PwC and RVC present the MoneyTree: Venture Capital Market Navigator report for 2013


PwC and RVC present the MoneyTreeTM:
Venture Capital Market Navigator report for 2013

25 February 2014, Moscow – The PwC Centre for Technology and Innovation and Russian Venture Company (RVC) present the 2013 Russian venture capital market report MoneyTreeTM: Venture Capital Market Navigator. According to the report, in 2013, fast-growing companies, working in the Russian biotechnology, industrial, and information technologies sectors, received venture capital investments of USD 653.1 million from a total of 222 deals. The number of investor exits almost doubled, increasing from 12 to 21, while investors' proceeds from these exits grew more than fivefold, from USD 372 million to an unprecedented USD 2 billion.

The MoneyTreeTM: Venture Capital Market Navigator is a regular survey of the Russian venture capital industry, issued by PwC in cooperation with RVC and based on Venture Database and RusBase data.

The survey reviews venture capital deals (cash investments in the equity of fast-growing startups) announced from 1 January through to 31 December 2013, with a value of USD 50,000 up to USD 100 million. The survey also focuses on key financial components of the Russian venture capital environment, such as investments in infrastructure, grant financing, major deals, and investor exits.

The report shows that the number of venture capital deals in 2013 exceeded the 2012 results by 18% (222 deals vs 188 deals in 2012), while the total investment decreased by 28% (USD 653.1 million in 2013 against USD 911.9 million in 2012) as a result of the average deal value dropping from USD 5.6 million to USD 3.1 million. At the same time, total venture capital deals on the Russian market, including grants, large deals worth over USD 100 million, investor exits, and investments in venture capital infrastructure, grew from USD 1.98 billion in 2012 to USD 2.89 billion in 2013.

The survey shows a decline in the average deal value for almost all stages of project development. This was primarily driven by the maturation of the market and, as a consequence, the fact that the average indicators for transactions have approached that of developed markets like Europe where the average deal comes to USD 1.4 million, ranging between USD 800,000 and USD 2.9 million in various countries. This trend has been driven by growing outbound investments by Russian investors who usually act in consortiums with more experienced foreign partners and draw on their expertise. As investors enrich their experience, they can better assess projects and inherent investment risks. This results in stricter requirements for project development on the part of entrepreneurs and stricter terms for deals.

Gulnara Bikkulova, Director of RVC’s Department for Capital, Industry and Innovation notes: "We've forecast that the extensive development of the Russian venture capital market will give way this year to a more mature stage. The MoneyTreeTM report supports these projections. Positive trends are visible. The number of investor exits is growing dramatically while the number of syndicated deals is increasing. Professional management companies are entering the market to establish new funds. Market maturity factors include a lower average for deal values and a new focus on the part of private investors on later project stages, while public funding is becoming more available for early stages."

As in 2012, the IT sector is leading in terms of investment funds raised. In 2013, it accounted for almost 87% of deals (193 deals) and 93.5% of total investments (USD 611 million). Thus, the IT sector's market share grew compared to the last year, when it accounted for 83% of deals and 87% of total investments, respectively. The number of IT deals increased by 23.7%, while total investment fell by 22.8% (against USD 792.1 million in 2012) since the average deal value decreased from USD 5.6 million to USD 3.3 million.

If we break things down by sub-sectors, the unquestioned leader among IT sub-sectors is the e-commerce segment, which accounts for the greatest number of deals (28) and the largest share of investment (USD 172.8 million). The advertising technology segment, with total investment of USD 25.8 million, ranks second in terms of the number of deals (27), while there were four projects in the telecom and IT outsourcing sector (USD 105.9 million) coming second in terms of investment funds raised. In 2013, investors were especially interested in IT projects focused on educational services, financial technology, medical and lifestyle services, as well as games.

