Volga | Finance, business | Technology & innovation

How RVC's $68m Seed Fund helps grow regional Venture Partners

22 Jan '10
Oleg Kouzbit, Online News Managing Editor

Yesterday Russian Venture Company announced the launch of its national Venture Partners program. RVC and its $66-68m Seed Fund will look for partners willing to invest in innovation projects across Russia, get them debugged and refined for further Fund consideration. What is starting out as a six-partner consortium is reportedly expected to grow to a few dozen by the year end. Eduard Fyaxel, the president of one of the program pioneers, Nizhny Novgorod-based Start Invest Business Angel Association, explained to Marchmont how the partnership will help grow Russia’s innovation economy

Conceptually, how will the Seed Fund work?

Say there is an interesting $1m project but an investor can only put up $250k. One option is to take the idea to a business angel association for the rest of the investment; but what if there isn’t any or the association is fully invested?

This is a case when RVC’s Seed Fund can partner with the investor following our representation on his behalf. If the project is approved, the Fund buys into it with the remaining 75%.

Typically, business angel investors have normally shunned $330+k projects. We tried to take such projects to private-public venture companies, but still there were shelved ones. Now we have been granted yet another solid channel, through which to fund innovation.

RVC said it wanted regional Venture Partners to multiply to dozens. Is it reasonable, given financial and other limitations?

I think it is. What sounds less rational though is RVC’s idea of having more than one per region. A region will hardly have so many projects for so many Partners to handle, and on the downside of it, scuffles and maneuvering to ‘grab a piece of the pie’ are likely.

In fact, professional venture partners like business angel associations are very few and operate in only four or five Russian regions. If instead the Fund deals with someone who has but an unconfirmed “agreement” with a make-believe expert, it runs the risk of burying itself under a heap of hopeless ‘perpetuum mobile’ kind of projects seeking funds.

It is good for each of them to have a competent Venture Partner. I hope our association will be one of the Fund’s best partners. We have a unique combination of experts, project valuation experience and professional investors ready to give a practiced hand in taking companies to more advanced levels of development.

The biggest problem for the Fund is its narrow capital base—around $68m. For too many Partners, this amount of capital is ridiculously low; but for a very select group it could make a difference. I hope if the Partners do well, Russian Venture Company may decide to augment its Seed Fund or set up another one. Either way, it will be a great help for us here in the regions.
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