1. INTERVIEW
VENTECH
Exclusive interview for Private Equity Russia & CIS Journal of Alain
Caffi, founder and Managing Partner of TOP-10 European fund man-
ager Ventech.
Alain Caffi,
Managing Partner, Ventech
You founded Ventech in 1998 and developed it into a Tier-1 picking up real fast.
venture capital firm in Europe, with 63 closed deals in different In Europe, I would say that the phenomena started 15 years later
countries. In what countries do you think there is the most comfort- than in the US, so in the mid 1990s.
able infrastructure for venture investments and start-ups? Why?
What does now represent Ventech?
First of all, the European market in terms of VC investments is split
We have 10 people in Paris and 6 people in Beijing and we plan to
in 30% for UK, 17% for France, 16% for Scandinavian countries as a
have 2 more persons in France and 1 more in China.
whole and 11% for Germany. About €4.5billions are invested annually
Over the last 15 years we raised € 375m for Europe through 3 gen-
to compare to $34b in the US, meaning that the European should invest
erations of funds and $ 50m for China for a first fund. We are currently
5 times more than they do to match with the US in proportion of their
raising a new fund for Europe with a target of € 120m and a new one for
GDP.
China with a target of $ 125 m.
That being said, it shows that Europe as a whole has still a long way
Our two anchor investors are FEI (European Investment Fund) and
to go, which is a shame as the level of research, is quite high especially
CDC (Caisse des Dépôts), French equivalent of RVC. Then we have about
in France, UK, Germany and Scandinavian countries.
15 different investors, pension funds, fund of funds, insurance compa-
UK is certainly the most favorable place for start-ups as it is by far the
nies, banks (less and less!), family offices, plus some corporates.
country where the VC community is the largest and where are located
the biggest international funds. For a star-up UK is also the shortest way Please, describe shortly your strategy and criteria of your in-
to the US market. Then the local VC community is quite strong in France, vestments.
weak in Germany and Scandinavia but with a strong presence of the Ventech revisited the venture capital model over the past 5 years to
UK VCs. meet LPs performance expectations by taking advantage of an unprec-
As VENTECH, we have a leading position in France, our local market, edented potential brought by “new economic paradigms”.
PRIVATE EQUITY RUSSIA&CIS JOURNAL (PERCIS) #9 June | July 2012
and then we target continental Europe as the UK market is the most Leveraging this new venture capital model as well as the in-depth
competitive. At the same time we decided to expand our geographic industry knowledge of the Firm’s Partners, we address opportunities
scope to high growth emerging countries bordering Europe, starting across the different ICT sub-sectors where Ventech has been active in
by Russia then Turkey. for the past 14 years.
Driven by the rapid shift of significant parts of the overall economy
What makes the Russian market attractive for you as a venture
towards digital networks (wired Internet as well as mobile networks),
investor?
investment opportunities extended from just “building the Networks”
We found in Russia a great combination of key success factors:
to “using the Networks”.
- a fast-growing internet market, with Russia achieving the biggest
Rather than focusing only on Breakthrough Technologies (30 to
number of internet users in Europe;
40 % of the allocation), we also leverage the huge value creation that
- a fierce cultural specificity that allows Russian models to gain lead-
comes from New Usage Paradigms (60 to 70 %), i.e. the way people
ership in the country over imported products and services (heralded by
communicate and socialize, access entertainment and information, and
Yandex vs Google);
consume.
- a strong passion for entrepreneurship, as we met with a lot of
This shift has dramatically enlarged the scope of venture capital and
ambitious, tech-savvy and hard-working young company-founders
opened the way to new business models that are more capital-efficient
amongst whom some will certainly become very successful;
and highly scalable globally.
- a perennial quality in scientific and engineering education that
While we may invest in different sectors, a certain number of criteria
allows to assemble top teams who will be able to deliver world-class
are applied systematically during all investment selection processes.
products.;
Strong Management Team: We look for entrepreneurs and leaders
- a nice angle for Ventech to penetrate the emerging Russian VC
who demonstrate creativity, vision, technical know-how, experience,
scene, as we dedicated very early on, time and resources to build a net-
discipline, organizational skills, ethics and transparency. Part of our re-
work in Russia, and found great response from local players such as in-
sponsibility is to clearly identify the key expertise needed along the way.
cubators, seed funds or VCs to collaborate with us.
