In May 2013 we saw the continuation of a well-established venture market trend, as media projects and internet startups focussing on marketing and search proved most popular with investors. Almost all the startups that attracted funding raised between $300,000 and $500,000, which corresponds to 3-4 months worth of operations for a growth-stage project. Investors’ continued interest in these projects can be explained by the sustained growth of e-commerce and social media, which both use and are used by internet marketing firms.
However, May was not such a good month for developers of computer software. Demand for their products fell and the sector remains on the margins of the Russian venture market. There was also little to cheer for the ailing travel sector, whose ongoing troubles showed no signs of letting up as more firms had to be shut down.
In 2012 the the Russian venture market (including Ukraine, Kazakhstan and Belarus) hosted at least 8 successful exits (i.e startup was sold to strategic investors or merged/absorbed into another company). We don't include the "Begun" - "Rambler" deal, which wasn't exactly venture capitalism, while a number of other small deals are excluded either because they are mergers with littel hope of success or because the startup in question was from outside the region.
Overall, in 2012 the return gained by investors in the majority of exits was less than 20 to 30 times, which shows that leading players in the market are still reluctant to spend serious money to acquire fast growing startups (with the exception of Viewdle). In other words, it's still the case that successful Russian startups must look to the West in order to secure a high price for their company.
Below you can see an infographic analysis of the Russian venture market in March 2013, brought to life by GoVisual
$ 212.5 million
Investor: IPO (Nasdaq)
Why: Russian payment service provider QIWI completed a successful IPO, which saw the firm’s total value rise to $844m. 12.5 million shares were sold (23% of the total) for $17 each, right in the middle of the previously set price range of $16-18. Those selling shares included Mail.ru Group, who reduced their 21.4% stake to 19.8%, while the Romanenko family reduced their’s from 12.7% to 9.3% and Andrew Muravev reduced his from 8.5% to 6.2%. Other important shareholders in the firm are Mitsumi, which founded QIWI-bank, and E1, which represents the interests of payment system e-Port (OSMP).
$ 10 million
Why: The WebMediaGroup holding, which has 6 internet projects on the go - Zoomby.ru, Dostavka.ru, Bank.ru, Credit.ru, Menu.ru and Photosight.ru - attracted $10 million from investors. The most notable aspect of the deal was the participation of the Leader Inovations fund (founded by RBC), in partnership with Gazprombank and the company’s own management team. Neither side has disclosed financial info about the companies belonging to the holding, but it is well known that Zoomby.ru brings in the most money. The holding’s owners continue to own a controlling stake, while Gazprombank and Lider-Inovatsii's combined shares make up around 30% of the firm.
≈ $5 million
Investor: Prostor Capital
Why: Online advertising exchange CPAExchange, which combines cost for action with RTV technology, has attracted around $5m from Prostor Capital in return for 25% of the company. CPAExchange’s main goal is to create an online advertising cluster which firms will consider a strategic priority. Within two years they hope to claim 20% of the Russian market.
FUND OF THE MONTH
Why: The "Russian Fund for Investment in Information and Communications Technology" (Rosinfokominvest), which was founded in 2007 to invest in tech projects, has been relaunched with a new strategy. From now on it will pursue state-private investment partnerships, matching investments made by private co-investors. The fund’s resources come from the state budget, and total around $500,000. It is now managed by management company “Lider”. The fund has been authorized to operate until 1st January 2018 and investments are limited to $5 million.
PERSON OF THE MONTH
Why: Igor Ryabenki, a Russo-Austrian entrepreneur born in Ukraine, became one of Russia’s top-5 business angels. He now has investments in more than 18 early -stage projects, and has invested in a further 10-12 through the Altair Capital Management fund, which he founded. Ryabenki is also a partner of Moscow State University’s business incubator, an accredited investor of the Moscow SeedFund and a member of the judging panel for a number of startup competitions.
FAIL OF THE MONTH
Why: Flatora, which offered short term rented accommodation, failed to attract its next round of investment and was shut down. Its management team explained that investors were put off by the firm's failure to prove its potential for growth.
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