Igor Agamirzian, chief executive of russian government fund of funds RVC, spoke with Sabrina Willmer about RVC’s next set of VC funds, their expected returns and how U.S. startups might access the capital.
Q: How much money did you deploy to venture funds this year and how much do you plan to deploy over the next 12 months?
A: Since its inception in 2006 RVC has invested in total about $533 million. In 2012 and 2013 we plan to launch a number of new VC funds tailored to specific technology sectors and investment stages, varying from seed to diversified early-stage, and four cluster-specialized technology funds: aerospace, nuclear (civilian use), energy & Cleantech, and Smart Systems & robotics. Overall we aim to deploy around $350 million over the next 12 months.
Q. Tell me more about your seed strategy.
A: In 2012–2013, we plan to launch along with private investors five to 10 new seed funds. To help bridge existing gaps in the russian VC and entrepreneurship ecosystem, RVC has developed and is implementing a number of initiatives to increase the volume of available seed and early stage capital, but also cover a full range of activities aimed to foster technology market development. Among others these include measures to shape Russian market infrastructure, assist Russian startups with integration in global technology chains and raise the profile of high-tech entrepreneurship in the general public.
Q: What will the special-purpose funds do that you are forming? How many have you created?
A: The specialized RVC cluster funds are intended to close existing gaps in the Russian technology market. These include lack of startup capital and service infrastructure to support business of young technology companies. Since these sectors are not quite attractive to private investors, to date we have created three relevant funds: Seed Fund, Infra Fund and Bio Fund.
Q: How much capital do you have left out of the $1 billion the government gave you? Would you consider raising money from other investors?
A: At present our capital reserves available for investment stand at around $800 million. The Russian government allocated the original $1 billion back in 2006–2007. RVC is wholly owned by the Russian government. At present there are no plans to diversify our investor base. However it is quite possible that at some point in the future we shall develop the concept of attracting institutional and private investors. Currently private LPs co-invest along with RVC, acting as anchor LP, only at the individual funds level.
Q: What sort of impact do you expect to have on Russia with your program? Do you expect to draw attention from non-Russian firms?
A: The RVC’s key task as a development institution is to create a self-sustained VC industry. Once the venture capital investment cycle is complete, the national economy should be capable of reproducing this business model, delivering commercially profitable products not only with public support, but through raising private VC investments. Globalization of Russian technology entrepreneurship is essential to build a truly competitive and viable knowledge economy in our country. We therefore are keen to adopt best interna- tional practices through engaging with top-tier overseas funds and GPs.
Q: What sort of returns have you generated and what are your return expectations?
A: Our investment policy is quite specific in that our return on investment in VC funds is limited to just 5 percent per annum to motivate private investment in Russian VC funds. Effectively this doubles returns for private investors in our funds — we see this as a powerful incentive. However, in some funds we participate on regular market terms. We expect a long-term rate of return of more than 10 to 15 percent per annum.
Q: How much will you invest in startups elsewhere? What sort of U.S. company will attract your attention?
A: To date our total investment in startups has exceeded $330 million. Some of our investments have been made in the U.S. We are mainly looking at early stage technology companies and investing in rounds B, C. However, we also see a lot of attractive opportunities at the seed and round A stages. Mostly we are interested in companies with breakthrough technologies in energy, electronics and telecommunications, biotechnology. Importantly these companies should have capacity for transferring their technology to Russia.
Q: How much venture investment is there now in Russia and where would you like it to be? What are the most promising industries within Russia to attract international attention?
A: In 2011, the growth rate of PE/VC funds’ capitalization was slightly lower compared to the pre-crisis period, however it managed to double the level of 2010. As a result the capital accumulated in the funds operating in Russia has reached about $20.1 B in 2011 (VC funds — about $4.5 B in 2011). The results achieved in 2012 make us believe that the trend of rapid growth will sustain in the next year.
At a glance.
Hometown: St. Petersburg
Education: MS in Applied Mathematics, Ph.D. In Computer Science
Hobbies: Smart Systems, good wine
Favorite Restaurant: None, opportunistic approach