Of the 68 countries tracked for venture investment last year by Thomson Financial, Russia ranked 27th in total amount invested ($91 million) and 29th in total number of deals (12). It was eclipsed by the likes of Denmark ($650 million in 63 deals), Italy ($387 million in 59 deals) and Belgium ($375 million in 74 deals).
The Russian government hopes to move up on the list through the formation of the Russian Venture Co. (RVC), a public-private partnership. The RVC plans to invest $550 million in eight to 12 Russian venture funds that back Russian companies. It will contribute up to 49% of the limited partner commitments to a fund, with the expectation that the other 51% will come from non-governmental LPs.
So far, the RVC has made three committments:
They’re starting to get the entrepreneurial fever. It’s clearly time to do something in Russia.
Don Wood, Managing Director, Draper Fisher Jurvetson
- It invested $58 million in a $118 million fund being raised by VTB Asset Management, a partnership formed by Russia’s Bank VTB, The European Bank for Reconstruction and Development and other investors.
- It put $56.8 million into Bioprocess Capital, a $116 million biotech fund created by Pitch Johnson’s Asset Management firm, with a $56.8 million investment. (Johnson was instrumental in advising the Russian government on how to set up a matching funds program.)
- And it committed $37.8 million to a $115 million being raised by Finance Trust, a firm established by Israeli financial group Tamir Fishman and Russian partners.
Some U.S. VCs think the time is ripe to invest in Russia. “They’re starting to get the entrepreneurial fever,” Draper Fisher Jurvetson Managing Director Don Wood told VCJ. “The economy is doing quite well there. There are a lot of smart people there. It’s clearly time to do something in Russia.”
DFJ tried to launch a Ukrainian affiliate several years ago, but its efforts turned into an incubator rather than a fund, Wood says. The firm has not applied for RVC matching funds, but is investigating to see if raising such an investment might make sense. Wood visited Russia in April and met with the Ministry of Economic Development and Trade to discuss potential collaboration, but he found the requirements—such as having to invest strictly in companies located inside Russia—too restrictive.
“Regional operators inside of Russia who can build into those areas have a much better chance of receiving [RVC money] than someone with a global brand who hasn’t rolled out offices in Moscow, let alone in the provinces,” says Harry Kelly, a co-founder of Russia-focused venture firm Starboard Ventures. —Alexander Haislip