This Venture Capital Market Overview 2015 has been elaborated by the independent investment company RMG Partners in collaboration with East-West Digital News.
The authors of the survey underline that even if the year 2015 was the worst one in the history of Russia’s modern VC market, there are signs which give hope for the future.
For the first part, the year brought a substantial sag in investment; on the other hand, it accentuated the reluctance on the part of portfolio holders to show a knee jerk reaction to the slump, hence a near negligible number of exits. Investors had more than enough grounds for wariness, and even fear.
The national currency shed most of its pre-crisis value; the oil prices experienced a giant nose-dive; the political standoff between Russia and the West showed no sign of easing; and on top of all that, it was uncertainty regarding the rules of the game and the government’s role in the VC market that weighed down on investors. Amid endless changes in budgetary priorities the Cabinet could have simply forgotten about the market. Direct government investments shrank indeed.
However, the regulators did reach out to VC market players in spite of that. They moved to streamline—perhaps not across the board yet—the participation of corporates in the support of start-ups and their technologies. Viewing big business as a customer of domestic technology led to the launch of a new corporation-focused program within GenerationS, the largest acceleration initiative by RVC, Russia’s fund of funds for innovation. The most recent government decision compelling 90 biggest Russian state-owned companies to purchase high tech solutions from small and medium-sized businesses has fuelled hopes for recovery to come, showing the key players that the regulators are not turning their back on the market even in the face of the current crisis.
Bloomberg put Russia on its list of the world’s 15 most innovative countries in 2015, commending Russia for a multitude of high tech companies registered here. That means that Russia’s heading, at least quantitatively for now, for certain critical mass of bright minds supporting the national venture market. A quantitative increase in the number of tech-focused start-ups, if sustained, may—in agreement with a rule of physics—give rise to a major qualitative improvement of the technologies the start-ups develop. And this brings optimism as we look deeper into the year 2016, because it’s no secret that the quality of today’s pre-seed stage technologies out of Russia often falls short of investors’ expectations, forcing many angel investors to stay out biding their time.
In spite of the overwhelming odds the VC market had not ceased to toil for survival and further development in 2015 confirm the authors. Many Russian start-up projects are plainly undervalued following the devaluation of the ruble, and project teams can’t but realize that technologies focused exclusively on the domestic market are just hopeless; and all this provides a strong enough foothold for the VC market to regain momentum
Read the full report here.
RMG Partners is an independent Russian investment company. RMG Partners is an active member of the National Association of Alternative Investors (NAURAN). NAURAN is a non-profit partnership created to draw attention to the market of direct and venture capital investments in Russia, to form a favorable legal environment, to assist in fund raising and promote the Russian investment market on the international scene.