Interview with co-founder and head of the investment units of the Fund TMT Investments Artem Usov Intenum. The material is prepared with support from TMT Investments.
Artem Inyutin — one of the founders of RBC has left the media company in 2012 and joined the leadership of the investment Fund TMT Investments. The Fund invests in Internet projects, which have the prerequisites to become an international business. The Funds assets in 33 projects, some were bought by Yahoo, AOL, and Monsanto. One of the projects recently completed an IPO.
Investor said on the investment activities of TMT Invesmtents, the Funds portfolio and the industries in which now invest the most readily. After leaving RBC in 2012, you almost immediately joined the leadership of TMT Investments and became head of investment division. You worked with TMT?.
Artem Inyutin. My friends and partners, German Kaplun and Alexander Morgulchik founded the Foundation informed, and since 2011 began to work in TMT Investments. Why shares of the Fund are traded on the alternative market of the LSE?.
It is known that for most investors is very important to the transparency of the asset in which they invest. And public offering of shares on one of the largest exchanges in the world — the best way to show investors that we have nothing to hide, we are ready to publicly talk about their results, news, investment, formal reassessments, and so on. Of course, this will not affect the validity of trade secrets on a number of issues with our portfolio companies, but the startups themselves decide what part of the information for their business to open press.
The TMT is completely transparent, it is regulated by the listing rules of the London stock exchange (LSE). LSE is the biggest platform not only for English but also for global companies. To go to NASDAQ, you have to be billion dollar company, thats why we went on AIM (LSE division) — the best area for start-up companies operating in the global market.
Now the market value TMT Investments is approximately $60 million. The fair value is significantly higher. Revaluation of the portfolio companies do not occur every year, so the net asset value is a minimum annual delay compared to the actual growth of the business.
In 2015, you have identified five ideas that are more willing to allocate funds investments (subscriptions, FINTECH, Internet of things, B2B cloud services, Big Data). Something has changed now?. I think, for investors, these ideas will be relevant long. But I would add to this list new topic.
For example, the popular marketplaces (trading platforms, collecting and systematizing information about transactions and services). The marketplace has become more efficient and will only continue to rise. Amazon, eBay, YouDo — the best proof of this.
The marketplace in Russia is not as well developed as in the West, where there are a huge number of projects offering services analysts, videographers, marketers, designers and other professionals, but this specialization continues to grow. Also in the last two years has become an important segment of VR/AR (virtual and augmented reality — Prim. Ed.). Such projects are becoming more.
Id pay attention to artificial intelligence. While there a small number of players. Mostly major corporations — Google, Microsoft and others, but these projects have a great future.
In the notion of artificial intelligence included a number of technologies that will be used in any industry. For example, today with the help of artificial intelligence and robotics made a great breakthrough in medicine, it is significant number of complex operations, and the growth potential of artificial intelligence is still difficult to imagine. I believe in the next 5-10 years investors will enjoy the rapid development of AI.
And returns of investments. Amazon, Google, Microsoft, Facebook have already started serious competition for projects related to artificial intelligence, as well as for developers who are working in this segment. Why TMT Investments buys stake not exceeding 25%, and does not claim to operational control of the company?.
This is our strategy. We believe that obtaining the operating control of the company in which we invest — not quite right. Everyone needs to do their job. Because the company has its own founders, CEO and other.
They should develop the business so that we, the investors wanted him to continue to invest. I think in most cases, the Fund will never be able to effectively and correctly replace CEO. It is impossible to effectively manage up to 40 projects.
Of course, there are all sorts of situations. Replaced the founder of the project, or change the CEO, because he cant lead the company to a new level. Then someone needs to temporarily take over the function of the control. And if the choice falls on the investor, the decision is justified only for some short period of time — not more than six months.
Greater development, the company will receive from people who are interested in the long-term development of the project and focus on it. The investor should invest in the project which he believes in people, trusts, and the main thing – time to get out of it with profit.
Thus, one does not negate the assistance of an investor. We are always ready to help with marketing, it consulting, to attract money into the project and, in the end, to help sell it strategist. Unless, of course, is necessary for his development and we asked the founder. If not asked, then thats great, we are happy. So chose the right professional team in which to invest the money of the Fund.
How many companies TMT Investments now has a stake?. Now in the portfolio of the Fund 33 project. Is from Israel, Eastern Europe, CIS, but most of the projects is based in Silicon valley.
How many successful exits have been during the existence of the TMT?. Today we have eight full and two fractional output. I think this is very good result.
