2. PE is a marginal asset class in Russia
PE/VC funds account for less than 1% of $500 bln. invested annually in Russia
2
Region # of
PE/VC
firms
NAV Dry powder New
investment/
year
# of deals/
year
# of portfolio
companies
US 3 300 $3 000 bln. $800 bln. $400 bln. 4 000 17 000
EU 1 800 $700 bln. $200 bln. $45 bln. 5 000 21 000
Russia 220 $30 bln. $10 bln. $3 bln. 300 1 500
3. Key players in the PE/VC market in Russia
Russia PE market was established in mid 1990-ies at the initiative of EBRD and other
DFIs. Local capital is the main growth driver going forward.
3
Stage Seed / Venture Growth capital Buy-out funds
Investors Angels and VC funds (series A,
B)
PE funds
(series В, C, …)
Family offices, FIGs
Local players FRII
Runa
ABRT
Bright Capital
AddVenture
Finam
I2BF
Imi.vc
Klever
Phenomen Ventures
Prostor Capital
RVC sponsored funds
Qiwi ventures
iTech
Rusnano
Aton Capital
Svarog Capital
Wermuth
Ru-Net
NRG
VIYM
UCP
Da Vinci Capital
Renova
RDIF
AFK Systema
Gazprombank
Promsvyaz Capital
Alfa Capital
Onexim
Global players*
Almaz Capital
Mangrove
Direct Group
Ventech
Fastlane Ventures
eVenture
TMT Investments,
Intel Capital
Russia Partners
Baring Vostok
Accel
Bessemer Elbrus
CapMan
Vostok Nafta
Tiger Global
UFG
Kinnevik
MCI
Balderton
Insight Captial
GS PESS
TPG
Carlyle
KKR
Access Industries
Warburg Pincus
Blackrock
* - where > 50% of capital sourced from outside of Russia Government money in bold print
4. 4
Deal Sourcing: scratching the surface
Russia is a potentially large market, still untapped
300 deals a year
10 000 hit PE/VC radar
screens
100 000 new business every
year
1 mln businesses
4 mln legal entities
5. 5
Deal Sourcing: you eat what you kill
Russian VCs are where US VCs were in 1970-ies – small circle, limited market
infrastructure. It takes 10 years and $10m to make a good VC.
40
20
40
40
20
40
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Junior VC Experienced VC
Middlemen Other funds Rolodex
US / EU
80
10
10
30
10
60
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Junior VC Experienced VC
Middlemen Other funds Rolodex
Russia
6. 6
Deal Sourcing: you know a good deal when you see it
Typical filters are market, team, business model and deal. In the US good deal is
where you have 2 out of 4. In Russia you need 3 out of 4.
1. Market: size, growth,
fragmentation, liquidity
2. Team: experience,
motivation, alignment
3. Business model: unit econ,
competitive advantages
4. Deal: valuation, liquidity
7. Deal making: transactionally heavy environment
Takes x 3 time and x2 overheads to close the deal in Russia vs. US
07
Identify target investors
Prepare business plan, fin
reports and fin model
Circulate the teaser
Sign NDAs with interested
investors
Review financials and memo
Negotiate term sheet
Negotiate ISA
Homework: 1 – 12 mth Marketing: 1 – 12 мес Deal: 3 – 12 mth
Agree business plan
Due diligence
Consolidate ownership
8. Portfolio management: lessons learned
Flexibility is the key in long-term investment in Russia
08
Define value added: staffing, clients, deals (M&A, follow-ons, exits)
Put post-completion obligations on paper
Board process as a matter of discipline: require homework!
What happens between the Boards is more important
Four eye principle
Personal relationship vs. keeping entrepreneur challenged
Transparency is a must
Non-compete is a matter of principle: exit first
9. Exits: luck favors prepared mind
Investment is science, exit is art
09
Define exit plan before you invest: make the list of potential buyers, research multiples
Sync your plans with the founders: common vision, timing and motivation (careful with family
businesses!)
Build exit terms into the shareholders’ agreement (tag, drag, etc.)
Motivate the founders and management for the exit (bonuses for performance, transparency,
etc.)
Make sure the portfolio company is ALWAYS ready for a quick deal if the buyer shows up
(consolidated ownership, audited accounts, etc.)
IPO is an icing on the cake, not the cake. 80% exits globally and 90%+ exits in Russia are
through trade sale
Consider MBO (redemption, dividend out) options if neither IPO nor trade sale work within the
investment period.
10. 10
Further reading
Free access Subscription based =
Local sources
rusbase.vc
i.rbc.ru
siliconrus.com
startuppoint.ru
rvca.ru
rusventure.ru
PwC MoneyTree
preqveca.ru
International sources
crunchbase.com
techcrunch.com
venturebeat.com
pehub.com
cambridgeassociates.com
evca.eu
nvca.com
bvca.com
fenwick.com
Preqin
Capital IQ
Bloomberg
Dow Jones
Thomson Reuters
Pitchbook
CB insights
