Although the total number of deals dropped sharply in January 2014, investors were far from inactive and the total sum invested was similar to the previous month.
However, January also had its fair share of crises - online flights retailer Eviterra was shut down, electronic payment system RBC Money was sold off at a discount price, VK.com’s investors started looking like corporate raiders and Displair was forced to abandon production in the face of mounting debts. On top of all that, a number of funds also entered discussion about selling their stakes in portfolio companies that have failed to get established on the open market.
Rusbase predicts that this trend is likely to continue this year and will ultimately lead to a more mature market, but without many international co-investors.
As for niche startups, the situation is unchanged - e-commerce, media and software continue to be the most popular. The automation and robotics sectors, along with clean tech are starting to grow, but it is not yet time to call this a new trend.
Below you can see an infographic analysis of the Russian venture market in January 2014, brought to life by GoVisual.
$1 million +
Yandex’s “acqui-hire” investment in Multiship is typical of the internet giant’s activity in the Russian venture market. They bought Multiship’s delivery service aggregation software for $1 million, and the Multiship team have moved over to Yandex, where they will continue to work on the project, which remains technically independent. Yandex has also committed a further “few million” to fund the development of the service.
Investor: Ivan Tavrin
Undisclosed. Sources estimate the deal to be worth between $300m and $350m based on valuations of the whole company.
The most mysterious deal struck at the start of 2014 was the sale of founder and general director Pavel Durov’s 12% stake in VK.com to Ivan Tavrin, the general director of telecoms operator Megafon. Sources say that Durov’s stake may have been worth much more than he sold it for, but disagreements with other major shareholders forced him into accepting a much lower price.
Investor: Private investors
RBC Media sold 99% of RBC Money, one of the major payment systems on the Russian internet. The stake was bought by nine managers of the project, whose names were not disclosed. The other 1% belongs to EastBound Limited.
FUND OF THE MONTH
Target Ventures, founded by former Rambler employee Anton Terekhov, has built up a strong e-commerce portfolio in recent months. In addition to BABADU.ru (an online children's retailer) and MixVille (an online sweet shop) the fund's portfolio now also includes Timepad.ru, which sells events tickets. The fund’s average investment is $1-3 million.
PERSON OF THE MONTH
Ivan Tavrin (born 1976 in Moscow) shot to prominence in January 2014 when he bought Pavel Durov’s 12% stake in VK.com. According to Nikolay Kononov’s The Durov Code Tavrin was previously involved in negotiations between the social network and oligarch Alisher Usmanov.
Kononov explains that Usmanov wanted to get to know and understand what motivated Durov. He wasn’t too concerned by the conflict with Mail.ru - he had more important things to worry about (like increasing his stake in Gazprom) than quarrels between programmers. However, he did know that the value of Mail.ru on the London Stock Exchange would greatly increase if it acquired Russia’s number 1 social network. The easiest way to do so would have been to buy the stakes held by co-founders Lev Leviev and Vyacheslav Mirashvili, but that didn’t work out. Although Mail.ru made a generous offer, the founders chose to hold out for an IPO. During these negotiations Usmanov invited Durov, Mail.ru finance director Verdi Israelyan, Ivan Streshinski (who manages Usmanov’s telecoms shares) and Ivan Tavrin, who represented Megafon.
Source: The Durov Code. N. Kononov. pp. 85,86.
FAIL OF THE MONTH
Discount flight retailer Eviterra's business model failed spectacularly at the beginning of 2014, leaving thousands of people that had bought tickets on the site empty handed. The startup had been aware of the problems which eventually led to its collapse as early as July 2013, as this interchange between founder Nik Zaryanin and Sasha Peganov from SiliconRus shows.
S.P: Regarding the reduction in commissions - S7 from 5% to 0.1%, Aeroflot, to 4% etc. Why are they doing this? Do they think that secondary retailers like yourselves have enough money anyway - that revenues are growing as sales increase? Or do they want to sell more themselves?”
N.Z : They want to sell more themselves. I think it’s an experiment - let’s reduce commissions and see what happens. In the cases of S7 and Aeroflot it’s quite clear what’s happening. Both are doing ok with online sales. Aeroflot.ru sells more flights than any other site, while S7 has a solid IT team. But no airline websites can really compete in terms of choice or user experience with the site of a good online travel agent.
S.P: But if you haven’t “really suffered”, what about other retailers like Ozon.travel, Anywayanyday and OneTwoTrip?
N.Z: We have indirect info. They have suffered.
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