The volume of venture capital investments in Moscow in 2022 exceeded the pre-pandemic level

In 2022, 119 transactions worth $658 million were concluded in the capital. This is 3 times less than the indicators of 2021, but exceeds the pre-pandemic level.

The capital’s venture capital market in 2022 decreased in volume and number of transactions 3 times compared to 2021, according to research data of Moscow Innovation Agency. A total of 119 deals were made last year for a total of $658 million, experts calculated.

Across the country, Moscow accounted for over half of the volume of venture capital market in Russia. Following the capital were St. Petersburg (11%), Tatarstan and Krasnodar Territory (3% each).

According to experts, the Russian market has decreased a little more than global market. This was due to economic sanctions. At the same time, analysts believe that the market did not collapse, but rather normalized after an explosive 2021, when the venture capital market was “overheated.”

Most of the capital’s deals in 2022 – 67% – came from pre-seed and seed investments. The most demanded on the market were IT companies with ready B2B products that have already entered the market and are actively selling their services and solutions. It is noteworthy that in 2022 “newcomers” – relatively young projects – also increased their market share. At the same time, the majority of the founders of such companies previously did not even have an entrepreneurial background. In general, last year was marked by a decrease in the age of projects, which attracted investments – from 5 years in 2021 to 3.5 years in 2022.

In terms of market participants, the largest decline is noticeable in the private funds segment that were the driver of growth in 2021. Last year they reduced the volume of investments by four times. The number of new funds also reduced significantly – from 27 in 2021 to 7 last year. As for startups, the composition of participants has changed here – builders of ecosystems were replaced by  former startups such as Playrix, red_mad_robot and others. At the same time, almost half of all capital transactions – 44% – fell on business angels. However, they could not increase the formal volume of investment in 2022. Only state funds were able to do this last year. But it is worth making a reservation that they were able to do this mainly at the expense of one transaction, which accounted for 85% of the total investment.

As for foreign investments, their volume has decreased significantly – almost 3 times. At the same time, all transactions were made at the beginning of the year – in the second half of 2022 there was not a single agreement involving foreign investors.

In terms of investment, in 2022, the MedTech industry retained its leading position. Despite an eightfold reduction in investment in this niche, it still remains attractive due to the possibility of development of innovative drugs, medical devices, etc.

Very slightly, EdTech lags behind MedTech, its investments inflow also declined last year.

Children’s education remains the most popular in this area. In adulthood additional education the associated with the training of IT-competencies segment is actively growing. Transport and logistics closed the top three of destinations popular among investors last year. In this niche there were there 11 deals, 7 of which are pre-seed and seed rounds. Noteworthy, that some of the companies that received investments were founded only in 2022. In transport and logistics, investors were primarily interested in delivery and warehouse management solutions.

2022, a difficult  year for the economy, also forced investors to change their strategy. For example, more than half of them combine venture capital strategy of earnings on capitalization and dividend model.  According to experts, this allows to reduce risks significantly. Investors also learned to work competently  in different jurisdictions: more than half of domestic specialists split or plan to split their investment business into Russian and international. Another feature of 2022 was the decline of number of syndicated deals.

At the same time, despite certain negative trends, analysts are observing now its gradual revival. So, the share of investors who ceased completely venture capital activity decreased from 37% in October 2022 to 21% in February 2023.

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