Transcript RUSSIAN BUSINESS ANGELS

FIRST ANNUAL US-RUSSIA BUSINESS ANGEL SYMPOSIUM
Boston Region Open Doors (BROD)
RUSSIAN
BUSINESS ANGELS
Dr. Alexander Kashirin - Chairman of the Board of The
National Union of Business Angels of the Russian Federation
(RUSSBA)
12 November 2007
Boston
Business Angels of Russia.
The current state.
• Business Angels (BA) are not formed as a part of society,
the state or the economy
• Fragmented – some BA with a poor interaction between
each other
• UNIDENTIFIABILITY of BA
- There is no concept of “business-angel” in society nor the
state as an investor-subject of the economy,
- Potential investors (by availability of capital) do not identify
themselves as BA – lack of information, knowledge and
experience
• Financial insufficiency – a small volume of funds in the
BA sector
Business Angels.
The information deficit.
• Introduction of the BA term into the everyday language
• Creation of a positive BA and SIC (small innovation companies)
image in the public consciousness – the architects of the economy of
knowledge, economy of the future, the benefit for everybody: the
citizens, the society and the state
• Explanation of the essence of BA and their activity, one team (BA,
inventors and managers) and aim, new relations, confidence, mutual
aid and respect
• Capital formation in the BA sector, demonstration of the BA
profitability, availability and history of success
• Important social function: investment in intellect and science, creation
of the new enterprises and workplaces
“Invest in the innovation Russia”
Business Angels and venture funds.
The balance requirement
The venture investment volume in Russia.
The nearest future. Evaluation
RVC (Russian Venture Company)
30 milliard rubles
RIFICT (Russian Investment Fund
for Information and
Communication Technologies)
1.5 milliard rubles
Regional Venture Funds
6.4 milliard rubles
Private Venture Funds (foreign
jurisdiction)
5 milliard rubles
TOTAL
≈43 milliard rubles
Business Angels and venture funds.
The balance requirement
The business angel investment volume in Russia.
The current situation. Evaluation
ROSNAUKA FTSTP (Federal
Target Scientific Technical
Program) (seeding stage)
2 milliard rubles
BORTNIK Fund (seeding
stage)
1 milliard rubles
Business Angels
0.5 milliard rubles
TOTAL:
3.5 milliard rubles
Investment statistics.
Business Angels and venture funds
Number of
projects
submitted for
investment
Of them – number
of the invested
projects
Average
investment
volume
Business
Angels
10
1
10 million
rubles
Venture
Funds
10 (100)
1
40 million
rubles
Business Angels and venture funds.
The balance requirement
• A need for the volume of the investment in
the seeding stage. Evaluation
100 milliard rubles
The calculations have been made based on the need
for the availability of a certain number of start-ups
for the existing venture capital volume. The start-ups
are formed out of the invested “seed” companies, not all of
which find out the venture investment
CONCLUSION
The business angel investment is a growing market in Russia
which has a significant commercial interest for investors for
the foreseeable future
Business Angels and venture funds.
The balance requirement
Proposals
● To increase the financing of the existing government “seed” financing
programs;
● To the extent of the existing investment government programs – to
allocate a part of funds for the financing of the innovation companies of
the seeding stage
● To develop the new programs to the extent of the state-private
partnership, including the creation of the seed financing funds (seed
funds);
● To perform work on the business angel sector support and development
due to the arrangement of the conditions for the capital transition to this
sector from the other trades on the basis of forming the normative-legal
and economic conditions adequate for this task;
● Promotion of the participation of big corporations in the fund investment
in the seeding stage
Potential for the business angel
investment in Russia
Number of the dollar millionaires in Russia:
Officially – 88 thousand
Minimum (assessment) – 100 thousand
Maximum (assessment) – 400 thousand U$D
millionaires
Assessment of the volume of the potential
business angel investment in Russia
• 10 thousand can potentially become business
angels (10% of the minimum)
• Average volume of the investment of one
business angel in the innovation business is
100 thousand US dollars
• Potential investment resource volume – 1
milliard US dollars = 25 milliard rubles
Business Angels of Russia.
The investment problems
•
•
The low innovation sector competitiveness, availability of more attractive
ways of capital investment (real estate, finances, trade, public catering,
transport, communication, power engineering, etc.):
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High profitability
Short payback terms
Low risks
A new undeveloped investment tool:
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No pledge or guarantees
Long money and high risks
Poorly studied investment approaches and methods
Insufficient qualification of business angels as the venture investors

Wages

Dividends – 24%
• Investment resource taxes:
Natural persons:
SST (Single Social Tax) – 26%
Income Tax – 13%
Legal entities:

