Russian Venture Company (RVC) has completed all registration procedures and launched its two new cluster funds — Biopharmaceutical Investment Fund (RVC BioFund) and Infrastructure Investment Fund (RVC InfraFund). The conceptual frameworks of these funds have been approved by the Board of Directors of RVC last June. In late 2010 the funds started receiving bids and are now getting down to their boost stage.
In the summer of 2010 we announced our decision to launch our first funds whose investment focus will include innovation and technology infrastructure projects—RVC BioFund and RVC InfraFund. Today, we are proud to officially announce that all the legal formalities have been settled and the funds have started working, said Andrey Vvedensky, Director of Programs and Projects Department at RVC.
BioFund’s initial size, RUB 500 mln, will be take up to RUB 1.5 bln. The fund life is 10 years (prolongation possible upon agreement of all participants). The Fund will be investing capital into innovation biopharmaceutical and service companies providing laboratory, information and analytical and consulting services to biotechnological, pharmaceutical and medical companies, as well as in certain cases to biotech start-ups. The Fund will also pursue a number of efforts to create an ecosystem to nurture as many biotech projects as possible.
Our top priority objective is to screen and invest capital into projects submitted by biotech service infrastructure companies whose core activity is to ensure fulfillment of international requirements prescribed by best laboratory practices to enable recognition of drug research internationally and unlock export opportunities for domestic innovative prototypes, noted Egor Beketov, CEO of RVC BioFund.
RVC BioFund will be using VC mechanisms to invest capital into innovative projects offering opportunities to create special services, design innovative drugs and medicines in order to meet the demand we currently see on our healthcare market and to market our innovative prototypes internationally.
It will be recalled that the share of domestic innovative drugs on the Russian pharmaceutical market is currently less than 1%. Russia does not have its own infrastructure to develop biopharmaceutical and medical start-ups. Through this adversity, a considerable chunk of Russian investment resources (50—80%) is consumed by foreign services.
Russian biopharmaceutical market, namely its innovation segment, is in need for international investment and technology competences, said Andrey Vvedensky, Director of Programs and Projects Department. Investment priorities of RVC BioFund suggest using international standards and practices, first of all in service infrastructure companies—and subsequently in start-ups. Competitive progress of Russian innovation biopharmaceutical market is only possible if innovative companies and major market players in Russia get ample opportunities to generate and market prototypes in compliance with the globally accepted rules.
Service providers are an important partner to ensure growth of Russian VC start-ups both in the biopharmaceutical sector and on the technology market. If we manage to solve this problem, we will soon see a buoyant flow of quality projects. Russian market will become attractive not only as a “testing area” but also as an investment-oriented sector integrated into the global market.
InfraFund’s initial size, RUB 500 mln, will be taken up to RUB 2 bln. The fund life is unlimited. The task of the InfraFund will be to render a bundle of special-purpose services to assist technology companies in their core businesses, speed up their development and market their products both in Russian and internationally. The new infrastructure will provide innovative entrepreneurs with consulting services on marketing, finance, law, IP, investor relations and other issues.
In February 2011 we will be open for bids from service companies. Our investment focus will target providers offering services that we do not have enough and are needed by our innovation and venture ecosystem players. The deal flow generation process will purport to identify maximum available investees that show the greatest potential both for infrastructural and financial targets of the Fund. Our key deal sources will be RVC partners and profit-oriented projects initiated by RVC, said Svetlana Reznik, Director of RVC InfraFund.
Additionally, the Fund’s key objectives in 2011 will be to articulate key business processes facilitating efficient investment decision making, business development of our portfolio companies and, consequently, helping to raise their capitalization.
Andrey Vvedensky noted that VC and technology oriented services are needed badly not only by development institutions but also small innovative companies. We can identify potentially successful teams who can cope with this task. Many experts note that on our growing market the profitability of service companies will compare to that of VC start-ups, said Directors of Programs and Projects Department.
These new RVC funds will screen projects, accept bids directly from project initiators or developers, as well as from private investors. Investment decision making will be done by investment committees of the Funds.
The Funds are ready to cover up to 75% of capital demand (up to 50% for innovative biopharmaceutical companies) to a maximum amount of RUB 100 mln in Round 1, to be matched by private investors. Any legal and financial deal terms allowed by current Russian laws are acceptable.
We have been working on the structure of the funds for a long time, because we needed to analyze the market and come up with potentially large-scale but flexible decisions. The purpose of the Funds’ principles is to ensure a maximum number of service projects to cater not only biotech, but also the entire ecosystem of innovations, as well as to help entrepreneurs minimize their risks and focus on business development, said Jan Ryazantsev, Director of Investments and Expertise Department at RVC. In addition to the BioFund and InfraFund, we plan to launch in 2011 a number of special-purpose cluster funds corresponding to Russia’s innovative development priorities, said Jan Ryazantsev.