RVC and Rusnano’s Fund to invest in cloud telephony service

The Far East High Technology Fund (FEHTF), established at the instruction of the President, has approved the first investment. The fund will invest RUB 75 mln to Hotlead, a cloud telephony service created by the former top manager of Mail.ru Group. In the Russian Far East, there are still few nationwide startups, according to participants of the venture capital market.

The FEHTF has invested RUB 75 mln in the cloud telephony service for Hotlead business, the Fund’s CEO Ruslan Sarkisov and the founder of Hotlead, former regional sales executive of Mail.ru Group Gennady Redko, told Kommersant. The company will receive funds in the form of a convertible loan, the FEHTF becoming the owner of a 5% stake in Hotlead. Depending on the financial performance of the developer, by 2023 the Fund’s share will grow to 40%–49.9%. About 5% of Hotlead will be granted to Skolkovo Ventures which will act as an advisor to the company. The transaction is scheduled to be completed within a month.

FEHTF was founded in August 2018 by Rusnano, the Far East and Baikal Region Development Fund and the Russian Venture Company (RVC) at the instruction of the President of the Russian Federation Vladimir Putin. Under the management of the Fund, it intends to invest RUB 5 bln in robotics, biotechnology, intelligent software, industrial Internet of things and alternative energy.

Hotlead is a resident of Skolkovo and the Russky Technopark, the service integrating IP telephony, virtual automatic telephone system, CRM system and marketing analytics. The company says that the government of the Khabarovsk Territory, enterprises of the Far East and hospitals in South Korea are already working on the project.

The FEHTF plans to exit the project by 2023 by selling its stake to a strategic investor. By this time, the company should have been in control of 20%–30% of the cloud telephony market in the Far East Federal District and up to 1.5%–2% in Russia, the Fund’s management hope. “We think, Hotlead has the potential to become a regional champion in its sector in the Far East Federal District and a nationwide player,” said Ruslan Sarkisov.

The specifics of most start-ups in Russia’s Far East is their focus on the regional market, rather than the national one, says Mikhail Shatrov, Head of Regional Projects at the Internet Initiatives Development Fund. “This is due to the fact that the regions are far away from each other and the product needs to be adapted to new regions. For startups, this often means unaffordable transportation costs. As practice shows, it is much easier to go nationwide from Moscow,” he reasons.

Innovation centers historically emerge in places where talent and capital are concentrated, the Far East being locally such a center, albeit incomparable to Moscow in terms of scale, says Konstantin Vinogradov, Senior Investment Manager at RunaCapital. “From my perspective, there is no critical mass of top universities and capital for  the second Silicon Valley to emerge there. Creating another state fund will not address this problem,” he believes.

It is difficult for regional companies to attract financing, but the state assuming the role of direct investor means the risk of losing taxpayers’ money, opines sceptically minded Managing Partner of Frontier Venturessceptical Dmitry Alimov. According to the investor, there are talented entrepreneurs in the Russian regions, but building an international business from there is difficult due to the “unfavourable investment climate”. As an example of a more effective method of public participation in investments, Mr. Alimov cites the Israeli model where the state places funds under management of private professional management teams.

Dmitry Shestoperov