“Golden” ru-Net and Leonid Boguslavsky's Venture Odyssey to India
"If you want to learn how to play well, play for money with strong players . " (L. Boguslavsky)
At the end of 2015, Leonid Boguslavsky first entered the Forbes global ranking with a fortune of $ 1.2 billion. Investments in Indian startups have helped a businessman to earn a significant amount of his fortune.
Boguslavsky believed that experience in Russia - a competitive advantage over large Western funds - can be applied in other emerging markets.
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“China very quickly became a fashionable topic. Any local entrepreneurs who did something immediately aroused the interest of the press in the United States, they had a status. There are billions of companies in India too, but few can name them all, ”explains the entrepreneur. China needed a lot more money to invest than the fund could afford.
Boguslavsky thought that it was possible to work in India just as in Russia. This turned out to be true only by 50%, the billionaire now admits.
"The company must have a founder, ready to dig the earth in order to achieve the success of his brainchild," says Boguslavsky. Since then, he no longer invests in companies whose founders are not at the helm.
The third ru-Net investment in India was based on the following scenario: the Indian division of the Sequoia Fund was a partner.
Trust relationships with top managers of the local Sequoia developed after the conference in Singapore, where the Boguslavsky team traveled. “They showed us absolutely all of their investments in India, it only remained to remove the cherries from the cake,” says Boguslavsky.
According to the businessman, openness as one of the features of the venture capital market in India. Both startups and foundations understand that this is the only way to raise big rounds from a large number of international investors.
“In Russia, you must first send or receive a promising offer, and only then are meetings scheduled. In India, potential partners can meet simply to exchange views, ”Ramnik Kohli, head of the Russian representative office of the Indian smartphone maker Micromax, talks about the specifics of the market.
The first investment together with Sequoia in the company FreeCharge (a platform that allows you to pay a mobile phone bill online) turned out to be more than successful.
In 2015, FreeCharge bought Snapdeal, an online trading platform, another company from India’s ru-Net portfolio. Boguslavsky said that during the transaction the payment service was estimated at $ 500 million, but did not disclose the size of its share. The newspaper Vedomosti, citing a source, estimated it at 15%. “Snapdeal bought FreeCharge for cash. We got the money, recaptured all the investments and jumped into Snapdeal’s shares, ”says Boguslavsky.
Boguslavsky invested in Snapdeal in 2012 at an estimated $ 170 million, now the company is estimated at $ 6.5 billion, Forbes reports , citing data from the entrepreneur.
High closing speed is also a feature of the Indian market. Transactions in India are closing fast. Agree on the conditions for two to four weeks after the first meeting, another half to two months is spent on due diligence, the preparation of documents and the closing of the transaction.
At the same time, the Indians are rather mild negotiators, the founders do not fight for each item in the shareholder agreement, like Russian or European entrepreneurs. Why do deals go easy? If everything is bad, carefully defined conditions will not save anyone, and if the business shoots, there will be new rounds on new terms. “They will earn everyone,” Boguslavsky is sure.
“Indians in spirit are entrepreneurs and phenomenal sellers. In Russia, even strong founders often cannot sell themselves and the company. Even air can be sold here, ”Boguslavsky assures.
Representatives of ru-Net come to India twice a month, meeting with all portfolio companies. We couldn’t restrict ourselves to conference-stakes and video calling - you don’t feel a person, the businessman explains. Knowledge of mentality helps to avoid mistakes.
At the very beginning, Boguslavsky selected projects from the sphere of e-commerce - the industry was clear to him after the experience of Russian investments. “E-commerce is just made for India. It essentially replaces the niche of civilized shopping centers and malls, which are only in large cities. Plus, the smartphone market and Internet access are growing rapidly, ”says Boguslavsky.
However, over time, Indian companies began to compete in terms of the volume of attracted capital, and not in technology and management. Investor money often went to marketing campaigns. But if in the developed markets this leads to the accumulation of a loyal base, then in India, Boguslavsky says, this does not happen: the client visits five sites, somewhere buys something, but does not remember where. As a result, the fund changed its strategy, starting to look closely at the models that used precisely the imperfection and uniqueness of India.
