So much for not having too many days between blogs - one month later:
The snow has finally melted and the outside temperature has finally risen above zero for a week on the trot. Maybe that is the driving reason behind what feels like a wave of investment tourism � at least for Russia. The ubiquitous Esther Dyson is in town meeting morning, noon and night. The daughter-in-law of one of the founding fathers of US VC investing is looking to see if her Russian roots and Californian location can drag something out of Russian tech that has evaded the rest of us so far. Meanwhile, the founder of Flintstone Technology (a real tech transfer incubator) is back in Moscow working out how not to invest in tech but take advantage of the booming retail sector. Those in the know believe that it is down to boredom with a very dull rest of the world.
My conviction that excellent and cheap Russian technical assets (scientists and programmers) really do make a difference to returns is starting to be borne out. I am looking at a deal that requires $8mn to get to break even � that�s a lot of expensive European management � if the R&D centre was moved out of Russia you could add a another $4mn (minimum) to the bill. The minimum post-money (fully-diluted) is going to be $12mn, more realistically $20mn (options are expensive in return dilution.) Assume that a VC expects a minimum of 5x cash-on-cash � that�s a minimum exit valuation of $100mn. The VC world remains fixated by finding the next $1bn company, the reality however is that investors returns come from a range of reasonably successful companies and not too many failures � there aren�t that many VC-backed companies being sold for in excess of $100mn today.
Still the question remains are there enough Russian tech companies to build a portfolio of $100mn companies?
18 April 2003
So much for not having too many days between blogs - one month later:
The snow has finally melted and the outside temperature has finally risen above zero for a week on the trot. Maybe that is the driving reason behind what feels like a wave of investment tourism � at least for Russia. The ubiquitous Esther Dyson is in town meeting morning, noon and night. The daughter-in-law of one of the founding fathers of US VC investing is looking to see if her Russian roots and Californian location can drag something out of Russian tech that has evaded the rest of us so far. Meanwhile, the founder of Flintstone Technology (a real tech transfer incubator) is back in Moscow working out how not to invest in tech but take advantage of the booming retail sector. Those in the know believe that it is down to boredom with a very dull rest of the world.
My conviction that excellent and cheap Russian technical assets (scientists and programmers) really do make a difference to returns is starting to be borne out. I am looking at a deal that requires $8mn to get to break even � that�s a lot of expensive European management � if the R&D centre was moved out of Russia you could add a another $4mn (minimum) to the bill. The minimum post-money (fully-diluted) is going to be $12mn, more realistically $20mn (options are expensive in return dilution.) Assume that a VC expects a minimum of 5x cash-on-cash � that�s a minimum exit valuation of $100mn. The VC world remains fixated by finding the next $1bn company, the reality however is that investors returns come from a range of reasonably successful companies and not too many failures � there aren�t that many VC-backed companies being sold for in excess of $100mn today.
Still the question remains are there enough Russian tech companies to build a portfolio of $100mn companies?
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