Venture Russia 1H 2020: Results National Alternative Investment Management Association STRATEGIC PARTNER GENERAL PARTNER PARTNERS Skolkovo Resident Business Intelligence for Investment Decisions Analytics for Corporations on VC\Hi-Tech markets: • Market\Startup Research • Technology Scouting • Database Russia&CIS: deals, startups, investors • Venture Russia Report Our partners: www.dsight.ru [email protected] Venture Russia | 1H 2020: Results Contents Methology 4 Venture Russia: Greetings 6 Interview Scouting for start-ups amidst the pandemic: new challenges and trends 8 1H 2020 trends overview Market in the blues, deal numbers and moneys down 12 The venture market goes online 18 Government cranks up 20 Ecosystems in vogue 22 Global robotization 26 With an eye to self-isolation 28 Investors over-ate 30 Another criminal prosecution 34 New legislative initiatives 36 The Venture World In partnership with Crunchbase The global market: a second year of shrinkage 40 New stories Key transactions of the year as reported by EWDN.COM 48 The data source for graphs and tables is Dsight, unless otherwise indicated 3 Methology In this Report, we used methodological recommendations 5. Government funds and corporations are nonpublic that have been put by the domestic venture capitalists. legal entities and management companies in Russian The “venture investment” term describes an investment jurisdiction whose majority shareholders are the Russian of up to $ 150m (at an official ruble / dollar rate current Government and / or government agencies. at the time of writing) in risky technology projects that promise an IRR of at least 15%. 6. Foreign / international investors are private investors, companies and funds with headquarters, legal entities “Investment” is referred to as a purchase of a shareholding and the key part of the team located outside Russia; their or charter capital in a privately-held legal entity regional focus is on foreign privately-owned companies. and / or access to a convertible loan under various payback terms.. When assessing volumes and dynamics for Russia's VC market, we exclusively took into account venture investments in companies that predominantly operate We divided investors into six groups: in Russia. 1. Private funds are legal entities registered in a Russian Deals involving Russian investors and investment or foreign jurisdiction, managing capital raised from recipients that are focused on markets beyond Russia more than one source in order to make professional were not considered in this Report as contributors direct investments in privately-owned companies, and to the overall value of Russia's VC market. promoting themselves accordingly in the market. Investment-related information used in this Report is first 2. Accelerators are companies that offer privately- and foremost the information that became publicly owned companies development programs, provide open through the media, blogs, corporate websites, expert assessments for market stakeholders, and help public presentations and startup databases. In any companies improve their products, enter new markets, other instance, we contact a newsmaker, or source, for and raise investment. confirmation. 3. Angel investors are private investors (individuals) Describing “corporations” in this Report, we refer who buy into a privately-owned company (investee) 's to corporate funds whose capital comes from corporate share / charter capital. founder's internal sources and whose investment activity is not limited to exclusively supporting affiliated 4. Corporations and corporate funds are funds capitalized companies. from founding organizations' internal sources and putting money into investees that may or may not be affiliated with the founding organizations. 4 Venture Russia | 1H 2020: Results Additional information regarding certain deals may have Development stages for an investable been obtained directly from deal participants. Data startup: on some specific transactions came from a closed survey and has been presented in an aggregate form. Seed An early development stage between the formulation Analyzing the overall value of Russia's VC market, of an idea and the building of a team, new hypotheses we did not consider exits and investments in market verification, and the start of commercial activity. infrastructure. Startup “Investment in market infrastructure” is referred to as An early development stage, at which a company begins investment in venture funds, business incubators, ongoing and full-fledged commercial activity with sales accelerator programs, technoparks and other institutions proceeds and plans for growth. that operate in the VC market but are not venture companies. Growth A hyperactive company development stage, when While a grant is a gratis subsidy for R&D, we did consider commercial hypotheses are corroborated, and them as contributions, alongside repayable investments, the business needs external funding for explosive growth. to the development of commercially driven venture projects. Expansion A hyperactive company development stage, when “Exit” is referred to as a special type of deal which results the company steps up business and enters into new in no additional investment in a project; instead, one markets. or more shareholders sell their stakes to a strategic investor or in an IPO. Maturity A stage of sustained and unremitting growth — less dynamic, perhaps, than at the previous stages, which reduces investment risks considerably. 5 Venture Russia: Greetings The Russian economy and of corporate investment looks the domestic VC market have imminent. Two year ago, we could apparently survived the pandemic, hardly list ten corporations that but the loss has been huge. From actively sought and invested in start- whichever angle you look at it, ups; now the number has grown by venture investing has shrunk by a factor of ten. anything between 30% and 70%, while sizable deals done by start- What does that mean? First and ups that left this country have foremost, big Russian companies have considerably grown in number. This realized that there's no competition Arseniy Dabbakh leaves me in no doubt that Russian without innovation. Corporations Founder Dsight start-ups will soon be able to raise are lagging behind in developing more money abroad than at home. new products within their own environments and have found it The crisis has triggered market easier to do the job in partnerships transformation. Whether new with young companies. It appears sources of start-up funding and that we will likely see Russian growth will ever emerge has yet majors contending for start-ups both to be seen, but a boom in the field in Russia and internationally. Dsight is a BI (Business Intelligence) platform, with a focus on the technology market. The company helps corporations and investors in monitoring industry technologies, forming a pipeline and exploring markets / startups around the world. Dsight releases Venture Russia reports. The founders of Dsight are Arseniy Dabbakh and Sergei Kantcerov. 6 Venture Russia | 1H 2020: Results Crisis is the time of opportunities, Balancing ups and downs, data some say, and no mistake. In this protection became a new headache Report, we join its authors in to remedy, as work from home laid discussing factors that impacted bare a swarm of snags in corporate the venture market in 1H 2020. cyber security. That couldn’t but Start-ups that organically operate galvanize companies into a buying through remote interaction gained spree for protective solutions and fertile ground for development from investors into new deals in the field. the pandemic. As corporate Russia shifted to remote working, services Vitaly Mzokov that supported the process were in Head of Innovation Hub, huge demand, including co-working Kaspersky and teamwork software, cloud storage solutions, etc. The effects of the global pandemic, continued to be the key source for the geopolitical and the local local venture exits, which is a good macroeconomic factors including sign of the Russian venture being the dynamics oil prices and ruble connected to the Global markets. exchange rate, required to be rather We see, that the large corporations cautious when forecasting the Russian continue to invest in startups, building Venture Market results for the 1st half its own ecosystem of services, of 2020. But the report prepared by and the corporate accelerators our partners together with EY proved are becoming instrumental to the a certain resilience of the Russian success of this strategy. Assisting the Dmitry Pozdnyshev Venture as the significant drop of the market participants In the search and Director, EY Innovation number of deals was not observed adoption of innovation remains to be Development, Russia & (108 vs. 115 in the 1st half of 2019) one of the priorities for EY. CIS while the total market size remained volatile to the unique big-size deals and amounted to $183.8 millions in 1st half 2020. Foreign investors The COVID-19 pandemic has left emerging in 1H 2020. We used to see a deep imprint on Russia’s venture investors vie for promising start-ups market, bringing both new challenges to invest in; today, it’s start-ups that and barely expected opportunities. vie for investor attention. Investors are now busy scrutinizing business models which they believe will be winning in a post-coronavirus world, and companies are studying signs of new interesting niche markets surfacing, and doing their utmost Denis Belyaev to get a toehold in those. Market Partner