The venture capital industry in Russia is demonstrating notable growth. According to the Moscow Innovation Cluster, startups raised $87 million across 74 deals by the end of the first half of 2025 – an 82% increase over the previous year. Furthermore, the market is expanding beyond Moscow and St. Petersburg, with emerging technology clusters in cities like Kazan, Yekaterinburg, and Novosibirsk. What factors could stimulate the industry further? What role does venture capital play in the nation’s economy and technological sovereignty? And what barriers are preventing more active participation from private investors? These issues were central to the discussion at the inaugural meeting of the Venture Capital Commission, held by the Russian Chamber of Commerce and Industry’s Council on Financial, Industrial, and Investment Policy.
A focus on sovereignty
A primary challenge for Russia’s venture market is its unconventional structure. As explained by Artem Genkin, Doctor of Economics, Full Professor and Chairman of the CCI’s Venture Capital Commission, early-stage projects rely on a limited pool of business angels, while successful later-stage startups are often acquired by corporations. This dynamic, where corporations focus on acquiring mature startups, is not entirely typical of classic venture capital ecosystems.
“Corporations are scooping up everything that has survived, grown, and proven its value,” Artem Genkin notes. “So where are the venture funds? Where are the syndicates, who currently hold a mere 5% market share? And where are the mass private investors? What will it take to attract them to this market? For now, they remain mostly occasional participants.”
The key to more robust growth, therefore, could lie in greater activity from venture funds and syndicates across all project stages, as well as from the mass of private investors – a pool that exceeded 38 million individuals with brokerage accounts on the Moscow Exchange in June 2025. The expert emphasized the need to analyze the motivations for these private investors to diversify into new financial assets beyond traditional bank deposits and debt securities.
Simultaneously, venture capital is a significant driver of technological sovereignty. It fosters innovative companies, helps retain top talent within the country, and reduces dependence on foreign solutions. For these reasons, Artem Genkin stressed that developing this sector remains a critical national task.
The early-stage valley
However, participants in the meeting held at the Chamber of Commerce and Industry agreed that attracting investment for early-stage startups is not exactly easily accessible either.
“Unlike mature stages, early-stage startups face a capital shortage,” notes Vitaly Polekhin, President of the INVESTORO international investors organization.
One solution could be the development of investment platforms, operating under Federal Law No. 259-FZ as tools for crowdinvesting and crowdlending.
“This is a very significant and convenient tool that needs to be promoted and developed, albeit cautiously, to maintain and bolster investor confidence,” says Natalya Voyevodina, Director of the Center for Banking Consulting and Applied Research at the Financial University under the Government of the Russian Federation.
For more active development of this niche, she believes it is crucial for the country to expand the startup ecosystem, introduce tax incentives for investors, develop flexible equity instruments, support the secondary market, and more.
Exit challenges
However, difficulties with exit strategies remain a constraint on attracting capital into venture investments. Until 2022, market participants managed to earn returns by taking projects to US and European markets followed by an exit; today, that model has lost its relevance, says Luiza Aleksandrova, Chair of the Union of Business Angel Organizations (SOVA).
While the number of exits in the market for the first half of 2025 nominally grew by 57%, their volume in monetary terms has decreased, notes Aik Dzhulakyan, Managing Director for Partnerships and Communications at the Moscow Venture Fund. Business interest in mergers and acquisitions has also diminished.
The high refinancing rate also creates complications.
“It is quite difficult to explain to an investor why it makes sense to invest in riskier projects even if they offer higher returns compared to deposits,” clarifies Luiza Aleksandrova.
However, not all deals are conducted openly; the actual market figures are three or even four times higher.
“Not everyone is willing to share data; a large portion of deals are not accounted for in the statistics,” notes Aik Dzhulakyan.
Development through legislation
Market growth is often constrained by regulations that don’t always align with industry needs. For instance, companies currently face limitations in establishing stock option programs to motivate teams to develop their own projects, and there are challenges in structuring transactions, as highlighted by Yekaterina Zakharova, Partner and Head of Venture Practice at ASB Consulting Group.
Challenges also emerge at the stage of creating investment funds. For example, launching a fund with private investors is currently only feasible through a closed-end mutual fund, which is costly to manage. While the investment partnership model is simpler and more flexible, it does not allow for attracting private capital.
“On one hand, everyone wants to access private investors’ funds, but we lack the tools to handle this money efficiently and without excessive bureaucracy. That’s why we continually stress the need to modernize the closed-end mutual fund model,” Zakharova notes.
Protecting investors
Safeguarding individual investors in venture capital projects demands careful attention.
“Today, investors have virtually no protection in the market,” notes investment mentor Maxim Pechenik.
One promising approach to address this is through the open exchange of experience.
“Today, every new participant faces the same difficult path; newcomers end up making the same mistakes,” agrees Director of InvestKontrol Fyodor Shevtsov.
He believes that best practices for both judicial and non-judicial collection should be compiled into a White Paper, and that market standards should be developed for project scoring, crisis management, and other key areas.
Improving the financial and legal literacy of market participants, including project founders, is also a critical task.
“No matter what conditions we set in charters or corporate agreements, when the time comes to meet obligations, a founder can simply say, ‘thank you all, goodbye,’” Pechenik cautions.
From сonsumption to сreation
Despite these challenges, meeting participants remain confident that venture capital has a future in the country.
“Russia’s investment in scientific research, relative to GDP, is comparable to that of leading global venture capital markets. While scientific advancements have not yet translated into venture capital projects, this is a challenge that can be addressed,” emphasizes Vladimir Gamza, Chairman of the Russian Chamber of Commerce and Industry’s Council on Financial, Industrial, and Investment Policy.
In any nation, the venture capital market’s size correlates with GDP. By this measure, Russia’s venture capital investments in 2023 were 72 times smaller than expected.
“For comparison, China’s gap is only 1.8 times, and Brazil’s is 3.8 times. For us, this discrepancy signaled the need for corrective action,” Vitaly Polekhin says.
Russia is also experiencing a “reconfiguration” in its market – that is, transitioning from an open market focused on consuming transnational technological products to a closed one centered on creating and consuming domestic innovations. This shift is expected to have significant implications for the venture capital landscape.
“In 2020, India banned a wide range of Chinese apps, initially targeting 59 and eventually expanding the list to 200. Within a year, India’s venture market grew fourfold as investors recognized the inevitable rise of local digital solutions and acknowledged the need to adjust their investment strategies accordingly,” Polekhin notes.
A platform for dialogue
The meeting participants spoke on a substantial number of other initiatives to support the development of Russia’s venture capital market. Those require in-depth discussions with key stakeholders – investors, project leaders, funds, regulators, and legal professionals. The CCI’s Venture Capital Commission is expected to serve as such a platform, combining legislative action, expert assessment, and educational efforts.
One of the commission’s key priorities is to gather a wide range of proposals addressing barriers and risks to the sector. This will include developing strategies to mitigate these challenges, including by reviewing global practices. The commission also plans to prepare a report for the State Duma and the Federation Council on the current state and future outlook of the venture capital market. Another focus will be working with projects from enterprises affiliated with the Russian chambers of commerce and industry.
“Our goal is to provide a convenient and efficient expert platform that fosters constructive dialogue between private investors, businesses, and the government,” concludes Artem Genkin, Chairman of the Commission.