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2013 - A pivotal year for the Russian venture industry

0 December 2013

2013 was a pivotal year for the Russian IT venture market, as structural changes started to transform the sector. A considerable number of private pre-seed and seed funds appeared, founded on capital generated by the partial or full sale of internet companies (Impulse VC101StartupsCloud4Auto), while a number of larger private and state-backed investment institutions were also founded, including Flint Capital and Maxfield Capital

Against this backdrop the state-funded (and Putin-promoted) Internet Initiative Development Fund (FRII in Russian) became the main player in the online startup ecosystem. In the final 3 months of the year it signed up almost 100 projects for its online and offline acceleration programs, which are based on the Y-combinator model. In comparison, similar private initiatives added an average of just 4-5 projects to their portfolios in 2013 (compared to 7-10 in 2012). 

497 investments in startups, worth a total of $1.1 billion

The presence of new investment companies allowed the total number of deals and amount invested in IT to grow in 2013. According to RusBase data there were 497 investments made in startups last year, worth a total of $1.1 billion. This represents a 70% increase in the number of deals. However, as the average deal size halved, the total invested only increased by 30%. This decline can be put down to the increased activity of seed investors and angel investors. 

$3.5 billion earmarked for venture investment

At the same time, the total funding earmarked for investing in Russian startups rose to more than $3.5 billion in 2013. This figure, estimated by RusBase analytics, includes the value of venture funds, cash made available by business angels, state grant funds and money attached to other investment bodies. Less than a third of this money was actually invested, which highlights the disparity between money and worthy projects - there is still a lot more money than there are things to do with it. 

However, the ‘lag’ between the announcement of funds and their actual investment in projects also has something to do with the disparity - money tends to be invested a year or so after it is earmarked for investment. 

$3 billion to be invested in 2014, predominantly in low-risk consumer services projects

With this in mind, RusBase predicts that the $2.5 billion set aside but not invested in 2013 will be injected into projects in 2014, along with up to $800,000 worth of new commitments. 

We think that the amount of new commitments will come down as a result of the gradual slowing of general economic growth in Russia, which means that there will be less money to channel into venture investment, and also because relatively few successful startupers choose to re-invest money they have made through their projects into new ventures. 

As for where the money will be spent, Russian investors’ aversion to risk means that projects already generating appreciable revenue represent a much more appealing option than an innovative idea, even one that has a clear monetization strategy. For this reason consumer services startups were the most popular in 2013 - e-commerce, payments and social media, and that is not likely to change this year. 

M&As of the Year (VKontakte)


48% of, the most popular social network in Russia and the former CIS, changed hands in Spring 2013, when Ilya Sherbovich’s fund UCP bought out the project’s earliest backers Lev Leviev and Vyacheslav Mirilashvili. The value of the deal was not disclosed, but based on the company’s winter 2012/13 valuation it is estimated to be no less than $720 million. The circumstances of the deal were strange - with founder and general director Pavel Durov claiming not to have been informed about it in advance. 


$80 million

Kinopoisk, Russia’s oldest and biggest film database, was acquired by Yandex at the end of September for an undisclosed sum. It is known that the company were also in discussions with Western publishers and Alisher Usmanov, the main shareholder in Group, but they chose Yandex’s offer. The Russian search giant intends to use Kinopoisk’s database to improve its video recommendation service. 


$50 million


Russia’s top-3 classified ads sites OLX, Slando and Avito were merged into the Avito brand, creating the world’s third biggest site of its type. In January of last year Avito had 16.5 million unique monthly users, while Slando had 10.9 million and OLX around 4 million. South African holding Naspers, which previously owned OLX and Slando, also invested $50 million in the merged company and obtained an 18.6% stake. The bulk of the funds are being spent on strengthening the site’s position in the vehicle and property sectors. 

IPOs of the year


$212.5 million
Nasdaq (New York)


Russian online payments processing company Qiwi sold 12.5 million shares last May (23% of the total) for $212.5 million, giving the company a total valuation of $844 million. In the IPO Group reduced their share in the firm from 21.4% to 19.8%, Andrey and Nikolay Romanenko reduced their’s from 12.7% to 9.3% and Andrey Muravev cut his stake from 8.5% to 6.2%. Other shareholders include the founders of Qiwi Bank, Mitsumi and E1. 

