Russian start-ups bring real money, Leta Capital believes
20 Feb '20
“Many investors rightly reckon that Russian start-ups are undervalued; that means they can bring good money,” Alexander Chachava, Managing Partner at Leta Capital, was quoted by Firrma.ru as saying.
For the past years, this Russian VC fund was working its way up through the bleak economic conditions in Russia, and through the difficulties caused by the international sanctions. But in the face of all that, Leta’s inaugural venture fund, Leta Capital Limited set up in 2012, appeared to outshine quite a number of funds in the U.S. According to Cambridge Associates analysts, for America’s largest VC funds DPI (Distributions to Paid-in Capital, a ratio of the investment put into a fund and the money received as dividends and/or following portfolio company sales) these years was 0.66, while for Leta it was 1.25.
U.S. start-ups have been by and large overvalued lately; this forces American funds to make a pre-exit cycle longer as they seek higher venture yield. “In this respect, working with undervalued start-ups bears more fruit; it’s no accident that we have seen many American funds enter the European market with its more adequate valuations,” Mr. Chachava said.
Leta Capital predominantly invests in companies that have been set up by Russian-language entrepreneurs worldwide and have R&D centers in the former Soviet Union. In pursuit of this strategy, in 2017 the firm established a second venture fund, $50m Leta Capital I. The new fund is currently being actively invested, and with further development some of the assets acquired may already be exited next year.
In eight years of its operation, Leta Capital Limited showed an annual IRR (Internal Rate of Return) of 11% in dollar terms.