Investor profile: FINAM Venture Fund. Dmitry Rodionov

Published on December 05, 2007

Investor profile: FINAM Venture Fund. Dmitry Rodionov

    I continue to publish with a slight delay some materials from my blog about venture investments, venture investors and startups IdeaBlog.ru . This material is from the Venture Capitalst's Profile blog section , in which I publish the profile of the next venture investor based on the results of a personal conversation with them once a week and talks about investment preferences and requirements for the Finam venture fund projects. The original article is here .

    Dmitry Rodionov, FINAM
    Rodionov Dmitry Vitalyevich , Project Manager (Venture Investments), Finam High-Tech Investment Center .

    Age: 32 years.

    Amount of funds for investment:about 1.5 billion rubles.

    Projects invested by the fund: Mamba , Runner , MoneyMail , Buka , “Ashmanov and partners” and others.

    Previous jobs: Deputy General Director, Director of the Anti-Crisis Technology and Investment Agency branch, Spring Wireless project manager of the Delta Private Equity Partners private equity fund, and his own projects.

    Contacts:

    Address: Russia, Moscow, ul. Myasnitskaya, 26a,

    bld . 1 Phone +7 (495) 796-93-88 (multi-channel)

    Fax +7 (495) 796-93-89

    E-mail: rodionov@finam.ru

    Website: www.finam.ru

    Company Finam is known in the Russian venture investment market primarily for its investments in Mamba , Begun , MoneyMail , and Buka. Finam invests in venture projects through its High Technology Investment Center, and then “packs” the projects that have reached their design capacity at ZPIF (closed venture investment fund) FINAM - Information Technologies, the shares of which are traded on the stock exchange. This is a kind of preparation of the invested and mature projects in their portfolio for IPO - stock investors, looking at the shares of a closed-end investment investment fund, study the investment fund's portfolio, getting acquainted with the companies whose shares are “packed” in it, and the conclusion of such a company to An IPO in the future will not require a large outreach to investors about what these companies are and what they do. Besides, A closed-end mutual investment fund by additionally issuing shares and placing them on the stock exchange can attract funds from small portfolio investors for their subsequent investment in other promising projects. The capitalization of the FINAM - Information Technology closed-end investment unit investment fund, which, I repeat, does not include all, but only the "ripened" projects invested by the company, now amounts to about 1.6 billion rubles.

    Dmitry Rodionov leads the venture division of the Finam High-Tech Investment Center. He is a physicist by training, he graduated from the Physics Department of Moscow State University. He used to have his own projects in which he attracted venture capital investments, so he knows about venture capital investment both from the start-up and from the investor, which, in my opinion, is very important in this industry. In response to my traditional first question about what has happened over the past year in venture investment in Russia, he replies:

    A growing number of truly venture capital projects are emerging. A year ago, venture capital projects boldly called investments in creating a chain of stores or construction projects. Now there are real venture projects and real venture funds, rather than private equity funds that called themselves venture capital. In many ways, the situation was influenced by state rhetoric in this regard.


    According to Rodionov, the total limit of financial resources Finam is ready to invest in venture projects is about 1.5 billion rubles. This is the amount of free, not yet invested funds, which was at the time of our conversation with him (end of October 2007).

    The maximum in terms of the volume of required investments project, which Finam was considering (together with partners), required investments in the amount of $ 20-25 million. Now there is a project in progress that requires investments in the amount of $ 19 million. This project passed the business stage with business -angel, and is now at a late start-up stage . But projects that require investments of no more than $ 10 million are usually considered. The minimum amount of investment, as a rule, is $ 1 million.

    Investment preferences

    Like the leaders of other venture capital funds, Rodionov would like to finance already launched startups that are at the stages of growth or expansion . However, experiencing, like other venture investors in Russia, an acute shortage of high-quality projects ( about what a high-quality project is in the view of venture investors, read here ) forces the fund to shift to ever earlier stages . Therefore, the fund also invests in projects that are at the seed stage , while giving preference to those projects that synergize with projects already in the Finama portfolio.

    In order for a project that does not synergize with other Finam projects to receive funding from it at the seed stage, the startup, according to Rodionov, must have a very good understanding of the market in which he is going to operate.