Competitive Advantage and Time-to-Market: Each Ventech Port-
What particularities of doing business and making venture folio Company involved in ICT Breakthrough Technologies should
capital deals do you see in Russia? own a unique technology/competitive advantage/IP portfolio, in the
The key success factor in Venture capital is the team and we think adequate time-to-market window. When it comes to New Usage Para-
there is still a scarcity of experienced entrepreneurs in Russia as we are digms, we look for a clear and concise value proposition and a flawless
at the beginning of entrepreneurship development but it’s obviously execution plan and capability in order to benefit from a first-mover ad-
29
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2. vantage. We help our entrepreneurs regularly reassess and focus their Do you have any limits of the total fund commitments that you
strategy to build barriers to entry and/or keep the right growth momen- can use for investments in Russia?
tum. As we have European investors, we must invest 2/3 in Europe,
International Growth Potential and Scalable Model: As already dis- meaning that for our new Fund we will allocate maximum 1/3 to Russia
cussed, we pay particular attention to the international scalability of the on a € 100 m to € 120m. We are currently trying to attract Russian Inves-
ventures we back and are instrumental in supporting this development. tors which would allow us to renegotiate the geographic allocation and
Valuation and Exit Potential: We pay close attention to entry valu- allocate more to Russia.
ations and, for each deal, conservatively evaluate the total financing
Do you co-invest with other venture capital investors? Are
requirements needed to achieve a sustainable profitability or trigger a
there any advantages in co-investments, or they just make the deal
liquidity event. Our close relationships with M&A boutiques and invest-
more complex?
ment bankers enable us to constantly call into questions the level of
The syndication is a key success factor. Whenever it’s possible, we
exit valuations we may reasonably expect. This process has deep conse-
set up an initial syndication with pocket deep enough to support the
quences for companies’ strategic orientations and our internal dynamic
company until the exit or at least to a critical size, looking for one or
allocation of reserves.
maximum two coinvestors. This financial support allows the company
We can invest from less than € 0.5m up to € 10m, meaning that we
to move real fast, keep the momentum, without losing time in multiple
start to invest at the post seed or serie A maturity level and follow up the
fund raisings or to look for additional investors on a very selective way,
refinancing until the exit.
meaning looking more for additional value, specific network rather
We look for 5 to 10 multiple and globally our last fund should return
than just money. In Russia, we partner with local investors as we need
between X2.5 to X3 to our LPs.
their understanding of the Russian environment, their local network,
What is the geography of your work? Do you look at projects their ability to evaluate management teams which is less obvious when
from other CIS countries? you have a different culture. We have very good experiences with the
Our efforts are continuously focused on the need to position Ven- Russian VC who now fit the international standards.
tech as a pan-European player with the ability to generate an extensive
Do you cooperate with Russian government funds?
European deal flow. Our presence in China (as the only European ven-
We have been regularly in touch with RVC over the last two years
ture player), our global network and the highly visible international de-
and we expect that the policy which has been recently defined and the
velopment of our portfolio companies all help position Ventech among
resource allocation for foreign funds, will give a chance to our new fund
the 10 leading European fund managers.
to qualify for an investment from RVC. As mentioned earlier we are not
Two third of our investments will be made in Europe and Europe
looking only for money but a Russian investor will allow us to redefine
candidate countries, mainly Turkey.
our geographic strategy with much more emphasis on the Russian mar-
As for the remaining one third, for the most part we will look for
ket. On the same line, the cooperation with RVC would help us enlarge
opportunities in Russia. We will look at CIS countries but at this stage
our network in Russia.
essentially by supporting the development of Russian companies in the
area. We will also continue to support US companies originating from Which spheres and industries do you find having the best op-
Europe or elsewhere. portunities for venture investments in Russia now and why?
