RVC and PwC presented MoneyTree™: Venture Market Navigator, a review of venture deals in Russia for three quarters of 2012



RVC and PwC presented MoneyTree™: Venture Market Navigator, a review of venture deals in Russia for three quarters of 2012

According to the second review of Russia's venture capital market prepared by PwC's Centre for Technology and Innovation and RVC, total venture investment in Russia's market in the three quarters of 2012 amounted to USD 495 million received from 117 deals (including deals with undisclosed values). The report was presented to public end November. English and russian versions are available on site RVC.

In this report, we focused on venture investments in the IT sector and extended our research scope over another two sectors, namely, biotechnologies and industrial technologies. According to the report, the IT sector retains a leading position in terms of venture capital investment: for the three quarters of 2012, their volume reached USD 485 million, which is 2.5 times more than for the same period of 2011. The authors of the report note that the forecast made in the previous report turned out to be conservative: for 9 months of 2012 alone, venture capital investment in the IT sector has exceeded our expectations by USD 450 million. However, the number of transactions remains practically unchanged. From this we can conclude that gradual change to the venture investment market structure favours mature companies.

Significant growth in the total investment in the IT sector is driven by larger volumes of investment with higher investment rounds in later stages of projects rather than increased numbers of deals.

The biotechnologies and industrial technologies included in the report for the first time are still lagging behind the leader — namely, the IT sector — both in terms of deal numbers and investment amounts. Based on the results for three quarters of 2012, there were 14 deals (USD 2.6 million) in the industrial technologies sector and 13 deals (USD 7.0 million) in the biotechnologies sector. Accordingly, average deal value in the biotechnologies sector is higher than in the industrial technologies: USD 0.9 million versus USD 0.3 million correspondingly. Average deal value in the IT sector stands at USD 5.6 million, which also indicates that this sector is the most developed one.

In the three quarters of 2012, 655 grants totalling over USD 133 million were provided for the development of IT, biotechnologies and industrial technologies. It is noteworthy that the authors of the report have not factored grant-related data into the total market volume and assigned grants to non-market tools for financing innovative companies.

Investments in the development of innovation infrastructure also testify to further development of Russia's venture capital market. In the three quarters of 2012, the market witnessed seven such deals totalling USD 24.7 million.

The new publication of MoneyTree™: Venture Market Navigator also analyses the geographical distribution of investors based on the location of their headquarters, rather than the place where the legal entity is registered. Investors of Russian origin still represent the driving force behind the development of the Russian market (participating in 106 deals). However, foreign investors have also made their mark — the USA came in second for the number of deals (nine deals), followed by Germany (six deals).

Venture capital investment by IT sub-sector: Investment volume and number of deals

In terms of raised investments, e-commerce remains the unrivalled leader. The sector saw 21 deals raising approximately USD 315.7 million in investment. That is more than 6 times growth as compared to the comparable period of 2011 (14 deals totalling USD 48.9 million). By the number of completed deals, the sub-sector of cloud computing technologies holds a leading position — 22 deals raising approximately USD 25.6 million in investment. Projects related to the development of social networks and information and social services ranked third by the number of completed deals at 17 deals. Although investor activity in this sub-sector was high, venture investment under these deals only amounted to USD 24.7 million.

It is worth mentioning that projects related to the development of mobile application services — six deals totalling USD 26.3 million — and investments in companies in the online tourism sub-sector, remained at the same rate as last year — five deals totalling about USD 25 million.

Venture capital investment by project development stage

Distribution of venture capital investment by stage of a project life cycle shows a shift of investors' focus from projects' seed stages towards their later stages: the number of deals in the seed stage fell from 46 to 30 for the three quarters of 2011 for the comparable period in 2012, while the number of deals in start-up stages grew from 24 to 29 and in early-stage companies — from 12 (in total) to 30.

Biotechnologies and industrial technologies

According to the data obtained, total venture investment in Russia's biotechnologies sector in the three quarters of 2012 amounted to USD 7 million, received from 13 deals. There were five deals with no disclosure. Average deal value stands at USD 0.9 million. Peak of investment activity in that market was reached during the second quarter of 2012: six deals (two of which were not disclosed) in the total amount of USD 4.9 million. Total venture investment in Russia's industrial technologies sector for three quarters of 2012 amounted to USD 2.6 million, received from 14 deals. There were five deals with no disclosure. Average deal value stands at USD 0.3 million.

Currently, investments in the biotechnologies and industrial technologies sectors are provided to companies in the early stages of development and average deal values are relatively small; however, global experience indicates that such investments are more capital-intensive and long-term in nature than those earmarked for the IT sector. We anticipate that, providing the positive trends in the Russian and global economies continue, these areas are bound to succeed and demonstrate vigorous and dynamic growth.

The outlook for venture investment in Russia

The authors of the report note that the Russian venture market is becoming more mature and transparent and is expected to demonstrate robust growth. Development of the venture capital market in Russia will be driven, among other things, by growing competition between both businesses and investors.

The emergence of new successful innovation projects, increased interest from Russian and foreign investors and active government support are all factors stimulating an increase in the number of entrepreneurs, and, correspondingly, start-ups, as well as accumulation of the required experience by the market players,” believes Anton Abashkin, director, CTI, PwC. “The quality of projects is gradually improving as well, which in turn impacts investor behavioural patterns. I am sure that the Russian venture market will continue to gain momentum and create new opportunities for all participants.

