Venture investments - what is it and what is the mechanism of venture financing + list of TOP-5 best venture funds in Russia

Hello dear readers of the financial magazine Rich Pro! Today the subject of our conversation will beventure capital investmentsused to finance new or growing companies, and also talk aboutventure capital funds and investors - professional venture capitalists.

In this article we will consider:

• The concept of venture capital investments and their scope;
• What are venture funds and how do they work;
• The main stages of the venture investment process (information for investors);
• Features of attracting venture capital (information for startups and novice entrepreneurs);
• list of the best venture capital funds in Russia.

This article will be useful:

• entrepreneurial investors who are willing and not afraid to take risks by investing in new ideas and projects;
• "newcomers" in the business field who do not know where to start and which niche to choose;
• persons who are not yet familiar with entrepreneurial activity, but who have an innovative idea and lack of funds for its implementation.

So let's get started!

What is venture investment and how do venture capital funds work, how do investors make money on venture (risk) investments, what are the peculiarities of attracting venture capital for a startup - you will learn about all this and not only by reading this article to the end

1. What is venture investment - definition + overview of promising sectors of the economy for venture investors

Term venture borrowed from English denoting "risk" or "risky start". Venture capital investment does not bring instant profit to its investor. Such investments are long term and highly risky.

Venture investment - These are risky investments in promising innovative companies (startups) in order to obtain significant (above the average market) income.

The risk is that money is invested in absolutely new ideas, technologies or product. Will bring it lesion or profit only show the investor time. In case of loss-making of the new enterprise, the investor simply loses his invested funds. But in case of success, the investor receives superprofits, that is, much more than invested.

At the initial stage, the investor makes his investments in a new business, and when the company reaches a sufficiently high level of profitability and development, he has the opportunity to sell his part (share) in the company at a higher price. That is, the growth in the cost of a share (stock) of a company owned by an investor is its main source of profit.

Venture Investor Income = cost of sale of the share (stock)- amount of money invested

P.S. Venture investment is not always an investment in the authorized capital of a company, in rare cases, such financing may be in the formloan.

Venture investors can be both private individuals and large organizations and corporations, as well as syndicates and funds, regardless of their field of activity.

5 most attractive sectors for venture investment

Sectors of the economy in which it is profitable to invest money to venture investors

The most attractive areas of the economy for attracting venture capital investments are information technology, Internet, software, mobile communications and telecommunications. In this sector, entrepreneurs are ready to invest big money in new developments and innovations.

Healthcare, pharmaceuticals, biotechnology have more interest in the west than in Russia. But recently, there has been a tendency to increase investment in this sector.

Industry and construction not as fast and dynamically developing as the previous two sectors. Such sectors of the economy are considered inert and conservative, but at the same time possessing the ability to bring big profits for risky people.

By the way, there is a separate article on our website that details investment in business and startups, as well as the best startup areas in Russia where you can invest money.

What is a venture capital fund and what is the scheme of its work, who do venture capital funds invest in, and what do experienced investors earn from? Read more about this

2. Venture fund - what it is and how it works + a comparative table of venture financing and bank credit

Let us define the concept of “venture capital fund”.

Venture fund - This is an organization that invests in new, innovative and young projects.

The activities of venture capital funds are associated with high risks, but also with a large potential profit.

Venture funds may be:

• specializedwho invest only in a specific sector of the economy or region
• universalworking with different fields.

As a rule, venture capital organizations invest money in several projects in order to differentiate risks.

According to statistics 70% of the objects of financing are unprofitablebut the rest 30% bring significant profitcovering all risks.

Who do the venture capital funds invest in:

• in projects or business ideas that need additional research or the creation of sample product samples before entering the consumer market (seed);
• to new companies that recently work in the market, requiring research work to promote their products on the market (start up);
• to enterprises that already have their finished product for commercial implementation (early stage);
• in companies that have long been on the services market, but needing additional funds to increase working capital and fixed assets, increase output and research (expansion).

