The Russian venture capital sector is flourishing, thanks to a...

The Russian venture capital sector is flourishing, thanks to a string of billion-dollar initial public offerings

Capital Markets CIO Outlook | Thursday, November 11, 2021


The capital markets are flooded with stimulus money, and the e-commerce explosion has created ideal conditions for Venture Capital investments.

FREMONT, CA:  The Russian venture capital industry is flourishing, as entrepreneurs and businesses try to cash in on the rapidly expanding tech sector's international thirst. According to East-West Digital News, Dsight, a Moscow-based business intelligence firm specializing in investment, has just released the English version of its Russian venture report for the first half of 2021. (EWDN). In contrast to last year's poor results, the market began to show signs of life early this year, with total deal value reaching $1 billion in the first semester.

According to Dsight, this is an all-time high: "We've been seeing the Russian market expand steadily over the previous few months, and sail along to Europe's top 10 venture regions," writes Arseny Dabbakh, the agency's founder.

Russia's tech sector has become one of the most active in the world as the stars have aligned. Before the coronacrisis, Russian e-commerce was already expanding, but the epidemic has only served to accelerate the already rapid growth of online retail, which is rising at a rate of nearly five times that of the real economy.

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Traditional bricks and mortar retailers are now facing competition from large e-commerce players like Yandex, Ozon, and Wildberries, which this year became Russia's largest retailer of any kind and is playing catch-up with established market leaders like children's goods chain Detsky Mir. Simultaneously, Russia's major banks are acquiring online businesses in an effort to create complete ecosystems that cater to a wide range of customers' lifestyle needs.

Sber, Russia's retail banking juggernaut has dropped the word "bank" from its name and is now simply known as Sber. The fierce competition among these businesses has resulted in a surge in M&A activity, with startups able to sell to one of the incumbents for tens or hundreds of millions of dollars.

In general, the value of assets continues to decline. The average transaction value (excluding the highest) fell 6.4 percent to $38.6 million in January-June 2020 from $41.3 million in January-June 2020, but analysts anticipate that when the economy improves, the quantity and value of deals will increase again, despite a new wave of the pandemic.

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