Russia’s venture market, which hardly even reached $1 billion in pre-war years, is enduring hard times. In the first half of 2022, it fell by almost 40% in volume, according to industry research agency DSight, cited by industry news site PlusWorld.
Company valuations in the tech sector have fallen dramatically, according to a study from Skolkovo and Tinkoff Private.
“We see down rounds where the valuation is established several times lower than in the previous round. Thus, an investor that would have got a 10% stake for $1 million in the past could now get a majority stake,” says Renat Batyrov, who heads the Skolkovo tech park.
But experts and officials believe the VC/PE market could recover slowly in 2023.
Finance minister Maksut Shadaev sees “everything related to venture investments and public offerings” as “the most urgent task.” He sees “positive trends” in the fact that “many customers show interest and look where to invest money,” and knows about “several large companies that intend to create corporate funds” in 2023.
Market recovery could be favored by the fact that many foreign players have quit Russia, leaving room to domestic players including in the technology sector. Pavel Novikov, director of the Skolkovo Fintech Hub, estimates that a new, 500 billion ruble-worth space ($10 billion) can be filled by big and small domestic players.
Investment strategies are changing. Russian startups can no longer expect to gain weight through state funding and then move their headquarters to a foreign jurisdiction.
“Startup investment hasn’t stopped being attractive to investors as they can yield high returns, profitability,” says Ilya Oprenko, head of digital private banking Tinkoff Private.