Venture funds are created, as a rule, by experienced entrepreneurs - financiers who work according to this scheme:

1. Search for innovations, ideas, new companies with potential high profitability.
2. Analysis of selected companies for profitability, development, economic feasibility and possible risks.
3. Development of ways to develop the company and potential and new markets.
4. Issue of shares of the enterprise (as a rule, the manager has a controlling stake, and the fund has only a small part of them).
5. The development of the company, which in turn leads to an increase in the value of stocks and assets.
6. Investor earning from dividends or from selling their sharesalready increased in price.

The last stage is the final, since it is on it that it is determined whether the cash investments will bring the income that the investor originally expected.

Why new companies with new ideas choose a venture fund, and not a bank loan. The advantages of this are many.

for exampleIt is practically impossible to get a significant loan from the bank for a new idea, even with a profitable and far-reaching business plan. But turning to a venture fund, you can not only attract investment in the development of the project, but also take advantage of training programs, mentoring of more experienced entrepreneurs, and preferential lending.

Comparative characteristics of venture funds and bank loans are shown in the table below:

Thus, summing up, we can say that attracting venture capital investments will bring the company not only cash, but also support at various stages of development and promotion of a product or service.

3. Venture business: the concept and characteristics of venture activity + successful examples

So what is a venture business?

Venture business (from the English. Venture business - a risky business) is a risky and long-term business in the field of investment of innovative (sturtup) projects.

Usually, venture organization (fund) it is a team of investors who, together and having sufficient experience, work to achieve maximum profit.

Venture business features:

1. The return on investment is from 3 to 10 years (up to 5 years, research work and release of goods can last, and after they are marketed, profitable).
2. Venture investors initially prepare for the withdrawal of invested funds, upon reaching the company a high level of development.
3. Often the objects of investment are not companies and projects, but peoplewho promote ideas and have already had successful experience in the past.
4. The investor is personally interested in the successful development of the project or company, therefore, supports the management of the company as much as possible in the form of consultations, recommendations, research and support.
5. In this type of business the risks are very high, because it is impossible to predict the development of the company with accuracy, as there are no such analogues so far, but the profit is ultimately the maximum in comparison with other types of investment.

An example of competent business venture capital funds:

As you can see, the profit significantly exceeds the amount of invested funds, which is the main goal of the venture capital funds.

4. Stages of venture financing

Venture financing - This is a high-risk investment of money in order to profit in promising innovative business projects in the early stages of their development. It has several stages of different durations.

The ultimate goal of venture capital investment is achievement of a liquidity stage by a company, that is, the stage at which the company is able to place its shares and securities on stock markets and receive income.

The duration of all stages depends on the type and specifics of the development.

Step-by-step guide to earning money on venture investment

5. 6 main stages of venture investment

Whether the business will bring profit and success to the investor depends on many factors, and most importantly on your actions. Actions should be clearly systematized in stages and accurately performed only in the sequence presented below.

Stage 1. Collection of initial capital

This is the initial stage, because when a person starts implementing a project, you need to have at least the necessary initial capital for the first time. An investor can finance both partiallyand completely development and implementation of a project or idea.

Stage 2. Definitions of the vector of investment development

At this stage, it is important to study the situation in the stock market. About what the stock market is and how it works, we already wrote in the last issue.

Perhaps you will find a free sector of the economy for your project or company, or find out that you have an innovative product that is not yet on the market and will be exactly the first.

Stage 3. Searching for a promising business and drawing up a plan for its development

The project for future development is selected, it is now important to stop and think, analyze all the risks associated with the activities of the enterprise. And only then proceed to the development of a plan for development and its implementation for maximum benefit. This may require the transformation of the company from private at shareholder.

In one of the articles of our magazine you can read about how to draw up a business plan or download ready-made examples of business plans.

