Interview has been published with Ulf Persson, managing director of Mint Capital venture capital, which creates a new fund to work in Russia. He spoke about his strategy in the sphere of investments and general trends of venture market development
Reference: Interview of Mr. Shkolin with Ulf Persson, managing director of Mint Capital venture company, «Ulf Persson, «We Expect To Get 40-60% A Year,» Finans., N30, August 16-22, 2004, p.31-33.
He said, «The next fund is expected at the level of $100 million and we plan to make larger investments — worth $10-15 million. This money will be distributed in entrepreneur companies operating in Russia. We will invest into production of consumer goods, service sphere, light industry and also we can make investments into technological companies created within the last 5-10 years, but not start-ups. Our first fund allocated money for them. However, it is fully invested already — a little less than $25 million. Out of eight investments, four can be called start-ups and the other half is medium size companies. We are typical „first“ external investor and will try to work hands on.
The first fund had two areas of investments. One was investing into fast growing entrepreneur companies, which products and services were meant for the Russian market. The second area was high tech companies which sell their products outside Russia: they develop technologies which are later sold abroad. These companies were mostly start-ups. However, situation has changed, we believe that stable growth in Russia over the last 3-4 years has enhanced companies’ ability to receive investments. It became more interesting for us to invest into companies working for the domestic market.
Four years ago, we could only imagine future, then Russia just coped with the crisis. There was no real growth, low base accounted for significant increase in the GDP in 1999. Currently, the country has seen good growth for a few years already. On a number of issues certain critical level has been reached, which allows to make direct investments into Russian companies.
One of the reasons why there are few funds in Russia is that the market for direct investments is very young, there is a small share of structured investments and there are few professional teams. Time and market volume were not enough for them to grow. However, I believe most important factor is the fact that up until recently there were few investors in Russia ready to put up their money for 5-10 years, which is standard for a direct investment fund. However, currently, a lot of market participants consider long-term investments into Russian economy. It seems to me now we have stability, platform for further growth and improvement of investment climate. There is a big difference how foreign investors reacted to us back in May-June 2000 and how they receive us now. In Switzerland, where we and a number of our key investors come from and other European countries people listen to possibility of investing into Russia with great interest.
Research conducted by Ernst & Young showed that Russia ranks second in Europe after Germany by investment attractiveness. I read this research and have no clues how they arrived at this conclusion. Russia is in fact attractive for investors, but they are very cautious now: history of the country since 1990 hasn’t been very decent. However, over the last few years investment climate has become more favorable.
Everybody with whom we meet with view of attracting money for the fund, ask questions about the YUKOS case. However, Mint Capital invests only in entrepreneur structures that depend only on themselves and are not subject to informal control. We don’t invest into companies dependent on the state or governors. That is why the YUKOS case doesn’t directly touch upon companies which shares we have in our portfolio. However, many investors fear that they don’t know all ins and outs of the situation. There is still a positive for us aspect: the YUKOS case straightens arguments in favor of our fund, in particular, and direct investments in general. We say that political risks that you face investing into companies, which fate depends on politics and officials, can be avoided if you invest into independent companies and gain control and have representatives on the board of directors.»