— The market in Russia is quite attractive. After all, it has not stopped being part of the world economy. Many foreign investors with whom I have discussed the subject agree with me on this. Undoubtedly, due to the reduction in business activity and the fall in the population’s incomes, many things are difficult in Russia today, but some companies have succeeded in “re-inventing themselves”, including shifting their focus to world markets. Nor should one forget that a crisis often gives rise to new opportunities. Success comes to those players who because of their effectiveness and innovative technologies, can offer goods and services at a lower price.
— What makes you decide that a project is worthy of support?
— In selecting a project, I look not at the country of origin but at the team. David Shostak and I have known each other for more than ten years now, and I have confidence in him as a knowledgeable operations manager and a reliable partner. Therefore I invested in T-Tronic, although it had a difficult initial stage when the business model was being formed on the basis of the original idea. And furthermore, as in any new project, many problems great and small kept on cropping up. David successfully carried the project through from an idea to a product, and quite soon brought an excellent service, one I consider highly necessary, into commercial operation.
— How actively do you participate in the life of the project?
— I help with the strategy, from analysis and planning to implementation. And I use my professional experience to attract investments. David and I talk at least a few times a week.
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— Are you equally active in other projects?
— Not in all of them, although, of course, I try to help them all as far as I can. Much depends on the stage at which I come in. For example, when I got into SOLOMOTO, a cross-channel “Software as a Service” (SaaS) platform for organizing presence and managing progress in the online medium, I took part as a member of the team of founders. Now I am working in the Board of Directors and am involved in fund-raising and business development. This Israeli project with a considerable Russian presence had great international potential, which was appreciated by serious investors, in particular by Blumberg Capital. Today, SOLOMOTO is operating not only in Russia, but also in Latin America and the USA. In projects which I have joined as a financial investor, and which are developing well without my intervention, I try to be useful by virtue of my contacts with potential clients, contractors and investors.
— Are you considering other projects?
— Yes, I am constantly on the lookout for new projects with good prospects, including in Russia and Belarus.
— How do you take a decision about investment?
— As an investment banker and consultant, I am used to relying on an analysis which gives answers to a fairly standard selection of questions. But even when rational tests produce a positive result, you must also use intuition, consider your own feelings. After all, the figures do not always enable confident conclusions to be drawn, particularly in the case of quite young projects. Successful investors manage to make fewer mistakes.
— Do you mean that all your projects are successful?
— That depends on what you mean by success. (He laughs.) I currently have about ten projects in my portfolio. They are all developing, some of them very actively.
— Do Russian and Israeli projects differ in the way they do business?
— The main difference is that in Israel every startup entrepreneur is aiming at global expansion from the very first day, because the market in the home country is too restricted, whereas many Russian projects develop or plan their development only within the country, and do not make much effort to expand to a world scale. This is understandable, of course. Russia is a large country with a population of 150,000,000. Probably part of the explanation is that many of those starting up today are of the generation born in the eighties and early nineties, and have inherited the specific mentality of those times. Those of them who have had the advantage of studying and working in the West have expanded their outlook as compared with those who have not.
But time moves on, and there are already many Russian IT projects which have scaled themselves up beyond the limits of Russia and the former Soviet Union, and are successfully competing in international markets.
— What is the main problem in taking a project to the international market?
— From the technical point of view, if we are speaking of IT projects, the problem is often that the platform is not properly prepared. Projects intended for the global market from the outset put more flexibility into the technology, making it possible to change and set the functionality more quickly on the basis of the features of a specific market (a payment system, price formation method and marketing communications familiar to the target audience), and of course the special features of the product and so on. Altogether, setting the scale for new markets is a difficult business problem. And as a rule, it is considered to be one of the key investment risks.
— Are deals drawn up differently in Russia and the West?
— I have had experience of drawing up deals under Russian law. There are no particular difficulties in this matter in Russia. It’s another matter under English law, where you can write in any convenient scheme for cooperation between the business starting up and the investor, and it will be considered legal. In Russia, the basis in law for this is not always sufficient. But primarily, international investors find it simpler to work under the standard conditions of English law, which they have studied thoroughly, and understand. Drawing up such a deal is not a particularly long or difficult process, and as a result, this sort of structuring makes it possible to organize work in new markets in a symmetrical way. That’s the way it was with T-Tronic. The deal was drawn up under English law, and then a subsidiary was opened in Russia. This market is close to the project founders, and it is here that the development of the technology and running in of the product began. Once we are sure that the platform is convenient and some technical details have been sorted out, we shall start up in other markets, in particular in the USA, in a similar format. I think this could happen in the near future.
— When do you expect a return on your investments?
— An investor entering a venture project at an early stage can expect to wait from five to ten years until possible liquidity in one format or another. Quicker deals quite often happen, but you can’t rely on it. T-Tronic is developing successfully, the first revenue has come in, but it is too soon to talk about profitability. We still have a long way to go.
— Is than when you usually want to sell your share?
— As a rule, yes. But if we manage to get the scale right, we shall probably grow by ourselves inorganically too. It is important not to rely on a single desirable scenario. You have to be an “opportunist” in the best sense of the word.