Stage 4. Signing the contract

You discussed the financial component, now it’s important to tackle legal issues. In this matter, it is worth giving preference not to financiers, but to qualified lawyers in this matter in order to avoid further disagreements.

Stage 5. Control of the enterprise

Venture investors are personally interested in a successful outcome of the company's development. They not only invest money, but also directly control the activities of the enterprise.

They take an active part in the process of developing the concept, planning, determining new areas of activity. Also, venture investors, as qualified specialists in this field, provide advice on certain issues and useful tips.

Stage 6. Sale of company shares

When the company reaches a significant financial position, brings sufficient profit, investors begin to think about selling their shares. Such shares are bought by other investors who prefer work that is not associated with high risks.

Attracting venture capital funds for a startup project

6. How to attract venture capital to a startup

What is venture capital? Let us define this concept:

Venture capital is the money of investors who financestartup projects (young promising companies).

The usual organization (fund) of venture capital receives more 1 000 requests per year for financing startup projects, of which 90% eliminated immediately. Deviations may be due to mismatch geographical, technical or market policy venture capital company, as well as illiterate business plans, requests and documents.

Most venture capital companies work with those projects or ideas that require investments in the amount of from $ 250,000 to $ 1,500,000

The remaining 10% are subjected to thorough and costly research on various parameters. For this, companies hire consultants to evaluate a product or idea, especially if it is new and innovative.

Such a check focuses on the following indicators:

3 important parameters for checking a startup project

If a venture capital company conducts such research, spending significant amounts, this means that it is interested in an idea or product. At this stage, companies are also eliminated, and only somewith which the investor is ready to work and risk his own money.

The process of attracting venture capital to a startup can be reduced to 4 main and very important stages for obtaining guaranteed financing.

The process of attracting venture capital - 4 main stages

The most important factor for a potential investor is the presence of qualified company personnelwho are competent in this field of product activity. The responsibilities of each should be clearly stated. And as a guarantee of the interest of the leaders of the company in maximizing profits, they should be co-owners of the company.

As for the sales market or niche that your innovative product is ready to take, here the connection is direct: the larger the market you intend to conquer, the higher the chances of obtaining financing. This is noticed by the investor and strengthens your competitive advantages over the others.

Important also objectively evaluate and describe all kinds of upcoming lawsuits, difficulties with obtaining a license, especially for a new product. That is, as carefully as possible to approach the analysis of deferred costs associated with the activities of the company.

The share of venture capital in a company may fluctuate from 10% to 80%if the company has insurmountable financial difficulties. Usually, part of the investor’s shares does not exceed 30%, since the owner should have an incentive and personal interest in the development of his company.

7. Where to look for venture investors for new projects and ideas - 3 best options

It is important for a beginner not just to find like-minded people who believe in his product or idea, and most importantly those people who are able to invest their money in its development and market promotion.

Few of the beginners have sufficient funds to create a company themselves, so the age-old question arises, where to look for investors. There are several options here:

Option 1. Familiar

Most likely the novice entrepreneur has no acquaintances of millionaires, so the search is conducted among the closest circle of environment. The more you talk about it, the higher the likelihood that a potential investor who is ready to believe and invest in your idea will hear it.

Example! Ordinary motor vehicle salesman Jan McGlynn invested € 5,400 in the business of his friend Anita Roddick, who opened the Body Shop natural cosmetics store, receiving a share of the company in return. Subsequently, the company grew to 2,000 stores, and it was bought by the cosmetics giant L'Oreal. Jan McGlynn's net income was around 180 million euro

Option 2. Project exchanges or forums

Forums are held in different parts of the world and in different countries, where many potential investors come together for one purpose, looking for new business ideas for investing their own money.

You can also use the Internet and investment project portals. They contain a lot of useful information, it is possible to put your project or idea and find a sponsor yourself or wait until he comes to you. The most popular portals are startup.ua and inproex.ru.

