LETA Capital discloses the results of its VC fund “LETA Capital Limited” and announces its extension
Moscow, February 19, 2020. LETA Capital, a venture capital firm, announces the financial results of its evergreen fund LETA Capital Limited. The fund, which was formed in 2012, has deployed $15M of investments in total up to date. IRR (Internal Rate of Return) on already distributed cash to LPs amounted to 11% per year; at the same time, the remaining fund’s portfolio still retains growing and liquid companies, thus the lifespan of the fund was extended in 2019 for another two years. During this time period, LETA Capital intends to realize remaining companies and reach the ultimate IRR of 23% per annum. Therefore, the fund's DPI (Distributed to Paid in Capital, cumulative distributions to LPs divided by paid in capital) amounted to 1.25, while the Fund's RVPI (Residual Value to Paid in Capital, valuation of unrealized assets divided by paid in capital) is 1.44. As a result, the TVPI (Total Value to Paid in Multiple, DPI+RVPI) equals 2.69.
When calculating the returns, the fund took into account all transactions in which the fund participated: both the ones which ended up in successful exits (sale of company), and those where portfolio companies couldn’t build viable businesses and were eventually liquidated. On top of the capital gained from exits, the return estimate also included dividends received from current portfolio companies.
It is important to note that according to the standards adopted by LETA Capital, reassessment of the companies’ valuations in the fund's portfolio occurs only as a result of a liquidity event, such as an investment round from the external investor, and not on the basis of multiples to the companies’ business metrics, as some venture funds do. On one hand, such methodology might provide a more conservative valuation estimate, but at the same time it better reflects the current market situation and gives more accurate and justified assessment of the company itself.
LETA Capital Limited successfully exited from three companies so far: Zurich Insurance Group, the largest insurance provider in Switzerland acquired Bright Box (connected car platform) – which turned out to be one of the most visible exits for the Russian-based VC fund in several years; WeWork acquired Unomy (platform for automating decision-making in sales and marketing); and last but not least, Redhelper, an online audience engagement service was acquired by Livetex. The fund's current portfolio includes several companies with great potential, including Double Data (specializes on big data analytics), 365Scores (sports news aggregator, the leading service in Latin America and the EMEA region) and QMarkets.net (one of the global leading innovation management software providers).
“Most of the fund's investment activities and operations fell on the period of challenging macroeconomic situation in Russia and the constraints associated with the international sanctions” said Alexander Chachava, Managing Partner of LETA Capital. “Nevertheless, LETA Capital Limited managed to demonstrate an adequate lucrative return, which is not only an outstanding result for the funds originating from Russia, but also proves to be competitive compared with the US-based venture capital funds vintage of 2012”. According to Cambridge Associates data, the DPI of US-based top quartile funds (top 25%) was 0.66 (1.25 at LETA), RVPI of 1.83 (1.44 at LETA), and TVPI of 2.27 (2.69 at LETA). “Over the last few years US startups have been significantly overvalued, which forces US funds to extend the holding cycle until the exit awaiting venture returns.” – explains Mr. Chachava. "In this regard, we see a lot of potential in cooperating with undervalued startups. As a result, we can see many US funds entering the European markets, where valuations are more adequate” - concludes Mr. Chachava.
LETA Capital executives believe that the fund's success was driven by a strategy of investing mainly in sustainable companies that have robust business models with high sales margins: even at times of unstable macroeconomic conditions and international politics tensions, such startups are more solid, more tolerant of external adverse impacts, and therefore are the most favorable for venture investment in the context of limited financial resources available on the market. LETA Capital intends to pursue the same approach in the future.
As a recap, LETA Capital invests mainly in companies created by Russian-speaking entrepreneurs and those who have R&D centers in the former Soviet Union countries. In order to implement such strategy and based on the successful track-record of the previous fund, LETA Capital raised another venture fund in 2017, which was fully subscribed – LETA Capital Fund I – with the total size of $50 million. This fund is currently in the phase of active investing, which ends in the middle of 2021. As of today, LETA Capita Fund I portfolio is already comprised by a number of promising fast-growing companies, including inDriver, IntelliBoard, Devar, Cerevrum and Unigine. Altogether LETA Capital firm out of its two funds has made more than 30 investments up to date.
"Many investors justly believe that startups originating from former Soviet Union countries are undervalued, which means that there is significant upside for the investors,” - continues Alexander Chachava. “One of the factors hindering the growth of the Russian-speaking venture market is the lack of transparency - both for international funds and for private investors and startups. That is why I believe it is extremely important to publish the results of the real cash returns from venture investments, unveiling both successful and unsuccessful deals. In my opinion, the disclosure of such data will diminish risks for investors and will contribute to the future growth of interest and volumes of venture capital deals in high-tech companies created in the region. I invite other Russian-origin funds to follow our example and publicly present the results of their work."
About LETA Capital
Venture capital firm LETA Capital (https://leta.vc) invests in breakthrough technologies using a data-driven approach when selecting the best startups. LETA Capital invests in B2B and B2C software developers, focusing on the most promising markets. Priority sectors for the current active fund are corporate SaaS, machine learning and artificial intelligence technologies, robotics, and VR/AR. Current portfolio includes more than 30 companies.
The ideal investment targets for the LETA Capital l Fund are companies created by Russian-speaking entrepreneurs, operating on the global markets, running innovative IT businesses via changing traditional approaches in legacy industries with the help of latest technologies – at the late Seed, Series A and the early growth stages.
For more information:
Partner – LETA Capital