The Russian venture capital industry has grown tenfold since 2007
10 February 2014, MOSCOW. – EY, the leading services provider for strategic growth markets, and RVC, the key Russian institute for venture industry development, announce Russian and global venture markets in 2007–2013 survey. The study presents an in-depth view of the market, features new statistical data, and contains insights from the venture industry leaders.
According to the EY’s analysis, the Russian venture capital (VC) industry has shown triple-digit growth over the last 7 years, reaching the volume of US$1,213b in 2012 (compared to just US$108.3m in 2007). The record-breaking volume of deals in 2012 made the Russian venture market the second largest in Europe and the fifth largest in the world. The amount of incubators, angel investors, angel clubs, start-ups and early stage deals has also significantly increased over the period. Investors are clearly showing trust in the Russian venture market.
The growth is driven primarily by investments in IT and the consumer market, whose main driver is the shift to online retail. In Russia, as well as in other countries studied in the survey, the IT and consumer market segments are easier to innovate in than the other segments and provide a shorter return on investments. Private venture funds tend to invest in internet companies, while state-operated funds prefer science, materials and chemicals.
The VC market in Russia is in its early stages of maturity. It is characterized with relatively few exits because Russian corporations have not actively pursued M&A, and international exits are not common yet. As of today the most developed projects collect most of the funding supplied, but we notice new initiatives aimed at support of early-stage companies.
The Russian government plays a significant role as the provider of the infrastructure, creator of the ecosystem and the endorser of the venture market as a whole. The level of government support makes Russia similar to both China and to some extent Israel. Indeed, the venture industries in these countries were created and launched by their governments’ coordinated efforts, rather than by the efforts of private investors. However, the ecosystem and access to information on investors and centers of excellence remains fragmented in Russia.
Global trends strongly affect the Russian market. Global monetary policies contribute to the increasing availability of funds for Russian companies going global and US markets have a significant pull over Russia due to their size and experience. Silicon Valley serves as a role model for the Russian venture market. Its influence is felt in both the attempts to land successful Western business models in Russia and in an interest of some talented Russian entrepreneurs in starting their own ventures in Silicon Valley.
Alexander Ivlev, EY Country Managing Partner for Russia: “The venture investment industry is still going through difficult times coming out of the severe financial crisis. In these circumstances, the rapid rise of the Russian venture market suggests that stakeholders continue to believe that the efforts of the government and market players will result in a transparent business ecosystem and that the way to the future lies in building the innovative economy”.
“The innovations themselves, however, are the result of continuous effort by entrepreneurs and governments alike to develop a clear vision of the high-tech future and a path toward it. In tomorrow’s rapidly changing world, EY, as ever before, will be there to help businesses navigate their way toward sustainable growth and success.”, - he adds.
Igor Agamirsyan, CEO and Chairman, RVC: “The report has proved the expert opinion that Russian venture market is hitting a new development stage. Our task is to adjust existing market disproportions, including those related to stages - deficient supply of funds at preseed and seed stages, and sectors - most sectors, except for Internet, e-commerce and telecommunications, display insufficient supply of funds. We will do our best to develop regional infrastructure, attract human assets to knowledge-intensive industries, in particular, through cooperation with universities”.
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This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.
RVC is a government fund of VC funds, a development institute of the Russian Federation and one of Russia’s key tools in building a national innovation system. RVC was established by the Russian Government in accordance with Order No. 838-r dated 7 June 2006.
RVC’s authorized capital stands at over RUB30b. It is a wholly owned subsidiary of the Federal Agency for State Property Management (Rosimuschestvo).
In 2013, the number of RVC-backed funds reached 13, and their total volume RUB27.67b. RVC’s contribution to these funds exceeded RUB16.85b. The total number of companies financed by RVC-backed funds is 144. The aggregate volume of investments made is RUB13.29b.