For four years, ru-Net has invested in a dozen companies, while looking at several hundred startups. At stage B, the amount of his check in one round is $ 2-10 million.
“Investing in Indian projects, of course, has risks, but they are more than covered by the possibility of exponential growth - entry into the project at a low score, incomparable to world peers, and fast exit with a multiple multiplier,” predicts Andrey Romanenko, a shareholder of Run Capital .
Yesterday, March 19, Megamozg wrote that the Russian financial and industrial corporation AFK Sistema launched a $ 50 million fund. Sistema Asia Fund will operate in India. The fund is interested in Indian start-ups in the e-commerce and start-ups that provide services (for example, furniture leasing or food delivery) through online services. The fund will also invest in projects that have a future development in the Russian market.
At the end of 2015, Leonid Boguslavsky first entered the Forbes global ranking with a fortune of $ 1.2 billion. Investments in Indian startups have helped a businessman to earn a significant amount of his fortune.
Leonid Boguslavsky is one of the first Russian venture capital investors. He gained capital after a successful exit from his own business - in 1996, he sold PwC consulting company to the system integrator LVS, created after the departure of Boris Berezovsky from LogoVAZ.
At the beginning of 2000, an investment company, ru-Net Holdings Limited, was created jointly with an initial capital of $ 20 million; Boguslavsky participates in the significant amount of ru-Net Holdings capital and becomes Chairman of the Board of Directors.
Reasons for entering the Indian market
Boguslavsky believed that experience in Russia - a competitive advantage over large Western funds - can be applied in other emerging markets.
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“China very quickly became a fashionable topic. Any local entrepreneurs who did something immediately aroused the interest of the press in the United States, they had a status. There are billions of companies in India too, but few can name them all, ”explains the entrepreneur. China needed a lot more money to invest than the fund could afford.
Boguslavsky thought that it was possible to work in India just as in Russia. This turned out to be true only by 50%, the billionaire now admits.
Venture investors from Russia in the Indian market - units.Boguslavsky's first investments in India were unsuccessful. At the Intel conference, he met the founder of the Smile Group, Harish Bal. In the middle of 2012, ru-Net invested two projects of the Smile Group - online shopping sites Freecultr (clothing) and BeStylish (shoes). But startups never took off.
"The company must have a founder, ready to dig the earth in order to achieve the success of his brainchild," says Boguslavsky. Since then, he no longer invests in companies whose founders are not at the helm.
The fund invested about $ 17 million in these two startups.Since then, he made it a rule to enter a startup only on the condition that before him or with him came a fund that can be trusted and has an Indian office. “You have to do everything yourself, with your team. But since we are not there, we need people who are not your employees, but are themselves market players. Less conflict of interest if they invest themselves, ”he explains.
The third ru-Net investment in India was based on the following scenario: the Indian division of the Sequoia Fund was a partner.
Trust relationships with top managers of the local Sequoia developed after the conference in Singapore, where the Boguslavsky team traveled. “They showed us absolutely all of their investments in India, it only remained to remove the cherries from the cake,” says Boguslavsky.
Features of the India Venture Market
According to the businessman, openness as one of the features of the venture capital market in India. Both startups and foundations understand that this is the only way to raise big rounds from a large number of international investors.
“In Russia, you must first send or receive a promising offer, and only then are meetings scheduled. In India, potential partners can meet simply to exchange views, ”Ramnik Kohli, head of the Russian representative office of the Indian smartphone maker Micromax, talks about the specifics of the market.
The first investment together with Sequoia in the company FreeCharge (a platform that allows you to pay a mobile phone bill online) turned out to be more than successful.
The founder of FreeCharge, Kunal Shah, figured out how to teach compatriots to pay for the phone via the Internet (before that, the Indians charged up the phone for $ 1-2 offline - with the same phone sellers as they did in Russia ten years ago).“FreeCharg is an example of a company that has changed its approach to the business model,” says Boguslavsky. This is another feature of Indian entrepreneurs: they easily transform a business if problems arise with the existing business model. “In Russia, they will be up to the last, until the head comes into the wall.” They will be looking for new investors, they may lay a flat, ”the businessman explains.
