Russia’s National Association of Business Angels (NABA), Atom Partners, a Moscow-based investment consultancy and high-tech investor, and RVC, the state-owned fund of funds dedicated to innovation, have presented the results of their 2013 business angel investing study.
Tapping into a wide variety of open information sources, the partners found in their report that Russian business angel investors had put up $116.5 million for early-stage projects between January and November 2013 – a hefty 4.5-time increase from 2012.
Individual investors funded a reported 96 projects, of which four received in excess of $10 million each. The number of projects funded soared by 174% on a year-on-year basis.
Sector-wise, business angels’ preferences changed little from last year, the researchers underscored. The lion’s share of private venture capital ($77.1 million, or 66%) went towards IT and telecom projects. Other sectors, such as finance, business services, retail, procurement and creative industries, were far behind IT and telecom with their combined $34 million in investment.
“Favorable government policies and efforts by business angel associations have helped lower risk barriers and increase information transparency of the market. Its self-organization level, however, is still fairly low, and there’s potential for growth,” said Konstantin Fokin, the president of NABA and CEO of Moscow’s Innovation Development Center.
Pro-angel policies
Gulnara Bikkulova, the director of RVC’s department of innovation markets, called attention to the fact that today the main problems that Russia’s VC market faces include the insufficient number of seed-stage investors and tight spots at exits.
Regarding IPOs, the Moscow Stock Exchange’s Innovation and Investment Market (IIM) opened only in 2009 and saw its first IPO the next year. Acquisitions by industry players, the most common type of exit, are far from typical for Russia as corporations do not seem to be interested.
Therefore, RVC is now seeking to eliminate these two major snags that hinder early-stage funding and thwart successful exits, Bikkulova continued.
“We have two fundamental tools to achieve the goal. One is a network of venture partnerships, including regional angel investors leveraged financially by the RVC Seed Fund. The other is the pilot project lunched recently between the RVC Seed Fund and the Moscow Seed Fund and calling for co-investing with business angels. Already 20 angel investors have been picked on a competition basis to work with our Fund,” she explained.
There is yet another tool co-developed by RVC and NABA, and this is Ready for Equity, a program that aims to train entrepreneurs and angel investors in the ABCs of early-stage venture investment deals.
Elaborating on legislative initiatives in support of private investors, Alexei Kachai of Rusnano highlighted a new bill that calls for the easing of an investor’s tax burden proportionally to the amount of his smart investments.
A business angel’s point of view
“We haven’t had any exits during this investment cycle, but we have enough offers. We are postponing exits until projects reach a more mature stage,” said Igor Ryabenkiy, one of the most active angel investors in Russia, in an exchange with East-West Digital News.
Ryabenkiy conceded failures: “So far around 5 projects have failed. Some others are still trying to find their way.”
Russia has a good education system and many talented people, the investor believes. “These bright teams need our help and input. It might be easier to work with Russian business angels for linguistic and other reasons.”
Investing in the Valley or other western hotspots is easier “because the infrastructure and legislation are mature there,” Ryabenkiy says. “Teams are more prepared and experienced in company management. There are way more exit opportunities. However, Moscow has built an infrastructure for startups which makes it a nice place to work and invest in.”
Russia’s top angel investors
Firrma.ru, a Russian-language website for startups, unveiled earlier this month its Top 15 of Russia’s most active angel investors.
The ranking covers the past two years and only brings to light investors’ public activity; no insider information about below-the-radar deals has been considered here, the media partners pointed out.
The primary criterion used to rank the fifteen was the number of projects invested in over the 24-month period. The rankers admitted that this is not the most decisive metric, but it is the most transparent and crystal-clear metric; ROI, which is the more important of the two, however, is much harder to evaluate, they noted.
The list is far from being comprehensive; for example no mention is made of such an active angel as Bas Godska. This Dutch e-marketing expert based in Moscow has invested in more than two dozens of startups, from e-marketing solution provider Crossss to next-gen screen manufacturer Displair to online travel agency Travelata.
