Launched in 2010 in Russia, Imperious Group began investing in Ukrainian startups last year. Regardless of the political tumult, the fund’s interest in this market was maintained this year to such an extent that has it has become one of the most active funds in Ukraine with more than $3 million invested so far.
This year, Imperious Group invested in seven Ukrainian projects at the seed stage – which came in addition to transactions in Russia and other countries. In an interview with the Ukrainian tech blog AIN.UA, Imperious Group analysts Pavel Aleshin and Kirill Mazur talked about the fund’s activities in Ukraine, investing in startups and market conditions in general.
What kind of startups did you invest in this year and what was the investment total?
This year, we concluded three deals at the seed stage, investing $350,000 in Topes, $300,000 in Publicfast and $250,000 in Multitest. Also, we invested $43,000 in each of seven startups at the pre-seed stage as part of a joint program with the incubator Happy Farm. Those startups are HappyTom, ARQuest, Sportamba, Audaster, Mitten and DentalCloud. We also have two deals on the Russian market worth a total of $1.15 million. We invested almost $1.2 million in Ukrainian projects this year. Last year, we invested almost twice that amount – about $2 million, but now we are investing more at the pre-seed stage and being more selective of projects.
Why does a Russian fund invest more in Ukrainian projects than in Russian ones?
We are not a Russian fund, although our headquarters were originally in Moscow. At present, we have physical or virtual offices in Ukraine, Israel and the United States. The fund’s executives have a rather diversified business and some of it is abroad. We see more interesting startups in Ukraine and we think that the most interesting projects arise in interesting times. When we were selecting startups, many of the projects were from the Ukrainian regions. Also, Ukrainian teams are solving more global problems – they understand that the domestic market is quite small and immediately orient themselves toward Europe or the US. In Russia, it’s the other way around: projects are often created for domestic purposes.
How are things going with the projects you invested in before that?
The Crimean startup Bazzilla had technical complications with mobile connections because the operators blocked calls from Ukraine. There were other operational problems, but they were minor difficulties. You wouldn’t call them setbacks. A more positive example is Advice Wallet (Settle) [a mobile acquiring startup which also received financing from Russian fund Life.SREDA] which is now beginning to make money. It’s still not the numbers that we were dreaming of, but they are growing twice as fast as we had planned on paper. They are also making good money on international markets, in Kazakhstan, for example.
All the other seed projects plan to develop abroad. Topes has contacts in Poland, Publicfast launched on the Kazakhstan market and Multitest planned to enter Europe and the U.S. from the very beginning.
Tell us about working with business incubator Happy Farm. What are the benefits for each side?
Happy Farm searches for projects and trains them, and we invest in them. The benefit for us is that we find startups to invest in, and Happy Farm receives awards for their training and interest from the press and other startups.
We used to have other sources for finding new projects, but they were not always productive.
How has the war affected the venture business and Russian-Ukrainian relations?
There are greater economic and political risks in investing in Russian projects, so we have begun looking more at the Ukrainian market. We have only made two deals in Russia this year. In general, I think the venture business should be beyond politics. We are interested in projects that will make the world smaller and break down borders. And I think that getting carried away with politics is improper.
How have the investment markets in Ukraine and Russia changed in the last year?
We all know that there is an outflow of capital from Russia now and there are significantly fewer deals being made. In Ukraine, there are fewer good teams and projects. Startups that had been in the country are going abroad and it’s hard to catch them. Many are no longer operational and now we don’t have enough projects in the early stages to invest in. But we hope that everything will be all right soon. So we are staying ahead of the pack and want to show everyone that there are excellent opportunities for business now. That’s why it is possible and necessary to invest in startups. I hope things will pick up. Problems can’t go on forever.
Editor’s note: Imperious Group’s capital, which remains undisclosed, is coming essentially from real estate. The fund generally invests from $50,000 to $500,000 in startups at the pre-seed, seed and Series A stages. Its target markets encompass Russia and neighboring countries as well as Europe, Israel, Canada and the USA.
