With $60 million in new venture capital Swedish investment company Vostok Emerging Finance goes hunting for startups in Russia and the Middle East.
Last summer the management of the Stockholm stock exchange’s classic venture capital firm Vostok Nafta announced that the company would be split in two parts. Vostok, having invested early in Russian-Swedish classifieds company Avito, would demerge the part in business which invested in young tech companies within the financial sector.
In connection with the split Vostok Emerging Finance – which is the name of the demerged company – realized a new share issue worth $71 million. Swedish fund-managing heavyweights Alecta and Carnegie were among the investors – but so were private individuals in Sweden.
“Our investors have made a lot of money on us before, thanks to the Avito investment among other things. That is why they want to be part of it again, now we start a new company aimed at fine-tech”, Irishman David Nagle says, Vostok Emerging Finance CEO.
The company will focus its attention on investments in Eastern Europe, Middle East and Africa. The aim is to find entrepreneurs who have succeeded in proving their business models – but are in need of money to grow faster.
“In India and China, which is very hot turf right now, competition is tough for fintech startups. We have decided to concentrate on regions where there aren’t that many players. For instance, in Eastern Europe there is still a lack of venture capital and we can help there”, he says.
The company has already made its first two investments in Russian, start-up Revo and Sorsdata. The former is a company dealing with payment service similar to what Klarna do, while the other performs market research for e-commerce companies.
Investments are happening at the same times as many international investors, among them the Stenbeck-family’s power-house Kinnevik, flees from Russia.
“Sure, the political risk is higher in the market where we intend to invest, but it also means that competition for the best companies is lower and the possibility for a future return is better. I also do not have any plans to invest all our money in one country. We will diversify between different regions”, David Nangle says.
The plan is to make ten investments with a profit aim of 5-10 times the money when holdings are sold after, on average, seven years.
“I like to invest in experienced people. I believe that next generation unicorns (companies valued more than $1 billion) will be built by entrepreneurs aged somewhere around 35 years. You have a certain amount of experience while you have a lot of energy at the same time”, he says.
Footnote: Vostok Nafta has changed its name in connection with the divide to Vostok New Ventures. Meaning there are two Vostok companies now on the stock exchange. Vostok New Ventures where Swede Per Brillioth is CEO, and Vostok Vostok Emerging Finance where David Nangle is CEO.