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Crimea has had "little affect on Russian VC sentiment"

0 25 March 2014

“The situation in Ukraine has had little effect on Russian VC sentiment” according to an article on by Nick Davidov, investment director at iTech Capital and managing director of the Pult Group

Davidov admits that some US-funded venture capitalists have slightly reduced their activity in Russia in light of recent events. However, the sanctions imposed by the US government have very little direct impact on the tech sector because they only target those at the very top of the Russian political system, and most of these individuals have never invested in tech companies. 

This means that US VCs are still free to invest in Russian projects, and Davidov has actually noticed increased interest from US private equity and growth investment funds in iTech Capital’s portfolio companies in the past few weeks. 

Of course, the situation may yet escalate further but if it does Davidov doesn’t think that the impact on the Russian venture industry would be catastrophic. He points out that only 15% of VC funding in Russia comes from the US and Europe and argues that if this source of finance were to be cut off there are plenty of ways that the sector could fill the gap. 

One of these is the state. 38% of seed deals last year and 24% of total seed funding was financed from the state budget. The state owned Russian Venture Company’s 15 funds are worth $750 million. 

Davidov also reckons that Russian investors, who are investing more and more in foreign projects, would probably have to return their attention to local projects if sanctions were stepped up. 

The impact on projects is also unlikely to be severe - Russia’s most successful international tech companies, such as Kaspersky and Parallels, are fully integrated into global markets and don’t depend entirely on Western clients. Furthermore, there are few signs that the crisis will impact Russian companys' ability to do business in emerging markets and the Middle East, which should cushion the worst effects of any US-led sanctions.  

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