International

NOAH 2013 welcomed leading speakers from various countries who shared insights into their respective markets, as well as experts in the field of international expansion. Speakers included Alex Shevelenko, founder & CEO of Glocal Partners, Alberto Genovese, CEO of Facile and Oskar Hartmann, founder & CEO of KupiVIP.

Three of the most exciting Internet companies in Russia are run by women and all three chief executives spoke at NOAH, a conference in London on November 6th & 7th focused on late-stage Internet investment organized by Noah Advisors. Informilo interviewed the women about building big businesses in Russia.

It is not easy to stay ahead of the curve when you run the largest online retailer in Europe's biggest and fastest-growing Internet market. Just ask Maelle Gavet, the chief executive of Ozon, Russia's version of Amazon. Her mastery of this tough job has helped earn her a spot on the Forbes Global Women to Watch list.

Ozon posted sales of 8.87 billion rubles ($282 million) last year, an almost 80% jump from 2010. The growth rate has continued to soar, almost doubling in the second quarter to 7.1 billion rubles, not far from the figure that Ozon earned for all of 2011. The company, which doesn't release profitability figures, is well on track to reach its target of $1 billion within three years.

Index Ventures and other investors took part in a $100 million investment round last year, capital Gavet is using to help Ozon achieve its goal of covering 5,000 sales points in every city in Russia with more than 50,000 inhabitants.

The key to becoming more and more efficient is to fine-tune processes. "That is hard to deal with when you're growing quickly," says Gavet. "Say you want to implement next-day deliveries. If everything is stable, all people in place are people that have been working with you for five years and you lay out a plan. But if your business is growing as fast as we are, then half the people around the table you didn't have on staff a year ago."

Gavet says she has adjusted her processes for decision-making twice over the last 18 months and that she will have to change again soon to keep up with the company's growth. "What worked when you're a company of 100 people doesn't necessarily work when you're a company of 500 people," says the 34-year-old CEO. "It's very challenging to make decisions on something that is moving so quickly, but it's really exciting to be in such a demanding environment. You need a lot of drive, but I don't think I could work in a peaceful business."

Gavet left her native France and moved to Russia in 2001, launching Predstavitelskij Dom, an organizer of large corporate events. Two years later she went to work for Boston Consulting Group. After advising Ozon during her time at BCG she was offered a position as head of marketing in 2009 and told that she could become CEO if she did a good job. She obtained the top job a year later.

Gavet is the first to admit that staying on top is a continual struggle. "The most difficult thing, and what I find most exciting, is that you have to keep changing everything," says Gavet. "I thought, for example, we'd create the perfect website and then we'd be set, but I realized that you keep having to redo it in what is a never-ending process. You always have to change and adjust in a country like Russia and a business like e-commerce. It's exciting but exhausting."

Annelies van den Belt (pictured on Informilo's home page) knows how to manage media companies: she was the head of the broadband unit of Britain's largest free-to-air commercial broadcaster, ITV. She spent a year and a half as the director of digital media for British newspaper group the Telegraph and four years as director of new media for the Times, another British media group. She also was publisher of the Moscow Times and worked in executive roles at the Russia Business Review and the St. Petersburg Times.

Fluent in Russian and global in outlook, she was a natural choice to head up SUP Media, one of Russia's largest media companies, founded in Moscow in mid-2006 by American entrepreneur Andrew Paulson and Russian billionaire Alexander Mamut. Van den Belt got the call to build what was already a growing business and that is what she has done in the past four years with significant bumps in users and revenue. The company was profitable last year, the first time in its history, and is on track to repeat the feat this year.

SUP, based between Moscow, Kiev and San Francisco, owns Gazeta.ru, the online news service which has 8 million unique users per month, as well as several other popular sites including Russia's top blogging and social media platform Livejournal.com and popular Russian sports website Championat.com. The company, which is owned byMamut, Kommersant Publishing House and its management,derives its revenues from advertisements, and e-commerce.

"I've always felt incredibly comfortable in Russia because the country is full of energy and a lot of things can be achieved if you have the right frame of mind and mentality," says van den Belt, a native of Holland. "One of the reasons I think I do well in Russia is that I have lots of energy and I'm a glass half-full person. I love to build and there is still a lot to be built here. Russia is still so much the land of opportunity."

All markets are exciting, when it comes to reinventing media, because there is so much to do in the digital space, she says. "It's about spotting the opportunity in each market. That same mentality and skill set can be used in the UK, the Netherlands, Russia or wherever."

That said, she is quick to add that in general Russian companies are more dynamic than their counterparts in western countries. "When you do marketing in Russia you don't deal with agencies you have been working with for 25 years where the biggest thing on their agenda is the annual golf trip," she says. "If we introduce a new technology there is genuine excitement to try new stuff rather than say let's stay with what we had before. In digital media trying and testing are very strong elements. They are an important part of operations and of the strategic planning of the business."