According to Anton Abashkin, Director at the PwC Centre for Technology and Innovation: "Projects related to IT, the Internet, and mobile solutions are still top ranked among investors, because these areas have huge potential for successful business development. While the first wave of Russian venture capital projects was focused on ‘virtual’ problems faced by customers, these days, entrepreneurs are more and more looking for opportunities to build business around long-term needs in traditional industries, such as finance, telecoms, retail, media, education, and healthcare. These industries are best positioned for implementing innovations. They also demonstrate high capitalisation, which helps investors with significant monetisation potential to offer in-demand products to the market based on proven business models. These businesses attract investors largely because the relevant market risks are highly predictable."

The industrial and biotechnologies sectors remain rather small in terms of both the number of deals and investment funds raised. The 2013 results indicated 16 deals worth USD 29.1 million in the industrial technology sector, which is one deal less than in 2012. In addition, the average transaction size in the industrial technology sector shrank from USD 8.3 million to USD 2.2 million while the average transaction size in the biotechnology sector remained almost unchanged at USD 1.3 million compared to USD 1.1 million in 2012.

Grants still remain the main source of financing for small enterprises in these sectors (in accordance with this report's methodology, such grants are not considered venture capital investments). At the same time, the total number of deals in the industrial technology and bio-technology sectors has decreased even as the total number of grants has increased. For instance, we recorded 1,693 grants in 2013, 74% of which went to the industrial technology and bio-technology sectors, compared to 702 grants in 2012. At the same time, the average grant size, as with the average size of venture capital transactions, decreased in 2013, from USD 207,000 in 2013 to USD 61,000 in 2013. This was primarily driven by the rising share of organisations financing projects in their initial stages within the overall structure of grant allocations. Thus, total grants in 2013 came to USD 102.8 million (compared to USD 145 million in 2012).

In terms of investment stages, it is worth noting that in 2013 investors continued to shift their attention from projects' "seed" stage to later phases such as the "startup", "early" and "expansion" stages. For instance, in 2013, we noted 12% less deals in the "seed" stage compared to 2012 while "early" and "startup" stages saw total number of deals increase by 50% (from 31 in 2012 to 46 in 2013) and by 37% (from 63 to 86), respectively.

Apart from total venture capital deals, there was over USD 100 million in major transactions straddling the line between venture capital financing and classic direct investment, which was tapped for latter development stages. Thus, and based on the report's methodology, such transactions are not viewed as venture capital deals. In comparison with 2012, which saw three major transactions on the Russian market worth a combined USD 516 million, there was only one deal of a similar magnitude in 2013 when Lamoda raised a record USD 130 million in investment for the Russian e-commerce sector.

Based on the main trends in the development of Russia's venture capital sector in 2013, the following conclusions may be reached about this sector's maturation. Firstly, the professionalism of the players on this market is growing and, as a result, there is demand for quality in project implementation. Secondly, investors are cautious in their selection of companies and, since they are eager to mitigate risks, they are putting less money into projects at each financing stage. In order to secure investors, companies, even at their earliest stages of development, now need to have a tested business model and an experienced team, as well as a product that has proven itself on the market.

Furthermore, the report notes that many players in the sector, who had started their operations four to five years ago, are reaching the end of their initial investment cycle. Now, their efforts are more focussed on managing portfolios, reading companies for sale, assisting in business development and dealing with non-profit investments. At the same time, new players are appearing on the market, including institutional and private investors, as well as fund managers who saw their first successes in 2010-2012. Furthermore, new funds are springing up, fostering further growth in investment and deepening the competition for quality projects.

In addition to the overall increase in the quality of projects, investors also note a deficit on the market which, even with a growing number of players and more capitalisation, has not only sparked a drive for "good deals", but also has resulted in a rising number of syndicated deals and more active cooperation between market players, thereby spurring on further accumulation, a boost in market transparency and greater ease in tapping capital for entrepreneurs.

Download the report (in Russian, English will follow):

For more information, please contact

Olesya Kuzminskaya (Tel.: +7 (495) 967 6013, e-mail:

Yulia Davydova (Tel.: +7 (495) 777 0104, е-mail:

PwC Russia ( provides industry-focused assurance, advisory, tax and legal services. Over 2,600 people work in our offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Novosibirsk, Krasnodar, Voronezh, Yuzhno-Sakhalinsk, Roston-on-Don and Vladikavkaz. We share our thinking, experience and solutions to develop fresh perspectives and practical advice to open up new vistas for business.

