Bad news from the Russian venture capital market
The venture capital market has collapsed
The number of transactions also dropped sharply to 53.
The investment company Rai, Man and Gore Securities (RMG) has prepared a review of the Russian venture capital market, according to which both the volume of investments and the number of transactions have turned out to be record low over the past 6 quarters.
The trend towards a decrease in the volume of venture investments and the number of transactions certainly exists, analysts say. The general slowdown in economic growth in the first half of 2013 also affected the volume of venture capital financing, and not only in Russia: the venture capital market also declined slightly in Europe and the United States. However, there are other reasons for the observed decline.
The Russian venture capital market is quite closed and information opaque, so it often becomes known about closed transactions only after a few weeks or months. In addition, the parties often prefer not to disclose the volume of the transaction, and expert assessments can vary significantly. Thus, the true scale of the reduction in venture financing in the 2nd quarter of 2013 is most likely less than follows from the figures given.
In the company's analysis, the total market volume does not include transactions in excess of $ 100 million and exits, as well as investments in venture infrastructure.
The decrease in the number of transactions closed in the 2nd quarter of 2013 compared to the 1st quarter was mainly due to investments in companies at the seed stage: the number of transactions at the startup, growth and expansion stages decreased slightly in the 2nd quarter of 2013 (from 30 to 24), and significantly fewer transactions were concluded at the seed stage (29 vs. 45).
It is worth noting that the sharp drop in the number of seed transactions did not affect the volume of seed financing in monetary terms. On the contrary, the volume of venture capital attracted by Russian seed companies in the 2nd quarter of 2013 increased by 9.3% compared to the 1st quarter and amounted to $17.2 million.
In 2013, the most noticeable trend is the reduction of private and public-private investments in venture companies at the seed stage: the share of private funds in the total volume of transactions in the 2nd quarter of 2013 was 13.1%, while in 2012 it averaged 34%, and in the 4th quarter reached 44.7%. The same trend is observed in transactions with startups. This means that financing new projects at the seed stage becomes the responsibility of state funds.
The number of transactions with venture companies of later stages of development remains consistently low (8 in each of the two quarters of 2013). The small number of closed transactions suggests that it is relatively easy for Russian venture projects to find start-up capital, but it is still difficult to attract investments for expansion. At the same time, investments in companies at the stages of growth and expansion in the 2nd quarter of 2013 amounted to 53% of all attracted venture capital.
Information technologies are still the most fertile ground for venture projects.
In the 2nd quarter of 2013, about 87% of all investments in the Russian venture capital market were in the IT sector. The amount of capital invested in industrial and biomedical technologies over the past 5 quarters does not exceed 11% of the total volume of venture investments.
There are very noticeable differences in investor preferences: if private and corporate funds invest mainly in IT, then 70-90% of investments in promtech and biotech come from state development institutions. According to Dmitry Galperin, Investment Director of the Runa Capital Fund, bio– and promtech are riskier sectors, since they require more investment and time to bring a product to market than in IT. In addition, there are more IT projects in general: there are many good developers in Russia, and interest in the sector is fueled by success stories of Western companies.
Within the IT sector, the most popular subsector of eCommerce (e-commerce) among investors can be identified. The share of eCommerce in investments attracted by the IT sector in the last 4 quarters is 41.8%; in the 2nd quarter of 2012, this figure reached 81.2% due to two major transactions at once: the ad service Avito.ru It attracted $75 million, and the KupiVIP online club sales store - $ 38 million. For comparison, the largest venture transaction in the e–commerce subsector for the 2nd quarter of 2013 was the purchase by the Media Capital Fund of a minority stake in the Refrigerator online store.<url>" for $ 10 million. It is also worth noting a noticeable increase in the share of investments in the cloud technology sector in the total volume of venture financing (4.3% in Q2 2013 compared to 0.8% in Q1), as well as a decrease in investments in mobile applications from $ 41.3 million (27.8% of all venture investments) to 3.8 USD million (4.4%).
The volume of the average venture transaction in the 2nd quarter was $ 1.65 million – slightly less than in the 1st quarter ($1.98 million) and in 2012. ($1.96 million).
The most active investors in the 2nd quarter of 2013 were private venture funds, which invested 44.9 million US dollars (51.5% of all venture investments) in 16 projects. Thus, private funds retained leadership in these indicators, although both the volume and the number of transactions decreased by almost half during the quarter: in Q1, private funds invested $88.5 million in 32 companies.
It should be noted that a certain industry specialization of investors can be traced in the Russian venture capital market. So, in the 2nd quarter, only private funds and business angels invested in e-commerce, and only state funds invested in biotech. This "division of labor" can be attributed to the low activity of private funds at the early stages of the development of venture companies: venture projects in the fields of biomedical and industrial technologies are mostly at the seed stage. In addition, IT for private foundations is an opportunity to make money on copies of successful Western projects, which is not available in biotech and promtech.
A distinctive feature of the Russian venture capital market is the extremely low activity of corporate funds. In the 2nd quarter of 2013, they invested only 1.8% of the total investment in the venture capital market, and by the end of 2012, this figure was even less – 1.5%. For comparison, in the last 10 years, the share of corporate venture investments in the volume of the US venture capital market ranged from 6.8% to 9.1% in different years.
Portal "Eternal youth" http://vechnayamolodost.ru20.09.2013