It’s not getting worse
It’s obvious that nothing bad will happen to domestic venture market venture, in addition to what’s already happened. The size of this market will collapse. Venture investors and world-class projects which wanted to leave — already left, which didn’t want — stood and adjusting to new and fairly positive conditions.
But it’s getting a lot better
1) Projects on seed phase have gone down in value drastically
The market value of operating projets already came down and new startups will go down in value a bit later, but even more at the moment when they will approach the Valley of Death. Our records indicate that now the average value of seed startup is 50 million roubles post-money, which stimulates investors and angels to invest in it while the market is in decline. Back in the days, the average post-money seed value was 1 million dollars and now it is down by half. That is good because now one can invest in twice as many projects.
2)Projects on seed phase are greatly improved
While before the typical seed project with unchecked hypothesizes and without any returns approached an investor with the average draft of 250,000 dollars, now you can invest 125,000 dollars in a complete product with tested hypothesizes and in statistically approved point not far of break-even. For another thing, now inexperienced and partly unfunctional teams are almost gone. And it means lesser risks for an institutional or private investor.
3)Advantageous pricing environment on external market
If your startup learned how to sell its product not on the domestic market, but on foreign one, it spends roubles while gaining increased profit by means of positive currency difference. Orientation on export always was essential because the domestic market, with some minor exceptions, always was not big enough. If you have something you can sell on the foreign market, you need to sit down, give your strategy a second thought and go beyond Russia with your product.
Now it’s much more profitable to invest in Russian projects, which can work on foreign market. Back in the days Russian projects wasn’t that commercially viable on foreign market due to rouble exchange value and, because of their overstated expectations of value, had rarly been finding their professional mass investor. But all you need to work on foreign market are attitude and familiarity with foreign language. So if you want it you can do it.
4)New opportunities on domestic market
There are some Russian branches, domestic market of which is enough so any startup can develop only by the means of their own growth and that market’s volume. First of all, that’s new technologies and business models needed in financial, consumer goods and petroleum branches. But you have to have an expertise on a branch market. That said, due to its concentration petroleum market isn’t venture one, but very interested in innovations.
The financial branch is over-regulated by the government, so the most of the succeful innovations are going to be built around typical major players. That’s why for market investors there is only consumer goods market. We are still keeping and eye on it in 2016, while constantly replenishing our portfolios by Marketplace Performance and Retail Performance areas. Our first Marketplace Performance portfolio is well-known in Russia, so we wouldn’t describe it any further. But New Media Performance is our new focus in the current year.
That is our name for completely new thing lying at the joint of the media business, digital commerce and advertising which allows an advertiser to gain completely new communication channels for shaping his or her own loyal audience and improving simultaneous monetization of his or her content projects of any nature and format. We began shaping our portfolio in that new niche, beginning with already well-known startups: “GetShop-TV”, cloud service for direct communication between the advertiser and a viewer, cloud content recommendation platform “E-Contenta” and cloud platform for native advertising management called “Shopnetic”.
For all intents and purposes, our main task as a seed fund is to find a good team with good technology and expertise in Retail performance, to which we, apart from money, will help in building proper venture history, because we do not invest in development or integration teams. Sometimes the possibility of startup’s fast development is defined by preeminently right product inclusion into a suitable business model, which is always built on project’s capability of making new obvious additional quality for different members of the ecosystem as a whole rather then it’s separate elements.
Back to the Retail Performance: additional quality of your product must exist for retailer itself, because otherwise he or she will not use your product; for end consumer, which buys consumer goods, because otherwise, the consumer will not participate in his inclusion in key processes of cooperation between he or she and retailer or brand; and, more importantly, for the brand, which is placed on the top of the food chain, being primary source for budget allocation between elements of ecosystem, which need more transparency in selling their goods at the same time.
The easiest way for a retail startup to use brand capabilities, when and if you have tested the utility of your product (on concrete metrics of first pilot projects) which generates business effectiveness growth, is widening the pilot territory, gradually reaching national and then world coverage. We are happy that we’ve had invested in cloud service for managing an income of distributing facilities in real time called “Giftoman” and also we are planning to close some complementary deals on projects until the end of the quarter, which is going to raise average draft and user’s productive time.
5)National Technological Initiative
To focus government and private technological and venture efforts on new world markets, which are only at the groundwork stage in Russia, we finally have National Technological Initiative. This knowledge about perspectives of new markets provides an opportunity to make good products today with rouble exchange value, but tomorrow — to export them to new markets. These are, for example, such clusters as “AeroNet”, “NeuroNet”, “MarineNet” and a host of other things, where the strong world breakthrough is projected and huge national capacity are presented.
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