The Kremlin’s venture capital firm is investing $1 billion in everything from online shopping avatars to breast cancer screening tools as the world’s largest energy exporter tries to diversify its economy.
“Everyone understands that dependence on oil and gas is a road to nowhere,” Axel Tillmann, chief executive officer of RVC-USA, the Boston-based arm of the state-backed Russian Venture Co., said on Nov. 30 at Bloomberg’s headquarters in New York. “What is lacking is the application of technology and we are here to help Russian startup companies enter the U.S. market, attract U.S. venture capital and make it work.”
Russia, where venture capital investment was seven times less than in India over the past five years, founded the firm in 2006 as part of a move away from oil and gas, source of 50 percent of budget revenue last year. The Micex Index has the cheapest valuations of the biggest emerging markets and has slumped 6.2 percent in the past year, with six of the 10 biggest companies on the gauge in the oil and natural gas sectors.
Futures expiring in December on Russia’s dollar-denominated RTS Index slipped 0.2 percent to 143,400 in New York on Nov. 30. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. climbed 1.2 percent to 92.86, trimming a 0.9 percent decline in November, the second straight monthly drop.
RVC has $1 billion of capital from the government and runs 12 Russian venture capital funds and two in the U.K., Tillman said. Russia has seen 45 venture capital deals over the past five years valued at a total $688 million, according to data compiled by Bloomberg. That compares with 407 deals for India at $4.6 billion, the data show.
The firm invested $50,000 in a Moscow-based startup called Dress Former Inc., which creates an online avatar for individual shoppers that can be used to make sure clothing and shoes purchased on the web fit properly. RVC also paired the company with its so-called angel investor, Sergei Plastinin, co-founder of Russian juice and dairy company OAO Wimm-Bill-Dann.
Plastinin invested $1.4 million and will put the button created by Dress Former on its Russian shopping sites, Tillmann said. The company plans to begin selling the button within a year from now and seeks to pitch it to the biggest U.S. retailers, he said.
“I am very enthusiastic about this one,” Tillman said. “It would revolutionize the way we shop online.”
Plastinin didn’t respond to phone and e-mailed requests for comment when contacted trough Marina Kagan, the Moscow-based head of public relations at Wimm-Bill-Dann.
RVC is also investing in CardioWave, a developer of software that uses mobile phones to monitor and store data on blood pressure and Mammologia Ltd., which makes a breast cancer screening device, Tillmann said.
The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, rose 1.2 percent to $27.84 on Nov. 30, leaving it little changed in the month. The RTS Volatility Index, which measures expected swings in futures, slipped 0.6 percent to 22.22 points.
Oil capped its first monthly increase since August last week on signs that economic expansion in the U.S. is accelerating.
Crude for January delivery extended those gains today, adding 0.6 percent to $89.46 a barrel on the New York Mercantile Exchange, poised for the strongest close since Oct. 19. Brent oil for January settlement gained 0.6 percent to $111.84 on the London-based ICE Futures Europe exchange today, while Urals crude, Russia’s chief export blend, added 0.3 percent to $110.03.
VimpelCom Ltd., the world’s sixth biggest mobile phone company by subscribers, surged 3.2 percent to $10.58 on Nov. 30, the steepest gain since Nov. 1. A Moscow court dismissed claims last week by the Federal Anti-Monopoly Service against shareholder Telenor ASA, freeing VimpelCom to distribute dividends.
“This means corporate governance is restored and that financial transactions may be resumed in a normal manner between daughter and mother and that dividends may be decided upon,” Dag Melgaard, an Oslo-based spokesman for Telenor, said by e-mail on Nov. 30.
While the shares’ gain on Nov. 30 boosted Amsterdam-based VimpelCom’s valuation to 10.98 times estimated earnings, the stock still trades below the 11.5 multiple of competitor OAO Mobile TeleSystem.
“The discount on VimpelCom looked excessive,” Evan Miller, an analyst at Gabrielli & Co. who has a buy rating on the stock, said in a phone interview from London on Nov. 30. “We are now in a fairly steady situation in terms of major shareholders of the company.”
Futures expiring in December on the ruble showed the currency gained 0.1 percent to 30.959 per dollar. The currency had its strongest monthly advance since September, strengthening 1.5 percent to 30.88 per dollar in November. The ruble weakened 0.1 percent to 30.91 per dollar today.