In 2020, $702.9 million was invested in Russian startups, according to а joint study by DSight, Kaspersky Lab, EY, Raiffeisen, Moscow Innovation Agency, DS Law, NAIMA and Crunchbase. The total amount invested dropped 19% from the figures for 2019; however, the total number of transactions increased by 14%, and most of them were initiated by private funds. Elena Aster is the founder of one of the sector’s leading venture funds, Aster Venture Capital. She has raised more than $100 million for technology projects, and works with private investors and funds from Russia, Southeast Asia, the Middle East and South Africa. Elena is a graduate of the Moscow Institute of Physics and Technology, where she studied aerospace research. She began to explore entrepreneurship in 2010, and has been investing in the tech sector since 2017. We asked Elena about women’s role in the venture capital market, the prospects for venture investments in Russia, and the principles she uses to select her investment projects.
Women in venture funds: difficulties and prospects
— You’re only 31, and you’ve already broken into the list of the top-20 most promising women in the venture capital field. What’s your secret? Is it difficult to be a woman in a male-dominated field?
— I joined the startup industry at the age of 21. The technological sector is one of the most advanced industries, but it’s still governed by stereotypes. At first, it was difficult to overcome the gender norms rooted in my post-Soviet childhood. But I’ve always done things I really love, and it helps me cope with any obstacles and difficulties. After all these years, I found a way to get along with both men and women in the venture business. I rely on logic, common sense, and my sense for a person’s personality and energy — these factors have way more influence than one’s gender.
— Interestingly, many recent studies suggest that women are more likely to succeed in investing. The return on investments made by women, according to Warwick Business School, exceeds the annual return of the FTSE 100 index by 1.94%, while for male-run portfolios they only found a0.14% advantage. According to Goldman Sachs, investment funds managed by women have overtaken those headed by men in terms of profitability: 43% vs 41%, respectively.
— I am sure that as the share of women among investors, partners, industry experts, and other decision makers grows, the industry will feel a positive impact through an influx of additional funds for management.
Lately, I’ve been encountering more and more women at meetings and business events. Even in America, the number of investment companies with a considerable female presence in top management is growing, reaching 35% already. Russia is far ahead of the curve in this respect. This year, the number of women and men in management roles is almost equal, which is also reflected in venture capital.
—You founded a successful fund, Aster Venture Capital. Can you share details about your brainchild? Does it have a specific focus?
— The fund is something I’ve been working on for several years. It started as a list of private investors who asked for my help in managing venture investments and forming portfolios. I began expanding my geographical reach, and investors from Russia and the CIS solicited international companies from Hong Kong, China and the MENA region as venture capitalists. COVID has significantly simplified communication, paradoxically, and we now make a lot of new connections online. These days I am structuring my first fund in the UAE’s jurisdiction, specializing in investments in high-tech projects.
Projects for startups: choosing between profit and benefit for humanity
— What projects interest you the most, and why?
— I personally favour projects in robotics, AI, IOT, the blockchain, and anything that falls under the mobility field All of these industries are actively growing and gaining momentum. There are many interesting developments in these areas, including inventions that could potentially bring incredible benefits to mankind. In the next 10–15 years, the number of industrial robots will at least double, the global AI market may grow by a third, and the global mobility market is projected to swell from $251 billion today to $1.8 trillion by 2028. As for the Internet of Things, by 2026 these technologies will account for 46% of all mobile connections.
— Recently, we’ve witnessed a trend of more and more investors investing in late stage startups. How would you explain this?
— Perhaps it’s about reducing risks and wanting higher returns on a small investment horizon. But there are very few projects seeking a Round B right now. As a rule, large institutional funds invest in later rounds and pre-IPO stages.
— On your website there is a simple call to action in one section: “Send ideas and projects to …” followed by an email address. Is it that simple? In order to propose a project, you just have to send an email? What should a startup look like to catch your fund’s eye?
— Surprisingly, yes, anyone can send information about their project by email. We review them daily. Some people even find me on social networks and write there. Someone might approach me upon a recommendation from a friend. On top of that, we’ve built a comprehensive scouting system to locate the best projects from top universities, technology parks and accelerators in several countries. The project must have an MVP and be generating revenue; we only make exceptions for deep-tech initiatives. We prioritise startups with strong, well-coordinated teams that have already implemented interesting technology.
— What are the areas the VCs find most interesting right now? What has changed in the last year? Are you expecting any changes on the horizon?
— One of the most promising fields for the next 10 years is artificial intelligence. According to market estimates,more than 75% of decisions made by venture investors in early stages will be based on artificial intelligence forecasts by 2025. Needless to say, AI has a huge impact on other industries!
The pandemic has further reinforced interest in medtech, including digital medicine, biotechnology, and pharmaceuticals. E-commerce and EdTech have also become very popular these days. I think that in the years to come, our focus will shift to deep-tech projects, although investments in them only pay off over time. Projects related to robotics, quantum cryptography, finance, and smart cities will become more popular. And then, of course, there’s blockchain — the technology is already being implemented in a variety of fields, from medicine to fintech.
The nuances of attracting foreign investment
— In your opinion, what are the unique characteristics of the Asian venture capital market? What should Russian developers do to attract investment from Asia?
— Speaking of Southeast Asia, we see a very young market with many open opportunities for investors. Surprisingly, just 10 years ago, the region had no established venture market, and the number of transactions were in the mere dozens. Now we see hundreds of successful projects running and billions of dollars invested, and the positive trend is sure to continue.
In every new market, it is very important to find the right partners who will provide you with the right entry or introduction. After all, funds invest in projects that they intuitively understand and that align with their way of thinking. I recommend raising your first investments from Russian investors who are looking for international representation, and only then approaching international ones. If the product shows good dynamics, you shouldn’t have any problems with investments.
— Today, many countries are gradually coming out of quarantine thanks to mass vaccination. How does this affect financial activity in the venture capital market?
— In the face of uncertainty, investors have become more cautious and pragmatic. Nevertheless, the pandemic greatly accelerated many processes and simplified communications, so the venture capital market was not seriously affected — quite the opposite, in fact. In Europe and the United States, investment volumes have reached the highest levels in history, exceeding $300 billion for the first time ever. As soon as the world’s economies begin to recover, we can expect a new and unprecedented boom for venture deals.
— Experts predict that the venture capital investment market will soar in 2021. Do you share this view? How long do you think the boom in the venture capital market will last?
— I agree with the forecasts and expect that the upward momentum will only continue to accelerate in the coming 10–15 years.