The volume of investment in Russian startups and Internet companies increased by 2 times compared to 2010 and up to $1B in 2011, according to a study of venture capital firm Fast Lane Ventures.
59 deals were concluded in Russian Internet market in 2010. $225 M was invested in new Internet companies and startups that is 17.3% of total investment in RuNet including two largest transactions of mature business: IPO Mail Group and the purchase of shares in VKontakte company by Mail Group ($ 1,3 B).
And the number of transactions has dramatically increased in nearly 3.6 times in 2011. Total volume of investment increased to $540 M, which was already 26.7% of the total market ($2.15 B including IPO Yandex, buying shares in VKontakte company by Mail Group, investment of ruNet, Rakuten and Index in Ozon). Despite positive trends, Russian Internet market remains non-transparent.
According to Fast Lane Ventures experts’ estimates, the amount of non-public transactions in RuNet is approximately equal to the public and the information about them is open. Having regard to the undisclosed transactions Fast Lane Ventures experts estimate the total volume of investment in Russian Internet companies and startups at about $500 M in 2010 and $1 B in 2011.
The last two years have shown a radical growth in investors’ attention paid to Internet startups at seed financing. The number of companies that received initial investments in 2011 increased by more than 4 times compared with 2010 (22 transactions in 2010 - 91 transactions in 2011). The total amount of seed investment in 2010 totaled $8.7 M and $14.1 M in 2011.
Also, during this period unprecedented growth in grant funding can be seen: 61 startups received more than $20 M in grants for two years (this figure tended to zero before 2010).
Against the background of the significant increase in investments at seed stages of financing, funding of later rounds and withdrawals from business do not show equally positive trend. Analysis of eight transactions that can be classified as withdrawals showed that half of them are the purchases of teams and technologies. Full-fledged success stories are only two transactions: the purchase of Darberry by Groupon and Qik - by Skype.
The main object of investment and the main driver of Russian Internet market growth is electronic commerce. This is a logical trend. The use of proven business models to minimize risks of failure can significantly speed up the process of developing and launching of new companies. And for the Internet market the speed is critical. Ideas float in the air, and the winner is the one who has time to implement them first - said Marina Treschova, the CEO of Fast Lane Ventures.