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Experts predict growth of Russian venture capital market by almost 30 times

Source: RBC

By 2030, the volume of the Russian venture capital market should grow to 410 billion rubles, Russian Venture Company predicts. The share of foreign investors in it should increase from the current 9 to 17%

By 2030, the volume of transactions in the national venture capital market should reach 410 billion rubles per year, which is 29 times more than in 2017. The total capital supply in the venture capital market (the total amount of money that projects from venture capital investors of different categories can count on) should increase 12.5 times, to 2.73 trillion rubles. Such goals are indicated in the draft strategy for the development of the market for venture and direct investments for the period up to 2025 and further perspective until 2030, prepared by Russian Venture Company (RVC) together with the Ministry of Economic Development.

The project was presented at an event in Moscow, RBC correspondent reports. In the first quarter of 2019, the document is planned to be submitted to the Government, explained Artem Shadrin, Director of the Department for Strategic Development and Innovation at the Ministry of Economic Development.

The strategy provides for the implementation of more than 40 initiatives aimed at removing barriers to the development of the venture capital industry in Russia. They include the lifting of legislative restrictions and the creation of economic incentives for new types of investors to enter the market, including non-state pension funds and insurance companies. In 2030, they should account for 9% of the volume of transactions in the venture capital market in Russia. The share of corporate investments should increase to 35% (in 2017 it was 23%), foreign investors — to 17% (from 9%). At the same time, the share of public and private investments will decrease to 4 and 35%, respectively (in 2017 — 12 and 56%). However, in absolute terms, the amount of public investment should increase by eight times, and private — by 18.

In order to increase the inflow of foreign investments, it is necessary to make Russian jurisdiction more attractive, as indicated in the strategy. In particular, the option of creating local Russian research and development centers by foreign companies is mentioned. The strategy also involves the creation of a special economic zone with a special tax and legal regime for foreign companies and the proposal of tax benefits for them.

Deputy Director General, RVC Investment Director Alexey Basov believes that several factors will contribute to the growth of the market. First, it is the creation of mechanisms for attracting investors, who are not very actively invest in developments, in particular the ones of foreigners and institutional investors. With the advent of new types of investors, the number of expensive transactions at a late stage of project development will increase (now the main share of investments falls on sowing, that is, the initial stages of development). The growth of the market will also be facilitated by the growth of the sales market, in particular through the creation of project consortia. As explained by Basov, this mechanism involves the merger of corporations to form requests for development.

“Thanks to the strategy, over the next five to ten years, the state, together with the private market, will be able to change priorities in the venture capital market and change the overall landscape,” he said at the presentation.

As Alexander Galitsky, Almaz Capital Partners Managing Partner, noted that the main thing to attract foreign investors is to decide where and who to offer Russian technological resources. As part of the strategy, it is planned to promote Russian developments to the international venture capital market and subsidize their participation in international industry exhibitions and conferences and launch a program to identify the technological needs of foreign companies.

“This is not a market forecast, but results that can be achieved subject to the implementation of the proposed measures,” said Sergei Safonov, head of the practice of providing consulting services to the PwC financial sector. “At the same time, it is necessary to understand that the global venture capital market reached its peak in 2017, and in Russia the peak fell in 2012, after which the market fell low, and despite the recent rise, we now expect growth from a low base. In fact, we are striving for the indicators we once were at,” he said.

In June of this year, Rosnano head, Anatoly Chubais, said that sooner or later, pension money in Russia will be invested, which is already a world trend. But Deputy Finance Minister Alexei Moiseev, commenting on this statement, noted that it was too early to talk about such a thing in Russia.

According to iTech Capital Fund Partner Alexey Solovyov, the pace of development of the venture capital market, described in the strategy, look quite realistic.

“Already next year, we will definitely be able to achieve the figures of 2012, which was the peak of the development of the Russian venture capital market, and then systematic growth will continue,” he believes.

In his opinion, the market growth can be predicted based on the volume of projects that developers can offer, and the amount of capital that investors are willing to invest.

At the same time, Solovyov noted that the interest of foreigners in Russia is already visible today.

“In 2018, institutional investors from Asia began to invest more actively in Russian venture capital funds, in particular, Chinese investors show interest. For example, the Russian Direct Investment Fund has a joint venture fund with China. Therefore, there is no doubt that foreigners are really ready to invest in the Russian venture capital market. In addition, the industry expects that by 2030 the sanctions rhetoric will subside, which will further attract capital to our country, ” said Alexey Solovyov.

By: Alexandra Posypkina.

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