Central regions | Finance, business | Technology & innovation

EY and RVC: Russian venture capital industry has grown tenfold since 2007

12 Feb '14
EY, the leading services provider for strategic growth markets, and RVC, the key Russian institute for venture industry development, have issued a survey on Russian and global VC markets in 20072013, RVC announced.

According to the study, the Russian VC industry has shown triple-digit growth over the last seven years, reaching the volume of $1.213bn in 2012 (compared to just $108.3m in 2007). The record-breaking volume of deals in 2012 made the Russian venture market the second largest in Europe and the fifth largest in the world. The amount of incubators, angel investors, angel clubs, start-ups and early stage deals has also significantly increased over the period. Investors are clearly showing trust in the Russian venture market.

The growth is driven primarily by investments in IT and the consumer market, whose main driver is the shift to online retail. In Russia, as well as in other countries studied in the survey, the IT and consumer market segments are easier to innovate in than the other segments, and provide a shorter return on investments. Private venture funds tend to invest in internet companies, while state-operated funds prefer science, materials and chemicals.

The VC market in Russia is in its early stages of maturity. It is characterized by relatively few exits because Russian corporations have not actively pursued M&A, and international exits are not common yet. As of today, the most developed projects collect most of the funding supplied, but there are new initiatives aimed at supporting early-stage companies.

The Russian government plays a significant role as the provider of infrastructure and the promoter of an ecosystem. The level of government support makes Russia similar to both China and to some extent Israel. Indeed, the venture industries in these countries were created and launched by their governments coordinated efforts, rather than by the efforts of private investors. However, the ecosystem and access to information on investors and centers of excellence remains fragmented in Russia.

Global trends strongly affect the Russian market. Global monetary policies contribute to the increasing availability of funds for Russian companies going global, and US markets have a significant pull over Russia due to their size and experience. Silicon Valley serves as a role model for the Russian venture market. Its influence is felt in both the attempts to land successful Western business models in Russia and an interest of some talented Russian entrepreneurs in starting their own ventures in Silicon Valley.
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