Art of investments


Interview of Aidar Kaliev, Global Head of Venture Investment at VTB Capital, for EWDN's report on Russian E-commerce

Tags: venture capital

Sep 5, 2012
Aidar Kaliev, Global Head of Venture Capital: “Succeeding in Russian e-commerce requires deep pockets and strong execution”

What is your vision of Russian e-commerce as an investor?

On the one hand, this market offers a big opportunity. The country is clearly attractive: last year, the Russian Internet market became the largest in Europe, with over 50 million users. So far online retail has had little penetration, but it is growing very fast. E-commerce accounts for less than 2% of total retail sales, compared to over 10% in some advanced countries – so huge growth is ahead. In the middle term, Russia will also become one of the major e-commerce markets in Europe.

On the other hand, Russian online retail is also a challenge. Very big investments are required in infrastructure. So far, certain business models which could develop relatively easily in the West, might be more difficult, slow, and costly in Russia. Among the issues are payments. For orders of physical goods, cash on delivery accounts for over 80%, and, as a consequence, cash flow and returns are issues.

However, this is a chance for domestic players. Foreigners will have difficulties coming here, including importing their assortment and solving local infrastructure challenges. This is probably the reason why global ecommerce giants haven't come to Russia, or have developed only a partial presence in the country.

In this context, two essential things are required for an e-commerce venture to succeed: deep pockets and strong execution. Our pockets are deep enough; but for execution we made an alliance with Fast Lane Ventures. This company has accumulated valuable experience in two years and has several teams organizing vertical projects. Many – though not all – of our ventures in the Internet field and e-commerce will be organized through, or in partnership with, Fast Lane Ventures.

What are, in your opinion, the exit perspectives for funds investing in Russian e-commerce companies?

This is essentially a question of time. For the moment, I see just a few candidates, namely and Their exit is likely to happen even before anyone else can grow enough for an exit. It will probably be an IPO on a Western stock exchange, even though one cannot rule out that a foreign player – not necessarily eBay or Amazon – comes and buys such sites.

Why IPOs, and why in the West?

These players are too big for acquisitions; and Russian stock exchanges are not mature enough to trade their shares. It is a very small and mostly non-liquid market. The combined capitalization of all listed Russian companies is smaller than that of Apple! We must, and we will, develop the Russian stock exchanges, but some still perceive the country's wealth as being mainly about oil and mines; so for digital companies today, the West is way better for IPOs.

VTB Capital is the investment arm of VTB Group, a leading Russian state-controlled financial group. VTB Capital's venture business has financed a number of Russian and foreign small and mid- sized IT companies. In the e-commerce and related fields, VTB Capital owns stakes in Mobidengi, a leading mobile payment service provider and, a major online hotel booking service, in addition to indirect participation the portfolio companies of Fast Lane Ventures.

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