Central regions | Finance, business

2018 Venture Russia: market waits, corporates show energy, start-ups look West

18 Apr '19
Dsight, a Russian analytic company, has put together an insightful overview of the Russian venture market in 2018. In this effort, the company partnered with EY and the National Alternative Investment Management Association (NAIMA) not-for-profit partnership.

The analysts found that in 2018, Russias VC market reached a stage of certain maturity and, moreover, overcome the prior years crisis triggered by the sanctions and a decline in venture activity.

The key takeaways from the 2018 venture market study:

● The number of deals barely changed between 2017 and 2018 (302 (2017) and 299 (2018)), with many funds refocused on international markets.

● Total investment grew dramatically from $471m (2017) to $714m (2018), primarily on a substantial rise in the number of later stage deals worth $10m and up.

● The key sectors to attract investment: e-commerce (27%), transport and logistics (21%), industrial tech (12%), IT for business (10%), and medicine (4%).

● The e-commerce segment grew as product and service purchases via the Internet and mobile apps increased noticeably; multichannel trade was on the rise, prompting large players, followed by investors, to invest in digital sectors.

● Corporate investments accounted for 40% of the total, which outshines the developed markets in this respect; analysts expect the share to go up.

● The seed stage saw a 46% increase in the number of deals last year, a good sign for those hoping to deal with the companies at later stages. On the other hand, FRII, one of the largest seed stage investors, is curtailing activity, and round A funds get depleted (only to be replaced by corporate investors).

● The overwhelming majority of companies are looking at international markets; developing a start-up exclusively for the domestic market is a strategy no longer.

● Angel investments were on the rise in 2018; on the backdrop of a nosedive in deposit, stock market and bond market yields investors found a new source of capital growth.

Arseniy Dabbakh, Dsight Founder, commented on the results:

Defining the past year as fairly lucky wouldnt be an exaggeration. The market grew a bit; new names emerged; a lot of startups made a splash by going global; and corporates kicked into high gear investing across sectors, even where they had been least expected.

Our team elected to continue with sector-focal reporting, and this time we start looking into Technology in Logistics. We polled a few dozen fund managers and found their response interesting. In the next few months we will study the market for logistics tech and share our findings with you.

Anton Ustimenko, Technology, Media & Telecommunications Leader, Central, Eastern and Southeastern Europe & Central Asia, EY Partner:

We in EY keep a watchful eye on Russias VC market as a source of new projects and partners in the technology sector. Insignificant as it still remains for an international onlooker, the market nonetheless gave us hope last year with new activity. In an effort to innovate and build new business models as they head for the digitization of the economy, corporations and government energetically joined in the game.

With all the volatility we saw in the numbers and volumes of deals, the Russian VC market inculcated a feeling of increased maturity, professionalism and viability. Rounds still eclipse exits but volumes do give grounds for cautious optimism. Corporate players are becoming increasingly involved in the race for new projects, and the trend already outshines the average global one, a sweet reminder of the 20122013 venture boom.

Dsight is a database of deals and analytical platform focused entirely on Russias venture market. The company publishes Venture Russia reports twice a year and issues sectoral studies on the most attractive VC markets. Dsight also carries out contract-based research for customers on markets, companies, and investors.
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