The Russian venture capital market's key results of 2017 were presented on November 30, 2017 at the IV annual Forum "Ecosystem of Innovations" organized by RVC. The experts summed up the year's results, outlined current problems and trends in the venture capital market development.
The Russian Venture Capital Association (RVCA) in cooperation with the Venture Capital Innovation Fund (VCIF) presented the annual report "Overview of Equity and Venture Capital Market" which covers 9 months in 2017. According to the report, the aggregate capitalization of equity and venture investment funds in the third quarter of 2017 showed upward trend for the first time since 2013, exceeding the $ 21 billion mark.
The researchers note that despite the difficult economic background, new funds continue to enter the market: 16 new VC funds with a total volume of $ 313 million were launched over 9 months, which exceeds the figures in 2016 (13 funds). At that, the volume of venture capital investments shrank to $ 81 million (in 2016 it was 126 million dollars). Around a half of the total amount of funds accrues to private funds, which means that investors have a positive attitude towards the market.
17% increase in the number of deals was registered in the segment of equity and venture investments following 9 months as compared to the same indicator in 2016. The growth was ensured by Private Equity players, including state-owned. About 80% of the total investment makes a share of the Russian Direct Investment Fund. Most of the venture investments (12%) companies received from the Internet Initiative Development Fund, which provided about 49% of the total number of deals.
As in previous periods, ICT remained the most attractive sector for investors with over 70% of the money directed to the ICT companies. In biotechnology, medicine and industrial technologies the share of publicly owned funds in terms of VC-investments is close to or equal to 100%, which once again underscores crucial role of government in support of venture projects in this sector.
Intensification of activities to launch new funds to the market, in particular RVC-backed funds, made it possible to slow down the downtrend in the number of publicly owned funds. One may predict that the number of publicly-owned venture capital funds will grow in the near future largely thanks to RVC and other state institutions for innovations development. In general, the researchers believe that the market situation inspires optimism. The statistics and investment activity at the end of 2017 may well reach the values of similar indicators taken in 2016.
The forum has also presented some results of the Venture Barometer Russia 2017, the annual study of opinions by venture capitalists regarding the market, its opportunities and future growth.
According to the study, almost all of the interviewed venture market incumbents (92%) claim that family offices should be actively considered as potential LPs. The former and current IT entrepreneurs occupy the second place. The number of votes for this category has increased compared to last year (61% vs 44% in 2016). The third place is occupied by Russian private companies, including banks (42% vs 36% in 2016).
Alexey Solovyov, who is the initiator of the study, also believes that the project investment market in 2018 will remain stable. Moreover, it is expected to grow thanks to new players, namely corporations, new RVC funds and private funds.
According to the Firrma's rating of funds and business angels, at the end of 2017 391 fund deals have been tracked, a similar number (390) was noted in 2016. The number of venture funds is increasing. The rating authors point out to 17 funds available in 2017, in 2016 there were only 4 funds. The next trend is the growing seeding segment, both in deals and in capital as well as increase in business angel segment.
In 2017, business angels closed 177 deals compared to 143 deals in 2016. The number of active funds has also increased: 57 in 2017 as compared to 42 in 2016. On the other hand, the number of exits has decreased from 53 in 2016 to 43 in 2017. The foreign companies have intensified financing of Russian projects: 30 cases of this trend have been recorded in 2017 as compared to 17 in 2016. The other trends the researchers have noted are as follows: the funds continue to shift the investment interests to the seeding stage, the corporations become increasingly interested in venture capital investment, managers of major companies turn into business angels.
The National Association of Business Angels (NABA) reviewed condition and development trends of business angel investments in 2017 which revealed an increase in the number of business angels. The main beneficiaries are clubs which already operate on the market. In addition, one witnesses new associations of business angels: both private and those supported by regional leaders and premium branches of banks. Another trend was involvement of early-stage private investors in club deals with venture funds of various stages.
The forum “Ecosystem of Innovations” is held with the support of the Department of Investments and Development of Small and Medium-Sized Businesses of Krasnodar Krai.