For example, AOL purchased us startup Kanvas, Yahoo bought Astrid, Monsanto – VitalFields, and the draft 1-Page went IPO. For some deals we cant disclose the yield, as it is a commercial secret, but with almost all the deals we got with a factor of 2-6 times more of the initial investment. A little lift the veil of secrecy.
Despite the large number of already closed deals, the main outputs we have. An estimated TMT about ten of these “star” projects that have either waiting out, or continue to grow rapidly. Its the projects that we came with estimate of $7-$15 million, and currently the cost is $60-$250 million. Not counting anews.ru, TMT virtually none in portfolio of Russian startups.
Why?. Our other Fund is fully Russian start – up Fishki.net.
When we make a decision on joining the project, we do not restrain ourselves with the geography, and a rigid mandate at the site we have. We are interested in those projects that we believe are most profitable and which are able to generate maximum profit to the Fund at the output. We communicate a lot with Russian entrepreneurs.
But the fact is that many start-UPS that they create, develop successfully outside Russia. We are happy to communicate with Russians, Ukrainians, Belarusians, representatives of other CIS States, and if it is running on a local market, or developed abroad, is a secondary factor. Moreover, we believe that right when the startup is working on several geographical markets.
For example, we are satisfied when our project portfolio — project management with Wrike founder of Russian Andrey Filium — works all over the world. Cloud CRM Pipedrive with Estonian roots works in the States and in Europe and in Russia. The project Pandadoc has Belarusian roots, and operates mainly in the United States. Another striking example of successful Russians abroad — our portfolio project Scentbird (subscription to samples of perfume), he is now working in the United States.
How about the Snapchat IPO, the stock price of which increased by 44% from the declared value. Is it possible to repeat other Internet companies?. Very well. Of course, in the future, its market value will fluctuate, depending on whether the project is to maintain a high growth rate of the youth audience and revenue.
But for me today the main indicator is its market capitalization. I see a big potential for Snapchat. The company has set a new trend, he threw the challenge to many social networks, including Facebook. And Snapchat is not a social network, a messenger, which is moving towards social networks.
The most difficult for these startups to not be a project “single chip”. There have been many examples when social networks die, failing to offer anything new. In this sense, I am much worse than treat Twitter as if it suddenly began to be used for work or public relations, journalists and other public figures, Twitter would someone be interested in and would have long lost their popularity.
But Snapchat did not one, but several “chips” first. Invented erasable message made filters augmented reality. And, as I understand it, the company didnt stop there and come up with new. So it becomes so popular in the United States, other countries, it chooses a new generation of teenagers worldwide.
On the website TMT Investments specified investment size from $250 thousand to $3 million. What does it depend?. This often depends on the stage at which we enter the project.
If this is the early stage when the project gets on his feet, he was only a small investment. If a later stage (e.g., pre-A), the amount of investment increases. There is another reason.
We would be willing to give more money, but the project remains space for substantial investment, so we give as much as possible. And finally, we have internal assessment projects. For example, if the 10-point scale, the project is estimated at 7-8 points, we first go with a small package, and see how manifest the company. If the company continues its aggressive growth, then do not increase our share in new round investment.
And if the project is solid top ten, even at the initial stage of the project we can give a large amount. Fond every minute decides for himself the question — to give the investment in a new project, or cheaper to make now re the investment in your portfolio project.
As a rule we do deals very quickly, and this is one of the main advantages of TMT Investments. The shortest might take about two weeks from due diligence (evaluation) to investment. Although sometimes from familiarity with the project prior to the transaction is a year or more. If we are not sure, then take the project on the radar and see whether he is worthy of our primary interest. If Yes, then do the deal quickly.
On what grounds are selected startups.
On average, we have done one deal for about 200 projects considered. Importantly, the project was in that niche that we are interested in subscription, Big Data, SaaS, marketplaces, and so on. Also, the project needs to thrive and grow. In addition, it is important for us as well massturbate a project in which we are going to invest.
The project, which operates only in one area, we are not interested. For example, the distribution of the project in only one country, such as the EU or Russia is sometimes not enough to interest us. I know a large number of projects, which are already closely within the same country, even the US and they are going to scale up further, but there are nuances.
In one area the project may end, but not on others. For us it is important that the founder and his team, thought is not “parochial”, and globally. The only way to make an interesting project for different countries and cultures.
How important is the number of founders, the sales team size?. Of course, we look at sales. Monthly income must be stable. We also do not like when the founders do not have a controlling stake “oversized”.
In our opinion, if the founder has a small package, then had a big incentive not to develop. And the number of people in the project have no filter. Also important is the growth and promising niche. But the main criterion is the ambition of the team, its ability to provide aggressive growth.
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