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  1. 1. Venture Funds: if you can’t make’em, buy’em Russian Venture Company: Russian Government fund of venture funds March 9, 200 7 Yuri Ammosov Ministry of Economic Development and Trade Russian Federation
  2. 2. Russian Venture Company Is state involvement needed? Reason : Free market failure Objectively Hi-tech investments - High yield High risk Subjectively Investors think hi-tech yield lags behind hi-tech risks Why there is a shortage of Russian venture capital ? Policy involvement purpose : Shift risk-return ratio ①
  3. 3. Russian Venture Company What kind of involvement needed Investment decisions Country Problems Result State Private managers Korea , Finland , Germany … US ( SBIC 1958) Israel (Yozma 1993) Corruption Stupid decisions Tiered decisions Inefficient Usually efficient State VC fund State fund of VC funds Conclusion : Make a fund of venture funds ②
  4. 4. Russian Venture Company How it invests in high tech startups Russian Venture company Privately managed venture funds Fund of funds level Venture funds level Startup level  ☣ Å  Nanotechnologies Alternative energy Medical technologies Biotechnologies Telecommunications Information technologies  Microelectronics RUB 15 billion (~$ 565 million) From RUB 1.2 billion (~$45 million) To RUB 3.0 billion (~$115 million) ③ Venture fund MC Venture fund MC Venture fund MC Venture fund MC Venture fund MC Venture fund MC
  5. 5. Russian Venture Company Basic structure JSC Russian Venture Company Venture funds (closed-end mutual funds) Fund Management companies RUB 0.6-1.5 billion 51% Venture Specialists    manage Carried interest (20% max) Management fee (2,5% max) 10 or more venture funds Investments Early stage innovative startups manage Private VC fund investors RUB 0.6-1.5 billion 49% Return on investment ( ~ 80%) ④
  6. 6. Russian Venture Company Board of Directors Herman Gref Minister of Economic Development and Trade, Russia Chairman of the Board Dmitry Livanov Vice Minister of Education and Science, Russia Igor Artemiev Chairman of Anti-Trust Committee, Russia Esko Aho President, SITRA National Innovation Fund Finland Yigal Erlich Former Chairman, YOZMA Fund of Venture Funds Israel Konstantin Remchukov Editor-in-Chief, Independent Newspaper Russia Government Directors Independent Directors Alexei Korobov CEO, Russian Venture Company ⑤
  7. 7. Russian Venture Company Terms of the First Venture Funds Our first competitive selection starts NOW ! Selection Schedule Terms of the Venture Funds ⑥ Competition results announced May 14 RVC Board meets to listen to presentations of competitors and select winning applications May 11 Deadline for applications April 15 First day applications accepted March 26 Competition announced, rules and application forms published March 1 1% minimum Commitments from fund managers 80% of total Early stage investment 51% required Commitments from private investors 5% or CPI rate, whichever is less RVC return cap RBL 20 million Escrow deposit Diversified in: Security and counterterrorism Biotechnologies Medical technologies and equipment Nanotech and new materials IT and telecom Environmental technologies Transportation and aerospace Alternative energy VC Fund Investment areas RUB 600 million to RUB 1.5 billion RVC Investment (49% of each fund) RUB 4.8 billion Total Investment Limit
  8. 8. Russian Venture Company Why cap on returns? Government will cap its return from VC funds at 5 % per annum ! RVC share 49%, IRR to RVC 5 % Management fee and carried interest are not factored in Extra IRR For 5, 7 and 10 years of fund life <ul><li>RVC funds will be refundable at 5 % or CPI inflation rate, whichever is less! </li></ul><ul><li>If a fund is successful, limited partners buy out the government's share in the fund at a negative or zero real interest rate to the government </li></ul><ul><li>This way the government will take out some of investment risk </li></ul><ul><li>Our goal is not to make money but to create Russian hi-tech sector </li></ul><ul><li>WE GIVE FUND </li></ul><ul><li>YOU GROW STARTUPS </li></ul><ul><li>YOU KEEP NEARLY ALL NET INCOME </li></ul>⑦
  9. 9. Russian Venture Company The Message <ul><li>For investors and venture capitalists : </li></ul><ul><li>Hire the best teams </li></ul><ul><li>Seek most promising startups </li></ul><ul><li>Come and apply </li></ul><ul><li>We want to work with you </li></ul><ul><li>For mass media : </li></ul><ul><li>Tell everyone who dreams of building a new Google или Intel , but does not dare – </li></ul><ul><li>Start founding startups now unless you want to be late for money . It's time . Money for new success stories is on the way . </li></ul>See HTTP://WWW.RUSVENTURE.RU for more info