On October 30-November 2, 2012, RVC, a major LP on VC funds in Russia, held a series of events named RVC Smart Future: InvestDay at the Open Innovation forum in Moscow.
Its participants discussed the most effective instruments for financing new high-tech projects, the advantages of venture capital funds run by large corporations and their cooperation with R&D departments, effective interaction between startups and investors, as well as many other topics.
InvestDay comprised a series of panel discussions, workshops, round tables and informal meetings, which were attended by more than 1,000 guests, including current and prospective investors in innovative companies.
Top managers of Russian and international venture capital funds, namely KPCB, Arch Ventures, iTechCapital, Frontier Ventures, ProstorCapital, and Bright Capital, gave speeches at the event. Additionally, representatives of corporate venture capital funds from international giants like IBM, SAP, and Phillips and representatives of Russian companies like RAO UES, RusHydro, MTS presented. Famous Russian venture capitalists and business angels, such as Almaz Capital Partners Founder and Managing Partner Alexander Galitsky, NeirOK Group of Companies President and CEO Vadim Asadov, and many others were key speakers at the events.
The key topic of InvestDay was investment in R&D and technology projects by new players who traditionally have not been active in the market. The prospects of the private sector are also very high, as it has all the necessary prerequisites and effectual infrastructure. Experts say the volume of investment by private Russian corporations and individual entrepreneurs in venture capital projects and funds is likely to increase in the near future.
Corporate venture capital funds, as noted by speakers at the LP Unlimited conference, which has become a hallmark of InvestDay, have already gained a good reputation in the West. They are an important resource for raising funds for innovative industries, and corporations benefit from this effective instrument for acquiring new ideas and products.
According to IBM Venture Capital Group Partner Deborah Magid, her fund has become a "bridge" between innovative entrepreneurs and IBM for more than 5,000 startups. According to international experts invited by RVC, about 80% of international corporations consider corporate venture capital funds as a development tool that could combine their strategic and financial interests.
Representatives of major Russian industrial groups and members of the Russian R&D Club have also accumulated some experience in this field. Corporate venture capital funds are an emerging trend in Russia, as companies increasingly approach technology brokers outside of corporate research institutes and R&B departments for innovative ideas. On the one hand, these partners are familiar with the challenges that corporations face, and companies’ inner decision-making mechanisms. On the other hand, they understand the startup market and can pick the technologies that suit the customer best.
Dmitry Grinchenko, deputy manager of the Energy Without Frontiers fund set up by INTER RAO, noted that his institution prefers to buy directly into innovative companies or to order some customized technology solutions from external suppliers .
MTS telecoms company has gone down its own path, according to Yelena Seryogina, the head of MTS' Department for Relations with Professional Communities. The company has formed youth innovation centers in several Russian regions by inviting the most active and talented young people — students, scientists, and entrepreneurs — to generate new ideas and technologies. The company also hosts the Telecom Russia competition aimed at collecting ideas, which it later implements in its business.
In the West, besides corporations, conservative investors, which include insurance companies, pension funds and family offices, are becoming more and more interested in investing in the venture capital industry, as they see this investment as a source of high-risk big return. Larry Ashebrook, CEO and Founder at Gentry Financial Corporation, said that today customers of family offices channel 15% to 20% of their money to alternative venture capital investment.
Parallel to investors’ discussions on how to work with technology assets, startups discussed their views on cooperation with different types of investors. Interestingly, startups, as well as corporations, said that a class of professional mediators and special platforms is being formed on the market to help startups gain access to investment and expertise.
One of the issues raised within the framework of InvestDay was attracting funding by startups. Experts believe that startups should toughen their requirements for investors, underlining that venture capital investments are “smart money” in the sense that after obtaining investments, startups can expect mentoring and other non-monetary investment on the part of the investor.
This rule applies not only to institutional investors but also to business angels. According to Andrei Golovin, managing partner of Golovin and Partners, business angels do not only provide financing, but they are also “lifetime mentors” of a project, helping to use the obtained funding correctly.