Intel Capital – analysis of investment climate in Russia

Intel Capital – analysis of investment climate in RussiaIn July, 5 2013 in Moscow Center Digital October was held an information panel “Development of venture investments in Russia: changes for the last 10 years”, associated with tenth anniversary of investment activity of the Fund Intel Capital on markets of Russia and CIS.

The Intel Capital Fund is an international subdivision of Intel Corporation on investment activity, mergers and acquisitions; the Corporation has long ago worked up a reputation of one of the most authoritative venture investment companies in the world. According to the President of Intel Capital, the Fund is aimed at new technologies promotion, and with this objective in view invests annually $300-500M per year, and strives to open new undeveloped by other investors markets. Firstly Intel Capital entered Russia in 2003, making investment in Yandex.

In the course of the event there have been conducted discussions, devoted to development results and perspectives of venture market growth in Russia. In panel`s work took place both representatives of Intel Capital management, and one of the most successful Russian investors and entrepreneurs.

In the opening speech the president of Intel Capital and vice-president of Intel Corporation Arvind Sodhani highly appreciated company`s success in Russia and noted, that Intel Capital was the first who entered Russian market and during 10 years managed to make 15 intensive investments – more than any other foreign investor.

Having said so, Mr.Sodhani adverted to peculiarities of investment on Russian market, making emphasis both on positive and negative moments. According to Mr.Sodhani, Russia significantly behind market leaders in the venture sphere – USA and other developed countries. However, the main problem is that Russia only enters the game, while Silicon Valley during more than 50 years has its own fully formed ecosystem, which significantly simplifies the process of conclusion of deal. Nevertheless, Mr.Sodhani noted onrush of technologies in Russia and appearing of more companies, focused on Global market.

Mr.Sodhani adverted to such important for any Startup founder subject as principles of Intel Capital in choosing projects for investments. According to expectations, the main criteria for managers of such powerful investment Fund, remains readiness to selfless work. “We still search for people who passionately devoted to their work, are eager to work during 18-20 hours per day, 7 days per week and do everything that is needed in order to achieve success”, - said Mr.Sodhani.

The president of Intel Capital marked main developing spheres, in which the Fund is intended to invest in future. According to Mr.Sodhani, such spheres are the following: sphere of artificial intelligence, cloud technologies, data analysis, mobile application field and software – that is those spheres, in which Russian experts have already made a claim about themselves on international market.

After Mr.Sodhani`s speech there has been held a panel with participation of invited experts – managing director of Intel Capital Fund Marcin Hejka, co-founder and managing partner Almaz Capital Partners, member of council Skolkovo Aleksander Galitsky, chairman of board of directors Runet Ventures Leonid Boguslavsky, chairman of board of directors and founder of ABBYY company David Yang, who discussed results and perspectives of venture capitalism development in Russia. Moderator of discussion became СЕО Digital October Dmitry Repin.

It is important to note that participants positively appreciated changes on the market, agreeing with the fact that during the last 10-12 years in Russia practically from the ground up grew ecosystem of Startups and investors. According to managing director of Intel Capital Marcin Hejka, “10 years ago there were no evidence that in Russia there will be large IPO at all, however Russia proved that it can really create large companies, which are right attractive to have large IPO on such markets as the Royal Exchange or NASDAQ”.

According to the participants of the discussion, it is about timing formation on Russian market so called “mafia”, when workers of successful companies leave their work places in order to organize their own successful projects, as it was with Google or PayPal. For this purpose it is necessary to wait for series of large IPO of Russian companies.

At the same time, experts unanimously agreed that Russian market still possesses some factors, which significantly restrain growth of new ecosystem. One of the main problems is insufficient capital and expert experience circulation, which, possibly, is the result of Russian entrepreneurs committal to conservative methods of business dealing.

Due to this reason investors from a real sector of economy not always are able to take adequate decisions on investments in technology field. “Companies trust us, and we are still a young venture branch, and people do not understand our true role”, - believes Aleksander Galitsky – co-founder and managing partner of Almaz Capital Partners, member of council Skolkovo.

One more negative peculiarity remains stereotypes about economical and political life in Russia, closely coming into minds of players of global market, and not promoting to foreign investors coming. According to Leonid Boguslavsky, chairman of board of directors of Runet Ventures, events of the last two years did not manage to improve country`s look in the eyes of foreign partners. “There are really worries and concern regarding the whole situation in the country, - believes businessman, - this is Russia`s image, and it is not good for field improvement”.

It is interesting that participants of the discussion highly appreciated value of Skolkovo project, which recently received criticism. According to Marcin Hejka, there are examplesof many countries, where such governmental initiatives successfully established ”new economy system from the ground up”. However for this plan realization it is necessary to win both unsystematicity of many projects and low responsibility of managers and executives. “Once Skolkovo has been established, it is necessary to be responsible for it on national level, because you have really invested great amounts of money not from private investors, but from taxpayers”, -says Aleksander Galitsky.

At the end the participants shared their prognosis on investment stage development in Russia for the future 10 years, and agreed that Russia possesses all chances to significantly raise its reputation of equal partner on international technology market, and according to chairman of board of directors and founder of ABBYY company David Yang, “during 10 years produce more than 10-billionth IPO”.