– Adrien, how did you find out about the Displair project?
– As chief-editor of East-West Digital News, I receive a daily review of Russian innovation as reported by the Russian media. And when, in November of last year, I heard about Displair winning one of the Russian innovation contests, I was, naturally, interested. My interest was first expressed in an article I prepared for publication. Then I met Maxim KAMANIN and other members of the Displair team.
– Was it difficult to come to a decision about financing these young people who are not even from Moscow, but from the provinces, from Astrakhan?
– I was already quite interested at seed stage. But I saw my involvement being more as mentor rather than investor. I haven't invested as much actual money in this project as other investors: I received a 1% share in the company, and a few more percent in return for my mentoring advice, as is common practice.
– To what extent do you see the project as potentially successful, and the investments it has received as risky?
– Investing in a start-up doesn't bring any guarantees. But I consider the risks associated with this project to be minimal. Especially with regard to the potential value of the company. Suffice itto say, at the first round of investment the company was valued at $3m, and now it is almost $7m. The risk/opportunity ratio in this project is exceptionally favourable. Yes, the device is not quite ready yet: it is the latest prototype of the first generation. But most of the work on it has already been done, so the technical risks are few.
The company has the potential for multimillion capitalisation. With a bit of luck, Displair could be a Samsung or a Sony at a low start.
There are also few commercial risks. Displair has a variety of applications; it may well become the screen of the future. It is set to replace, albeit partially, the interactive screens and terminals already out there now. The company has the potential to become a global player. With a bit of luck, Displair could be a Samsung or a Sony at a low start. There is that chance!
– Are you not worried that the Displair device will just be used for computer games?– Most of the areas it can be applied to are serious. Not only advertising but medicine, education...
– How do you contribute in practical terms to Displair's activities?
– First of all, I took part in organising the fund-raising. In the end, the company managed to raise a million dollars. Before I arrived, Displair Company wasn't managing the subtleties of presenting itself, arguing its case, or estimating its value properly. This is a “package” without which you cannot “sell” the project. They already knew a lot but there wasn't enough “sauce” to entice investors. As Mikhail Glinka said “Music is created by the people, we composers merely arrange it.” They created the technology, all I did was to make sure it came across as convincing to investors. I should point out that investors had already expressed an interest before then. But the decision to invest only came after the right “package” was put together. I drew the attention of Esther DYSON (a well-known US angel investor with interest in 15 Russian start-ups) to the project; she actually took part in the seed stage round of financing. I also organised a road-show in Paris where a number of international brands got acquainted with Displair's technology.
– Incidentally, how quickly do you expect a return on your investment in Displair?
– Calculating the term of investment return in a particular start-up is quite difficult. But Displair is a special case. Nobody is in any great hurry to walk out on it. If there was another round of fund-raising tomorrow, and somebody offered to pay me 10 times what I paid for my share, I would decline. Because the day after tomorrow it would be worth considerably more.
They created the technology, all I did was to make sure it came across as convincing to investors.
– What is the balance of investment on the Russian start-up market? How much of it is from Russian bodies and investors, and how much from Western ones?
– Five years ago there was almost nothing: neither from private investors nor government finance. There was only one accelerator in Moscow, and that was founded by students from the Higher School of Economics. Almost no foreign venture investors. Even 2-3 years ago, there were no more than two dozen really functioning Russian venture funds.Now it is a completely different story. Investments in technology are growing fast. In Moscow, venture funds, accelerators and incubators spring up like mushrooms. Foreign funds and Russian angel investors have appeared on the high tech scene.. There are also strong state-sponsored programs like Skolkovo and the Russian Venture Company. Regions like Tatarstan have also started their own venture funds and technology parks. When he visited Russia last year, Silicon Valley veteran Steve BLANK declared that he didn't expect to see such a “pile of money” in innovation. Of course, this is not to say that life for Russian start-ups is all sweetness and light. But a start-up offering a truly worthwhile product which is well packaged can attract investment.
