European funds that invest in Russian companies still tend to be both a white crow and a black swan in the IT field. However, the situation may change dramatically in the nearest future. Ventech Capital, a French-based investment firm, is the first swallow announcing the change of times – in 2008 they invested $6M in the Russian women-centric site WomanJournal.ru. Alain Caffi, General Partner and Founder of Ventech, says that the Russian IT and New Media market is very appealing to him. Here are the extracts of interview with Alain which was published in the second issue of StartupIndex Review in English.
Alain, Ventech Capital invests in the IT and biotechnology sectors. Which is your priority at the moment and why?
As a general rule, 60% of our funds are dedicated to investments in information and communication technologies and 40% to Life Sciences. We consider this a good risk diversification in terms of innovation sectors but also economic cycle. However, some investors in funds prefer to invest in pure ICT or Life Sciences funds and so is their own diversification.
Why did you decide to invest in Russian projects and why do you view the Russian market as a promising one?
Our first move to Russia was purely opportunistic. We heard about WomanJournal just by chance, and then we were quickly interested as this company is a copycat of a French company, AuFeminin, that we know really well. WomanJournal was initially funded by Pascal Clement, a Frenchman and a very successful serial entrepreneur in Russia.
Since then, we have learned more about Russia. Globally, even if I’m not an economist at all, I do believe that Russia and the CIS countries are going to be a strong driver for the European economy. Regarding Venture Capital, I also believe that we may find great opportunities in Russia with still few competitors. For the time being we plan to focus mostly on the Internet and mobile sectors as Russia is still a little bit behind the US and Europe with strong particularities which give a real chance for local players to outperform international ones. We should close a second deal in Russia – which is at a very early stage project – by the end of October; it’s a copycat of an American company but with a very distinctive Russian approach and a high-level management team.
Do you have plans to open your own subsidiary in Russia or are you still just exploring the market?
We don’t plan to open a subsidiary in the near future but we plan to do more than just exploring the market. I’m in Russia almost once a month to set up a local network. Outside France we always partner with local venture firms and so I’m in the process of building strong and trustworthy relationships with local colleagues. Apart from direct investments we also look at business and corporate developments that bring value to companies. We would speed up the process and implement a subsidiary in Russia if we were able to raise money in Russia for our next fund, Ventech Capital IV.
Do you see many differences in investing in France, Russia and China and what are they, if any?
To make a long story short, when we invest in a company we buy a strategic vision and an ability to execute, a team. Fundamentally, there is no difference but it’s pretty difficult to evaluate people when you don’t speak the language and when you have a bit different cultural references. So it’s a reason amongst others to partner with local investors. On a much lower level, there are differences in terms of tractions and opportunities. There is an incredible traction in China as the expansion is fantastic so it’s possible to grow companies real fast. To a lesser extend it’s also the case in Russia and the CIS countries.
Do you know any European fund that successfully invests in Russian projects? And vice versa?
I know Mangrove that seems very successful with KupiVip and they opened the last round to Accel Partners, the large American fund that has a team investing in Europe and is based in London. I know also a German and American fund E-Venture that co-invested in different deals in Russia. Amongst those in Darberry with Addventure, which turned out to be a very successful story!
Despite good tendencies, Russian law concerning corporate property still has a lot of drawbacks. Do you think it might be a difficulty for you or your colleagues?
Until now we didn’t identify really unbearable drawbacks. In terms of legal agreements, maybe we are wrong but we tend to set up Cyprus holding to have the flexibility of an almost British law, which we need for our type of shareholders agreements.