Alexander Rumyantsev: “We have the same situation with entrepreneurship as with literacy in the '30s”
The well-known Russian investor about the main problems of the venture industry
Has the activity on the Russian venture capital market subsided? Do we have enough well-developed startups and people ready to invest in them? Why do entrepreneurs take their projects abroad and are there any tools in Russia to keep them? Why the hackathon is a useless work? Where is the startup capital of Russia? Alexander Rumyantsev, who, according to RBK, is the number one venture investor in Russia in 2016-2018, answers the questions of Realnoe Vremya.
“At an early stage, only friends, family and fools invest”
Alexander, let me share my subjective opinion, based solely on the monitoring the materials in the Russian media: last year, virtually everyone talked about venture capital investments, there were many publications, interviews with experts and so on. In 2019, the interest seemed to have diminished, as well as activity in this industry. As one of the most active venture investors in Russia, do you see a similar picture?
In my opinion, this year there will be much fewer transactions than last year (at least, mine), although we still planned to go all out at the end of the year. But in general, I agree with you: recently, venture deals and publications about them have rarely appeared in the information field. We have discussed this topic with other venture investors, and the general feeling is that the number of transactions this year has really become much smaller.
What do you attribute that to?
The thing is that there are very few well-developed startups on the market that are suitable for investment. As an investor, I want a startup to have a minimum version of the product and, preferably, the first sale or some dynamic growth of the base — in this case, it is interesting in terms of investment. But such projects are actually very few.
At the same time, are there enough people willing to invest?
Certainly. If interesting projects that have dynamics come to me or to the fund, we will certainly be ready to consider and invest in them.
But if we are talking not about funds and professional investors, but about “ordinary people with money” — how active and competent are they in terms of venture investments?
If we are talking about investing in startups at an early stage, it is important to understand that 80% of projects are likely to close. People are afraid to risk their money, and I would not recommend illiterate investors to invest in startups at all.
Investing in the early stages is very dangerous. In the US, there is the concept such as FFF, the meaning of which is that at the initial stage only friends, family and fools invest — Friends, Family & Fools. The model, when a non-professional investor comes and starts investing does not work.
If we are talking about investing in startups at an early stage, it is important to understand that 80% of projects are likely to close. People are afraid to risk their money, and I would not recommend illiterate investors to invest in startups at all
“Nobody likes entrepreneurs in our country”
In 2017, you said that the Russian venture capital market was in the process of formation. Has this process completed?
Based on my personal experience (and I know the Russian market of venture investments and startups quite well), I can say that there are very few projects now. They are sorely lacking. At the same time, there are a lot of investors. The thing is that people do not know by what rules to create technological startups.
For a long time, entrepreneurship in our country was oppressed — remember dekulakization and other episodes. There was no support. But if someone even started to do something, then they were immediately called a speculator or some other offensive word. Nobody likes entrepreneurs in our country. If you look at the statistics of Bloomberg, you will see that in Russia there is less than 1% of entrepreneurs. At the same time, in the US this figure reaches 16%.
A serious gap.
Yes, on the one hand, it is a serious gap, but on the other — we have the opportunity to work in this direction. However, many of these 1% transfer their startups to the US or other countries. This has a negative impact on the venture capital market, as the project is created here, but investments are received abroad. That is, there the company is opened, but here it is closed. This trend is now very well felt. Personally, I am categorically against my projects moving to other countries. In my opinion, they should develop exactly where they were formed.
As an example, I can cite Maksim taxi service: the guys are developing the company in Kurgan, and they have more than 5,000 employees, they are represented in 18 countries and 400 cities of Russia. There may be many more such examples, but the environment should be created.
In general, now I would concentrate not on making deals, but I would invest in a serious project aimed at explaining to entrepreneurs how to create technological startups from scratch. By the way, a similar programme was launched in Skolkovo — the speech about Techno Skolkovo Community. They created a startup accelerator in an online format. This is a completely free project, and no one forces its participants to move anywhere. A person creates a startup in the same Kurgan, and when he has a product and sales, he can turn to me as an investor. By the way, within this theme, I am planning to make about 20 deals this year.
Now I would concentrate not on making deals, but I would invest in a serious project aimed at explaining to entrepreneurs how to create technological startups from scratch
Do we have working mechanisms for keeping startups in the country?
You know, some even create foreign funds and organize various competitions with the participation of embassies, which in every way move these projects abroad. Now we have nothing to hold the brain drain, although the market is completely open.
Of course, the outflow can be avoided if a person is a patriot. For example, Maksim Belonogov (the creator of Maksim taxi — editor’s note) or like me. We do not want to move, despite the opportunity we have because we love our homeland — we like everything here.
“I could name Kazan, but still I put Kurgan first”
Alexander, how do you assess the effect of the hackathons? How often do such events result in new technology companies or innovative products?
It's a fruitless job. It's work for work. It's made to spend money. For the most part, this is an inefficient tool because hackathons are often held by people who do not have the necessary experience.
If we take for comparison the already mentioned online accelerator, then it involves the directors of Microsoft, Mail.ru Skolkovo, as well as the founders of cool startups — they all share their experience and structurally talk about what and how to do. But the hackathons have the following situation: someone wins a tender, people are brought together on the platform, but how the organizers explain them something — I have no idea.
It will take at least 30 days to create a start-up and give understanding. Of course, if we find and gather experienced people, maybe they can do something, but I am saying that now we have the same situation with entrepreneurship as with literacy in the ‘30s. People do not know what the economy is, they do not know how to make a presentation, how to set up advertising and so on. But the hackathons don't tell about this.
If you had to choose a startup capital of the Russian Federation — with high activity and favourable conditions — what city would you name? Except for Moscow, of course.
Kurgan. Of course, I could name Kazan, where serious work is also carried out, but I still put Kurgan first.
Why particularly Kurgan?
To create a technological startup, it is necessary to sow the basics of entrepreneurship. If this is not done, projects will not appear in principle. We have several regions in our country that are doing this sowing. For example, in Kazan, it was possible to gather 200 people for the Skolkovo online programme, and in Kurgan, where the population is only 300,000 people, there were 600 participants. Based on these figures, I can say that Kurgan is more active.
I would note that many regions categorically do not want to do this — they do not need it. Some see it as an extra responsibility. People at the local level think, “I'd rather not do anything — it's safer. And I will still get a salary.”
To create a technological startup, it is necessary to sow the basics of entrepreneurship. If this is not done, projects will not appear in principle
In conclusion, I would like to ask you to name some of the most pressing problems of the venture industry in Russia.
The number one problem — complete illiteracy, both among investors and among startups. To solve this problem, it is necessary to bring people to the existing platform, for example, to Skolkovo. In fact, we already have a well-established mechanism, it just needs to be scaled up, and everything will be great. I think that in this case, in just five years, our country will have not 1%, but 3-5% of entrepreneurs — only thanks to scaling.