The European Bank for Reconstruction and Development (EBRD, London) capitalized the Lower Volga Regional Venture Fund (one of ten regional VC funds) with $32MM AUM and the US Russia Investment Fund was capitalized with $440MM by the US Government (US Treasury and USAID); these funds were established to catalyze new investment and regional economic growth in Russia by financing the growth needs of private and newly privatized SMEs.
The issues facing these funds and their investment managers is building quality deal flow and transacting investments in regions plagued with non-operating and debt heavy enterprises, poor business prospects, and low economic activity. Staff issues compound the investment challenge; personnel with no VC experience were hired to manage regional offices, transact investments and guide investees through liquidation.
Both funds engaged IVI to provide interim management in operations, specifically to upgrade the investment skills of staff in the investment process from deal origination through liquidation.
IVI contributions included:
- Conducted a diagnostic review of each Fund’s operations and personnel in the Volgograd, Samara, Saratov, Vladivostok, Khabarovsk and Sakhalin offices and implemented remedies in fund operation. Total staffing in these offices was 20.
- Role modeled the investment process to staff by leading multiple transactions: US$600k in a Volgograd printing company, $10MM in a food/beverage company in Vladivostok, $3.2MM-$7MM investments (debt/equity) investments in food/beverage, consumer, services, distribution and warehousing enterprises as examples; conduct due diligence to international standards, structure the investment though investment committees’ approvals
- Establish policies and procedures for fund management, staff training in deal intake through deal closure including the injection of marketing and sales assistance into investees to boost their operating performance and the value of Funds’ equity.
- Managed investment, accounting, administration and fund reporting to investors in the Fund’s regional headquarters office in Volgograd and Vladivostok
IVI’s value-added to portfolio investees include:
- Establish offshore investment holding companies in Cyprus, create 1st Board of Directors, implement international corporate governance policies/procedures, code of ethics/conduct, director responsibilities, spending limits and other restrictions on management w/o Board approval, monthly reporting
- Transition enterprises from Russian accounting to IFRS, hire E&Y/KPMG to implement IFRS accounting and train newly hired Finance Directors. Established formal mgt structures with new functions of production control, finance, QC, purchasing, sales/marketing, advertising, biz dev., implement 1st bonus (incentive) plans for employees––triggered to mfging and QC KPIs achieved
- Uses of funds: reconfigure operations for scaling, purchase Western equipment to modernize production, create/launch new products, hire new staff for new positions, eliminate/retrain staff for new functions, launch B2C/B2C programs, new product dev, branding, advertising and distribution
“Consider IVI as your investment advisor and partner in planning and executing international private equity schemes. We can help you avoid the learning curve costs that skilled investors inadvertently incur when executing new investment programs.”