Central regions | Finance, business

Russia’s VC market “matured” in 2Q 2014, but kept shrinking, RMG and EWDN analysts found

18 Sep '14
Rye, Man & Gor Securities, a Russian investment firm, and East-West Digital News, an international resource on Russia’s IT, have issued a report on the status and trends of Russia’s venture market in 2Q 2014.

Here are the key takeouts from their joint report obtained by Marchmont News from RMG (please see full version here: Russian Venture Capital Market Overview 2Q 2014):

• Many signs of maturity could be seen on the Russian venture capital market in 2Q 2014. The market contracted by 9%, while the number of deals increased by 32% compared to the previous quarter, entailing a significant decline of average deal value. The market was strongest at the growth and expansion stage.

• The Fund for Development of Internet Initiatives, founded in 2013, continued to account for a large share of the market in value terms (39%).

• Private funds dominated the VC market in 2Q: their investments in technology alone exceeded overall investments by any other type of investors.

• Five new venture funds were announced in 2Q 2014.

• The decline, which was found to be a regular occurrence on the VC market in the first half of the year, continued in 2Q 2014.

• There was only one large exit in 2Q 2014: AddVenture sold its interest in Delivery Club for an estimated $40m). The consolidated value of the remaining four exits was only $12m.

• The Russian VC market stayed heavily focused on IT. The long-term ratio between IT and all other sectors was an overwhelming 80:20.

• There was growth in B2B soft and Internet, while B2C soft and Internet saw a shift of focus from e-commerce projects to search and recommendation projects.

Geopolitical fall-out

“There will be fall-out for both investors and investees. Russian venture structures cannot expect to draw capital from western LPs in the near future: this source of capital has been limited in the past and it will be even more scant now. It will also be harder for Russian funds to enter western companies, and young teams will find it harder to enter international markets for their products. We would like to believe that the common sense of politicians will win out and the confrontation will not last for long,” the partner analysts quoted Alexei Solovyev, the managing director of Prostor Capital, as commenting on the situation.
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