There are challenges, though, when working in a country with a different culture and van den Belt says her Dutch-British humor based on joking with colleagues is not always understood.

"They are learning how to take me," she says. "You can't be 100% serious all the time; it's important to have a good time and have an outlet for pressure," she says. "I came here after eight years in the UK where you try to make fun of people you work with, because it helps when the pressure is high. I think the Russians understand me now because I'm still here."

Marina Treshchova has turned speed to market into an art form.

The CEO of incubator Fast Lane Ventures, Treshchova, along with partners Oskar Hartmann and Pascal Clement, is particularly adept at copying Western internet models and adapting them to the Russian market at an unprecedented clip. The incubator Treshchova heads has churned out more than 20 new Russian Internet start-ups in just a little over two years.

Fast Lane Ventures boasts that, on average, it takes 50 days to turn an idea into a fully operational business.

Some of those businesses have already found success, with Treshchova overseeing two significant exits for Fast Lane Ventures this year. The incubator sold sapato.ru, a Russian online shoe and accessory retailer that is similar to the U.S.'s Zappos, to Russian online retailer Ozon in February; shares in teleshopping channel Shopping Live were sold in April to Home Shopping Europe.

Other Fast Lane Ventures portfolio companies, which employ 800 people, cover online dating services, B2B sales, prepaid debit cards, healthcare media and online shopping.

Fast Lane Ventures has received more than $83 million in funding from Russian and international investors including Direct Group, e.ventures, Intel Capital, Mangrove Capital, UMJ Russia, Kinnevik and ru-Net. In its most recent round completed in April, Fast Lane Venturesreceived $18 million in funding from VTB Capital Venture Business and other investors. VTB may also in the future invest directly in some of the companies in Fast Lane Ventures' ample portfolio.

Treshchova, who worked for a U.S. telecom company for six years and earned a B.A. in business and finance from the University of Washington, says she is glad she came back to her native country. "Russia is a good place for women to do business," she says. If the job performances of Treschova,van den Belt and Gavet are an indication, that is very clearly the case.

When Melih Ödemis co-founded Turkish online food ordering company Yemeksepeti.com in 2001 there were plenty of skeptics. Even his best friend - an Internet savvy investor - told him not to do it. But Ödemis and his partners persisted and in September their bet paid off. General Atlantic, a global growth equity firm, invested $44 million in exchange for a minority stake.

There was no need to do a road show to raise the round. Some 20 U.S. and European VC and PE firms trekked to Istanbul to see Yemeksepeti.

It is a sign of the times. Emerging markets are now a big draw for both private equity and VC funds. And PE firms - until recently almost entirely absent from the Internet sector - are more comfortable making massive bets. The upshot? New players are attracting funding from new sources in new markets.

Questions around high valuations, difficulties with predicting Internet cash flows and competitive threats around technology disruption are less of a concern now than in the past, says Marco Rodzynek, a partner at Noah Advisors, the corporate finance firm behind NOAH, a conference focused on late-stage Internet investment taking place in London November 6th and 7th. "With the structural transition of eyeballs and shopping behavior from offline to online, we finally see a highly-awaited shift of the buyout funds to focus on online opportunities," says Rodzynek. "KKR, Permira, Hellman Friedman and many others want to bet on the right side of the medal when investing large equity checks."

Since bricks and mortar companies in emerging markets often don't have the expertise to develop turbo-charged digital companies, PE firms are increasingly writing checks to young entrepreneurs like Ödemis, who are jumping in to fill the gap, benefiting from first-mover advantage in fast-growing markets like Turkey and Russia.

Founded in 2001, when Ödemis was just 24 years-old, Yemeksepeti.com acts as a portal, bringing together consumers and restaurants, enabling consumers to order food online, with no extra charge. It makes its money by taking a cut from restaurants for orders placed. It has 1.5 million registered users across Turkey and the Middle East who submit over 50,000 orders daily.

The platform encompasses more than 6,500 restaurants including Burger King, Domino's Pizza, KFC, Little Caesars Pizza, McDonald's, Papa John's and Pizza Hut.

In addition to its core delivery restaurant marketplace, Yemeksepeti is developing new product offerings including a marketplace for grocery ordering, a restaurant reservation and review service, and a local delicacies ordering platform.

When Ödemis and his three co-founders - Nevzat Aydın (the company's CEO), Gökhan Akan and Cem Nüfusi, started the business there were only two million Internet users in a country of 70 million people. "We looked at what was happening in the U.S. and saw from day one the possibilities," says Ödemis, Yemeksepeti's CIO. Today there are an estimated 38 million Internet users in Turkey. Add in the Middle East - where Yemeksepeti is expanding - and the number jumps to 115 million. Less than half of the population in these countries is online so the potential to grow is huge.

Ödemis and his partners bootstrapped Yemeksepeti with $80,000 from friends and family. The business really started taking off after telecom operators began extending Internet services to the masses in 2005. In 2008 the company raised $3 million from the European Founders Fund, which was started by Germany's Samwer brothers.