Even just a few years ago, mainly stereotypes about Russia were doing the rounds. And, by the way, most western investors still don't really understand what is going on here.
– Is the situation in Russia a favourable one to foreign investors?
– The situation is favourable but clearly not enough is known about this country's opportunities. Even just a few years ago, mainly stereotypes about Russia were doing the rounds. And, by the way, most western investors still don't really understand what is going on here. The situation is slowly changing, something which began about two years ago. In 2010 and 2011, international investors noticed the successful IPOs of Mail.ru Group and Yandex. A lot was written about this. I can say that Displair elicited a staggering response in the western press. The technology was compared to scenes from the American film Minority Report with Tom CRUISE. Except that in the film it was science fiction whereas Displair is reality.
– Incidentally, it seems that this is exactly why your personal project East-West Digital News came about...?
– When I arrived in Russia in early 2009, I was a senior investment manager at Diract Group (now Fast Lane Ventures). Talking to my foreign colleagues, I realised that they simply didn't speak enough of the language to understand what was going on. There was a clear need for an international interface to explain in English what was happening in this sphere in Russia. Also, it was necessary to illustrate concrete Russian developments by reporting them. The result was the birth of East West Digital News which now reports on start-ups and innovation in Russia.
– East West Digital News covers a wide range of modern information technologies – I'm quoting your site – the internet, mobile communications, telecommunications, digital television, satellite systems, software, and related investment and legal issues. Was it difficult to gather together a team of such diverse experts?
– Ours is a small team, yet we carry out large-scale joint research. Not long ago we completed a 300-page joint project with PricewaterhouseCoopers and leading universities.Moscow's Higher School of Economics has supported us from the very beginning and owns a stake in the company . We also enlist the help of foreign experts. Although finding experts in our field is decidedly difficult. You need not just to know languages – Russian and English, you need to know what a start-up is, how investments are brought about. Finding such specialists in Russia is really hard, and that is the main problem. And not only for us, but for the whole internet industry.
In Russia, it is all the other way round. The product may be fantastic but the “packaging” is terrible: it's hard to see it coming from Europe or America.
– And talking about foreign specialists in this field, are there a lot of them in Russia?
– In start-ups there may be a dozen or a few dozen in the whole of Russia. There are more foreigners in foreign companies doing internet-business in Russia, and also in large Russian companies.
– Is it the case that Russian start-ups need not so much investment from the West as western marketing know-how, the skills to commercialise their products properly?
– Exactly. It is true that here there is a unique set of circumstances – Russia was always less open, less integrated in to the global economy. Furthermore, language barriers have an effect again. By no means do all Russian start-uppers speak English. Even at a basic level. It is blasphemy to propose entering an international market without knowing English.But it's not just a matter of linguistics. The main thing is to know how to sell yourself. The acknowledged kings of this are the Americans. They know how to beautifully “package” even a poor product, and to convince the consumer that it is needed. In Russia, it is all the other way round. The product may be fantastic but the “packaging” is sometimes terrible: it's hard to see it coming from Europe or America. The marketing side, all the more so for products intended for the international market, is, frankly, weak.Although there are exceptions. Take Resumup.com, a startup created by Eugene BARULIN from St. Petersburg. His is a stunningly beautiful product, presented in good English.
– Do you have an eye on any new projects for investment?
– Out of many I could single out, there is LinguaLeo.ru (a personalised English language learning module), and the 3D visualization device from Nettle Box (nttl.ru) in Voronezh. The former has already attracted $3m, but the latter still hasn't raised funds. That's one for investors to make a note of.
– By the way, what advice do you have for foreign investors trying to find start-ups with potential on the Russian market?
– Go through the press, go to contests, accelerator companies, technoparks. I also recommend StartupPoint.ru – this community tells you about projects on the Russian innovation market very informatively and in great detail. But keep in mind that it is all in Russian! That is why I started East West Digital News for foreigners.