Option 3. Crowdfunding

One option for collective investment is crowdfundingworking online. This is a service that specializes in posting ideas and promoting their projects.

The number of participants is minimized:

1. The author of the idea;
2. Curator;
3. Sponsor.

Curators there may be various organizations that are interested and ready to support the project. Support should be understood as advertising financing for product promotion, provision of equipment and technical means.

Crowdfunding platforms include all product information:

• the required amount;
• description of the idea in the form of photos and videos, i.e. presentation;
• timelines for achieving profitability;
• availability of rewards;
• information about the author and his bank details.

Depending on the service, the platform cooperates with different payment systems.

Most resources are social and you can access them using the Internet and a valid account.

The user has the right to track the activity of other participants, to receive information about projects created or financed by him. There is also the opportunity to chat with the author of the project or idea that you liked.

By the way, there is a separate article on our website that details how to find an investor to open a small business from scratch.

8. Famous venture capital funds in Russia - list + overview of the TOP-5 companies

The homeland of such a risky type of financing is considered Americabut in Russia this kind, one might say, has always been present. An example of this is different developments in the military-industrial complex of the country. Initially, only thanks to venture capital investments did this sphere of Russia reach such heights. Although the investor in this case was the state, not private individuals and companies.

Regarding other areas of the economy, initially even invested funds in the most promising projects in Russia only foreign investors. But today they are fully formed and successfully operate. domestic venture capital funds.

In the Russian Federation, there are about 20 venture capital funds. We will list the 5 best venture capital funds in Russia:

1. Runa capital (8.5 points);
2. Abrt (6.5 points);
3. RVC (5 points);
4. Russian ventures (4.5 points);
5. Softline Venture Partners (4 points).

These venture capitalists were evaluated according to the following criteria and received corresponding points:

• the number of startups funded by the fund;
• the amount of money invested or planned to be invested;
• the middle part in invested projects;
• stock growth rate.

Performance appraisals of TOP-5 Russian venture funds

Now consider these domestic venture funds in more detail (let's do a quick review on them).

Venture Fund №1. Runa capital

The founder of the fund is a Russian entrepreneur who willingly and competently invests in startups in the Russian Federation - Sergey Belousov. The foundation of the success of this fund is knowledge, experience and marketing.

Startups Belousova have a victory in the competition from The Next Web.

In general, thanks to competent policies and support, the brainchild of this fund is successful (Rolsen, Parallels, Nginx, Jelastic, LinguaLeo).

The share that the fund receives for financing is from 20% before 40%and investments reach 10 million dollars

Venture Fund №2. Abrt

The fund was established in 2006. Andrei Baronov, Ratmir Timashev and Nikolai Mityushin. The main area of ​​their interest is in innovative software development.

The properties of this fund are its willingness to invest not only in a startup in the development process, but also in the stage of growth and expansion.

In the development process, invest up to 4 million dollars, taking 20-35% shares of the company, and in the process of growth and expansion - up to 15 million dollars in exchange for 15-30% stocks.

Successful fund projects - Acronis, KupiVIP, Oktogo.ru.

Venture Fund №3. RVC (Seed Investment Fund)

This fund is state-owned in the field of innovative scientific discoveries. The peculiarity of this fund is its not too intrusive policy in the field of company management, but in order to receive financing in this fund it is necessary to carefully prepare the documentation, because it works together with a venture partner.

The share that the fund receives for financing is 25%.

Famous projects - Wobot, "Ceramic Transformers", "Membrane Technologies".

Venture Fund №4. Russian ventures

The fund was founded in 2008 Evgeny Gordeev. Initially, this fund was created in the form of a club. The founder of the fund is a professional in the field of information technology and is well versed in the characteristics of the Russian consumer of this market. The startups that this fund selects for themselves are adapted by concept and climate to the Russian market.