For the latest round Yemeksepeti chose General Atlantic and Endeavor Catalyst, a philanthropic investment vehicle supporting high-impact entrepreneurs in global markets. The investment was General Atlantic's first in Turkey. PE firms are a better match for Yemeksepeti, because it needs growth capital to further build the business, not pressure to exit, says Ödemis. "The VCs bring up exits within the first five minutes of conversation," he says, while the PE firms are more patient and content with 3x to 5x returns.

Relations are not necessarily adversarial: In many cases PE firms are teaming up with venture capital firms to help high-growth Internet companies in emerging markets to scale. Take the case of Trendyol.com, a fast-growing Turkish on-line fashion site. Last May it attracted $26 million from venerable Silicon Valley venture firm Kleiner Perkins Caufield & Byers and existing PE investor Tiger Global to fuel continued growth. The investment was the first in Turkey for KPCB, an investor in Google, Amazon, Twitter and AOL.

While investments in Trendyol and Yemeksepeti highlight the unprecedented Internet and e-commerce growth market opportunities in Turkey, Russia, Europe's largest and fastest growing Internet market, is also proving a strong lure.

PE and VC firms have been pouring tens - and sometimes hundreds - of millions of dollars into companies such as Ozon, KupiVIP, Avito.ru, Wikimart and B2B Center.PE firm Baring Vostok Capital Partners, the largest shareholder in Ozon, for example, has raised a $1.5 billion fund in Russia to invest in local Internet projects, financial services and the resources industry.Baring Vostok's investments also include stakes in Yandex, Russia's most popular search engine, which raised $1.4 billion in an initial public offering on Nasdaq in 2011.

Private equity investors are focusing on the new generation of companies serving Russia's promising online consumer and business-to-business markets. With 50.8m internet users registered in September 2011, Russia has overtaken Germany as the largest internet market in Europe and a 2012 e-commerce report by EWDN.com is projecting that the Russian e-commerce market will be worth between $40 billion and $60 billion by 2020.

Private equity firms are not limiting their investments in Internet companies to emerging markets. They are increasingly active in western European Internet market as well. PE firms first starting investing in European Internet companies as far back as 2005 and were visible in two very high-profile deals: a $180 million investment by Summit Partners in French flash sales site vente-privee.com in 2007 and the acquisition of 70% of Skype by a group of investors led by Silverlake in 2010. And industry observers say the number of PE investments in European Internet companies is increasing. (See a few examples on page 18). This is partly because Internet companies are now considered to be more stable businesses but also because Europe is producing a greater number of successful fast-growing Internet companies. (See the story on pages 4 and 5.)

Take the case of General Atlantic, which opened its first European office in 1998 and has invested over €2.5 billion to support the growth of nearly three dozen European companies. Many of those deals involved bricks and mortar companies but recent investments include Axel Springer Digital Classifieds, an online classifieds business headquartered in Germany, and Sweden's Klarna, a pan-European e-commerce payment platform that has also attracted investment from VC firms such as Niklas Zennström's Atomico and Silicon Valley venture capital firm Sequoia Partners.

For its part, KKR announced in May that, in exchange for a 50% stake, it would make a $150 million growth equity investment in Fotolia, a European crowd-sourced market place for microstock images and video content. Some 145,000 professional and amateur photographers license their images via Fotolia, which was founded in October 2005 by Oleg Tscheltzoff and Thibaud Elziere. With over 17 million digital images and videos to choose from, Fotolia, which operates in 15 countries, offers one of the largest image databases for individuals, graphical professionals, SMEs and big corporates.

In addition to its investment, KKR, TA Associates and Fotolia's management worked with KKR Capital Markets, which acted as sole arranger, HSBC, Lloyds, GE Capital, IKB and Mizuho to put in place $150 million in senior financing for the company. NOAH Advisors represented Fotolia on the deal.

Although Fotolia, which raised growth investment from TA Associates in April 2009, is not raising new funds as part of the deal, the company said its new partners will help it to expand internationally, accelerate business development, and fund future acquisitions.

It is important to note that Europe's largest e-commerce fundraise for 2012 came from private equity group Vitruvian Partners, which invested $64 million in Just Eat, an online takeaway ordering service founded in Denmark and now based in the U.K. which is active on four continents and used by millions of consumers.

Alongside Vitruvian, existing backers Index Ventures, Greylock Partners and Redpoint Ventures also contributed to Just Eat's round, with Torch Partners advising. The three venture capital firms previously invested £30 million in March 2011, following Index's original investment of £10 million in 2009.

Just Eat says it plans to use money raised in the latest round to make acquisitions.

Yemeksepeti, which is in the same line of business, was founded around the same time, but don't try telling Ödemis that his company is Turkey's answer to Just Eat. "Just Eat is Europe's Yemeksepeti," he says with a smile. The Turkish company also has big expansion plan. If PE firms are right, both will soon become even bigger household names in a greater number of countries.