RUSSIA: CHALLENGES AND

OPPOTUNITIES

WWW.RUSVENTURE.RU

A SPECIAL ECONOMIC DEVELOPMENT INSTITUTE

Russian Venture Russian Venture CompanyCompany

Regional Venture Regional Venture Funds Funds ((over over 20)20)

Russian Nanotech Russian Nanotech CorporationCorporation

Russian Development Russian Development BankBank

Russian Investment Russian Investment FundFund

Concession Concession AgreementsAgreements

Industrial Industrial Special Economic Special Economic ZonesZones

Seaport Seaport Special Economic Special Economic ZonesZones

Tourist Tourist Special Economic Special Economic ZonesZones

Technology and Technology and Development Development Special Economic Special Economic ZonesZones

Technology ParksTechnology Parks

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FIRST VENTURE FUNDS

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NEW MISSION, NEW FUNDING

RVC capital is being doubled to RUB 30 billionRVC capital is being doubled to RUB 30 billion

USD 1.25 billionUSD 1.25 billion

RVC mission is being expanded:RVC mission is being expanded:

Finance new segments of innovation companies

Do hi-tech market development work

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INVESTMENT SCOPE EXPANDED

Seed financingSeed financingRange - RUB 1 to 10 million (USD 40K to 400K)Capital contribution, refundable (or convertible) only if and after startup is venture funded

Later stageLater stageSeveral later stage funds may be created in 2008-2009Will operate in between early stage funds and private equity funds (as 2nd and 3rd round investors)Will have a smaller share of RVC money and less generous buyback rights but less restrictive fund terms

Co-financing of venture funded companiesCo-financing of venture funded companiesRVC can provide matching funds to deals with Russian startups led by an eligible VC (Russian or international)Same tech eligibility criteria will apply

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NEW HIGH-TECH MARKET DEVELOPMENT FUNCTIONS

Russian Venture Company has been entitled Russian Venture Company has been entitled by the Government to perform new market by the Government to perform new market development functions as a organizer and development functions as a organizer and

finance providerfinance providerTRAINING AND EDUCATION:TRAINING AND EDUCATION:Professional training for entrepreneurs and other key professions in innovation ecosystem

MARKET KNOWLEDGE:MARKET KNOWLEDGE:Research of innovation-related markets and industries in Russia and worldwide, to be published for public use

INTERNATIONAL:INTERNATIONAL:Relations with leading high tech clusters around the world for the benefit of cooperation between startups, tech corporations, research universities, venture funds and tech ecosystems

PROJECTS:PROJECTS:Other innovation-related projects, based on capacity and market need

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INVESTMENT LEGISLATION REFORM

17

ExamplesUS SEC Regulation DEU European Prospectus DirectivePossible uses Venture fundsPrivate equity fundsHedge fundsReal estate fundsAsset planningStatus: State Duma 2nd reading: passed Nov 6, 2007Becomes a law: E 1H 2008

•Concept of a «qualified investor»– Asset size– Experience in securities markets•Funds «for qualified investors»– Can be commitment based

(money is contributed to fund on demand)

– Right to keep reporting private– Right to create an investment

committee with the power to approve and veto deals

– Can charge increased fees– Other exceptions defined in fund

charters

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INNOVATION ECONOMY LANDSCAPE

USA2006

RUSSIA2006

RUSSIA2015

GDP $13,194 B $930 B $2,820 B

VC Deals volume

$26.3 B= 0.195%

~$0.2 B= 0.00021%Untapped:

$1.86 B

???Potential:$5.64 B

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INNOVATION ECONOMY LANDSCAPE

USA2004

RUSSIA2007

RUSSIA2015

GDP $11,686 B ~$1’066 B $2,820 B

R&D spending

$312 B= 2.67%

~$11.7 B= 1.1%

$78.9 B= 2.8%

PE+VC Funds

~ $150 B= 48%

~ $2 BUntapped:

$5.61 BRVC =

$1.25 B

???Potential:$37.8 B

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SERVICE INFRASTRUCTURE POTENTIAL

USA2007

RUSSIA2007

RUSSIA2015

Books:«Venture…» keyword

229,332Amazon.co

m

18 (!)Ozone.ru

???

Consulting market volume

1.07%GDP

0.16% (!) GDP

??Potential:

$28B

Bank sector assets

280%GDP

52% (!)GDP

?Potential:$3,000 B

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EMERGING VENTURE CAPITAL BOOM

EuropeEurope,, May May,, 25, 2007, 12:39PM EST 25, 2007, 12:39PM EST

Russia's Venture Capital BoomRussia's Venture Capital BoomTech startups in the Federation are coming of age Tech startups in the Federation are coming of age and starting to attract serious VC funding from the and starting to attract serious VC funding from the U.S. and EuropeU.S. and Europe by Jennifer L. Schenker

…To encourage such investments, the Russian government has set up a trust that matches investments from private venture capitalists. Already, it has agreed to dispense nearly $100 million to three groups of investors. Among them: Asset Management, run by legendary Silicon Valley venture capitalist Franklin "Pitch" Johnson, which has secured $52 million in matching funds from the Russia government for a new investment vehicle called Bio-Process Capital Partners. The Russia-based fund will scope out investment opportunities in biotech. ….…To be sure, Russia still lags far behind other global destinations for venture capital. Since 1999, foreign venture capitalists have invested only about $300 million in total in the country's tech companies, says Yuri Ammosov, the adviser to Russia's minister of economics, who is overseeing the government's new investment fund. That's less than venture capitalists invested in China in the first quarter of this year alone, according to figures from Ernst & Young. ….

RUSSIA 2.0

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CONTACT

OJSC “Russian venture company”Office 42, 3-4 Kapranova lane,

Moscow, 123242,Phone: +7 495 777 01 04

Fax: +7 495 777 01 06E-mail: info@rusventure.ru

Web-site: www.rusventure.ru