Russia’s tiny, but growing venture capital market reached $714mn in 2018

Russia’s tiny, but growing venture capital market reached $714mn in 2018
Russia's VC market grew by half in 2018 to reach $714mn as funds play a bigger role and invest three times more on average than in 2017
By EWDN in Moscow May 1, 2019

Russia’s venture capital (VC) market increased by half in size in terms of the volume of investments to $714mn in 2018 as professional funds increasingly target Russian start ups and maturing tech companies for investment, according to a new report.

DSight, a database of deals dedicated to the Russian venture market, has just released the English version of its latest yearly report, reports East-West Digital News (EWDN). The research includes contributions from EY, investor association NAIMA, CrunchBase as well as East-West Digital News.

The market grew significantly last year, reaching $714.4mn, up 51.6% from 2017. These numbers include deals involving startups registered outside Russia but with roots in the country. Thus, the three largest deals of last year were:

While the overall number of deals remained almost unchanged (from 302 in 2017 to 299 in 2018), the average value per deal in late stage investments increased dramatically. It grew from $13.9mn in 2017 to $49.2mn in 2018 (including the three deals mentioned above).

E-commerce deals accounted for more than 30% of all venture investments in Russia, with $194.2mn worth of funding in 2018.

PE funds and corporate VCs contributed the majority of investment money in 2018, with PE funds in particular accelerating the growth of late-stage companies. The number of deals involving such funds quadrupled from 2016, reaching 12 deals in 2018.

Among these deals were an $8mn injection by Rusnano Sistema SICAR and Skolkovo Ventures into Ivideon, and a $9mn round for DOC+ involving and Vostok New Ventures and Baring Vostok.

Corporations were involved in 40% of all deals. Much of this related to the fact that as many as 20 corporate accelerations programs launched in 2017.

In addition, a new law on private-public partnerships was passed last year to make fund creation easier. For instance, Skolkovo Venture Fund – Industrial I, which was set up in late 2017, has received contributions from Russian Railways and Russian Helicopters totalling $9.2mn. 

E-commerce remains the favourite sort of tech company being targeted by investors, accounting for $194mn from the total $714mn invested, followed by transport and logistics ($151mn) and industrial tech ($89mn).

And the average size of the investments took off in 2018 rising to $49mn for investment into the later stages of tech companies development from $14mn in 2017.

This DSight report is a continuation of a series published previously by investment advisory RB Partners. Dsight also carries out contract-based research for customers on markets, companies, and investors.