    If we talk about preferred industries, then this, of course, is primarily an Internet business, in which Finam has accumulated a lot of experience, which is confirmed by the public part of the company's investment portfolio. But Finam’s interests as a venture investor are not limited to the Internet alone — he is also interested in other technology startups based on technical inventions. Finam signed a cooperation agreement with FSUE Eleron, which is the structure of Rosatom on financing technology startups, including Finam, was interested in the project in the field of 3D object recognition. Investments in joint projects with FSUE Eleron , according to Dmitry Rodionov, will amount to tens of millions of dollars.

    As with other venture capital funds, the main problem for the Finama venture fund is the lack of a business component in most projects. This applies to projects brought by inventors and scientists, as well as often to Internet projects:

    There are many ideas - few entrepreneurs. Literally half of the ideas I want to “set” a good entrepreneur who could monetize these ideas. However, inventors are very poor, as a rule, get along with businessmen who need to build a project’s business, believing that they, people involved in scientific development and invention, must decide how the project will develop as a business. People often come to us with patents for excellent things, they offer to make a product , but have absolutely no idea how to do business. We are a venture fund, we invest in start-ups and help in key moments, but we cannot manage the business of the company ourselves - this should be done by the team of founders of the startup, and we should see that they have thought through and managed everything in terms of organizing the business. Recently, one inventor came to us with a very interesting patent - the typical “zablab of the Research Institute of the Soviet era”. I asked him: what exactly do you need money for? He was surprised: what’s what - we’ll rent an office, buy a car, hire employees, and they will work. Moreover, he had absolutely no idea how he would do BUSINESS. How to make a product represented well, but how to make a business - had no idea. But young start-ups, coming to us with good ideas, very often have no idea how to make a business out of it.


    In connection with the described problems of chronic shortages in the proposed projects of entrepreneurs who are able to do business in development, especially in high-tech projects, Finam tries in similar ( ie high-tech - IdeaBlog.ru) projects to get a controlling stake, because they will need to bring their business team, and without the right to cast a vote, as practice shows, it is very difficult to “cross” the scientists who own the development with the businessmen who monetize it. Without agreement between them, the enterprise is doomed, and a controlling stake allows the fund to successfully develop the business, giving more authority to the business team, to the mutual satisfaction of the profits of all parties. A controlling stake is also sought by Finam in capital-intensive projects requiring large investments.

    When in science-intensive projects it is still necessary to carry out fundamental research, without which building a business is impossible, then Finam does not finance such projects, since, according to Rodionov, “the risks in such projects soar”.

    In Internet projects, when the founders of the project include people who can effectively monetize it, that is, develop the project as a business , Finam often takes only a blocking package (25% +) for its investments.

    The Rodionov’s ideal project is described as follows:

    This is an Internet business that has already come out of the stage when the project has only a bare business model built on original technology patented under American or European patent law, which requires two-stage financing: in the first stage, the project requires $ 1-3 million, for the second - up to $ 10 million. The business model of the project should be run in the invested company - i.e. sales, at least initial ones, are very desirable. The founders of the project should have personal charisma, they themselves should be passionate about the project and should be able to light people with their project. Among the founders - a cool businessman and a highly qualified technical specialist. The IRR (internal rate of return) of the project must be at least 40 - that is, the project must pay off within one and a half to two years, the term of “sitting” of the venture fund in the company is 4-5 years,


    In the process of interviewing venture investors, I often asked them a question: are they ready to finance global projects? And so that the answer was not unfounded, I suggested that they honestly answer the question of whether they agreed to finance Google at the time it was just starting, and despite the fact that at that moment there were already such search engines on the market as Yahoo, AltaVista , Lycos, etc. - after all, many were convinced that there was nothing to “catch” in the search and the market was divided once and for all. I really liked that Rodionov thought for a long time before answering this question, and then honestly answered that he would like to answer “yes”, but “until you come across such a situation, you will not be able to answer this question.” Nevertheless, according to Rodionov, he is looking for global projects that would earn not only in Russian-speaking markets, but would also focus on development as global players. For example, according to the plan, one of the projects invested by Finam should earn 80% of the money in the US market, 15% in Europe and 5% in Russia. True, he notes, a similar business model was already on the market. Rodionov also said that they have a project about which it was announced at the investment council that either this technology will conquer the world or disappear. This suggests that the fund is ready to finance projects that have global ambitions, and not just projects focused on the Russian-speaking market. that they have a project about which it was announced at the investment council that either this technology will conquer the world or disappear. This suggests that the fund is ready to finance projects that have global ambitions, and not just projects focused on the Russian-speaking market. that they have a project about which it was announced at the investment council that either this technology will conquer the world or disappear. This suggests that the fund is ready to finance projects that have global ambitions, and not just projects focused on the Russian-speaking market.