PwC is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Our global network encompasses more than 184,000 people in 157 countries. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgement or bind them in any way.

PwC Russia refers to PwCIL member-firms operating in Russia.

RVC is a government-operated fund of venture capital funds, a Russian Federation development institution, and one of Russia's key instruments in building its own national innovation system. RVC’s charter capital stands at over RUB 30 billion. The Russian Federation Federal Agency for State Property Management (Rosimushchestvo) holds a 100% equity stake in RVC. RVC has formed 15 funds with a combined value of RUB 25.4 billion. RVC's own share in these funds comes to RUB 15.8 billion. RVC-backed funds boast a portfolio of 147 companies with invested capital totalling RUB 13.6 billion.

The publication of the MoneyTreeTM: Venture Capital Market Navigator report, with RVC's involvement as a development institution, is a crucial step in supporting the expansion of the infrastructure that Russia's innovation-venture capital environment requires.

Venture Database is a statistics provider for the innovation venture capital market in Russia. Industry professionals get insight on investment deals, projects and market participants; corporations get perspective on new business models and innovation ideas.

RusBase is the main channel for interacting with the Russian venture capital community. This is a platform that provides news, market data and services that help to launch a business or invest in Russia. As a media platform, RusBase covers all trusted news and current trends of the Russian VC market. This database also contains relevant and up-to-date information about the Russian startup ecosystem. The English version of RusBase is an online guide to the Russian venture capital market for international investors and startups.

For over 15 years, PwC has been issuing venture capital market reviews on leading high-tech markets such as the United States and Israel. For many global venture capital market players, these reports serve as a barometer of current market conditions and recent trends.

This report has been prepared according to the MoneyTreeTM Report methodology (

The MoneyTreeTM: Russia report is prepared by PwC in cooperation with RVC and based on Venture Database and RusBase data.

In analysing the data, we consider venture capital investment actually received during the first round of financing from business angels, investment companies, and private, corporate and public venture capital funds not exceeding USD 100 million. If a company has received investment in two or more rounds, each round is viewed as a separate deal. This study covered deals that were formally concluded in the period from 1 January to 31 December 2013.

The term "venture capital investment" is understood here to mean the acquisition of an equity stake or charter capital share in new or growing companies, but less than a controlling stake. Funds invested are primarily directed toward developing business, and not toward the purchase of shares owned by a company's existing shareholders (founders). This report covers companies active in Russia's IT, biotechnology and industrial technology sectors.

Please note that this report does not include information about deals involving Russia-based investors oriented toward the US market.

In addition, as non-market sources of funding, grants have not been factored into the total market volume.

This report also covers deals related to investor exists. However, similar to grants, these transactions are not factored into the total market volume.

Definition of sectors and sub-sectors:
The biotechnology sector includes companies involved in the development of medical equipment and pharmaceuticals, medical research, and the provision of innovative medical services.

The industrial technology sector includes entities involved in the development of equipment and technologies for application in clean technology-based operations; manufacturing of machinery and equipment for various purposes to be used in industrial production; chemicals production; and automated industrial operations.

The IT sector includes the following sub-sectors: e-commerce; development and application of cloud technologies; telecommunications; cellular applications; services and applications for the creation and development of social networks; Internet groups, information and recommendation services; tourism (hotel reservations, tickets, recommendations and reviews of tourist services); development of electronic and computer equipment; services and resources for the collection, processing and transmission of audio and video material (media); medical and healthy lifestyle services; educational services; and financial services.

Stages in the life cycle of a project/company and their definitions:
Seed stage: The company has a concept or idea for a product, but no final product; work is under way on a prototype.
Startup stage: The company has a pilot version of a product, or an initial demonstration version; testing is under way.
Early stage: The company has a product that is ready to bring to market, and demand is being tested.
Expansion stage: The product is available on the market, and there is visible sales and demand growth.
Later stage: The company is becoming a major organisation and exhibiting the characteristics of a public company.

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