(English) Software development grows despite the acute shortage of investments

02 августа 2018

(English) Each fourth software company grew more than 20% in 2017. At the same time, the volume of investments is twice less than the planned amount. These are the results of a survey conducted by RUSSOFT.

The average growth of Russian software companies over the past 5 years was 10% in dollars and 19% in rubles. There is the sales growth despite the crisis in the domestic market. At the same time, there are few cases when companies stop working, and only 3% of the companies reduced their turnover in 2017. There are prerequisites for an annual increase of over 10-15%.

If the prospects are assessed correctly, the capital of software companies could be doubled in a year. About 3% of companies grew in twice in 2017. It is difficult to find the same industry in Russia, which would be so attractive for investments.

Last year’s survey showed that 14% of companies expected to receive external financing. In reality, there were 6%.

This discrepancy between investments exists for the last 7 years, when RUSSOFT began to ask these questions for the first time.

The leaders of many companies are confident that they could increase sales faster with external financing. Money is needed for work abroad. A survey in the research “Perspectives of Russian IT developments on the global market” by SAP conducted in 2017 showed that the growth in overseas sales is constrained by an inadequate marketing budget for 52% of software companies, and – lack of funds for developing solutions, which can be competitive in foreign markets for 33%.

A lot of ideas that are not backed up by market expertise. But at the same time, there are claims to investment funds, because there are many dynamically developing companies in Russia, and they need external financing only for faster growth.

Some development teams went abroad (primarily in the US), found investments there and created successful companies with a large turnover (sometimes up to $ 100 million).

Thus, there are a paradoxical situation in Russia. On the one hand, there is an unmet need for investment, and on the other hand, holders of free funds can not invest in the high-tech sector of the economy, although they are interested.

To invest in development, but they have worked in the software industry for many years. The means of such capitalists are not enough.

Most software companies, including start-ups, are developing at their own expense. According to the results of the research “Startup Barometer 2018”, initiated by Alexey Soloviev with the FRI and EY, 71% of Russian start-ups are based on own funds. Only 11% have a non-core investor, 5% have a business angel, and 3% have a venture fund.

The problems of investment deficit can be solved by attracting money from other industries and from abroad. However, there is not enough expertise.

Freeholders have been interested in the possibility of investing in growing companies in recent years. But if they have experience of investing in other industries, then it interferes with high-tech companies. Such investors require a stake of more than 50%, but startup creators refuse to do so.

Foreign potential investors are not attracted, as there is little information on the Russian software industry abroad.

Sources of external financing are investment funds, venture capitalists, long-term soft loans, government grants for research and development, subsidies for marketing activities abroad, public offering of shares on the Moscow Stock Exchange (IPO).

In 2017-2018, state structures are trying to stimulate the investment process in the sphere of high technologies. Several new investment funds were created with their participation. But without separation with private investors and expertise such infusions will have low efficiency.

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