early stage

Fast Growth in Russian Early Stage Internet Deal Volume

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July 3, 2012

Funding for early stage hi-growth internet ventures is notoriously difficult to assess anywhere, but in Russia informed guesswork due to the high number of undisclosed or unpublished deals, may be as good as it gets. Fast Lane Ventures, a Russian equity and business development firm, released some figures and interpretations from their research on transactions between 2010 and 2011. They point to the following trends:

  • A busy early-stage sector: The number of companies having received seed funding from private investors quadrupled, from 22 in 2010 to 91 in 2011, with seed capital totaling USD 8.7 million and USD 14.1 million, respectively.
  • Noticeable government involvement, from practically zero before 2010 to $20 million in grant funding during 2010-2011, distributed among 61 startups in total.
  • A rapid increase in transactions and investment volumes for hi-growth companies. Available figures for 2011 show 215 transactions amounting to USD540 million invested in young internet companies, as compared to 59 deals totaling USD225 million in 2010.

Actual figures (including undisclosed deals) are thought to have reached the USD1 billion mark in 2011, versus USD500 million in 2010. The analysis of the largest transactions is said to confirm an investor preference for proven business models and major players in their segment.

 

At least half of the top 10 investments, including VKontakte, Darberry, Avito and Kupivip, are seen as direct analogs of Western business models. Significantly, there are two transactions considered true “success stories” in the group analyzed : Groupon’s acquisition of Darberry and Skype’s purchase of Qik.

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