Founder of Vestor.In venture capital fund compared business innovation market with moonshine

In 2014, Vestor.In entered the top ten most active venture capital funds in the country according to the rating of the Firrma portal. The founder of the fund is business angel Pavel Cherkashin. Previously, he managed to work in the Russian division of Microsoft, invest in several projects, found Sputnik Labs and Actis Systems . In 2011, the Russian Venture Company ( RVC ) recognized him as "Business Angel of the Year."

In an interview with Vedomosti, Pavel Cherkashin spoke about the global crisis of venture investment, the Russian venture market, star projects, own venture funds, and much more.

"Megamind" gives the most interesting statements from the interview .

On the situation in the Russian venture capital market

The situation in Russia is paradoxical. On the one hand, the market has a huge amount of money available for venture investment. People with this money, potential fund investors see how effective a model of venture financing based on Western experience can be. On the other hand, they do not really understand where to carry this money and how to invest it - directly in projects or funds or not to invest now and wait for better times.

In Russia, at least 3,000-4,000 new startups are launched per year. And this number increases during periods of crisis. When the opportunities to get into a large corporation end, the talented manager thinks: “Finally, I found the time and place to do my startup.” The number of startups is growing, the overall level of leaders of these startups is also rising.

On the function of state institutions for the development of business projects

The function of development institutions is to ensure the cycle of innovation. This market is easier to imagine as a moonshine. There is a vat in which, under high competitive pressure, ideas, entrepreneurs, investors, incubators ferment. Climbing corporations there is harmful and inefficient. The best pairs from this vat through a cooling coil (venture capital funds) should turn into pure spirit of innovation for the development of large corporations. Instead, corporations, through their long-term tasks (foresight), foster interest in the development of new innovations within the vat with braga.
Development institutes built a very efficient vat. Any graduate of the university understands that he has a great chance not to work for his uncle, but to work for himself, making his own startup. He can get all the necessary introductory, financial support for this, he knows where and how to go, where to find mentors, an idea, and so on.

But the pressure of startups and their investors rests in traffic jams at the exit. The coil does not work, because corporations are not ready to buy startups, even when they need them for development. I had several conversations with heads of Russian corporations. They say we have an M&A department, but they only deal with projects from half a billion dollars, but if we want to buy a startup for $ 10 million, we can’t technically do it - the board will not want to consider such a deal.

On overheating of the global venture market

Yes, there is a feeling of overheating. However, the situation is very different from the late 1990s. Then the bubble was inflated on the same expectations, companies were valued with multiples of 200-300 to their annual income. Economically, this was not supported by anything. Overheating is now determined by the investment model found by large investors in Silicon Valley. This model is built on the principle for investors “last come, first come out” and allows you to build an investment pyramid without having to go public. That is, liquidity is provided in this pyramid by new incoming investors, and not by the open market through public sale of shares. A large number of such pyramids appear, and one of them will certainly begin to collapse.

About your first venture capital fund

The first fund was $ 10 million. We raised money two years ago and actively invested. Now we have completed the investment cycle of the first fund, left only reserves for the reinvestment of existing companies and look more in terms of the possibility of exit. In parallel, we are collecting the second fund. We completely do the second fund with an orientation on this strategy - to look for the best international startups and bring them to the bazaar in Silicon Valley.
We have more than 10 investors in the first fund. In part, these are buyers of my past businesses, almost all private individuals are entrepreneurs or investment bankers who understand how this business works. There are European investment bankers who at one time scattered information about this fund on their network, and we quickly collected money from private European investors. More than half of all the money is mine and my partner Andrei Gurin, and the rest is European money. We invested in 15 projects. At the moment, there are 11. We have sold two, two have written off.

About the difference between stellar and just good projects

About the star you will not know until the last. The principle of the contrary works here. What cannot be saved must be discarded, and the sooner you do this, the easier it will work. Of the remaining ones, you slowly begin to cut off the excess by selling what is called suitcases without handles. The company can develop well from the point of view of the founder: it receives money, pays a salary, grows by 30% per year. But the investor sees that this is not the story he was buying. Then he is looking for any options to return his money in order to reinvest them. Because when a star company shoots, you must have money to reinvest in it.

About the second fund

It is designed for $ 30 million. We will make the first closure at the end of summer. We will collect a minimum to start investing with the most loyal investors - there are deals that are ready for this. And by the end of the year we will get the remaining money with more conservative investors. The strategy of both the first and second funds is based on co-investment.
The fund has a life of seven years. Usually it is structured like this: two years - the investment period, three years - the period for which we must go, and another two years in reserve. At this time, we no longer receive management fees. In fact, you need to start selling the day after you made the investment.

The second fund will have a significantly larger share of Russian money. More and more Russian investors are interested in this topic - we must use it. We have a good model, they have money, but no ideas. A great basis for collaboration.

About venture investors

These are people with free capital of more than $ 10 million. Venture investments should not exceed 10% of the portfolio. A check for entering a venture fund is usually from $ 1 million. If an investor wants to invest in several funds, he must have a capital of several million. We have investors who came from the business environment. It is enough for them to look in the eye, listen to the story, look at the documents, and they are ready to say that they can participate in this story more actively than the traditional financial investor.