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Investment
December 2018 www.intellinews.com I Page 13
Leta Capital’s new $50 million fund helps software startups “eat up the world”
Adrien Henni, East-West Digital News
In early 2018 Leta Capital launched its second fund to invest in promising software technolo- gies. As much as $50 million were contributed by Alexander Chachava, the founder and CEO of IT security solution provider Leta Group, and a few family offices, told us fund partner Sergey Toporov.
Among the investors are also the founders of BrightBox, a portfolio company of the first Leta fund, which was acquired in 2017 by Zurich In- surance Group.
Without much publicity, Leta Capital II has start- ed investing in companies with Russian or East- ern European roots as well as in Israeli compa- nies, in an expected proportion of 70% and 30%, respectively.
Russian opportunities
“Investing in Russian teams is still a good option, especially at the early stage,” Toporov explained, citing the relatively low cost of talented devel- opment teams remaining in Russian-speaking countries.
These costs allow startups to hire “larger teams of bright engineers” who will still receive moti- vating remunerations by local standards. “So, for the same amount of investments, our companies can build better technologies or products,” said Toporov.
Meanwhile, however, sales and marketing must be global, which explains Leta Capital’s interest in what Toporov calls “globalized Russian-speak- ing founders.”
“If a startup does business only in Russia, the valuation game is unlikely to go very far because of the small numbers of potential acquirers.” These are a few local players like Mail.Ru Group, Yandex and a few others, while international buyers will show “no interest in the Russian IT market,” according to Toporov.
Thus, Leta Capital likes to invest Russian- founded startups which have relocated or may relocate at least a part of their activities in another country — typically the United States or Western Europe.
This practice is common among other funds with a Russian management, as exemplified by Almaz Capital, AltaIR Capital, iTech Capital, Runa Capital and a few others.
Kiev-based AVentures Capital also puts much effort in facilitating the relocation of its Ukrainian portfolio startups in Silicon Valley, while a handful of western investors — from serial business an- gels Bas Godska, Fabrice Grinda and Jose Marin, to Mangrove Capital Partners’ David Waroquier — are known to be attentive to investment opportu- nities with Russian-speaking IT entrepreneurs.
Global software appetite
In terms of industries, Leta Capital II follows the same software-focused strategy as the previous fund: “Software is still eating up the world, and there is still a lot to be eaten”, said Toporov, citing US venture capitalist Mark Andreessen.
“We believe that the penetration and actual use of excellent and effective IT solutions in the