Big US deals for Russian-born tech companies

Several startups with Russian roots made the news in Silicon Valley this spring. In April, Miro raised a $50 million Series B round involving Iconiq Capital, Accel and several individual investors. The details of the deal were not disclosed, but valuation was probably considerable, a source calling the company a ”soonicorn.”

Founded in Perm, Russia in 2011, Miro is now a profitable business, claiming to serve “80% of the Fortune 100” with some 300 employees in San Francisco, Los Angeles, Austin, Amsterdam and Perm. Demand for its visual collaboration solutions has been skyrocketing amid the coronavirus pandemic, as business and educational customers have been moving from physical to remote work.

In late May, Ecwid, another startup headquartered in California but born in Russia, secured $42 million from Morgan Stanley and PeakSpan Capital. Launched in Ulyanovsk (720 km east from Moscow) 10 years ago, Ecwid quickly asserted itself as a global social commerce major. Since offline merchants can use these solutions to start selling online, Ecwid saw its transaction volume jump by 50% between March and April as COVID-19 stroke the world.

In late June, Russian-founded Intento secured a more modest $3 million in Silicon Valley to scale up AI content processing solution. This seed round was led by Flint Capital – a VC firm with Russian roots – with participation from Berkeley SkyDeck, SmartHub and other angel investors.

Meanwhile Yandex, the Russian search giant, raised $460 million on the NASDAQ – where it has been listed since 2011 – and closed a private placement of around $600 million to finance domestic e-commerce projects.  

While maintaining its IPO plans for Yandex.Taxi, its ride-hailing joint venture with Uber, Yandex conceded that these plans would be postponed. The company is now struggling to remain profitable amidst the pandemic.

In May, investment circles were shaken by Telegram’s decision to give up its widely-hyped blockchain and cryptocurrency projects. As much as $1.7 billion had been raised through a controversial ICO in early 2018 – involving mainly Russian and US investors. In 2019 the Securities Exchange Commission filed a lawsuit against Telegram following this ICO, in which it saw an unregistered securities sales. 

Under a settlement announced in late June, Telegram ultimately agreed to return $1.2 billion to investors and pay a $18.5 million penalty. A part of the investors are nevertheless filing lawsuits against Telegram, whose own mistakes in the course of the project explain much of this blockchain disaster.

On the Russian domestic scene

The second quarter was also marked by large domestic transactions in Russia:

• Online video platform ivi.ru secured a venture loan of $54 million (a considerable amount by local standards) from Alfa Bank.
• Kremlin-connected oligarch and Mail.ru Group shareholder Alisher Usmanov extended his tech empire to smart device manufacturing with the acquisition of notAnotherOne.

Sberbank, the state-controlled financial and tech giant, continued its buying spree:

• acquiring 2GIS, a leading mapping service, at a $205 million valuation;
• investing, jointly with Mail.ru Group, in two food delivery companies: Samokat and Localkitchen.ru;
• investing in e-signature service Legium.io;
• airing plans to buy a large stake in e-commerce major Ozon.

Two smaller deals deserve attention due to their unusual international implications:

• A Russian agritech startup called Agro.club was backed by top Western European investors – a rare case since geopolitical tensions tensions stated in 2014 – with plans to conquer the US and EU markets. 
• Viqeo, a Russian video publishing startup, acquired a UK adtech startup to “get stronger and go global.”

The atmosphere was nevertheless spoiled by the arrest of Alexander Povalko, the head of Russian Venture Company (RVC), in early June, and his placement under pre-trial house arrest. Established by the Russian government in 2006, RVC acts as a fund of funds and supports a variety of programs, from startup accelerators to industry research and events. The investigation alleges that RVC money was invested in personal projects of its top managers. This might have been the case with the reinvestment of part of the proceeds from the sale of an RVC portfolio company, Soft Machines Inc., to another portfolio company, US company Alion. 

Several prominent investors publicly shared their concerns about this new high-profile arrest from within the Russian venture scene. The most shocking one was that of US citizen Michael Calvey, the founder of Baring Vostok Capital Partners, under controversial charges, in February 2019. Calvey and his colleagues have maintained their innocence, but they are still under house arrest or in pre-trial detention.