Venture Investor Profile: E-Trust Group

    On November 19, I launched my stand alone blog about venture capital investments, venture capital investors and startups - IdeaBlog.ru , and here I will publish some materials from it with a delay of several days. The blog has a section called “Venture Capitalist's Profile”, and this material is from this section.

    Dossier: Maxim Karimov, E-Trust Group
    Karimov Remirovich Maxim , a partner group of business angels " E-Trust Group is " Age : 36 years "working" business angel full-time since 2003, it is the only thing in the moment. Amount of funds for investment : $ 10 million. Previous jobs : Top-manager of Norilsk Nickel and Basel. Contacts

    Maxim Karimov, E-Trust Group













    :

    Regus Business Center, Smolenskaya Square, 3, 119099, Moscow, Russia.

    Phone: +7 (095) 9338944

    Fax: +7 (095) 9378290

    e-mail: info@e-trustgroup.com

    Website:www.e-trustgroup.ru

    Group of business angels E-Trust Group is an informal association of business angels, most of which are current or former top managers of the largest Russian companies. The group was created and has been operating since 2003. The “face” of the group is Maxim Karimov, a former top manager of Norilsk Nickel and Basic Element, the other partners of the group prefer not to advertise themselves. Karimov does not receive remuneration from partners in the E-Trust Groupand he is not managing general funds in the generally accepted sense: each of the partners makes a decision on investing in a particular project on his own, although most of the preparatory work before investing in the project (evaluation, examination, negotiations with startups) is carried out by Karimov. The partners of the group plan to invest $ 10 million in venture projects, of which about 10-15% are currently invested. The group is experiencing a shortage of high-quality, well-developed venture projects that would fit the group’s investment criteria (more on this below ). The shortage of projects is clearly indicated by the fact that the group has funded only 3 projects over 4 years, and the group was able to invest only 10-15% of the funds, as mentioned above.

    According to Karimov, the assertion that there is not enough venture capital in Russia is incorrect: they are most likely not given ( for those projects that startups bring - IdeaBlog.ru ). “It’s important for me to understand the business model of the project,” Karimov says. - And, first of all, I need to understand the risks associated with the implementation of the project. I initially act as a skeptic, critic of projects. " According to him, finding the application of technology is no less important than developing it.

    On average, on a day, Karimov considers 4-5 Executive Summary of projects, most are eliminated immediately: the main reasons for the refusals are the lack of a business model for the project, as well as the discrepancy between the projects and investors' expectations. As Karimov figuratively puts it, "the project should suit the investor just as a good suit suits a person." In other words, each investor has his own idea of ​​an ideal project, and in order for such an investor to invest in a particular startup, it is necessary that the project be as close as possible to the “ideal”. Karimov advises start -

    ups who are at the seed stage to start with the Bortnik Fund ( IdeaBlog.ru will write more about the Bortnik Fund a bit later ), namely with its programSTART : according to Karimov, there is actually a very competitive environment, and this fund, like everyone else, lacks thoughtful and high-quality projects. “Their money is not enough for business development,” Karimov says, “but they give an impetus."

    Before addressing business angels and venture capital funds, Karimov advises working well, first of all, on the Executive Summary of the project. According to him, this document should be no more than 3 pages (although it is desirable to keep within 1 page) and should contain significant aspects of a startup as a business, which are important for an investor. Karimov does not go to startups on his own. According to him, this is fundamental: the way the startup actively seeks investments, convinces investors of the advantages of his project, tries to use every possible opportunity to launch his startup, gives an idea of ​​the psychology of the startup and characterizes whether he will also be active “Squeeze everything out of all possible situations” and in business.

    As already mentioned, the E-Trust Group currently has 3 projects in its portfolio. There was a fourth one, however, the founder of the startup bought from the investor a share in the project, and as a result, this project did not bring either profit or loss. The total investment in these 3 projects amounted to about $ 1 million - maybe a little more. The group has not yet completed exits from invested projects.

    In response to the question of what prevents him from investing in Russia (journalists like to speculate on the subject of a poor investment climate, a contradictory tax system and unclear legislation), Karimov replies that in Russia there are no unsolvable problems, he does not demand anything from the state and does not complains, if only there would be more good projects, and everything would be fine. And he adds that his investment opportunities are not realized, since he has nowhere to invest the funds planned for investment.

    Investment preferences

    Like all venture investors, Karimov is looking for projects that are global in nature - that is, those whose products or services will be in demand in different countries and in large markets. Like other venture investors, Karimov is very interested in the business model of startups proposed for investment. However, unlike most other venture investors, Karimov, according to him, will not refuse to finance the project due to the lack of a team, although the group’s website says that a professional management team is needed to ensure the development of the project after receiving funding. Moreover: Karimov is ready to rebuild the business component of the startup on his own - it seems that he is even more interested in projects where he can build and run a business,

    The funding limit for one project Karimov determines the amount of $ 1 million. This is not the average, but the maximum amount of investment in one project. Searches for projects that are in the seed and startup stages .

    Although in response to a question about which industries E-Trust Group prefers to invest in startups , Karimov answers fairly standardly - IT, software, Internet projects - but with more detailed questioning it turned out that the ideal project for Karimov looks like this:
    “This is a patented technical solution that can offer the market a new and marketable product, all of whose components are manufactured or can be outsourced ( that is, there is no need to build a plant - IdeaBlog.ru ). A start-up should be actually an engineering company that does not have significant funds invested in tangible assets, and product distribution should be possible through existing distribution networks ( so as not to invest heavily in building a distribution network ). ROI ( Return On Investments - IdeaBlog.ru ) must be at least tenfold for 3-4 years (those. Karimov expects a minimum tenfold increase in the value of his investment over 3-4 years - IdeaBlog.ru ), but the more, of course, the better :). "A business should be able to reach a sales volume of at least $ 10 million within a couple of years."

    It seemed to me that the presence of a patented technical solution is very important for Karimov, and so that the patent would protect the technology from all sides. He told the story of how a startup from far abroad addressed him with an interesting project, which made it possible to download any song currently playing on any radio station by sending an SMS message to a short number. He did not begin to finance this project due to the fact that, according to him, the patent from the startup did not fully protect the technology. Instead of a patent, there may be a patent application that has passed examination - according to patent law, protection of an invention or utility model is provided from the moment of filing a patent application.
    When investing money, Karimov seeks to obtain a controlling stake (50% + 1 vote), although, apparently, he is flexible in these matters - in response to my question, does the startup have “veto power” when making strategic decisions, he He replies that he is ready to give the start-up such a right to eliminate the fears of the start-up, although this is an additional risk for him as an investor, but adds that nothing happens for nothing and in this case, the start-up will also have to give up something. It seems that this is a sound position.

    Terms of investment

    As already mentioned, Karimov seeks to get a share in the invested business of 50% + 1 vote. Given that he usually invests in seed-stage projectsand at this stage, according to Karimov, it is impossible to accurately determine the size of the required investments and the project may require more investments in the future than planned, the investment conditions do not seem draconian. All the more so in this case Karimov is ready to take on the used of most of the work on the organization and management of startup businesses. We can assume that with this option, the startup will receive not only investments, but also an experienced businessman who is very actively involved in building and developing the business as a partner, and under such conditions, 50% + 1 vote is very good.
    As a rule, Karimov also makes conditions so that 100% of the profit from the first sales of the startup goes to return on investment, and after the investment is returned, the profit is divided according to the distribution of shares.

    The original article is here .

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