Russia: IT Financing
Overview
The
Russian’s have proven that they are growing there economy with 3 straight
years of more than 20% growth. “It’s
a no-brainer, it’s a growth market. VCs
should get on the plane,” said Mark Sanor, a
partner at Ernst & Young, who has spent the last seven years studying
Russia’s blossoming tech market.
“In general, prospects for new investments in
Russia’s Net companies look bright as New Economy enthusiasm continues
in Russia – despite recent market gyrations and start-up failures in the
US and Western Europe. Because
there is no history of astronomical valuations attached to Russian Internet
companies, a radical downward market adjustment has not been needed.”
(– Net Start-ups in Russia Seek Business Smarts)
Capital
Sources
There
are several capital sources available to Russian tech companies including
the Market-Based Commercialization Initaive
and the US Import Export Bank which is initiating a lending program that
will allow cities and regional governments to to
obtain loans on US-Russian joint ventures.
One
interesting note on the nature of US investments into the Russian economy
is that Russian business people are just as interested in management expertise
as they are the money. “It’s very
important to ask, not ‘Show me the money,’ but ‘Show me the strategy,’”
says Andrei Vakulenko, general director of a
Moscow start-up called Internet Incubator. “If you don’t pick the right invest for you
company, the 70% you retain in your company could be worth zero. You need investors who can improve your strategy
and share their contact networks.” Esther
Dyson, chairman of the New York investment firm EDventure
Holdings, Inc. suggests that “for each $100,000 investors send to Russia, they should send 3 good managers as well.”
FDI
into IT
Few
US companies have actually made direct investments in
to the Russian IT market. Although
the companies that have are reaping the rewards of first mover advantage. Russia is a top performer for companies like Sun, Microsoft,
and Intel.
Technology
IPOs
Investor
exit opportunities are actually quite persuasive.
IPOs will gain importance over the medium
term, and several have been successful so far:
- Beeline Cellular Communications
- Golden Telecom
- MTC GSM
- bp
The primary exit for
investors so far has been trade sales.
Examples of these are as follows:
- BP’s recently announced a US$ 6.75B investment
for up to 50% of TNK (Truman Oil Company)
- Heineken bought stake in Bravo for about US$
400M
- Nestle Waters bought stake in Saint Springs
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