Geography of participating companies

Distribution of participating companies by industries

Distribution of exhibitor companies by volume of investment required

 

World practice of performing venture fairs can be traced back to the sixties of the last century. They are widely spread in the USA and some European countries now, with the main goal of building constructive dialogue between investors and managers of new high-growth companies, mainly from the technological innovation sector.

The international experience of organizing such kind of the events was transferred to Russian ground in 2000, on the initiative and with the assistance of Russian Private Equity and Venture Capital Association (RVCA). Since then, the Russian Venture Fair was annually conducted and served as a meeting place for professional investors and domestic & foreign venture business experts which worked or planned to work in Russia. Traditionally, the organizer of the Fairs was the RVCA.

According to Yuri Ammosov, a well-known publicist and entrepreneur in high-tech sphere, “… the RVCA’s most successful project have been its Venture Fairs which were destined to provide communications between investors and entrepreneurs. The Fairs have had an unexpected “side” effect – a media for communications and discussions has been formed within them. Although this is not a single Russian forum on technology and venture capital issues, the leadership of the Fairs’ program is apparent. The RVCA Venture Fair is one of the biggest stories of the year, where many eminent venture capital community players arrive to informally communicate and discuss presentations. Within this communicative environment, arises an opportunity to build quite clear view of current situation at the venture industry field and to refine on one’s personal plans for the next year”. 

And what is the Venture Fair’s distinction in comparison with many other numerous exhibition events?  First of all, the Russian Venture Fair – is the unique for today Russian ground on which presentations of promising projects of innovative SMEs which are seeking for venture capital financing are being purposefully performed.

The grounds specialized by stages of companies’ development (start-up, expansion, later stages) or by industries (industrial equipment, nano- and biotechnologies, IT, etc.) work within the Fair frames. 

To be included in the Fair’s exposition, the companies have to be preliminary selected: leading experts from the venture capital and innovative entrepreneurship fields evaluate projects from the point of view of venture investing promises. Noteworthy that any company may be admitted to the competition regardless its region and sphere of activities. Additionally, there are number of special trainings (coaching) for top managers at the Fair, which are aimed at raising effectiveness of the companies’ interactions with potential investors during the presentations of their businesses.

The main peculiarities of Venture Fairs are the following:

• Exhibitor firms present their business at the whole but not the projects.
• Maximum comfort for direct dialogue between investors and companies.
• “Only for experts” work regime.

It is shown by practice that only approximately one third of competitive proposals gain positive conclusion of Expert commission which is composed of representatives of investment structures and venture capital funds. The experts, on the base of criteria which are generally used by venture capital funds at business-projects evaluation, estimate the degree of possibility of attracting venture capital for the competing business.

Working program of the Fair is rich with various events which are devoted to analysis of the experience accumulated by venture capitalists in Russia and abroad as well as to the issues of transition of Russian economy to innovation path of development. The list of topics to be discussed at Russian Venture Fair includes: development of private equity & venture capital industry in Russia; fundraising in Russia and abroad; public-private partnership; deal flow in the sphere of technologies; exit strategies; risks and their lowering; international cooperation in the field of high-tech development; and many others.

At the conferences and round tables, discussions of the main problems to be solved by Russian investment and innovation community, as well as elaboration of propositions on improving investment and business climate and raising investment attractiveness of the innovative technologies sector, take place. 

The Venture Fairs’ status as one of the biggest stories of the year is confirmed by concerned participation of representatives of regional and federal authorities in the Fairs. Each autumn, both venture business leaders from Russia and abroad, main specialists from private equity investment funds, bankers, managers of major Russian financial corporations and industrial companies, and heads of Russian regions, ministries and departments involved arrive to the Saint-Petersburg’s Fair. Starting from 2005, Venture Fairs gradually expand their sphere of influence by actively penetrating in regions. Under the patronage of RVCA, fairs in Kazan, Novosibirsk, Rostov-on-Don, and Irkutsk are regularly conducted. This kind of communications is of great interest – the issue of involving different regions in the venture entrepreneurship sphere with following organization of regional venture fairs is widely negotiated.

Here are some statistics:

Within the whole Venture Fairs’ history, there have been registered the following participants:

• 552 exhibitor companies;
• More than 400 investors from Russia and abroad;
• 3700 participants from 70 Russian cities and 30 foreign countries (700 - 1000 participants every year).

Fig.1. Geography of participating companies

The diagram illustrates the highest activity in innovation sphere at Central and North-West federal districts, mainly at the account of such big centers as Moscow and Saint Petersburg. Volga FD occupies the third place with a number of regularly conducted events which favor active development of venture entrepreneurship. The Fair of business angels and innovators “Russian capital – to Russian innovations” is the most significant one among these events.

Fig. 2. Distribution of participating companies by industries

Distribution of Venture Fairs’ participant companies by industries is presented at the diagram in concordance with adapted EVCA classification. It’s curiously to note, that this Fairs’ distribution differs substantially from the total structure of venture investments distribution at the Russian Federation, with higher percent of participating companies from the following high-tech industries: Industrial equipment (28% at the Fairs and 0.6% totally at the RF), Computers related (12% and 5%, correspondingly), and Electronics related (9% and 0.04%). At the same time, Consumer market related branch (4% at the Fairs and 47.9% totally at the RF) is represented to a sufficiently lesser degree. Such a picture is caused by direction of attention of the Russian Venture Fairs’ organizers mainly toward support of innovative technological enterprises. 

Fig.3. Distribution of exhibitor companies by volume of investment required

Relish for investments of majority of the participants is not very large – volume of the investments required ranges between 300 thousand and 3 million of USD that generally corresponds with expectation of venture capital. Though, lately have come out the claims for $3−10 mln investments that rather corresponds with private equity investments in more mature stage companies.

Naturally, the main goal of each company coming to the Fair is attraction of investment – according to the results of Venture Fairs, there is information on investments attracted in 65 companies to the total amount of 5 bln rub. – nevertheless, there are more benefits in participation in the Fair: establishing new contacts with partners and clients, advance training of companies’ managers, carrying out PR-actions, etc. According to questioning the companies-participants of the last Fair, in spite of very complicated economical situation, many of them have found business-partners, negotiate with expected investors, and some of them are preparing business-plans for investors and are at the beginning of due diligence procedure now.

Innovative model of economy – is none other than adjusted system of knowledge transfer from science to business. And it is necessary to understand that the rules for science activity are not the same that are the rules for business functioning, and this is true for the entire world. The countries that managed to “match” business and science become advanced in the area of innovation development.

The Fairs’ experience shows: to reach proper level of communication between the key investment process’ players, it is necessary to overcome the obstacles existing mainly in the information support. Lack of development of informational field causes a gap between expectations of investors, demands of business, and needs and requirements of innovative entrepreneurship.

Hence, the Venture Fair’s role as a discussion, presentation, and communicative ground where the contacts between investors and entrepreneurs are being established will strengthen in the future, and the Fair may acquire statute of “gravitation center” of Russian venture capital community.