ABRT Venture Fund partner, founder of Veeam Software
Investing is a heavy and disciplined business. No one invests in projects on emotions: I like this guy, this is a cool idea, I'll give them money. Each professional investor has clear criteria that can vary depending on the stage - the seed when there is only an idea and a prototype, and the growth stage when there is a product and first users.
Western funds have a clearer logic than most Russian ones, because they tend to be longer in the market and have a more global vision. Not surprisingly, Russian startups and projects from the former CIS are striving to get into the field of view of American and European funds. Western investors can help enter the global market. Of course, not all funds seek to Russia. Our market is only 3-5% of the global IT market. There are good teams and good ideas here, but it’s much easier to invest in Silicon Valley than to dig in three percent. There are exceptions to the rules, for example, our partner in many transactions, the Luxembourg-based Mangrove Capital Partners fund, he sees potential in Russia and the CIS countries.
We created our ABRT fund in 2005 with my partner Andrei Baronov. Then we sold Aelita Software and thought about what to do. During the deal with the Quintura search engine, we worked with Mangrove, an early Skype investor (we were the first to enter the company, they are the second). The project failed, but we appreciated each other's competencies.
Mangrove is a large professional fund, it has many experts and analysts, they make investments in companies around the world and can evaluate which market in Russia will become hot in a year, three, five. We are several years behind the West in some areas, while in others we are on par. They can guess hot markets. So, a few years ago we invested in Oktogo (now called Travel.ru).
Investing, on the one hand, is a very competitive market,
on the other hand, funds like sharing risks and competencies
We have been working with Mangrove since 2007 and constantly exchange information on which markets are promising and interesting. There was a beacon on the travel industry; in 2009, it began to show good growth. We looked closely at all segments - from ticket sales to content projects. Ideologically, we like transactional models more, so we stopped at hotels. With tickets by that time, everything was clear: there was fierce competition ahead and a decrease in margin.
We watched a lot of projects before we found Oktogo. With Mangrove, our work is structured as follows: we have our own selection criteria and we are well aware of the criteria of an affiliate fund. When we find a good team, and first of all, we focus on the team, we introduce it to our colleagues at a personal meeting or during a conference call. Marina Kolesnik from Oktogo had Harvard behind her, participated in Mail.ru projects, a good group of professionals gathered around her, without any imbalance. We liked her vision of the project (although then everything changed many times). Mangrove agreed with our choice. About four months have passed from the moment of acquaintance with the project to the moment of investment.
Investing, on the one hand, is a very competitive market, on the other hand, funds like to share risks and competencies. Look at the investment releases, most often rounds are spent by two or three funds in the consortium. If the Western Fund sees a prospect in Russia and the CIS countries (and it is really possible to make money here) and is ready to accept the political risks that exist here, it most often seeks advice from local players with good competencies. For example, to funds or investors, immigrants from the CIS who made good deals in the home market and in the West. Not only Mangrove works with us. We advise, for example, Insight Venture Partners, when they are going to invest in Russia or when the companies of interest to them came from the CIS. We know what they may be interested in, and forward them suitable projects. Several times we advised American foundations with which we did not enter into official partnerships. In such cases, we are asked to do an analysis of a specific area or to conduct an examination of a specific project - to assess the place in the market, competitors and so on.
The most important thing you should do is work on your product. Then, perhaps, the investor will find you himself
Now we are conducting ABRT-Mangrove CEO Camp - an expert platform for companies from Russia, the CIS countries and Europe, where the founders and heads of IT companies work out their business ideas together with Russian and foreign mentors. They receive recommendations from venture capital funds, build a product strategy, communicating with partners and customers. The first stage takes place in St. Petersburg, then the work is transferred to Silicon Valley.
To get into the field of view of the Western fund, you need, firstly, to soberly evaluate yourself. Is your idea capable of becoming a global scalable business? Is it too small-town. However, Internet projects designed only for the local market are still built and developed according to global laws, so a good idea for the local market can attract investors from abroad.
The second thing you can do is to contact Russian funds that make investments in partnership with Western players. All funds have managers who work with projects. You do not need to write a hundred pages of a business plan, a small description of the project and an Excel file with an explanation of where the expenses will go and where it is planned to receive income are quite enough. Some companies seek to travel to Silicon Valley and introduce themselves to several local funds. This is a good idea, but it is worthwhile to conduct reconnaissance and try to become a member of the many events and conferences that take place there. So it will be easier to arrange meetings and catch everyone in one place. It is important to study the specifics of the funds you are going to contact well. If the fund does not make seed investments, it makes no sense to bring him one idea.
But the most important thing you should do is work on your product. Then, perhaps, the investor will find you himself.
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Cover photo: veeam.com