The main mistake when applying to RVC Seed Fund is gigantomania.
Elena Timokhina, Forbes Russia
In 2010, the RVC Seed Fund, qualified to invest in projects at early stages, concluded 20 transactions (in general in 2010 RVC invested money in venture projects in the amount of 2.7 billion rubles in the portfolio of 58 companies). Who are the happy receivers of the money?
One of the projects, financed by RVC, is the development of a drug for treatment of renal cell carcinoma, which is implemented by a young scientist Ilya Tsimafeyeu. RVC does not work directly with start-ups, their choice is carried out by venture funds, who are partners of the corporation. “A venture partner is a kind of promoter, who gathers a team of innovators and scientists, attracts private investments and then proposes a project for financing by RVC”, - Alexey Teleshev, director of RVC Seed Fund, says. In the transaction with Tsimafeyeu such a promoter was Maxwell Biotech Venture Fund, that specializes in the investments into medical projects.
Tsimafeyeu notes that it took no longer than half a year from the moment of the application submission to the first money. At the same time the major part of the paper work was done by Maxwell specialists. The scientist himself has never even visited RVC.
According to Tsimafeyeu, it is not difficult to find the investment partner of the Seed Fund. As of today, there are 73 organizations in the list of partners. It is possible to submit an application to any venture fund directly through the Internet. “The main thing is knowing, where to go. - Ilya warns, - It is extremely important to appeal to a specialized fund. In case of a mistake it may happen so that you will lose a great deal of time but will not manage to find experts of the required level”.
After the submission and approval of the application the most long-term and complex process called due-diligence begins. Due-diligence is a complete legal, financial, marketing and scientific-technical expertise of the project. It also includes drawing a business-plan, including market analysis and evaluation of risk and financial potential. It is important that the expertise is free for the author as the expenses are the responsibility of the venture partner.
This work resulted in the investment memorandum, which should be presented and approved at the investment committee first in the partner fund and then in Seed Fund itself. Only after that the author can get the investments.
Tsimafeyeu’s application for investment was approved in June and the first investment tranche in the amount of 15 million rubles has already been given: Maxwell and RVC Seed Fund divided the expenses equally. “The fact that the RVC undertook a greater number of risks enabled us to enter the project at a very early stage of its development”, - Dmitry Popov says. – “Seed Fund can invest up to 25 million rubles in one project. - Evgeny Kuznetsov explains. – The money of the fund and partner are mixed only at the level of a certain transaction and the maximum percentage of Seed Fund participation is 75%”.
“One of the advantages of work with RVC Seed Fund is absolute transparency of the decision making process. – Ilya Tsimafeyeu says. – As an author, I could participate in the elaboration of the investment agreement and knew about the results of all the conducted expertise activities”. Now Tsimafeyeu in cooperation with OncoMax, a subsidiary company of Maxwell, completed the trials on the evaluation of the properties of antibody (the drug is based on an antibody) and proceeded with the next round of the preclinical studies. All the laboratories, where the studies are carried out, were chosen with the active participation of Maxwell Biotech and RVC.
“RVC continuously monitors the implementation of the project. – Tsimafeyeu says. – We report them about the results of all the stages of the trials”. Tsimafeyeu himself does not do any paper work. “I am responsible only for the scientific part of the project and my reporting forms include the description of materials, methods and results of the studies. – Ilya says. – All the other reporting materials on the project are within the responsibility of the employees of Maxwell Biotech and OncoMax”.
Here are 5 advices for those, who lay a claim on the money of RVC Seed Fund.
1. Thoroughness of the application
“Special attention should be paid to the documentation, connected with the submitted application. – Elena Alexeevna, director for investments of Softline, a venture partner of RVC Seed Fund, advises. – The list of documents, required for submitting the application, is quite large (two dozens — Forbes) and the preparation of these documents takes about a month on average. At the same time it is important to pay attention to the advices of the fund experts in making business-plans and preparing documentation”…
2. Presentation abilities of the team
When making a decision, we pay special attention not only to the innovative attraction of the project but also to the developers team. It is important to evaluate the potential of the team immediately: If it is able to implement this project and complete it. - Alexey Teleshev says. – Of course the way the project is presented is also important for us. A proper business-plan and good presentation is a kind of homework, which should be done by the team of the project in cooperation with the venture partner of the fund. We are also interested in the presentational abilities of the team as it should be able to present its project not only to us but also to the investors of the later stages”.
3. Variants of financial exit
According to Dmitry Popov, managing Partner of Maxwell Biotech Fund, the following measures can increase your chance of the attraction of investments from RVC: Detailed description of the innovative potential of the products, its market potential, description of the intellectual property protection strategy, proper presentation of the financial and calendar plan of development and the most important thing is preliminary determination of the variants of the financial exit.
4. Transparent distribution of funds
The main task of the venture partner is to prove the experts of the Seed Fund the relevance of investment and to explain the mechanisms of the budget distribution. “In my opinion, one of the main mistakes of the applicants is the insufficient transparency of the distribution of funds in the innovation company. – Elena Alexeevna says. – RVC is not a business angel and due to the insufficient understanding of the scheme of investments use they can refuse to finance the project. Therefore it is necessary to pay a special attention to making a proper business plan for RVC”.
5. True expectations
Alexey Teleshev, director of RVC Seed Fund, says that a typical mistakes of those who appeal to RVC for investments, is gigantomania: “All the projects are focused on very large prospects. But we make seed investments: For launching business, for preparation and understanding of the market, for the development of a prototype or the first trial model”.