Profit Tax – 24%
Business Angels of Russia.
The investment problems (continuation)
• Poor protection for minority shareholders
• Business angel status uncertainty in public authorities
and consciousness – as a participant (player) in
economic processes
• Lack of interaction and partnership of business angels
in implementation of the government programs and
projects (Assistance Fund, FTSTP, etc.)
• Lack of the business angel investment knowledge,
experience, culture and traditions
• Lack of the information of the business angels’
successful histories
• Difficulties in the entry, management and exit from the
innovation business
Business Angels.
The investment media problems
• Significant tax burden for small innovation companies
• Extremely complicated, volumetric and volatile
accounting
• Uncertainty with the rights to the intellectual property
created for public funds (adopted Part IV of the RF
Civil Code, Articles 1552 and 1556, means the transfer
of rights to the state)
• Organizational, legislative and financial problems in the
process implementation
 Company registration
 Patenting
 Certification
 Customs clearance, etc.
Business Angels. The investment
media problems (continuation)
• Antimonopoly adjustment problems (unique products –
one producer)
• Absolute lack of knowledge and experience in the
innovation project implementation by scientists and
managers
• Lack of the office premises, shop floors and equipment
under the terms acceptable for small innovation
companies
• Lack of the innovation business culture and traditions
 The National Commonwealth of Business Angels is
formed under the initiative by the Russian
Association of Direct and Venture Investment
(RADVI) under the patronage of the Committee for
Investment Policy of the Chamber of Commerce and
Industry of the Russian Federation (CCIRF) (the
date of state registration – 27 December 2006)
 Member of the European Business Angels Network
 Member of the Russian Association of Direct and
Venture Investment
RUSSBA (Commonwealth of Business
Angels of Russia) unites the following in
its ranks:
• The business angels and venture investors of
the small innovation companies of the early
stages of development (the seeding and the
initial stages)
• Other natural and juridical persons that
promote the implementation of the RUSSBA
goals and objectives
RUSSBA. What is done in 2007
I. Organization activity
•
About 50 became the RUSSBA members
•
3 regional networks are created and included into the RUSSBA
•
The RUSSBA development concept is accepted
II. Project activity
•
Number of the applications for investment – 350
•
Number of the applications which failed the expert selection – 169
•
Number of the applications being under rework by the project authors at the RUSSBA
recommendations – 116
•
Number of the applications being at the stage of preparation of a business proposal for investors –
34
•
Number of the Presentation sessions held – 2
•
Prepared and submitted to investors (business angels and venture funds) – 20
•
Under negotiation with investors – 9
•
Got invested – 2
 About 80 articles and interviews are published in the printed mass media
 The State machinery officials, the RUSSBA members and partners made over 100 speeches and
statements at forums, conferences, round tables, symposiums, seminars, etc.
III.
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•
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Propaganda activity
Development of the RUSSBA “Angel-Investor” trade journal (5 numbers)
2 books are prepared and published by the “VERSHINA” publishing house:
“Venture Investment in Russia”
“In Search of a Business Angel. The Russian Experience in Attracting the Starting Investment”
1 brochure – “The White Book of the European Business Angels Network” (translated from
English)
RUSSBA.
What is done in 2007 (continuation)
Program activity
Preparation and holding of the Moscow Venture Forum on 19-21 June
•First in Russia. The seminar-training for the Russian business angels – “Practical experience of the
innovation company investment by the US business angels”
In the course of the seminar-training the participants familiarized themselves with the practice of work
of the leading private investors of such business angels network as the Alliance of Angels (USA),
examined by the certain examples the methodology for the selection and accompanying of innovation
projects, got acquainted with the typical mistakes upon the investment and obtained the certain
recommendations as for the project management
• The Conference – “Financing the small innovation companies at early stages”. The sponsor is
Microsoft
In the course of the Conference the problems and opportunities for the innovation project financing
were considered based on the Russian and foreign experience. The presentation of the RUSSBA Seed
Investment Fund.
• The first presentation session of the RUSSBA
There were the presentations at the session made by 6 innovation companies of early stages for the
investment by business angels and venture investors. The companies passed the competitive selection
and expert training by the RUSSBA.
RUSSBA.
What is done in 2007 (continuation)
 The “Investment Memorandum for the RUSSBA Seed
Investment Fund” is developed and the managing team
is formed
 The following are developed and being implemented:
 RUSSBA Manpower (Personnel) Program
 RUSSBA Regional Program
 Technology of working with innovation projects
RUSSBA Regional Program
• The object – assistance to the regions in the creation and/or
further enhancement of the innovation development tools.
• Provides for the performance of the joint work on:
- the selection, assessment and preparation of the innovation
companies’ presentations with transferring the RUSSBA “Deal
Flow” technology on working with projects in the regions
• Holding the SBAR Regional Presentation Session
• Creation of the regional business angels network and training
on such theme as “Introduction into the Business Angel
Investment”
 The program implementation period – 1 year
 The negotiations are being carried on with some of the
regions
RUSSBA Manpower (Personnel)
Program – “Energy and Experience”
The object – forming the personnel body of the innovation
managers:
• “Energy” – a practical probation of the final year students, postgraduates, graduates from the institutes of higher education at the
RUSSBA and their further work as the innovation managers
and/or co-owners of business
• “Experience” – an attraction of those experts, consultants,
advisors, managing directors/executives, innovation company coowners, entrepreneurs and businessmen and corporation managers
who (for different reasons) have stopped with the active work, as
well as those managers who want to participate in the innovation
business development along with their direct work.
Arrangements in 2007-2008
The arrangements taken place in 2007:
19 May, KAZANJ, TATARSTAN
• The International Investment Forum – “The Russian Regions – the Growth
Strategies”
19-21 June, Moscow
• The Moscow Venture Forum
12 October, Saint-Petersburg
• The Russian Venture Forum
30 October, CCIRF, Moscow
• The Seminar-training for business angels
• The 2nd RUSSBA Presentation Session
The arrangements planned for 2007-2008
12 November, Boston, Massachusetts, USA
• The First Russian-American Symposium of Business Angels
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The National Congress of Business Angels of Russia (March)
The Moscow Venture Forum (June)
5-6 RUSSBA Presentation Sessions
5-6 Seminars-trainings for business angels
The arrangements planned
for 2007-2008 (continuation)
• Workout of:
 The RUSSBA SECTORAL Program
 The RUSSBA Program on cooperation with venture
funds
• Creation of the RUSSBA Seed Investment Fund
Dear Colleagues and Friends!
 We invite the investors – business angels, venture funds and
other investment tools – to become the RUSSBA members and
open a new perspective and profitable investment tool for
themselves
We will help you to master and develop the business angel
investment
 We invite those small innovation companies of early stages
which look for the investment. We will help to get you ready for
the investment and find out a business angel or a venture investor
 We invite corporations to interact with small innovation
companies