The first true entry

Early 2004 was marked by an event of great importance - the first "entry." The Aelita company with development centers in St. Petersburg and Moscow was sold to Californian Quest for $115 million. This exceeds Russia's annual average volume of venture investments. The level of $100 million had been reached only once before - in the case of RBC - and not a single time with private direct sales. The maximum over recent years was achieved by the sale of the Aport portal of Golden Telecom, when Josef Avchuk, the major stockholder, sold the company for $25 million, having invested less than a million in it a year before.

It's hard to tell how profitable the transaction proved to be for Aelita's venture investor, Insight Venture Partners (the same as in the case of Acronis), but the initial investment sum was likely to have been enlarged by at least several times. Insight invested $10 million in Aelita in November 2002, while already in March 2004, the transaction involving the sale of the company was closed. Thanks to Insight to a certain extent, one would think, since the company's founder, Ratmir Timashev, stated that his aim had not been procuring development money that the company with turnover of more than $10 million didn't lack, but proving the business model with a venture financier of repute. In 2001, the firm had also considered the possibility of an IPO but the slack stock market had eventually brought it to Insight.

Another curious trend is that this year, it has become manifest that portfolio investors of the Russian stock market are also interested in technology sector stocks. In June, RBC made a secondary stock issue: the company raised more than $21 million for further development purposes. After the floatation, RBC's stock price, going down at first, started growing steadily and increased at least twofold, volumes traded surging up substantially, an important thing for portfolio investors. RBC's market capitalization at its current high approximates at $300 million, which, by the way, draws its co-owners nearer to entering the top 1,000 richest Russians.

On the verge of the secondary issue, its underwriters pressed that portfolio investors were interested in diversifying the conventional portfolios (energy, oil, metallurgy, telecoms) into new industries, to include hi-tech along with low-tech sectors. They were right, one might presume. If listings of Russian exchange floors are to accommodate new hi-tech sector securities along with RBC's, investors are most likely to take them with interest.

Managing director and head of the securities department at Troika Dialog investment bank Jacques Der Megredichan believes that foreign, market-oriented innovative companies will have an advantage when entering the Russian stock market. As Megredichan told "Expert," "presently, there is actually only one company representing the sector on the securities market, and it's RBC. Its growth over recent months, investors' avid interest in primary placements, limited opportunities to invest in the sector as well as the sector's development prospects give every reason to believe that new stocks are to be in great demand on the part of investors. It's the stocks of companies that either can compete with foreign companies of the same specialization (e.g. in the software development sphere) or have managed to occupy a vacant niche like specialized TV channels or SMS-services that are going to enjoy the greatest success."