Russian online business magazine Hopes & Fears has published its annual list of Russia’s top funds.
The ratings are calculated from a startuper's point of view - and so take into account the experience of each fund's managers, the type of investment they typically make and the number of successful projects in their portfolio. This year particular weight was placed on successful exits and the return gained on them.
In order to be included in the lists, funds must have been active for at least 2 years and have invested in more than 3 Russian projects. Individuals and incubators aren’t included.
Here’s the top ten.
1-2: Almaz Capital
Alexander Galitsky’s fund became famous through its successful investments in Yandex, video service Wik and operating system Vyatta. A return on investment has been made from each company, with yield from the sale of Yandex shares reaching 1000%. However, not all the fund’s investment projects have been successful. For example, geo-location service AlterGeo, and online tour booking service Travelmenu both failed.
At the end of 2013, Almaz Capital Fund 2 was launched. Its total size has not yet been disclosed, but according to H&F it is in the region of $200 million – double the amount of the first fund. Like Almaz I, the second fund is also oriented towards software, Internet, new technologies etc. The have lost no time in getting started, with 6 projects already financed. Among these are education portal YaKlass, software company Acumatica and the iPad game, If You Can.
One startup that has had dealings with Almaz criticized the lack of support from the fund with regard to entering overseas markets. Many others mentioned that the fund is far from generous with its time and attention - letters from entrepreneurs in search of investment are often left unanswered.
1-2: Runa Capital
The fund continues to actively invest and puts no less effort into getting rid of failed projects. In 2013 Runa invested in 9 companies, including a record $8 million investment in finance service uBank. In the same year, the fund parted with several failed projects, including Travelmenu and ClipClock.
In January, Runa Capital announced the creation of a new fund worth $200 million, significantly bigger than Runa I ($135 million). Runa Capital II will target companies at the growth stage - and so the average investment will rise from $2.5 million to $5 million. It will also pay more attention to international projects.
3-4: Kite Ventures
Edward Shenderovich has achieved several exits from companies in his 6 years at Kite Ventures. In 2011 he sold their controlling stake in gaming site, Kanobu Network to Afisha-Rambler for an estimated $4 million.
Among other high-profile investments were game developer ZeptoLab and clothing store Trends Brands.
For the past few years Kite Ventures have been actively working in Europe and concentrating on e-commerce and communication projects. In February 2014 the fund teamed up with Insight Ventures and Target Ventures to invest $88 million in the company “Delivery Hero.”
Stanislav Sazhin, co-founder of medics’ social network Doctor at Work, says that Kite Ventures are “one of the most influential Russian funds in the USA; thanks to them we were able to make a lot of important contacts and we are generally very grateful to them for their advice.”
3-4: Ru-net Ventures
Leonid Boguslavski, the founder of ru-Net Ventures, reckons that one of the biggest problems facing the Russian VC market is “grey schemes”, which are widely used.
In the past year ru-Net Ventures showed no interest in the Russian market. Boguslavski emphasized three main areas: foreign investment, investment in current portfolio companies, and seeking out and closing large external rounds ($10 million and above) for his portfolio companies. Part of the foreign investment was related to the Indian market. Prior to last year the only Indian project’s in Boguslavski’s portfolio were “Bestylish” and “Freeculture.” In 2013 they were joined by “Snapdeal” and online shop “AppsDaily.”
In the words of investment director of the fund, Alexander Pavlova, in 2014 ru-Net will be paying attention to the Russian market and actively searching for young and upcoming companies in e-commerce, entertainment and finance. Russian entrepreneurs should be pleased to hear that the fund will be actively helping them to enter into overseas markets.
AddVenture involve themselves heavily in their portfolio projects, to the extent that they almost serve as an additional marketing director. In the past year the fund has funded three projects - a $1.5 million investment in Medbooking, which serves health centres in Moscow, as well as a second round of investment in DeliveryClub and an undisclosed investment in ChefMarket – a home-cooking project.
1.5 million dollars is AddVenture’s upper limit, and accordingly it focusses on seed investments. Founder Elena Masolova comments that “some of our investments haven’t worked out - they tried to scale too early.”
In 2004 entrepreneur Igor Matsanyuk teamed up with pop star Sergey Zhukov founded the company IT-Territory. When it was acquired by Mail.ru Group Matsanyuk was appointed vice-president. Over the next 6 years he earned $85 million, with which he founded the venture fund IMI.VC and also set up the Farminers incubator to search for prospective projects. Soon the fund attracted the attention of Matsanyuk’s Mail.ru acquaintances Mikhail Vinchel and Grigory Finger, who invested $75 million between them.
The fund generally invests in mobile technologies, and has around 40 projects from all over the world in its portfolio. One of its first portfolio companies, which also received one of its largest investments, is Game Insight.
