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MOSCOW, Nov. 13, 2018 /PRNewswire/ --
In 2017, the market for venture transactions in Russia showed an increase for the first time in recent years, growing by 48% to reach USD 243.7 million, compared with USD 165.2 million in the previous year. As in 2016, the total size of the venture capital ecosystem amounted to USD 410 million.
PwC and the Russian Venture Company (RVC) are presenting the seventh annual review of the Russian venture industry, MoneyTree™: Venture Market Navigator (MoneyTree™: Russia), for 2017 and the first half of 2018.
According to the survey, the venture transactions market amounted to USD 243.7 million in 2017-a 48% increase compared with USD 165.2 million in the previous year. Over the same period, the number of individual transactions amounted to 205, an increase of 21. These dynamics demonstrate that there has been a slight increase in investment activity on the Russian market. In the first half of 2018, a total of 97 transactions amounting to USD 93.4 million were conducted.
The average transaction size also increased, from USD 1.1 million in 2016 to USD 1.5 million in 2017. This growth demonstrates the positive attitude of investors towards venture assets in the context of improving macroeconomic conditions. In the first half of 2018, the average transaction size stood at USD 1.3 million. In 2017, the largest increase in average investment size in the transactions segment was observed at the seed stage (a 2.2-fold increase from USD 0.24 million to USD 0.53 million).
Information technology remains the leading sector in terms of both the number of transactions and the size of investments. In 2017, transactions in this sector accounted for 75% of all transactions and 84% of the total volume. The volumes recorded for the industrial and biotechnology segments amounted to 10% and 6%, respectively.
According to the report, the average transaction size at the start-up stage has also increased (by 49%, from 0.56 million to 0.83 million USD). At the same time, the average investment size at the early stage and at the expansion stage has remained virtually unchanged (from USD 0.83 million to USD 0.82 million at the early stage, and from USD 2.81 million to USD 2.77 million at the expansion stage, respectively). In the first half of 2018, the market experienced two-fold growth in the average transaction size at the seed stage (from 0.53 million USD to 0.90 million USD) and a 61% increase in investment at the start-up stage (from USD 0.83 million to USD 1.33 million). Over the same period, at the expansion stage, the average transaction size decreased by 29% (from USD 2.77 million to USD 1.96 million).
Investor performance fell sharply in 2017 with a total of just 15 transactions (compared with 30 in 2016). The total value of transactions also fell, by 33% to USD 79.9 million, compared with USD 120 million in 2016. Although only a small number of transactions (six) were completed in the first half of 2018, the total value (USD 68.5 million) is already comparable to the final figure for all of 2017.
"After many years of stagnation, the venture market is now at last growing, both in terms of the volume and number of transactions. This demonstrates a gradual change in investor sentiment and adaptation of the market to new conditions. The key question is whether it is possible to transform these currently unstable dynamics into a long-term trend. The venture capital market strategic plan now being developed by the RVC in cooperation with the Ministry of Economic Development and Trade should eliminate the most difficult constraints on the growth of the industry. The most important factors include attracting institutional investors and corporate strategists to the venture capital market, balancing the various stages of the investment cycle and creating a comfortable legal environment for investment."-Alexander Povalko, CEO, RVC.
"According to data on the first half of 2018, the total size of the venture capital ecosystem stood at USD 200 million and the total volume of exit transactions amounted to USD 69 million, which is comparable with the data for all of 2017. This indicates a recovery in demand for venture capital companies in the later stages. Russian venture funds demonstrate high involvement in the global venture capital system. In 2017, the volume of transactions involving Russian funds in foreign projects amounted to USD 696 million, almost three times more than investment in Russian projects over the same period." -Oleg Malyshev, Transaction Services Leader, PwC Russia.
In 2017, the number of grants issued fell to 4,558 and amounted in total to USD 88.5 million. In 2016, by comparison, 4,651 grants were issued and amounted in total to USD 121.4 million. In the first half of 2018, 2,266 grants were issued, amounting in total to USD 37.1 million. As in the preceding year, the most active grant funds were The Foundation for Assistance to Small Innovative Enterprises in Science and Technology (Innovation Assistance Foundation, or the Bortnik Fund) and the Skolkovo Foundation.
Editor's note:
For the full version of the study, please refer to:
Methodology
This report is based on The MoneyTree™ Report (http://www.pwc.com/globalmoneytree).
MoneyTree™: Russia was prepared by PwC with the support of the Russian Venture Company (RVC) on the basis of information provided by the Joint Analytical Group (JAG), created on the initiative of the Russian Venture Capital Association (RVCA) with the support of the RVC.
The main difference between the methodology of MoneyTree™: Russia and the methodology for collecting and analysing the main parameters and activities of Russian direct and venture capital funds (http://www.rvca.ru/upload/files/lib/methodology-of-data-collection-and-analysis.pdf), as prepared by the RVCA and supported by the RVC under JAG, is that the latter considers the venture investment market together with the direct investment market.
In addition, PwC made amendments to data collected by the RVCA (related to the use of other open sources of information and verification of the value of transactions by various external sources). In accordance with the methodology, transactions carried out by business angels were included in the analysis.
When analysing the data, account was taken of all venture capital investments actually received and made by business angels, investment companies and private, corporate and state venture funds, where such investments were for sums of no more than USD 100 million and made over the course of a single round of financing. Where companies received investments as a result of two or more rounds of financing, each round was considered as a separate transaction. The study took into account transactions formally completed between 1 January 2016 and 30 June 2018.
Venture investment is understood to mean acquisition of the ordinary share and charter capital of new or emerging companies, with the proviso that the acquired share is less than the controlling interest. The funds being invested are directed primarily into business development and are not used to purchase shares belonging to the existing shareholders (founders) of the company. This report looks at companies operating in the field of information, biological or industrial technology in the Russian Federation.
The report contains information on the volume of grants awarded. A grant is understood to be a non-repayable subsidy allocated to a company for the purposes of conducting scientific or other research and development work. However, grants constitute non-marketable sources of funding and are not taken into account when determining the venture capital market volume. The report also deals with transactions that result in investor withdrawal. However, like grants, these are not included in the total venture capital market volume.
About PwC Russia
PwC Russia (http://www.pwc.ru ) provides industry-focused assurance, tax, legal and advisory services. Over 2,700 professionals working in PwC offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Rostov-on-Don, Krasnodar, Voronezh, Novosibirsk, Vladikavkaz and Ufa share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients.
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About RVC
The Russian Venture Company is a state fund of funds created to develop the venture industry in the Russian Federation. The main objectives of the RVC are to stimulate the development of the private venture investment industry in Russia and take on the role of project office for the National Technology Initiative (NTI). RVC's authorised capital amounts to more than RUB 30 billion. This is owned in full by the Russian Federation, represented by the Russian Federal Agency for State Property (Rosimushchestvo). The RVC now has 26 funds with a total value of RUB 41.8 billion. (The RVC's share is RUB 24.8 billion). The RVC currently has funds in 225 portfolio companies. The total sum approved for investment amounts to RUB 18.6 billion.
