Following the results of the 1st quarter 2014 Russian venture market fell practically by one half. The total volume of transactions decreased by 42%, and their amount declined by 38% in comparison with the similar period of the previous year.
For the 1st quarter of the current year 79 transactions were closed, for a total amount of 109 mln USD. At that 49 mln USD is accounted for the exit of investors from projects and only 60 mln USD – for new financing. Such results have become minimal since 2012.
The experts note that softening of the venture market may be still more significant, if not for the activity of Internet Initiatives Development Fund (IIDF). The Fund was founded at the discretion of the President in July of the previous year. The Director of the Fund Kirill Varlamov announced then his intention to invest 6 bln RUB in different Russian startups during the coming three years.
The experts note the brisk growth of the volume of transactions in the sector of information technologies (IT). Following the results of the 1st quarter 2014 the share of IT sector made 44% from the total volume of transactions.
The most significant transactions of Russian venture market in the 1st quarter 2014 became the investments of the Fund iTech Capital into the service for the search of airline tickets Aviasales and into the provider of cloud communication services Mango Telecom. 10 mln USD were accounted for each transaction.
One of the main changes of Russian venture market is focusing of corporations on computer technologies and equipment. We remind that back in the previous quarter 89% of assets were invested in software and internet. Private funds, apart from investments into computer technologies, pay their attention increasingly to the development of biotechnologies. So called business angels or private investors take more and more interest in projects on the development of industrial engineering in recent times.
Today it can be stated that Russian venture market is in the search of a catalyst of growth. Surely, deterioration in economic and political environment impaired the volume of foreign venture investments. However, such exacerbation of economic relations with the West can be of benefit to Russian investors. In case of the decrease in capital supply it is possible to make arrangements with entrepreneurs on more favorable terms.
By Russia’s accession to the WTO the banking sector and engineering industry cause greatest concern about the stability level on free and competitive market. Among other things it was said that multinational financial corporations could easy take over domestic banks and dictate own terms to clients, as it was done in a number of Eastern European states. In large part our credit organizations are on development stage up to the present, and their capital is incomparably small in comparison with Occidental competitors. This is surely a significant minus for our country, which is included into TOP-10 economies of the world.
After much debate the parties reached a compromise about the limitation of participation of foreign capital in Russian banks, which should not be more than 50% of its volume.
Following these agreements, at the end of June the State Duma passed in a first reading the bill about fixing up the quota for foreign capital in total authorized capital of credit organizations, being in force on the territory of the RF, in the rate of 50%. Thereby, foreign banks and capital will be able to be involved in this business in a greater degree. However, having no majority interest by this, they won’t be able to carry out those or other decisions in their sole discretion.
According to the bill, by exceeding the quota the Bank of Russia will have the right to refuse the registration of credit institutions with foreign investments and to forbid the increase of authorized capital of a credit organization using the funds of non-residents.
In total, the passage of the bill can be considered positively. On the one side it will allow to protect our banking system from foreign control, and on the other side – to attract additional investments to it and foreign executive experience.
Information agency Credinform has developed an independent estimation of financial strength of banks, based on the analysis of key indicators of activity and the degree of conformance to standards of the Central Bank. With the help of bank financial strength index it will be easier for users to make a conclusion about the degree of risk of cooperation with a credit institution and about the safety of their savings.