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Russia’s most prominent venture investor Yuri Milner operates on the global scale and his success backing Facebook, Zynga and Twitter is mind-blowing. Last year, having send shock waves through the venture capital industry by offering to fund every single Y-Combinator company with $150 000 of convertible loan, Milner and Ron Convey’s Start Fund has seen Andreessen Horowitz joining their efforts.
In December 2011 Yuri Milner has also started planting seeds in the Russian tech startup scene. He partnered with the founder of Vkontakte Pavel Durov to create StartFellows which aims to support the best Russian early stage ideas with grants of $25 000.
What can easily be tagged as a charity project, StartFellows may be a first step to Milner’s playing a more important role in Russian startup ecosystem. During the course of less than a month StartFellows’ “investment” team has received over 2000 applications and made its initial selection of the winners.
The first recipients of the prize include the following companies. Budist /Wakie (already known to us) is the social alarm clock. Vnimanie.tv is a contest to find the best educational videos and generate public interest to self-education. Sandsign.ru will write your personalized message on a sandy beach of Costa Rica and Hawaii which you can share with your friends and family. Wheely is a taxi-ordering mobile app which is available in many continental European cities from Amsterdam to Vienna. Its Russian service is in the production. The Twi Journal is Russian-language twitter news and scandals aggregator. DrugDrugu is a service where users help each other based on “I want” requests and “I can” offers.
According to Russian online publication Slon.ru whose editor Zlata Nikolaeva has spoken to the winners, getting the actual money was not the primary objective of the applicants. Rather they looked for a sign of recognition from Milner and Durov, and resulting publicity for their ideas. Fair enough, $25 000 cannot take a startup much further: an annual gross salary of a mid-level developer even in Novosibirsk would approach this figure (as we reported in September 2011).
So the seed money will be used to take startups a few steps further, let them have a taste of what tech entrepreneurship is like, and then put them in front of the challenge to raise the real money. Alas even in Russia, where venture capital firms are more prominent, than say in Ukraine or Baltics, early stage funding is not available on entrepreneur-friendly terms. Reportedly Russian venture funds demand close to 50 per cent of the equity.
At the moment Russian government has a more solid offer to the Russian tech entrepreneurs. Its Skolkovo IT cluster offers $200 000 grants to its early stage residents without additional co-investment requirement. For a funding up to $1 million Skolkovo would give away 70 per cent of the money. If the investment sought is between $1 to $5 million Skolkovo matches the amount a private investor puts in and would support larger investments with 30 per cent of total sum.
According to the head of Skolkovo IT Cluster and former CEO of MySpace Russia Alexander Turkot, over the course of 2011 has selected 35 startups to receive the grants. Amongst them is the finalist of IDCEE Speaktoit, a.k.a Siri for Android, which was released before iPhone4S and Kuznech seen at TechCrunch Moscow, a visual search technology backed by Russian business angel Pavel Cherkashin.
Perhaps in the spirit of his Start Fund, Milner will consider supporting efforts of the Russian accelerators to back companies that are more likely to succeed. However most of the Russian accelerators, which we covered here, launched in 2011 and it is too early to say how well they have performed.
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