PwC and RVC provide a report on transactions in Russian VC market for 2012

According to the third overview of Russian VC market, prepared by PwC's Technology and Innovation Center and RVC JSC, the total amount of venture capital investments in the Russian market for 2012, as we estimate, totaled $910.6M received in 201 transaction (including transactions with undisclosed value).

The focus of this publication remains unchanged as it was in the previous report for Q3 2012, when we compared the dynamics of venture capital investments in the IT sector over two years. The report also includes the analysis of two new sectors: biotechnologies (biotech) and industrial technologies (promtech).

MoneyTree™: Russia report has been prepared in direct collaboration with RVC Venture Database partner project and other partner resources of RVC and PwC, in particular, RusBase (Startup Afisha), which is a special service for startups and investors that follow the events in the Russian VC market. We have adjusted the data for all quarters of 2012 considering latest information, and now offer you updated information on the Russian VC market situation.

The vast majority of transactions in 2012 was registered in the IT sector - 84%, 7% of transactions was related to the biotech industry, 9% - to industrial technologies. However, we should take into account that most of investments in high-tech projects were made under corporate investment programs. Grant programmes also played an important role in supporting biotech and promtech projects.

Last year, we identified three new sub-sectors in the IT sector: technologies in the financial sector, medicine and healthy living, as well as educational services. We observed a gradual shift in investors’ focus from early-stage companies to later-stage companies. Following the results of 2012, we have 18 transactions in the promtech sector ($108.4M), and 15 deals in the biotech sector ($10.2M).

In addition, there were 3 large deals of more than $100M each with total investment of $516M in 2012. Major transactions largely contribute to the growth in capitalization of the Russian innovation market, and attract big foreign players to the market.

In 2012, IT companies in biotech and promtech sectors received 702 grants with the total amount of more than $145M. Recall that we do not include the data on grants in the total market volume, relating it to non-market financial instruments.

There were 8 transactions related to the development of innovative infrastructure for a total amount of $37.7M in 2012, indicating that the ongoing development of the venture market. We also do not include these transactions in the total market volume.

In addition, 2012 was marked by an increased activity of venture capital funds relatively to late-stage companies. Thus, investors confirmed their willingness to invest large sums of money in promising companies. Investors withdrew funds from 12 projects worth $372M this year.

The director of PwC’s Technology and Innovation Center Anton Abashkin says: The past year has shown maturity and transparency of the VC market, the investment focus has shifted from early-stage projects to later-stage ones. I believe that we will witness the market growth in the coming year. However, the sector must provide a sufficient number of projects passed the seed stage in order to maintain the same level of development.

Andrew Vvedenskiy, the Director of Infrastructure and Regional Development of RVC says: Investors chose a more thorough approach to the selection of portfolio projects, giving preference to proven projects with good prospects. According to our forecast for 2013, new investments will be actively directed to other sectors of the IT market, while companies in industrial innovations, education, medicine and healthy living will become more popular among investors.