The Secret of the Firm: Venture Funds Flee from Russia

    The Secret of the Firm published a material entitled “Emergency exit: Venture capital funds flee Russia.”

    The article discusses the reasons why venture investors and funds curtail their activities in Russia and reorient to foreign markets, primarily in Southeast Asia.

    How did it happen that since 2012, when the Russian Federation ranked fourth in Europe in terms of investments in high-tech industries, the market decreased by 26% in 2014 alone, and the value of companies in portfolios fell, according to various estimates, from 30 to 100%?

    Megamind provides the most interesting excerpts from the article.

    Funds are now wary of Russian companies. “Previously, we entered the project when we knew that we would disperse it, some kind of partner fund would come and report more money. Now we are afraid to do this, ”says Igor Ryabenky, partner at Altair Capital.

    The goal of any fund is to exit the project profitably, that is, to sell its stake at the highest price. It is almost impossible to do this with Russian projects right now - the value of investments that funds made in dollars doubled due to devaluation, and the valuation of companies decreased. “This is a blow from us for us, because we cannot make any exits. The project grew to our estimates, and then the ruble fell on it, ”Ryabenky says. Now investors take a wait and see attitude - they hope for improvement in the situation or the development of projects in foreign markets, which can allow companies to grow in price and attract the interest of other investors.

    This year, almost none of the venture capital funds invested in Russian companies. Runa Capital, ABRT, The Untitled Ventures and others, although they claim to not leave Russia, reoriented themselves to foreign markets last year.

    “First of all, this is Israel, where there are a lot of global projects, the second one is Silicon Valley, the third one is Southeast Asia, the most convenient point of presence is Singapore,” says Konstantin Sinyushin, partner of The Untitled Ventures fund.

    The head of Life.SREDA, Vladislav Solodky, said that after the news about the release of their Lifepay portfolio project in Asia came to Asian media, representatives of the Government of Hong Kong and Singapore contacted the fund - they offered their support, for example, a 70% discount on rental premises in the first year and 50% in the next three years. Plus tax credits, assistance with visas and co-investments. Companies that enjoy government support live in a separate area of ​​Singapore: the famous INSEAD business school is located in high skyscrapers, nearby are ministries, research agencies and technology companies. “We have long been mentally abroad. But if working with German, British or American startups from Moscow is possible, then it is difficult with Asian companies, ”says Solodky.

    Dmitry Alimov, partner of the Frontier Ventures fund, is also opening an office in Singapore - last year the company "decided to expand the geography of investments." We traveled around the world for a year and explored various markets, as a result, we realized that Southeast Asia would be a priority.

    “All this is not related to where the political system is,” says Belousov, who spends almost all his time in Singapore. “Actually, Singapore is not quite a democracy, there is a well-organized authoritarian system in which everyone nevertheless votes, and it’s very good to conduct business and huge investments there. Or China, for example, there is certainly no democracy there - although there is no dictatorship and a certain electorality, it is very closed, access to Youtube, Facebook, Twitter is denied, there are no free elections, and so on. Nevertheless, there are a lot of startups, innovations and international investments. Where does Alibaba come from? This is international capitalization. Mainly because there is stability, there is almost no outwardly political aggressiveness, and there is a long-term plan. ”

    Since the beginning of this year, the law on deoffshorization came into force. This was another incentive for venture investors to abandon work in Russia. The law introduces the concept of “controlled foreign company” - entrepreneurs have a duty to notify the tax about their participation in foreign companies.

    It was assumed that the deadline for notifications would be limited to April 1, but it was extended until June 15. Now companies with capital of Russian companies or residents become accountable to Russian law. Alexander Turkot, a partner at Maxfield Capital, is confident that the deoffshorization law pushes funds to leave the country: “This is a difficult story for foundations, because if it is invested in Silicon Valley or in Argentina more than 10% in an American or any other company then this company in the chain may fall under Russian regulation. ”

    Some funds are linked by agreements on investments in Russia. In 2013, Almaz Capital received investments from the EBRD for investments in Russian projects and the CIS. There are funds focused only on Russian projects, for example, Prostor Capital (in the portfolio of Diary.ru, Umi and others) told Secret that they would look for niches in the existing market. The fund plans to consolidate part of the assets within various segments and launch individual projects on international markets.

    Large companies that create investment units and invest in third-party projects will be able to partially compensate for the departure of venture capital funds. In Russia, Sberbank is working in this direction, and Qiwi has also created the Qiwi Venture fund, which is invested in financial startups.

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