— When did you first consider making investments in the Russian fashion market? Is TrendsBrands your first project in this industry?
— We had previous experience in this field. We successfully invested in two projects: vestiarecollective.com and secoo.com. Both startups specialised in the sale of élite goods for women through the internet. The first of these was more like a social network for people interested in fashion. The project started in France, but became all-European and even came to include the USA. The second one was more traditional, on the click-and-mortar business model, i.e. trading both online and offline. This startup is now growing at a record rate in China too. In looking at TrendBrands, we were probably thinking of the example of asos.com, the like of which did not exist in Russia. We are still working in that direction, although the online concept seems more and more attractive to us. I suggest that we return to this question at the beginning of July: we shall have interesting news.
— The general opinion is that clones of Western startups are the most attractive for foreign investors in Russia. Is this the case?
— I have been in the direct investments market for more than a quarter of a century, and I know you have to advance carefully, step by step. And learn some lessons from each step. So we began in Russia by developing the business of our European startups: believedigital.com, crocus-technology.com, viadeo.com and a few others. But after that, we went over to direct investments in Russian projects: wmj.ru, oktogo.ru, pixonic.ru, trendsbrands.ru and mamsy.ru. At this stage it was simpler to proceed on the basis that Russia was somewhat behind the West, to make use of the undeveloped state in the Russian market of the most topical business models, reckoning that Russian teams would be able to adapt these models to the local market. And in general, I am sure that having gained experience, and ideally with a Russian partner, you can invest in unique projects, of which there are plenty in Russia, particularly in technical fields.
I have been in the direct investments market for more than a quarter of a century, and I know you have to advance carefully, step by step.
— You also invest in biotechnology. Have you found anything suitable in Russia?
— Our previous fund, Ventech Capital III, had two subdivisions: IT and biotechnology. Both operated very successfully. But our investors insisted that we create two separate funds. They no longer wanted mixed funds. We decided it was not worth creating two large funds in the context of the European recession, and decided to concentrate on IT.
— Which of your projects have been the most successful? In which market segment and in which country?
— Our greatest success has been in China. The company jumei.com, which launched an IPO on the NYSE in mid-May, was valued at 3.2 billion dollars, and is already worth over four billion dollars. Altogether we have more than 50 successful investment returns in Europe, both through mergers and takeovers, and through IPOs. In Europe, we reckon we can double our investors’ money. But in China, we can do much better than that! We are organised as two separate funds: one is concentrated in Europe and neighbouring countries, and the other in continental China.
— How much difference is there between the behaviour of users in the USA and in the countries in which you operate? Which of the markets is most like the Russian one?
— We do not invest in purely American companies. It would be foolish to compete with the American venture capitalists, but as a rule, our companies are very active on the US market. For example, it is from the USA that one of our best-known products, withings.com, obtains most of its income. I don’t think there’s anything in particular about American users, it’s simply a matter of the scale of the market, which enables companies that have started locally to become instant world leaders. It’s the same situation in China. And nowhere else. But don’t forget that the American market differs in its very high competitiveness and openness to innovative technologies.
In my view, the Russian internet market is like the Chinese one, but not so much in its size as in the fact that it is hard for the leading global players to break into it. Google’s market share is very small compared with that of Yandex, which dominates the local social networks. There are other examples too.
— How firmly do the startups have to be controlled by the venture investor? How often do you come to Russia?
— In Europe, we invest mainly in France and Germany. We have offices in Paris and Munich, with local teams working in them. For work with continental China, we have a dedicated group and an office in Beijing. There will soon be another one in Shanghai. The next place we make our mark on the map should be Russia, if we can attract sufficient capital to support an office and a team. Generally speaking, since we invest at an early stage, we have to work closely with the portfolio companies. We need local staff. It hasn’t reached that stage in Russia yet. I fly to Moscow roughly once a month, but I work closely with Russian funds, in which I have complete trust.
Since we invest at an early stage, we have to work closely with the portfolio companies. We need local staff.
— Is the Moscow business climate favourable for investments from Europe?
— It was favourable until recently. And everything will soon return to normal.
— To what extent does corruption influence business in Russia?
— We are investing in innovative companies, with young international teams working in them. There is no corruption.
— How do you react to the political risks in the present difficult situation of the cooling in relations between the West and Russia over the Ukraine crisis?
— I take little interest in politics, particularly outside my own country, because I suspect that the extent of my information and my understanding of Russia leave something to be desired, to put it mildly. But as an investor in long-term projects, I look to the future with optimism. However, we are obviously taking certain precautionary measures against unforeseen situations, and are listening to advice from the investors themselves.
— Is the support given to the venture business by the authorities sufficient?
— To be honest, I haven’t much idea what opportunities for venture investors are provided in Russia. We have had a very positive work experience with Crocus.com, which is our biggest Russian project. We could have financed it from either of two sources: either through American investment funds or institutions, or through Russian ones. We chose to cooperate with “Rosnano”, as the more interesting alternative.
Russia and the CIS are very suitable both for the development of the business of our European companies, and for direct investments.
— What would be your advice to foreign investors intending to invest in Russia?
— I’m not very keen on teaching or giving advice. I can only say that Russia and the CIS are very suitable both for the development of the business of our European companies, and for direct investments. But success, as always, depends on how capable you are of selecting suitable people and organising a well-knit international team.