For each payment through his service, the subscriber received a discount coupon from one of the merchant partners, for example McDonald's. And the operator pays a fee for replenishing the account platform.
Later, the service began to accept payment not only for mobile communication. Now, according to Boguslavsky, 400-500 thousand transactions are made every day through FreeCharge.
In 2015, FreeCharge bought Snapdeal, an online trading platform, another company from India’s ru-Net portfolio. Boguslavsky said that during the transaction the payment service was estimated at $ 500 million, but did not disclose the size of its share. The newspaper Vedomosti, citing a source, estimated it at 15%. “Snapdeal bought FreeCharge for cash. We got the money, recaptured all the investments and jumped into Snapdeal’s shares, ”says Boguslavsky.
Boguslavsky invested in Snapdeal in 2012 at an estimated $ 170 million, now the company is estimated at $ 6.5 billion, Forbes reports , citing data from the entrepreneur.
High closing speed is also a feature of the Indian market. Transactions in India are closing fast. Agree on the conditions for two to four weeks after the first meeting, another half to two months is spent on due diligence, the preparation of documents and the closing of the transaction.
At the same time, the Indians are rather mild negotiators, the founders do not fight for each item in the shareholder agreement, like Russian or European entrepreneurs. Why do deals go easy? If everything is bad, carefully defined conditions will not save anyone, and if the business shoots, there will be new rounds on new terms. “They will earn everyone,” Boguslavsky is sure.
“Indians in spirit are entrepreneurs and phenomenal sellers. In Russia, even strong founders often cannot sell themselves and the company. Even air can be sold here, ”Boguslavsky assures.
Representatives of ru-Net come to India twice a month, meeting with all portfolio companies. We couldn’t restrict ourselves to conference-stakes and video calling - you don’t feel a person, the businessman explains. Knowledge of mentality helps to avoid mistakes.
Indian entrepreneurs do not like to share bad news: they do not want to hurt or disappoint. And even the monthly financial reports do not guarantee the investor an understanding of the current situation in the company: more than once, Boguslavsky’s people found “inaccuracies” in the audited reports, and the indicators often didn’t mean anything the investor expected (for example, gross revenue was called gross billing - the total cost of advertising, but not a commission from her), there was also a frank deception.
Perspectives
At the very beginning, Boguslavsky selected projects from the sphere of e-commerce - the industry was clear to him after the experience of Russian investments. “E-commerce is just made for India. It essentially replaces the niche of civilized shopping centers and malls, which are only in large cities. Plus, the smartphone market and Internet access are growing rapidly, ”says Boguslavsky.
However, over time, Indian companies began to compete in terms of the volume of attracted capital, and not in technology and management. Investor money often went to marketing campaigns. But if in the developed markets this leads to the accumulation of a loyal base, then in India, Boguslavsky says, this does not happen: the client visits five sites, somewhere buys something, but does not remember where. As a result, the fund changed its strategy, starting to look closely at the models that used precisely the imperfection and uniqueness of India.
For four years, ru-Net has invested in a dozen companies, while looking at several hundred startups. At stage B, the amount of his check in one round is $ 2-10 million.
“Investing in Indian projects, of course, has risks, but they are more than covered by the possibility of exponential growth - entry into the project at a low score, incomparable to world peers, and fast exit with a multiple multiplier,” predicts Andrey Romanenko, a shareholder of Run Capital .
Yesterday, March 19, Megamozg wrote that the Russian financial and industrial corporation AFK Sistema launched a $ 50 million fund. Sistema Asia Fund will operate in India. The fund is interested in Indian start-ups in the e-commerce and start-ups that provide services (for example, furniture leasing or food delivery) through online services. The fund will also invest in projects that have a future development in the Russian market.
Source: https://habr.com/ru/post/299472/
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