Born in Nice. Age 38. Lives and works in New York. Graduated from Princeton University. Worked as a business consultant in McKinsey & Company. Has founded several successful IT startups, including the mobile content producer Zingy and the advertising site OLX (the Russian part of OLX has been acquired by Avito.ru). Investor, business angel. Invests in USA, Europe, Asia and Latin America. Has invested funds in more than 100 projects at an early stage.
– Why did you support the Russian Oktogo.ru project?
– I invest funds in travel, electronic commerce and trading platforms. Oktogo.ru is an online hotel reservation service, so it combines all three of my types of investment.
– To what do you usually pay attention when you are offered something in which to invest?
– I take the decision on financing on the basis of the answers to four questions:
1. Do I like the team?
2. Do I like the product?
3. Do I like this business and does it meet my nine criteria for selecting a business?
4. Do I like the terms of the deal?
– And what are these nine criteria you mention?
– They are described on my website at fabricegrinda.com
In brief, they are market volume (not less than one billion dollars), a viable business model, investment of not more than $2,000,000 at the seed stage, the chance to become a top player (if only at regional level), a scalable business, independence from middlemen or suppliers, and a business in a rapidly growing market. Then there are subjective factors: I have to be able to know my way round in this business, and I have to like it!
– What sums do you work with? Are they direct investments, share purchase or something else?
– I usually set aside from 50 to 100 thousand dollars as the first tranche and offer total financing of 500,000 to a million dollars. I invest directly in the company in exchange for a share of the business.
–Why are you confident that the Oktogo.ru startup will be a success?
– In Western countries there is a huge market for online reservation of hotel rooms. It is logical to assume that this market will become just as big in Russia too.
– When do you expect to see your investment returned?
– In angel investment, you have no idea when you will obtain a result. It is such a risky business that it is better to forget about the money you’ve paid out from the start. Recoupment time varies over a wide range. I have had a return in six months, and in nine years. It usually takes five to six years.
– Why did you choose Russia for your investments?
– Russia is the biggest internet market in Europe for the number of web users. The annual turnover of the Russian electronic commerce market has already reached ten billion dollars and continues to grow.
– What about the investment atmosphere?
– Russia has created a really strong ecosystem of interaction with investors at all stages of development of a startup – from the seed stage to potential exit by the sale of the company or holding an IPO.
– What do you think distinguishes Russian investment projects from Western ones? Are there specific factors?
– Russia has its own specifics in logistics and payments, connected with the insufficiently efficient system for delivering orders and the low take-up of credit cards, but otherwise there are no particular distinctions from the Western countries. Ideas which work all over the world work here too.
– How is Oktogo.ru developing? What difficulties have arisen?
– The company is growing rapidly and will earn tens of millions of dollars in 2013. However, it was all far from simple. Financial difficulties arose on several occasions; we had to optimise the cost structure to survive. And on top of that, we recently lost part of the money due to the Cyprus crisis.
– What form does your direct participation in the company take? Do you often talk with Marina Kolesnik?
– I began by helping the company to correct its concept and to attract seed investments. I also gave advice on the product itself, and on general strategy. Once the venture funds had been attracted, I kept my intervention to a minimum (which is normal), and now I only help occasionally, when Marina asks me for advice, usually on matters connected to the development of the product or the strategy.
– Do you ever find yourself disagreeing about something with the heads of the projects you finance? How do you reach a consensus?
– It’s quite rare for this situation to arise, since I look on myself exclusively as an adviser, whose role consists of supporting the founders of the business in any decision they take about the development of the company. One of my companies sold wedding dresses and wedding accessories, and then suddenly switched to dealing in shares. This seemed strange to me, but I supported their decision. I am involved in a startup’s affairs only as much as the founders need me to be. If they need help, I give it. If they don’t, I stand aside.
– You mentioned the insufficient level of development of the Russian electronic commerce infrastructure, from the point of view of organising the delivery of orders and online payments. How can this problem be solved?
– I suspect that a whole series of businesses dealing with matters of the infrastructure and payments will soon be set up. But I would dispute that anyone in Russia would start an analogue to GSI Commerce.
– And will foreign investors go for these businesses?
– While the Russian internet remains as unregulated as it is now, Russia will attract foreign capital and foreign players into this market sector. Companies like Tiger Global, Naspers and so on, are quite successful in Russia.
– Which Russian projects offer the best prospects for Western investors?
– Since the Russian market at present lags behind the American in level of development, many opportunities are opening up for copying business ideas which have been successful in the USA and transplanting them onto Russian soil. I see the greatest investment prospects as being in the adaptation of American projects. This reduces the risks.
– What would be your advice to those Western investors who want to invest assets in Russian projects? What is the difference in investment practice between the West and Russia?
– Invest in what you know about. The difference between investment practice in Russia and in the West is that in Russia, investors usually give support to much more experienced people than they do in the West; to those who are capable of overcoming all the difficulties inherent in this country. In the USA, many of those starting up are around 25 and have not studied in business schools. In Russia, investors prefer to deal with older entrepreneurs with management experience and often with MBA diplomas from Stanford and Harvard. Otherwise, it’s all much the same.