think about the monetization of the Odnoklassniki project?
- An interesting situation has developed with them. At first it was a service made in the likeness of Classmates. Then they began to use another scheme and technology developed by one Latvian company. When they realized that they had a lot of traffic, they started trying to monetize it. And now they are doing this, admittedly, quite successfully. At the last CIB, Albert (Popkov) said that 25 million should be earned in 2008. I can’t judge how true this figure is, but the fact that they earn a lot at least on those paid services with which each account is hung is undoubtedly.
- Is an ideal investor a pessimist or an optimist?
- Of course, the investor should be optimistic. Otherwise, he will not invest in those projects that are just starting to develop.
- What, in your opinion, is the main mistake of startups when trying to get investments?
“It seems to me that the main mistake here is to arrive too soon.” After all, a startup will have only one chance.