Cyrillic Partners

[This essay first ran in Thomson Financial’s Private Equity Week Wire]

Russia celebrated the 90th anniversary of the Bolshevik Revolution earlier this week with marches in Moscow. But Silicon Valley saw a different type of revolution taking hold and celebrated in a decidedly different way.

Vladimir Vinokurov, Russia’s Consul General in San Francisco, hosted a bevy of high-profile financiers at his home in Pacific Heights to celebrate the final close of DFJ-VTB Aurora. Venture capitalists and statesmen drank Stolichnaya and sang “Moscow Nights.”

The $150 million fund is appropriately named. Just as its namesake cruiser, anchored at St. Petersburg, fired the first shot in the Bolshevik Revolution; the fund symbolizes Russia’s first shot at revolutionizing its economy toward technology entrepreneurship.

The fund, which has offices across Russia and in Silicon Valley, is the first recipient of money from the Russian Venture Company (RVC). The RVC is a public-private partnership backed by the Russian government. It started out as a fund-of-funds designed to stimulate technology startups through investing in venture capital as a minority limited partner.

This week, however, the government authorized an expansion of the RVC, doubling its monetary commitment to $1.25 billion. The government also tasked it to consider direct investments in startups and establish market development programs. The RVC has backed three firms so far and plans to solicit proposals again in February.

The increased RVC fund size dovetails with certain proposed regulatory changes approved Thursday for further government consideration. The changes are designed to emulate Regulation D in the U.S. and include provisions to protect intellectual property. Experts expect the changes to pass into law before the end of the year.

But Russian hearts must be swayed if the startup revolution is to be sustained. No single government program can remove the stigma of a failed business, or roll back generations of zero-sum thinking. Silicon Valley may have the one model that Russia is supremely positioned to execute: combine brilliant people with money and sprinkle marketing on top.

Taking the precepts of entrepreneurship from the intellectual to the actual requires courage, commitment and trust. Succeeding with startups calls for a character that must be cultivated; and no tree that bears fruit grows overnight.

-Alexander Haislip

[Thanks to Wikipedia for the image]

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