    Regarding the options for “exit” from the invested projects, Rodionov says that he, as a person engaged in venture capital investments, can more clearly understand the focus of companies on selling to strategic investors. Although the “exits” from projects through an IPO are the future, he said.

    Working with projects

    As already mentioned, Finam, according to Rodionov, like other venture investors, is experiencing an acute shortage of high-quality projects with good knowledge of the markets in which they intend to work, a well-thought-out business model, a well-considered development model and a team capable of build and develop a business built on the idea of ​​a startup. Therefore, Finam is actively looking for projects on its own, and not just waiting for startups to come to it themselves.

    On average, 5-7 projects are sent to Finam a week, and the fund finds about 10 projects on its own. Most of them, according to Rodionov, are eliminated due to the fixation of startup founders on technology rather than business, and because startups do not understand what consumer needs their project closes. Because of this, about 1/3 of the projects are screened out. Of the remaining 1/3, they are eliminated due to a lack of understanding by startups about how they will monetize the attracted audience. Also, projects are screened out due to the lack of a “driver” among the founders of the project — a person who is “burning” with the project and who is able to “ignite” others with this drive.

    Like other investors with whom I spoke, I asked Rodionov a question about what he means by the word “team”? Before starting my meetings with investors, it was not entirely clear to me what exactly they mean when talking about the team. After all, often the project is done by 2-3 people who are not going to attract other people to their project for a share in it (except for the investor, of course), but they think of hiring them for a salary, and even know who exactly these people they will hire. These people are not partners, there is no point in hiring them before receiving financing - i.e. at the time of submitting the project to the investor, these often very important members of the startup team actually have nothing to do with it yet. So, in this case, the project, it turns out, does not have a normal team? Rodionov on this described what he understands by the word “team” as follows:

    A “team” is at least one person who has the charisma of a leader, believes in his project, and knows how to “infect” others with work on the project, who adequately evaluates the market in which the startup will operate. Moreover, he makes this assessment as an entrepreneur - that is, from the point of view of building a business and monetizing the project.


    By the way, to the attention of start-ups implementing Internet projects: “Finam” considers “ targeted” ( ie specialized ) Internet projects, the basis of which business model is generating revenue from advertising. If the business model is realistic, of course. And realism is best demonstrated, as mentioned above, at least by initial sales - then we can say that the business model is realistic, and not “taken from the ceiling”.

    The decision to finance a project is usually made within a period of 3 to 6 months. During this time, the fund not only carries out intensive due diligence of the project, but also finalizes, together with the startups, its business model and development plan for the company. Rodionov says he does not remember a single project in which this would not be required.

    According to Rodionov, “Finam” helps a lot in venture investment the name of the company and its reputation. He agrees that the reputation of the venture investor and his publicity are the best guarantee for the startup that no one will steal his project, realize it without him, and also will not throw him out of the business by raider methods after the project develops.

    Reprinting of the article is permitted only with the obligatory indication of the author (Arthur Welf) and with the obligatory active link to the blog about venture investments, venture investors and startups IdeaBlog.ru

    Leave your feedback about working with Finam, about negotiations with him, as well as read reviews from others You can in this thread on the IdeaBlog.ru forum .

    Original articleis here .

    UPD: This article was posted the night before last night on the Startups collective blog, and then someone overwhelmed it overnight so much that it stopped appearing in it, and I transferred it to my personal blog. But since I guess who made the night before last, before the main mass of habranarod, such a "flash mob", is pulled onto Habr, I decided to try again to post the article in Startups, especially since it was on my personal blog , they raised her rating. We'll see…