PwC and RVC introduce the Review of venture deals in IT over 2011

PwC and RVC introduce the Review of venture deals in IT over 2011According to the first review of the venture capital market in Russia over 2011, made by the Technology and Innovation Center of PwC and RVC OJSC, the total amount of venture capital investments in Russian IT sector for 2011 amounted to $237 M brought by 139 deals.

MoneyTreeTM: Venture Market Navigator’s review (MoneyTreeTM: Russia) for 2011 is entirely devoted to venture capital investments in the sector of information technology (IT sector) which is the most active and transparent market segment. According to the review, this innovative segment of Russian market in 2011 had an absolute majority of venture capital investments. Among the leading areas in terms of attracted investments was e-commerce, as well as projects related to online entertainment and social networks.

Russian venture market is characterized by inhomogeneity: it is represented, on the one hand, by a large number of small, not identifiable private investments in projects at the earliest stages of development and, on the other hand, by a number of major transactions involving companies already achieved success. Thus, our analysis does not include most of the transactions of less than $50 K and major transactions of more than $50 M that are not systematic, as well as grants that represent non-market financing instrument for innovative companies.

These results, in our opinion, accurately reflect the level of investment activity in the IT sector. In this case, according to various estimates, up to 50% of the market may be unaccounted due to the not disclosed transactions.

If we talk about the investors geography, it is interesting to note a considerable number of deals involving foreign investors, including those from the U.S. (14 deals), Germany (8 transactions), as well as France, Canada, Sweden and Switzerland (6 transactions in total).

The analysis of venture capital investments in the IT sector in 2011 by sub-sectors: the volume of investment and number of transactions

The leaders of attracted investment in 2011 were projects related to electronic commerce. This sub-sector accounts for 33 transactions worth about $107 M.

Venture capital projects related to entertainment and social networks come then: 31 deals and $ 57 M of attracted investment. On the third place of completed transactions are projects related to the use and development of cloud technologies: 29 deals. Despite the high activity in this subsector, the volume of venture capital investments amounted to only $ 17 M. Projects related to the development of services for working with information and its exchange, as well as e-learning services, attracted about $33 M in 21 transactions.

Venture capital investments in the IT sector

Analysis of venture investments distribution by stages of the life cycle of invested projects has shown that more than half of the total number of transactions (77 transactions) were transactions completed by venture capital companies at seed stage of financing, and almost a quarter (34 transactions) by companies at startup stage of development. At the same time the volume of attracted investments amounted to $30.6 M and $38.8 M respectively.

The largest volume of investment, $94 M from a total of 16 transactions was attracted by companies and projects at pre-seed stages.

Development of venture capital investments in the IT sector of Russia forecast

We expect that, on retention of favorable conditions in the Russian and world economy in 2012, the Russian venture capital market will continue to grow and set new records. According to our estimates, the amount of venture capital investments in Russian IT sector in 2012 could rise by more than 50% and exceed $450 M.

A large number of projects that received seed investment in the past 12-18 months, have grown and need further funding to consolidate the success achieved, to enter the market, to scale the business - said Anton Abashkin, PwCAccelerator in Russia program manager, Central Technology and Innovation PwC.

Both the increasing number of investors in the market and their specialization expansion will contribute to further development of the venture market in Russia, - said Igor Agamirzyan, the CEO and Chairman of the Board of RVC OJSC. - We expect qualitative changes to continue along with the market formation - in particular, the market will become more transparent, and investment and corporate management standards will become closer to the level of developed countries.