Bank of Russia outlines key areas in direct and venture capital investment development
Efforts to boost the government and major companies’ demand for innovation may foster the development of the Russian market for direct and venture capital investment.
This could be delivered through specific requirements for high technology production and for the share innovation revenue, as well as by setting key performance indicators for implementation of new technologies. These are the conclusions of the financial market community following a discussion of the Bank of Russia report 'Developing alternative investment instruments: direct investment and crowdfunding'.
The conventional tools to raise capital that public companies resort to are hardly suitable for a new and fast-growing business. What this business needs is the advancement of specific tools and methods. In global practice, direct and venture capital investment are key sources of capital for new businesses — which often fail to meet banks’ and stock market investors’ requirements.
Yet, each investor wants to see a potential opportunity for a startup exit. Among success factors here are a sought-after technology, a large potential market, rapid and sustainable business expansion, and a motivated and professional team. The discussants hold the view that exit strategies in Russia are immature owing to the lack of sustainable demand for innovations and scarce long-term investment funds.
Respondents believe that both private and institutional investors’ money could help fill the shortage of long-term funding. However, the demand factor should combine with better investor rights protection to boost interest in this investment market. Focus should also be turning to the area of legislation on individual instruments including an investment partnership agreement.
An innovation driver of no small importance is a training programme in finance and delivery of such projects. It is meant to bring into existence, in addition to professional expertise, a national entrepreneurial culture for this market area. Professional standards and levels of expertise of entrepreneurs, venture capital investors and startup initiators are essential prerequisites for success of individual products and prospects of the domestic venture capital market.
Based on public discussion outcomes, the Bank of Russia puts forward proposals relating to direct and venture capital investment development in Russia. These will make up the blueprint for a roadmap to be drafted following discussions with the Government.