Among IMI.VC’s projects are gaming industry projects Social Insight and Narr8, interior designing tool Planner 5D, social service Pluso, photo-service WeHeartPics, and the robotics manufacturer OMI Robotics. imi.vc usually acquires a share of between 40 and 60% of its portfolio companies. Incidentally, according to official data, the fund averages a share of around 20-25%. In the past year imi.vc has invested about $1.5-2 million in 4 companies, with a further 20 receiving between $150,000 and $500,000.
In an interview with Forbes Matsanyuk outlined his plans, “I want to find 3-4 companies in the next 3 years capable of holding an IPO one day.”
6-7: iTech Capital
High profile investors including Kiwi’s Andrey Romanenko, Mail.ru’s Mikhail Vinchel and Gregorii Finger, Andrey Kosogov from “Alfa-bank”, former Vice-President of “Sberbank” Victor Orlovski and imi.vc’s Igor Matsanyuk have entrusted their money to the iTech Capital fund.
iTech invests in a wide-range of technologies – they are open to pitches from developers of software, games, applications, payment processing companies and digital media. However, the fund does not invest in early stage project, instead focusing on startups that have already established themselves in their specific sector.
Projects funded in the past 12 months include contextual advertising services iContext and Garpun, and online ticketing services Ticketland and Aviasales.ru.
“The fund must be flexible and be able to find a common language with its diverse customer base,” the investment director of iTech Nikolai Davidov told H&F. “The fund must be useful. Pointless investment is of no use to anyone, even in Russia.” Incidentally the iTech fund will close in 2017, meaning that the sale of the company’s portfolio companies is not so far away.
ABRT, a fund created by IT-entrepreneurs Andrey Baranov and Ratmir Timashev, does not rushed into investments; in 6 years it has funded just 20 projects. In the next 5 years the investment portfolio will double, Timashev promised in an interview with H&F.
ABRT’s most notable investments are in Veeam, KupiVIP, Oktogo.ru (Travel.ru) and Acronis. In the last year they made two investments worth more than $1 million, which haven’t yet been made public. Timashev said that the fund is interested in SAAS-services in B2B, projects involved in online sales, mobile technology and robotics.
The fund controls about $100 million, and a typical investment can be anything $500,000 to $5 million. ABRT rarely holds a share of more than 35%. Since 2006 the fund’s capitalisation has increased 18-fold, a growth rate of more than 50% per year. Often deals are made in partnership with Mangrove Capital.
“This fund is ideal for those who develop IT-products for B2B,” an entrepreneur who is familiar with the work of ABRT explained to H&F. “Here you can actually find high level experts. The approach, it can be said, is individual. But if your project relies on B2C, then it is worth paying attention to funds with a strong marketing side.”
8-10: e.ventures Russia
The largest contributor to this fund is Germany’s Otto Group. It has worked on the Russian market since 2008. Noteworthy investments include online retailer Ozon, web hosting service Nginx, dating site Teamo and the Russian version of Pinterest – PinMe. The size of their investment can be worth anything from $100,000 to $3 million. For this the fund takes between a 10% and 35% share.
In 2013 e.ventures only added one Russian project to their portfolio - AdMoment, a targeted advertising for mobile applications. “Our investors offer support and help us to make connections ,” explained AdMoment co-founder Konstantin Rosset. “Moreover we are both foreigners and they told us what it is important to pay attention to in Russia.”
However, not all of e.ventures Russian investments have gone so well. In March 2014 the online sports hypermarket Heverest, in which e-ventures had invested $1.3 million, was shut down. According to a company representative, the project had to close down due to a decline in interest from western investors in Russian e-commerce.
8-10: Mangrove Capital
In the past year Luxembourg-based Mangrove Capital has not made any investments in Russia. FastLane Venture’s report on the Russian VC market in 2012-2013quoted representatives of the fund as saying that while interest in Russian projects from western investors is growing, the fear of the unknown stops them from investing. A solution to this problem could be cooperation between different western funds, and Mangrove has managed to find itself a partner in Russia, ABRT, with which it often co-invests.
One major difficulty facing Western investors in Russia is the absence on any really big exits, with the exception of Mail.ru and Yandex’s IPOs.
in attracting western investment to Russia is the absence of any big exits. Mangrove famously made a hugely successful investment in Skype with returns amounting to 900% but in Russia there are no such stories to boast of. There are, however, some failures: search engine Quintura and in-game advertising project EnterMedia were shut down.
Among the projects which have managed to stay afloat are online travel service Oktogo.ru (now Travel.ru) and the fashion retail club KupiVIP. Mangrove almost added Russia’s most popular online furniture retailer Homeme.ru to their portfolio, but the startup’s founder Oleg Pai decided that the transfer of money took too much time and chose not to wait for the investment. He backed out of the deal and developed the project alone.
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