Russian venture capital market has shown a significant recovery in 2016, although it has not reached the level of two years ago. At the same time, Russian funds are increasingly investing in foreign companies
In the period from 1 December 2015 to 1 December 2016, the Russian venture capital funds have made 390 transactions, according to the study of the media resource Firrma conducted with the support of Russian Venture Company and Ernst & Young (it is at the disposal of RBC). Last year, researchers counted only 313 transactions. Therefore, their number increased by 24.6%. However, two years ago, the number of deals was much larger — more than 450.
According to the study, the number of Russian funds that in the past couple of years made at least one transaction with a domestic company at the same time decreased from 54 in 2014 to 42 this year.
In general, classical foundations were quite inert this year as Firrma concludes. The publication attributes it to the fact that many have already completed the active phase of investment and now raise money for the second funds which is in the current economic situation is not easy.
Most of the transactions in 2016 took place at the "seed" stage, and the most active investor, as well as last year, became the Foundation for Development of Internet Initiatives (FRII), invested a total of $ 19.2 million in 91 projects. At the same time, the first five classic funds entered into 70 transactions during this year, and the sum of their total investment has exceeded $ 160 million.
The President of the Sistema Venture Capital Fund Alexei Katkov confirms that more and more investment transactions are made at an early stage of the project. However, he explains the trend as not shortage of money in the market, but a high level of competition for the technology, which forces companies to continuously test the hypothesis. New technological trends appear much more often, said Katkov. In 2016, artificial intelligence and machine learning "skyrocketed", as well as virtual and augmented reality, neural networks and telemedicine, lists the expert, adding that almost all of the projects in these areas are at the "seed" stage.
In the future, at the expense of projects that have been formed over the past five years, the number of transactions in the later stages will increase, predicts the portfolio manager of FRII Sergey Negodayev.
Another trend noted in the study is the globalisation of the venture capital industry. Russian funds actively invested in companies abroad, and the total number of transactions with domestic start-ups, by contrast, has declined over the year by about 20%. Partner of Venture Flint Capital Fund Andrei Gershfeld attributes it to a more stable economic situation in the international market. Furthermore, it is easier to find buyers there.
In turn, foreigners have become more willing to enter the Russian venture market. If, in 2014, only five foreign funds invested in start-ups in Russia, then in 2015 — 13, and in 2016 — 17. In total, in 2016, they carried out 32 investments, which is two and a half times more than last year.
According to Negodyaev, IT-developments in Russia are five to ten times cheaper than in the US or Europe, with the same high level of quality. Thanks to this, Russian projects have good prospects in the markets of Southeast Asia, the Middle East and Latin America.
"Russia is one of the world's largest countries in terms of Internet users, institutes of technology and personnel, and, of course, our market is interesting for global players", confirms Mr. Katkov.
The number of "exits" (successful exits of funds from projects) in the Russian venture industry, however, is "consistently low", although it is growing. According to Firrma, in 2016, Russian funds reported the sale of a stake in its 33 projects, while the previous year the number of "exits" was one and a half times less — 22.