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The Venture and Stock Market in 2019–2020: Can Unicorns Survive IPOs and Continue to Growth?
7 June 2019
12:00—13:15
KEY CONCLUSIONS
New technologies foster development of start-ups

We are witnessing the following trend: companies that are entering the market have a much higher value than it used to be 10–15 years ago. The platform boom and development of the platform business model that makes it possible to develop business much faster <…> If Google was valued at USD 23 billion at the time of its IPO, now we can see companies worth over USD 100 billion enter the market — Elena Ivashentseva, Senior Partner, Baring Vostok Capital Partners..

In 2013, when the term ‘unicorn’ was introduced [start-ups with capitalization from USD 1 billion, – Ed.], there were 39 such companies <…> Now this number has reached 150. It has grown considerably — Nick Kostov, Managing partner, Ribbit Capital.

Russia offers favourable conditions for unicorn companies to emerge

Russian market is big; it can grow major companies. We have very strong technological resources, and companies are able to develop products that can compete with global market players — Elena Ivashentseva, Senior Partner, Baring Vostok Capital Partners..

I would mention the Skyeng company. We strongly believe in online education and the English language niche for online education. The platform that they are building is one of the best on the market. And the market is pretty big — Boris Dobrodeev, General Director, Mail.Ru Group .

I would highlight the company Uchi.ru. They are pretty successful both in Russia and on external markets. <…> VkusVill also has a chance to become a unicorn soon, their earnings have already proved that <…> In Russia, a company can be ‘appointed’ a unicorn. The state can decide that this company will operate something, and it turns into a unicorn. CRPT is a good example of this — Alexey Katkov, Managing Partner, JSFC Sistema.

Modern unicorns do not rush to go public

Present-day unicorns are different from those of the recent past. <...> The time from the company establishment to going public or being sold to a strategist has considerably increased compared to 5–10 years ago — Lev Khasis, First Deputy Chairman of the Executive Board, Sberbank .

The times when you could just create a platform, place a banner and make money are over. The models that are emerging on the market are becoming increasingly intensive and competitive. Necessary solutions related to AI technologies require massive investment — Boris Dobrodeev, General Director, Mail.Ru Group .

Most unicorns partially sell their shares before IPO, so they do not need to urgently go public, they do have some money. Without IPO, you do not have to explain your actions to 2,000 shareholders — Inaki Berenger, Chief Executive Officer, CoverWallet.

ISSUES
Unstable business models of many start-ups

The failures that we witness – Uber, Lyft, initially Facebook, and many others, – are related to the fact that companies are not ready to go public, because they cannot explain their business model. <…> They will continue being volatile, as their business model is far from being full-fledged — Elena Ivashentseva, Senior Partner, Baring Vostok Capital Partners..

Challenges of reliable evaluation of unicorns

All company evaluations are too high. And this applies not only to companies, but to products as well. <...> There might be some kind of correction — Alexey Katkov, Managing Partner, JSFC Sistema.

The value of most unicorns is overinflated. At the moment USD 60 trillion are ‘walking’ the planet. <…> Thanks to high technologies, these money masses are instantly moving. <…> This refers to the unicorn industry — Tomoyuki Nii, Chief Executive Officer, SBI Holding.

In my opinion, this evaluation is justified. If you look at their balance sheets now, values can seem too high, but if you consider long term and take into account global development <…> then most values will go up — Chieh Huang, Chief Executive Officer, Boxed.com.

The question is how to make the company worth 150 billion for the IPO. <…> How are you going to measure the growth of such companies — Brett King, Founder, Chief Executive Officer, Movencorp Inc., writer.

SOLUTIONS
Defining a right model for start-up development

Development of digital economy is offering models for growth companies much faster <…> If you find the right platform model, it starts growing as a snowball — Elena Ivashentseva, Senior Partner, Baring Vostok Capital Partners..

We need to work hands-on, add value to the companies we work with, and give portfolio companies something else other than money. Some give massive resources, some help enter the markets, some offer deep immersion and integration — Gleb Davidyuk, Managing Partner, iTech Capital.

Representatives of Russia find opportunities to become part of the global venture system. <…> We can offer mental connection with those who come from Russia — Alexey Basov, Deputy General Director, Investment Director, Member of the Management Board, RVC JSC.

We can see that our investors are very active towards the companies that are successful in combining investment value and technologies. <…> They invest in ideas that they understand and can relate to — Ronen Assia, Co-founder, eToro.

Cooperation with major corporations

I think that Russia can incubate unicorns within corporations. We already have some successful experience — Boris Dobrodeev, General Director, Mail.Ru Group .

You need two things to grow unicorns in Russia. There are teams, but there is no venture investment market. <…> That is why our mission is to work with large corporations, have major contracts for all small business. The second thing is that we can create discounters, because in Russia it is cheap to build them, unlike abroad, and to export technologies; and this can be done really fast — Alan Vaksman, Chairman, Co-Founder, @Digital Horizon.

The material was prepared by the Russian news agency TASS