Up to know we focused on the Internet and mobile space because
What was the most profitable deal that you worked on? What
Russia is catching up with Europe and the US real fast so there is a 2 to
was the IRR in that deal?
3 years huge window of opportunity where we have both, the general
The most profitable deal over the last fourteen years was an inter-
traction of the digital economy and the need to catch up.
net company called www.meilleurtaux.com a B2C broker offering a
We plan as well to look at technological breakthrough either in
comparison engine for mortgage loans, more or less a copy cat of www.
software, telecom or semi conductors but we still need a better under-
lendingtree.com in the US. We invested in the company when it was a
standing of the Russian ecosystem and we plan to partner with local
paper project, we stayed in the company when it went public and we
investors like VTB for instance to speed up our learning curve. In the
exited on an 100% M&A transaction. At that time the company had 600
meantime we work on projects like CROCUS where we set up partner-
employees, 50 offices across France and more than € 50m revenues. We
ing agreement between European companies and Russian institutional
got X17 multiple on our investment and a net IRR close to 50% on a 7
investors.
years period.
What major current trends and changes on the venture capital
How big is your current deal flow? What is the main source of
market do you see, if any?
PRIVATE EQUITY RUSSIA&CIS JOURNAL (PERCIS) #9 June | July 2012
your deal flow? How big is your current deal flow from Russia and
As mentioned earlier, the rapid shift of significant parts of the over-
other CIS countries?
all economy towards digital networks (wired Internet as well as mobile
We received more or less 100 deals per month (excluding China)
networks), enlarged the scope of venture capital and opened the way
and Russia accounts roughly for 10% but those deals are very qualified
to new business models that are more capital-efficient and highly scal-
as they come mostly from seed funds, local VC, entrepreneurs.
able globally.
How many Russian companies are currently in your portfolio? Historically Venture Capital was focusing only on Breakthrough
What are they? Technologies, now it also addresses all the new business models that
We already invested in three Russian ventures: www.Womanjour- comes from New Usage Paradigms, i.e. the way people communicate
nal.ru , leading web magazine targeting women (Series A round); www. and socialize, access entertainment and information, and consume.
Oktogo.ru , a premier Russian hotel booking site (Seed round and Series This enlarged scope allows venture firms to set up much more bal-
A round); www.Pixonic.com, which operates highly successful games anced portfolios and as a consequence, lower the volatility and increase
on Russian social networks (Series A round). drastically overall performance.
In parallel, Ventech was instrumental in setting up three joint-
What are your plans and strategy of development on the
ventures involving our portfolio companies: 1) Crocus Nano-Elec-
Russian and CIS market?
tronics, a high-profile semiconductor JV between Rusnano and
We plan to maintain our effort and take advantage of our pioneer-
Crocus Technology, creating from scratch a state-of-the-art semi-
ing position to continue dedicating part of our resources to invest in
conductor manufacturing facility for magnetic devices; 2) a JV be-
Russian early stage companies and also to support the development of
tween Web Prime Group and Webedia to launch www.purepeople.
our European portfolio companies in Russia.
ru and www.puretrend.ru. Webedia is a web magazines publisher
If we succeed in raising money in Russia we will jump to the next
focused on 3 verticals, Celebrities and Fashion, Entertainment, “Day
development stage and set up an office and hire a dedicated Venture
to day” Life. Originally on the French web, the company is expand-
Partner.
ing internationally starting by Russia, then Brazil and other geogra-
phies soon; 3) a JV with Sanoma, leading media group in the Nordic With whom could companies from Russia contact on ques-
countries with operations in 20 European countries, to extend Viadeo tions of venture investments from Ventech?
professional social network to Russia and CIS. With 45 million members Alain Caffi, founder & Managing Partner, Ventech, 5/7 rue de
across the world Viadeo is active in Europe, South America, Asia and Af- Monttessuy, 75007 Paris, + 33 1 58 19 21 56, +33 6 07 62 65 24,
rica, with leading positions in various countries such as France, China, alain.caffi@ventechvc.com, www.ventechvc.com
30 Africa or Mexico…
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