Apart from the IT sector which is about to reach a certain level of market saturation, investors are also interested in such sectors as biotechnologies and industrial technologies, and investments in these two sectors are more capital-intensive and long-term in nature.

In addition, we can see that investors are demonstrating a vivid interest in educational projects. On the researchers' estimate, over the next 12 months, investors will focus on educational and healthy lifestyle technologies, mobile applications as well as B2B-related services and infrastructure technologies servicing such fast-growing sub-sectors as e-commerce and online tourism.

Given high venture capital market's volatility, its low transparency, the fact that its market players shun publicity and tend to limit disclosure of their investment deals, only such regular publications as the MoneyTree can build trust in the market tools and market players, says Andrey Vvedensky, director of the Department for Infrastructure and Regional Development and member of the OAO RVC management board. "Availability of relevant and up-to-date information is very important to all market participants — large companies, development institutes and start-ups alike. We are trying to build up a set of tools available to venture capital players which will help anyone to see the picture of the market as a whole and of individual industries. Our practice goes to show that such research publications motivate investors and companies to make themselves known and disclose information on their activities. Thus, one of our objectives when we carry out market analysis is to encourage as many market players to provide information about themselves as possible. Objective and accurate market assessment is key to choosing a successful strategy.&rdquo

For over 15 years, PwC has been issuing venture market reviews on leading tech markets such as the United States and Israel. For many global venture market players, these reports serve as a litmus test of current market conditions and recent trends. As the Russian venture investment market develops, new issues of MoneyTreeТМ: Russia will cover developments in the existing trends and the emergence of new trends in the IT-sector, biotechnologies and industrial technologies sectors as well as other segments of the Russian innovation and technology market.

Note to the Editor:

1. PwC

For more information, please contact Olesya Kuzminskaya on telephone + 7 495 9676013, or by email:


For more information, please contact Natalia Aristova on telephone + 7 495 7770104, or by email:

2. PwC Russia ( provides industry-focused assurance, advisory, tax and legal services. Over 2,800 people work in our offices in Moscow, St Petersburg, Yekaterinburg, Kazan, Novosibirsk, Krasnodar, Voronezh, Yuzhno-Sakhalinsk and Vladikavkaz. We share our thinking, experience and solutions to develop fresh perspectives and practical advice.

PwC is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Our global network encompasses more than 180,000 people in 158 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.

3. RVC is a government fund of venture funds, a development institute of the Russian Federation, and one of Russia's key tools in building its own national innovation system. RVC was established by Russian Government Order No. 838-r of 7 June 2006.

RVC’s authorised capital stands at over RUB 30 billion. It is 100% owned by the Federal Agency for State Property Management (Rosimuschestvo).

As of November 2012, RVC-backed funds boast a portfolio of 126 companies. Invested capital totals more than RUB 10.8 billion.

RVC's main goal is to stimulate the creation of a domestic VC investment industry in Russia and significantly increase venture funds' financial resources.

An important area of RVC's work is creating and supporting a special-purpose service infrastructure for VC market players, to increase transparency of investee funds and companies, to ensure Russia has an environment in this area that is conducive to international investors and entrepreneurs, and to optimise legislation affecting the development of innovative business.

The publication of the report MoneyTree: Venture Market Navigator is a crucial step in supporting the development of the infrastructure that Russia's innovation-venture environment requires, with RVC participating as a development institute.

The report MoneyTree: Venture Market Navigator used data from the RVC project to maintain a database on Russian innovation-venture ecosystems.

4. Methodology

This report has been prepared under The MoneyTree™ Report methodology (

MoneyTree™: Russia contains information from RVC which was used by PwC in establishing an overview of the situation.

In analysing the data, venture investment actually received from business angels, investment companies, private, corporate and public venture funds not exceeding USD 50 million in the first round of financing were taken into consideration. If a company received investment in two or more rounds, then each round is viewed as a separate deal. This study incorporated deals that were formally concluded in the period from 1 January to 30 September 2012.

The term "venture investment" is understood here to mean the acquisition of a stake or capital in new or growing companies, acquiring less than a controlling share. Resources invested are primarily directed to business development, not to the purchase of shares owned by existing shareholders (founders) of the company. This report covers the companies which pursue business activities in the areas of IT, biotechnologies and industrial technologies in the Russian Federation.

Please note that this report does not include information about deals oriented at the US market, but in which investors of Russian origin are involved.

This report provides information about the size of grants issued. The term "grant" is understood here to mean a free subsidy for pursuing scientific research or R&D work. However, grants are non-market sources of funding and not factored into the total market volume.

Definition of sectors and sub-sectors:

The biotechnologies sector includes companies involved in the development of medical equipment and pharmaceuticals, medical research and provision of medical services.

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

The IT sector includes the following sub-sectors: e-Commerce; development and application of cloud computing; telecoms; mobile apps; services and apps related to the creation and development of social networks, online communities, information & reference services; tourism (hotel booking services, ticket booking services, information & reference services in this area); development of electronics and IT hardware.

Stages in the life cycle of a project/company and their definitions:

Seed stage: The company has a concept, idea for a product, but no final product; work is under way on the prototype.

Start-up stage: The company has a pilot version of the product, or an initial demonstration version; testing is under way.

Early stage: The company has a product ready to enter the market, demand is being tested.

Expansion stage: The product is available on the market, sales and demand growth can be observed.

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