As the Russian economy remains affected by Western sanctions, with no lifting of them in sight, the local IT venture segment took a major hit in 2023, almost halving in comparison to the previous year.
Although in 2023 the number of deals struck in the Russian venture capital market was slightly up from the previous year, the total value of the deals continued to slump.
Foreign investors have largely stayed away from
Investors unenthused
According to data recently released by the Russian IT investment platform Dsight, a total of 158 venture capital deals involving IT start-up projects were concluded in 2023 for a total amount of
The average investment check was a mere
The most popular area of investment was business software, which accounted for 22% of the total value of deals and 15% of their number, followed by educational technologies (edtech) with 10% and 5% respectively, and financial technology solutions (fintech) accounting for 10% of the value and 11% of the number of deals.
Nearly one-third (32%) of the deals were struck by public funds and corporations. Another 35% of deals in 2023 were made by private funds, and 27% by business angels, which slightly stepped up their activity compared to the previous year, Dsight said.
The main distinctive feature of 2023 in
Meanwhile, the previous low in the Russian venture capital market was hit in 2022 when the size of investment decreased by 83.5% year on year.
Few notable exceptions
Only projects "with an established business model" received relatively large investments. But about 75% of deals were made with seed and pre-seed stage start-ups, "which usually do not receive large investments".
The largest venture capital deal was the acquisition of the Zdorovye.ru service for
The second largest deal of the year was the purchase by private investors of Looky, a social network for bloggers and businesses with built-in artificial intelligence for photo processing. The value of the deal was reported to be
In another major venture capital deal, a developer of a platform for accelerated drug development, Razvitie Biotechnologii (
In
This deal is part of a project to create an analogue of foreign repositories
He added that "with the support of a major vendor" Resolute plans to increase the pace of product development and "offer the market boxed solutions, including those with information security features."
By doing that,
In November, companies related to the major mobile phone operator Vimpelcom acquired a share in Candy Flip Robots, a tech start-up founded by former Gazprom Media top exec
Under the deal, Vimpelcom's venture investment arm Hive acquired 13.3% in Candy Flip Robots. The parties did not disclose the value of the deal, but analysts valued the entire company at
However, this investment might pay off nicely in the longer term. The research company Market Research estimates that the global market for solutions in the field of emotion recognition (EDR) will grow to
Grim prospects
In 2024, the situation in the Russian venture capital segment is unlikely to dramatically improve. Although investments in IT projects may slightly go up, as the sector benefits from the strengthening of the local IPO market, that is unlikely to compensate for the negative impact of political factors, such as the war in
According to some observers, this year
A growing number of IPOs might also help attract more venture capital to Russian tech start-ups, as it could stimulate interest in investments in the technology sector in general, according to Voskhod. In 2023, eight IPOs took place in
Still, the Ukrainian war and sanctions are expected to continue to be major factors limiting growth in the Russian IT start-up segment.
©2024 bne IntelliNews
, source