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Thursday, October 17, 2013

Venture capital market as symbiosis of human confidence and market requirement

The author of this post is Albina Nikkonen, the Executive Director of the Russian Venture Capital Association. You are welcome to go to their website to find out more about the organization.

In the American film "Wall Street", 1987, there is an episode which may be related to the current model of venture investor & entrepreneur’s relations. The character of Charlie Sheen, a young broker, trying to gain the confidence of the stock market "shark" Gordon Gekko, with an ambition says the sacramental phrase: "You wouldn’t regret that have chosen me. You are with the winner and I wouldn’t let you down…". The reply of tough and unscrupulous character of Michael Douglas was: "Stop advertising yourself as a cheap retailer. Tell me what I don’t know…".

Approximately the same also happens during "format" meetings of owners of the companies presenting an innovative product and venture investors prepared to give them money. But one should keep in mind that the phrases "we are pioneers in this field" and "nobody did it before us" can’t guarantee the investments. The owners of the needed sums in money equivalents always are in the process of seeking something best – best product, best company, best EBIDTA. Investors prefer startups which have definite competitive advantage in the market. It may be innovative technology, exclusive marketing and distribution relations, strong brand or access to limited resources, etc. Business idea should demonstrate guaranties of the return for investors. A worthy project corresponds to the proved long-term statistics: 2 of 100 projects having been reviewed by investors are successful and meet all the conditions of profitable allocation of capital.

Venture capital market today is a symbiosis of human confidence and market demand. To pass the way which may be referred to in the future as a successful financial deal, the parties should start from visual contact and firm handshake. This is a thorny path. Both parties – investor and entrepreneur – should clearly understand all the stages of mutual work over the project. Paraphrasing Guy Kawasaki, one may say that only the cooperation which is based on mutual willing to improve the world can be highly successful. A contract signed on the base of clear mutual understanding will allow building well coordinated interaction within the future partnership and correctly adjusting strategic plan of cooperation to a successful investor’s exit.

Novosibirsk always keeps its profile in this respect. The region with its rich infrastructure, tens of scientific and research institutes located on the territory of the world-known Novosibirsk Academic town, constantly amazes with the number of companies which are of permanent interest of investors and offer unique and creative ways of solution of the problems in the biotechnologies, medicine, IT and industrial spheres.

Due to the accumulated experience and the impetuous development of promising areas, the region long since has gained the statute of innovation cluster of Russia; and the professional level of preparation of the companies to presentation of their projects has become a quality mark of such events. The coaching with the RVCA experts on the threshold of the Fair has become a permanent annual event that tells on the high level of the exhibitor companies.

In November, different directions capable to occupy deserved niches in B2B and B2C sector will be presented by the companies of the region. For example, IT sector proposes a cloud solution which allows comparing all restaurants by menus, prices, interiors and occupancies of the facilities in on-line mode using a computer or a smartphone.

In the medical equipment sphere, a device will be offered which can carry out blood tests of a wide range on the base of high-precision digital recording, is 3-5 times cheaper than the analogous apparatus, and doesn’t require reagents. It may sufficiently affect the availability of medical care for all categories of population.

One of the industrial sector companies will present a system of accumulating electrical energy on the base of the accumulator batteries. It’s impressive that the variants of the system usage are varying from "home" to "corporate" solution and "distributed generation".

This is far from being a complete list of innovative companies which will be presented at the Exposition of the Venture Fair. The whole list is imposing and it includes practically all the spheres of financial interests. We hope that the exhibitor companies will attract attention of a wide range of investors.

The Siberian region annually vividly demonstrates the potentiality of innovative developments, both demanded at the regional level and targeted at the expansion on the international market.

On behalf of the RVCA, I want to wish all the companies participating in the Siberian Venture Fair a success in raising capital. And don’t forget the key constituent of a presentation: to be interesting, short-spoken, and tell investors the things they have never known before…

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