Government fund of funds
Development institute of the Russian Federation

News

Outcomes of RVC business breakfast: "State as LP: pros and cons"

15.02.2018

DSC_2912.jpg

On February 14, RVC held a business breakfast with the participation of partners and investors from leading Russian venture funds. The experts discussed possible advantages and risks of working with the state capital, and also learned detailed parameters of the open tender for the search of the NTI venture fund’s managing partner.

The meeting was moderated by Alexander Lupachev, Director for Investments in Russia Partners Advisers. The group of experts included the RVC Investment Director Alexey Basov, Managing Partner of Leta Capital Alexander Chachava, Partner of Da VinciCapital Vadim Bochkarev, Co-Founder and Managing Partner of Phystech Ventures Petr Lukyanov, Managing Partner of North EnergyVentures Ivan Protopopov, Partner, Managing Director of iTech Capital Alexey Solovyov. The Investment Manager of RVC Elizaveta Vasina attended the event as well.

Alexey Basov told about the renewed RVC’s approach to the way of search for managing companies for venture funds:

"A few months ago, a new strategy was adopted, which assumes an active role of RVC as a development institution and a fund of funds. Until 2020, we plan to create at least 10 new funds with private players, corporations and development institutions. Our task is to find the best management teams and by their help earn profit on the invested capital as well as the effect for the country, that is, the growth of those segments, technologies and markets that can give impetus to the priority development of the whole economy".

According to Alexey Basov, RVC is testing for the first time the format of an open tender for the search of a managing partner for the NTI venture fund. The fund will be created in the form of an investment partnership for 10 years, with the size of at least RUB 3 bln. Of these, 1.5 billion roubles will amount to the NTI subsidies, another 1.5 billion roubles were raised as co-investment in the fund or portfolio companies, including at least 1% of the funds of the managing partner.

Applications from managing partners are accepted before February 21. The selection procedure for the NTI fund consists of three stages. The first is a qualifying round at which a decision is made to admit applicants to participate in the tender by formal compliance of the application with the documents selection requirements. Further, a commission composed of the leaders of the NTI road maps and RVC representatives will evaluate applications based on several criteria. Applicants who score the maximum number of points participate in the third stage in negotiations with the commission to select the winner. Legally binding documents with the winner are scheduled to be signed before May 15.

DSC_3106.jpg

On February 14, RVC held a business breakfast with the participation of partners and investors from leading Russian venture funds. The experts discussed possible advantages and risks of working with the state capital, and also learned detailed parameters of the open tender for the search of the NTI venture fund’s managing partner.

The meeting was moderated by Alexander Lupachev, Director for Investments from Russia Partners Advisers. The group of experts included the RVC Investment Director Alexey Basov, Managing Partner of Leta Capital Alexander Chachava, Partner of Da VinciCapital Vadim Bochkarev, Co-Founder and Managing Partner of Phystech Ventures Petr Lukyanov, Managing Partner of North EnergyVentures Ivan Protopopov, Partner, Managing Director of iTech Capital Alexey Solovyov. The event was also attended by the Investment Manager of RVC Elizaveta Vasina.

Alexey Basov told about the RVC’s renewed approach to the way of search for managing companies for venture funds:

"A few months ago, a new strategy was adopted, which assumes the active role of RVC as a development institution and a fund of funds. Until 2020, we plan to create at least 10 new funds with private players, corporations and development institutions. Our task is to find the best management teams and with their help to gain profit on the invested capital as well as the effect for the country, that is, the growth of those segments, technologies and markets that can give impetus to the priority development of the whole economy".

According to Alexey Basov, RVC is testing for the first time a format of an open tender for the search of the NTI venture fund’s managing partner. The fund will be established in the form of an investment partnership for 10 years, with the size of at least RUB 3 bln. Of these, 1.5 billion roubles will amount to the NTI subsidies, another 1.5 billion roubles were attracted as co-investment in the fund or portfolio companies, including at least 1% of the funds of the managing partner.

Applications from managing partners are accepted before February 21. The selection procedure for the NTI fund consists of three stages. The first is a qualifying round at which a decision is made to admit applicants to participate in the tender by formal application compliance with the documents selection requirements. Subsequently, a commission composed of NTI road map leaders and representatives of RVC will evaluate applications based on several criteria. Applicants who score the maximum number of points in the third stage participate in negotiations with the commission to select a winner. Legally binding documents with the winner are scheduled to be signed before May 15.

In the wake of the discussion, the guests of the business breakfast shared their experience of working with the state capital, and besides about the existing barriers.

"The state is one of the largest final sources of money in the venture market of our country. Nevertheless, there is a large amount of prejudices as to the state’s role as an investor. One of them - the state requires a large number of documents, which makes it very difficult to get money into the fund and invest", said Alexander Lupachev.

Vadim Bochkarev agreed that young portfolio companies are often sceptical about state money due to excessive bureaucracy. However, the experience of Da Vinci Capital shows that works are built on the level of common commercial sense:

"Any state investor needs attention. It is necessary to make up forms and reports. We work with foreign investors and see that their reporting requirements are often higher than required by RVC. If we throw RVC as an investor into the scale and additional reporting, we have got a lot more".

Ivan Protopopov agreed that restrictions are inevitable in dealing with any investor, and it is important to understand the game rules beforehand:

"If your idea is to raise money from RVC and invest all these funds in the company in the ‘valley’, RVC would not support such an idea since it is at variance with the company's own investment mandate — to develop the Russian market. We had a clear idea of how we should act, and by 85% it was transformed into an investment declaration".

Petr Lukyanov emphasized importance of the stability factor when working with state LPs:

"Our investment experience is associated with 19 portfolio companies in Russia and abroad. We have 16 private investors, and the primary advantage of working with state LPs is stability".

The expert added that the world has seen quite many federal and municipal state LPs, and even the top GPs are ready to take money from the state.

Participants of the business breakfast also discussed risks of working with the state capital on the foreign market. Alexander Chachava noted that Russian companies often cannot earn enough money in the country to launch an international expansion, therefore they need some support.

"If the company works in the same market, in 3-4 years it acquires the genome of the company operating in one particular market. If the company operates from the very beginning in several markets, it immediately has, so to speak, an international genome. We are trying to find companies with such genome", he noted.

Alexey Soloviev said the inexplicable unjustified animosity of start-ups against funds with state investors:

"Basically, it all comes down to the fact that companies are planning to go global, and are afraid of problems which could arise when the company's capital is formed partially by public funds. We have learned how to work with objections, developed an internal script. Generally, foreigners react similarly to both Russian companies with public investors and private ones ".

Vadim Bochkarev explained that, on the one hand, the presence of a Russian investor could complicate the company's IPO if it’s included in the sanctions list. On the other hand, some investors consider it an advantage to work with a state player.

"When you come and present smart money from Russia, they consider you as an interesting investor and are preparing to let you in the current round at a good price", he added.

DSC_2940.jpg

DSC_3126.jpg

DSC_3003.jpg

DSC_2969.jpg

DSC_2935.jpg



Search by name:

Search by date:

Select date in calendar
Select date in calendar
Venue: