The venture investment market went up for the first time since the beginning of the SVO

The venture investment market, which had been falling since the outbreak of hostilities in Ukraine, went up in the third quarter – although so far only in terms of the number of transactions. A total of 37 transactions worth $11.7 million were concluded. The growth was ensured by a number of large transactions in the field of energy and medical technology. Experts note that a parallel trend is emerging towards exiting assets through an IPO. However, they believe that positive dynamics should not be expected at the end of the year, and in 2024, market growth can only be ensured by alternative investment methods, for example, non-public placements on investment platforms and pre-IPO mechanisms.

According to the Venture Guide service, in July-September the Russian venture investment market showed positive dynamics for the first time since the outbreak of hostilities in Ukraine.

In the third quarter, year-on-year growth in the number of transactions was 15%, although in money there was still a decline – by 56%. The total volume of investments for the quarter amounted to $11.7 million with an average check of $0.4 million, 37 transactions were concluded. For the period from January to September, according to Venture Guide estimates, investment volume amounted to $41.6 million across 82 transactions, down 96% and 37% year-on-year, respectively.

The energy and auto industries made a significant contribution to the market recovery in the third quarter: in August, investment platform Zorko invested $1.3 million in Hyper, which is developing charging infrastructure for electric vehicles. The Syndicate venture club invested $258 thousand in Ta-dam in September! — service for selecting spare parts for car repair shops. Other growing niches include medical technology: an undisclosed private fund invested $1.5 million in the developer of an online platform for doctors and patients, Rosmed.Info.

Last year, the market decline was much more dramatic, almost fourfold: from January to August 2022, Russian investment funds entered into only 31 deals with startups, compared to 121 deals for the same period in 2021. Then experts explained the decrease by “increased investment risk” (see “Kommersant” dated September 19, 2022). In 2023, the market began to recover, but only in certain segments – in particular, in the first half of the year, twice as much money was invested in the cybersecurity sector than in the entire 2022 (see Kommersant on July 10).

Now the situation can be characterized as “moderate growth,” says Konstantin Gibalo, venture partner of the Voskhod fund: “By now, investors and startups have mastered new approaches to structuring deals. Also, the expectations of the parties, according to estimates at this stage, have become as close as possible, and it has become possible to agree on investments on mutually interesting terms.”

Given the increased interest of retail players in the capital market and excess liquidity within the country, it has also become possible to exit assets through an IPO, notes Konstantin Gibalo. At the end of September, the August record for the activity of private investors on the Moscow Exchange was broken, the platform reported on October 4 – more than 3.5 million people entered into transactions.

The IT company PJSC Astra Group (developer of the Astra Linux operating system and other infrastructure software) announced on October 2 its intention to conduct an IPO of ordinary shares on the Moscow Exchange, trading will begin in October (see Kommersant on October 2). Also, the technology company Arenza-pro, specializing in equipment leasing, announced plans for a public offering on the Moscow Exchange. AFK Sistema invested in it. Kommersant’s interlocutors in the venture capital market explain that an IPO for investors is a profitable mechanism for returning investments.

However, not all market participants are optimistic. “In the fourth quarter, we do not expect quantitative growth, since we do not observe significant market prerequisites for the maturation of a large number of transactions by the end of the year,” says Dmitry Kurin, managing partner of the MTS venture fund. Nevertheless, in 2024, he believes it is possible to expect market growth by attracting retail capital through new tools: crowdinvesting (raising funds from micro-investors), non-public placements on investment platforms and pre-IPO mechanisms.

The venture market around the world is now “undergoing a correction,” although certain segments and niches are showing growth – for example, generative AI, investments in space technologies or energy efficiency in Europe, notes Kommersant’s interlocutor in one of the funds: “According to PitchBook data from 4 October, the number of transactions in the third quarter in the world fell by 35% year-on-year, and the amount also fell by 30% year-on-year.”

Tatiana Isakova, Timofey Kornev