Here’s a summary of Firrma’s Top 15 list:
Igor Ryabenkiy
- Number of projects funded over the past two years: “a few dozen” (made with his Altair VC fund)
- Average amount per project: $100,000-$300,000
- Most notable projects: ToutApp, OrBeSquare, Magicalis, DocMeIn, Guide and many others
- Most funded sectors: SaaS in the B2B and B2C segments, financial and tutoring startups, projects involving both IT and medicine, games and entertainment and content projects
Igor Matsanyuk
- Number of projects funded over the past two years: about 40
- Average amount per project: up to $1 million
- Most notable projects: Woodla, MyWardrobe, Proberry, GdeSlon and many others
- Most funded sectors: games and mobile apps.
Alexander Borodich
- Number of projects funded over the past two years: 22
- Average amount per project: $25,000-$75,000
- Most notable projects: Lovely, Verbling, Soldsie, AnyPerk, MyWishBoard.com, WishCoins.ru and many others
- Most funded sectors: mobility, digital health and e-education.
Pavel Cherkashin
- Number of projects funded over the past two years: 20
- Average amount per project: $200,000-$300,000
- Most notable projects: Tvigle, Webbankir, Minutta, Kuznech, Toonbox and many others
- Most funded sectors: search technologies, social services, images and video on the web, e-commerce supporting technologies, social CRM and mobile apps.
Konstantin Sinyushin
- Number of projects funded over the past two years: at least 10
- Average amount per project: $200,000-$300,000
- Most notable projects: Zingaya, Alloka, Octopod, rollad.ru, interior.pro, endorphin and many others
- Most funded sectors: cloud ad technologies, new ways of communications, social marketplaces, socializing development projects, added reality technologies and others.
Alexey Karlov
- Number of projects funded over the past two years: 8
- Average amount per project: undisclosed
- Most notable project: SlyLamb Studio
- Most funded sectors: medicine, mobile, understructure.
Andrei Golovin
- Number of projects funded over the past two years: 6
- Average amount per project: $100,000-$150,000;
- Most notable projects: Promo.ru, Kinoplex, MyCreditInfo, and others
- Most funded sectors: e-commerce, finance, second screen TV, digital health.
Eduard Fiyaksel
- Number of projects funded over the past two years: 6
- Average amount per project: $100,000-$200,000
- Most notable projects: undisclosed
- Most funded sectors: IT and telecom, energy efficiency, biotech.
Egor Rudi and Sergei Kuznetsov
- Number of projects funded over the past two years: five
- Average amount per project: $20,000-$100,000
- Most notable projects: LinguaLeo, Printio.ru, Dve Ladoshki, Foodik.ru
- Most funded sectors: consumer Internet.
Arkadiy Moreinis
- Number of projects funded over the past two years: five
- Average amount per project: $20,000-$100,000
- Most notable projects: Tagbrand, YClients, Klevosti, Podorozhniki, NormaSugar
- Most funded sectors: e-commerce.
Alexey Basov
- Number of projects funded over the past two years: 4
- Average amount per project: $100,000-$300,000
- Most notable projects: Habrahabr, Pruffi, Rollad, Roem.ru, Firrma.ru
- Most funded sectors: advertising technologies, crowdsourcing, media.
Sergei Gribov
- Number of projects funded over the past two years: 4
- Average amount per project: $60,000
- Most notable projects: undisclosed
- Most notable project: Jelastic
- Most funded sectors: personalization services, projects involving IT and medicine.
Alexander Turkot
- Number of projects funded over the past two years: 4
- Average amount per project: undisclosed
- Most notable project: Jelastic
- Most funded sectors: BYOD solutions, search technologies, mobile apps.
Vadim Asadov
- Number of projects funded over the past two years: 3
- Average amount per project: $50,000-$200,000
- Most notable projects: Mushroom War, iRates and others
- Most funded sectors: no specific preference.
Oskar Hartmann
- Number of projects funded over the past two years: undisclosed
- Average amount per project: about $500,000
- Most notable projects: Pharma Express
- Most funded sectors: e-commerce.
