At the same time part of its investment strategy is to take western companies and bring them into the region to take advantage of the deep pool of highly talented labour available that work at much lower cost.
Da Vinci is a veteran of the
Now ithas just had a first closing on it Da Vinci Capital III fund (DVCIII), raising
With economies around the world bouncing back, western equity markets overbought but emerging equity markets starting to recover, the interest amongst investors is palpable.
The German development bank DEG (Deutsche Investitions- und Entwicklungsgesellschaft) is the anchor investors with
“There are another 22 private investors that have joined and other development financial institutions,” says
The DVCIII fund is targeting growing companies across Emerging Europe but it specifically excludes
“It’s mainly the result of the mandates of some of our development financial institutions investors. For example the
Having development banks in the fund is a boon as it gives them some measure of political cover and better access to the government. It also encourages the limited partners (LPs) to invest as risks are reduced.
“DEG was already a co-investor in our second fund in
The exclusion of
“We are the only independent stakeholder and we helped to deRussify it,” says Fuller. “When we bought in about 80% of its business was Russian, but now its has fallen to around 60%. We helped them with M&A of international companies and now it operates in 55 countries. The company is getting ready for an IPO in October, a dual listing in
The deRussification of DVCIII portfolio companies is both profitable and strategically appealing to the owners. The fund is allowed to invest into companies that work with
“The problem most owners face is they are constrained in their own markets,” says Fuller. “They may be looking for a strategic or foreign investor exit, but its not there. Most of the exits are domestic to domestic and that limits the liquidity available. We buy a company and help it to become international. If you lower the share of Russian business you increase the valuation – even if the Russian business is strong.”
Target countries and tech
The theme of internationalization of companies is a common thread and for DVCIII it runs in both directions. The fund is investing about 70% of its capital in Eurasia and helps those companies build up an international business, but it also invests about 30% of its capital in western companies that want to move into the emerging markets.
“Challenger Bank that is based in the
The bank currently has its tech section based in
While many of the investments are in the tech sector, DVCIII is not specifically a tech fund. However, thanks to the coronavirus (COVID-19) pandemic the tech sector has had a huge fillip and many of the best opportunities are in tech.
“We will look at anything that is transformative. However, cloud services is where transactions is where its going and that business is growing exponentially. We want exposure to that,” says Fuller.
Other related business that DVCIII is looking at investing into is firewall development ad anti-hacking software, which Fuller says are also growth sectors.
Another advantage of
“We have no problem building a pipeline. We are looking to invest
“SME lending in
Another country that DCVIII is investing in is
“We are looking selectively at companies, and at a document authorization software company in Belarus,” says Fuller. There is also an interesting data art investment in
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