Press about RVC

Venture Transactions Market in Russia Reaches $248.1 Million over Six Months

Source: TASS

The market for venture transactions in Russia for six months of this year grew by 161% compared to the same period last year, according to the annual review of the Russian venture industry “MoneyTree: venture capital market navigator” for 2018 and the first half of 2019, presented by Russian Venture Company (RVC) and PwC.

“The market for venture transactions in Russia for six months of 2019 increased by 161% compared to the same period last year and reached $248.1 million. In total, 129 transactions were concluded on the market, compared with 87 transactions in the first half of 2018. The average investment check doubled — from $1.5 million to $3.1 million,” the press service of RVC reports information from the review.

At the end of 2018, the market grew by 78% to $433.7 million as opposed to $243.7 million in 2017. At the same time, the number of transactions compared to 2017 slightly decreased — from 205 to 195 transactions.

“Thus, the Russian venture capital market showed almost three-fold growth in the first half of 2019 and a twofold increase in 2018 compared to 2017,” says the press service.

The average transaction size in the first half of 2019 increased to $3.1 million. A year ago, this figure was equal to $1.5 million. Noteworthy is the almost seven-fold increase in the average transaction size at the expansion stage (from $2 million to $13.3 million).

The positive dynamics of this indicator is associated with the transformation of the venture model and the gradual blurring of the boundaries between venture and direct investment. At an early stage, the average transaction amount increased 2.5 times (from $0.9 million to $2.3 million). At the start-up stage, there was a twofold increase in volumes — from $1.2 million to $2.7 million.

Largest deals and industry leaders

According to the report, the most significant deals were the purchase of an 18.7% stake in by AFK Sistema in March 2019 for $119.3 million, a deal involving RDIF, Rusnano Sistema Sicar and WayRay start-up for a total of $80 million in September 2018, as well as another deal by AFK Sistema and in December 2018 in the amount of $57 million.

“In terms of the stage structure, investor demand continues to shift towards more mature projects. In the first half of 2019, as many as 60% of the total investment fell on the expansion stage, while in the first half of 2018, this took 55%. In 2018, as many as 80% of all transactions in value terms accounted for the expansion stage, in 2017, their share was 68”, the authors of the review believe.

The information technology sector traditionally remains the leader as to the number of venture capital deals and as to the number of attracted investments.

According to the results of the first half of 2019, the sector showed a positive trend both in the number of transactions and in the total amount of funds raised. At the same time, the leader was an e-commerce subsector. In 2018, transactions in the information technology sector accounted for 94% of the total amount of all transactions in the market. The share of biotechnology and industrial technology sectors was 3.3% and 2.7%, respectively.

Corporate investors are becoming increasingly active players in the venture capital market. In value terms, the volume of such transactions almost tripled — from $34 million in 2017 to $89.9 million in 2018. The most active venture investors were Sberbank, Yandex, MTS, and Mail.Ru.

According to the results of six months of 2019, thirteen investors withdrew, which is eight more exits than in the first half of 2018. Their total value amounted to $53.2 million. The number of investor exits in 2018 increased by 7% to 32 transactions, and the total value increased by 61% to $128.9 million, compared with $79.9 million in 2017. The largest exit was the purchase of the service by MTS in February 2018 for $55 million, which was an exit for iTech Capital, Sergey Solonin, and a number of investors.

A new stage in the development of the venture capital market

“The Russian venture capital market is experiencing a new stage of development, and its performance has shown steady positive dynamics for the third year in a row. At the same time, the landscape of the venture capital industry, the structure of the industry, and stage preferences are gradually transforming along the lines of mature markets of Western countries. A key factor in the growth of capital supply is becoming corporate players who are actively developing venture tools and form a portfolio of innovative projects. Creating corporate venture capital funds, providing them with financial leverage and expert support will become one of the priorities of RVC in the coming years,” the press service quoted Aleksey Basov, Deputy General Director and Investment Director of RVC.

According to Oleg Malyshev, the head of PwC transaction support practice in Russia, the total volume of the Russian venture ecosystem in 2018 amounted to $662 million, which is 61% more than a year earlier; in the first half of 2019, the market showed a double growth compared to the first half of the 2018 year, amounting to $348 million

“This may indicate market development, as Russian investors participate in large transactions with international funds, although they often act as minority investors in investment rounds. The optimism of investors in connection with the gradual stabilization of the economy, the growth of activity of corporate funds, the interest of foreign strategic investors will also further strengthen the Russian venture capital market,” the press service of RVC quoted Malyshev.

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