Tinkoff Credit Systems Bank

$1.87 billion
London Stock Exchange


The floating of Oleg Tinkoff's electronic bank on the London Stock Exchange raised more than $1 billion, $175 million of which went to the company itself. The rest of the money was split among the major shareholders - Oleg Tinkoff, Goldman Sachs, Baring Vostok, Vostok Nafta, Horizon Capital and Altruco Trustees Ltd. The high demand for shares meant that the company was valued at $3.2 billion, a number of times higher than the initial price set for the shares. This is probably because Tinkoff presented his company as a tech business, not a bank. 


$69 million
New York Stock Exchange

Luxoft, a software outsourcing company operating in Russia and Eastern Europe, raised $69 million in a June IPO held as part of IBS Group’s (to which Luxoft belongs) long term strategy to separate its businesses. Half of this sum went to the firm’s shareholders and half to IBS. This is the second major IPO for a Russian software outsourcing company, after EPAM floated its shares in 2012. 

Biggest investment rounds

$130 million
Access IndustriesSummit PartnersTengelman

., one of the leading online fashion retailers in Russia, raised a record breaking $130 million in a cash-for-equity round last May, bringing the total investment in the website to over $200 million. This is in line with the usual strategy of Rocket Internet, Lamoda’s German parent company, which often seeks to reduce its stake in projects by attracting leading institutional investors. 


$30 million, $8 million
Phenomen Ventures (along with contributions from existing investors inc. Kite Ventures)

Another of the year’s biggest deals was a Round D raised by Germany food delivery service Delivery Hero, which operates in a number of countries including Russia. This $30 million brought the total invested in the project to $116 million cash and a $10 million long term loan.

Delivery Hero has few genuine competitors in Russia, where its main rivals are probably JustEat and FoodPanda. The company’s total annual revenue worldwide is more than $400 million, but it is yet to achieve an operational profit. The funds are being spent on developing Delivery Hero’s services in its current markets and preparing new services. In December 2013 a further $8 million were invested by Phenomen Ventures, most of which went to the project’s earliest investors and to founder Levon Oganesyan.

$25 million
General Catalyst PartnersAccel PartnersFrontier VenturesYuri MilnerSteve HellmanEdward KaufmanErik BlachfordSherwin Pishevar.

Ostrovok, a leader in the Russian online travel sector, raised $25 million in a round involving both foreign and Russian funds and investors. The foreign investors include top bankers from UBS and Credit Suisse, along with Erik Blachford, the ex-director of Expedia. This impressive collection of investors suggests that the company is very serious about competing with major international players like and on the Russian market. 

People of 2013

Yuri Milner

Russian investor Yuri Milner (Ex-NCH, netBridge, Group), who currently directs the Alisher Usmanov-backed DST Global IT-fund, became a major shareholder in German startup incubator Rocket Internet, which is active in developing markets. According to German media reports he invested $340 million in the company. Milner joins leading investors including Kinnevik AB, Access Industries, JP Morgan, Holtzbrinck Ventures and Victor Pinchuk as a shareholder in the Samwer brothers’ spectacularly successful project. 

Andrei Romanenko

Andrey Romanenko, who founded Qiwi with some colleagues some years ago, became a dollar billionaire when the company held an IPO in May. Initially they developed the company without venture investing, but subsequently accepted funding from two Russian funds, one of which (iTech Capital) was particularly influential in turning the company into an international player. 

Nikolay Nikiforov

Nikolay Nikiforov, Russia’s 31-year-old Communications Minister, has a serious claim to the title of most influential person in the Russian IT sector. In 2013 his department played a key role in bringing together Russian and foreign companies with investors and development institutions and also oversaw an overhaul of legislation for the sector which was met with a mixed response by market players. 

Funds of the Year

Internet Initiatives Development Fund (FRII in Russian)

State-backed venture fund and startup accelerator FRII, which was created at the request of President Vladimir Putin, welcomed the first startups to its online and offline programs in October 2013. The project aims to fill a gap in the Russian market at the pre-seed and seed-stage by offering promising projects up to $450,000 alongside an accelerator program. Director Kirill Varlamov has tried to unite the Russian venture community behind the project by inviting investors and successful entrepreneurs to act as mentors to resident projects, but not everyone is convinced that such active state participation in the sector is a good thing. 

Runa Capital

Russian fund Runa Capital, which now invests in Russian and foreign startups, was the most active investor on the Russian venture market, funding 7 projects in Q1-3. 

Frontier Ventures

Russian fund Frontier Ventures impressed in 2013 by attracting major international funds to invest in its portfolio projects Ostrovok, and Eruditor Group. This work helps to improve the image of Russian investors abroad. 

Top image via Shutterstock

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