Since 2011, a new vector has been developing - investment in projects at the prototype development stage. The repurchased share is before 20% and the amount of invested funds from 35 thousand dollars before 500 thousand dollars

The principle of work of this fund and its founder is compliance and speed in decision-making (up to 30 minutes).

Famous and successful projects - Pluso.ru, Okeo, Ogorod.

Venture Fund №5. Softline Venture Partners

This fund was founded in 2008. His capital is 20 million dollars And has 13 projects. His specialization is startups designed for the domestic market, at the initial stage of development, to the level of expansion.

In 2015, the fund signed its largest transaction in total for 7 million rubles of investment in the offline Business Family network.

Successful projects - Mirapolis, ActiveCloud, Daripodarki, Magazinga, Client24.

9. Frequently asked questions (FAQ) on the topic of publication

Let's look at some common questions.

Question 1. Who are business angels and what is their difference from venture investors?

Business angels - These are single entrepreneurs who invest their capital in starting projects.

The first "angels" appeared at the beginning of the 20th century. They were a theater lover who invested their money in new productions and received income only if the performance was successful.

Now business anglers are entrepreneurs who have experience based on the successful development of their own business. Statistics show that these are most often men (99%) with a higher education or a doctor’s degree and solid management experience. And every fifth of them - millionaire. (In one of the articles in our magazine, read about how to become a millionaire from scratch - the advice of billionaires will help you achieve your goal).

The priority interests of business angels are information and high technology, and intelligence. They get their profit by selling already increased in the price of the company's shares.

The principle of work of business angels and venture funds is almost the same, as they are both aimed at the final result, but there are also differences.

Comparative characteristics of business angels and venture investors:

As we see the differences minor. Another property of business angels is that attracting them to cooperation is easier and easier than venture capital organizations.

Projects of business angels that have achieved significant success: Intel, Yahoo, Amazon, Google.

Question 2. Who are willing to finance venture capital funds?

Over time, the spheres of interests of venture funds have changed. If before, until the mid-20th century, the most attractive sectors with the highest returns were commerce (oil, weapons, pharmaceuticals), maintenance of gambling establishments, etc.. Now interest for venture capital organizations is high tech sector, telecommunications and healthcare.

Venture capital funds may have both narrow specialization so be it all-encompassing depending on the amount of investment and strategy. They are not tied to a specific region.

Also, financing by such organizations occurs not only at the stage of formation and launch of an idea, but also at the stage of expansion and growth.

Venture investors are not passive in the management of the company, because they are personally interested in successful development. Therefore, using all their existing experience and knowledge, they advise companies at all stages of development.

Question 3. How to start investing in a venture business?

Venture business - This is a very risky activity, but highly profitable. There are special professional communities teaching this business. The main bias is on Search, the choice, assessment and specifics of financing selected project.

Before investing in a venture capital business, it is important to decide on key key points, such as:

• Learning Venture Literature, which will help to understand the main aspects of the activity;
• Volume of capitalwhich you are ready to invest (here experienced venture investors will advise you to diversify risks and focus not on one project, but on several);
• Attachment Area (it is important to choose the one in which you have practical experience and knowledge, it will be easier to control and analyze activities, since the sector is familiar to you).

If you don’t have the required amount of money and lack experience, you can contact a professional venture fund or business angels who will do all the work for you.

10. Conclusion + video on venture financing

Venture business, without a doubt, even despite the high risks in financing projects, is quite a popular and attractive business in the world, since only it can bring excess profit investor. It’s also a kind of “saving stick” for new ideas and innovations. It is important to understand its basics and nuances, for this we wrote this article.

We advise you to watch a video about the venture capital financing market in Russia and venture funds investing in business development and expansion:

Our Rich Pro project team hopes that this material will help make the right choice andpotential investor, and novice startup. I wish you success in all your endeavors!

If you have any comments or have questions about the topic, then ask them in the comments below. See you soon on the page of our online magazine!

Watch the video: Venture Capital: Sanctions Scourge E39 (May 2024).