(English) State fund of funds RVC to launch $100 million edtech fund

05 января 2019

(English) RVC, the state-owned fund of funds dedicated to innovation, intends to launch an investment fund to support innovation in the field of education technologies in Russia.

With a considerable target amount – 6.9 billion rubles (roughly $100 million at the current exchange rate) – and a 10-year duration, the fund is being created in the framework of a government program called “Digital Economy of the Russian Federation.”

The new fund aims to “develop the best technologies, from idea-stage to full-fledged businesses” and “ensure a systemic approach to introduce them in education,” according to a company statement. The fund will focus on eight segments – including content creation, search, education experience, learning and professional training – and support a startup acceleration program.

“The fund doesn’t aim to replace existing players which focus on developing or integrating advanced edtech technologies, but to provide them with an instrument to share risks and benefit from investment expertise. The fund will tightly integrate with the education ecosystem, cooperating actively with accelerators, universities, government agencies, private investors, and consolidating these players’ efforts to transform the Russian education system and human capital,” stated RVC Investment Director Alexey Basov.

Under plans, the fund will start operating by mid-2019 after the completion of a tender to select the management company.

An embryonic market

In the context of an underdeveloped domestic venture market (around $500 million in 2018, according to the latest research by RVC and Inc. Russia), edtech investment deals in Russia have been rare so far.

As shown in a 2017 EWDN research on investment in Russian edtech, VCs are few in this segment. After some significant moves in 2011-14, investors virtually withdrew from the market, with the notable exception of IIDF (FRII), a government-inspired early stage Internet investment fund supporting Russia’s digital transformation policies.

Thus, the EWDN research identified only 66 investment deals taking place between 2014 and 2016, with just a couple of them exceeding $1 million. Total volumes never reached $10 million in total per year with a low point ($2.1 million) hit in 2016, taking into account only identified deals with disclosed amounts.

After years of passivity, however, corporations entered the market in 2016. That year saw the acquisition or GeekBrains by Mail.Ru Group , the LSE-listed Russian Internet giant, and the announcement of an investment of several dozens of millions of US dollars by Prosveshenie, a leading publishing house.

In 2017 Severgroup, a group of companies controlled by steel magnate Alexey Mordashov, invested some $20 million in Netology Group at a $50-$60 million valuation.

The latest substantial deal took place in early 2018, when online education platform Skyeng attracted investment from PE firm Baring Vostok at a $100 million valuation.

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