The Russian venture capital market is not dead - it is being formed for the first time

KAMA FLOW partner Evgeny Borisov spoke in an interview with Vedomosti about key changes in the industry, the launch of a new fund, the shortage of professional managers - and more.

 

What they talked about: 

 

Why it didn't work before:

Until 2022, the market was built primarily with Western capital and focused on the rapid export of projects. There was no domestic institutional foundation.

What is missing:

Russian institutional investment practice differs from the world. There are no professional managers in the country, and the most active players are family offices.

‘This is not enough - the industry cannot emerge without full-fledged institutional capital, i.e. dozens of fund of funds-like structures that serially place their capital in private equity funds, including venture capital funds,’ - Evgeny Borisov.

The imbalance between venture and IPO:

The volume of IPOs in Russia is many times higher than the volume of venture investments, which contradicts the world practice. It is impossible to form a sustainable public market without support for the early stages.

Promising areas for investment:

Our priority sectors include industrial software, cybersecurity, medicine, new-format tourism and technological solutions in fashion.

The new reality of global markets:

From 2022, export-oriented players are realigning to continue to operate in the east and west, but the second direction is more difficult.

"First of all, we are talking about the EU market. It is much easier to work with the US: if formal compliance requirements are not violated and legal procedures are followed, business can be developed. In the EU, sanctions restrictions actually squeeze companies out of there," - Evgeny Borisov.

About state investments:

For a project it does not matter what capital is in the fund. But the state should not always invest directly, at least in startups at early stages - this creates additional risks and difficulties in management.

"Often the capital of a private investor can be more “sophisticated” than that of the state. At least the state will not aggressively demand to return the invested funds with inadequate returns, as it can happen in private investments", - Evgeny Borisov.

About the portfolio:

""The best deal is the one that hasn't been made" - there is such a joke in the investment community. In fact, we have quite a high survival rate of portfolio companies. I am not saying that it is good, but the rule ‘8 out of 10 die’ does not work for us. More than half of the portfolio actually survives and grows," - Evgeny Borisov.

About the new fund:

In the changed reality, a long-term strategy is required to compete with the outgoing global players. KAMA FLOW has announced the launch of a new fund - one of the largest in the country, with a target of R10bn.

‘The idea of this fund was developed before 2022, and the events of 2023-2024 only confirmed our hypothesis that Russian vendors and independent tech companies will be able to compete with the outgoing global players,’ - Evgeny Borisov.

 

Read the interview at the link