Exclusive: Phystech Ventures’ second fund to be larger than first, might invest more in India, SEA

Visual of Phystech Ventures homepage. June 2016

Moscow-based Phystech Ventures is raising a second fund, which will be larger than its first, and exploring more investments in the high-growth markets of Southeast Asia.

Phystech is an international venture capital firm with a geographical focus on North America, Southeast Asia and Central & Eastern Europe.

The firm has been investing in companies that operate in the Southeast Asia region, such as application developer Raxel Telematics and British adtech startup Locomizer, in which it plans to co-invest up to $1.5 million by the end of the year. U.S.-based hardware assessment firm Tortuga Logic, a portfolio company, is entering South Korea and Taiwan.

Phystech started as an university venture fund of the Moscow Institute of Physics and Technology (MIPT), one of the country’s leading graduate science universities, in 2013. It has since amended its strategy and now works closely with 15 leading universities globally, including MIPT.

Olga Maslikhova, managing partner at Phystech Ventures, was in Hong Kong recently. She spoke with DEALSTREETASIA about her plans for the region, and the firm’s second fund. The firm currently manages $50 million in assets.

Q: What is your opinion of the fledging startup ecosystem in Southeast Asia, which has lagged behind that of India and China? Which countries in SEA appear to be most promising to you? 

I do not really think that there is ‘start up ecosystem’ as such but I believe that there is market driven need for high-tech ventures across the countries in the region – the most promising to us are Singapore, Indonesia, Malaysia, Thailand and Vietnam – we firmly believe that companies created by local engineers have much more potential than big international players with lack of domain expertise – especially in sectors like cybersecurity and ed-tech.

Q: Are you planning to raise another fund?

Yes, it will probably be a bit bigger than existing one but still 100 per cent focused on seed / early stage deals – this is where our core expertise in.

Q: Do you think that startups in the region are fairly valued? 

I would suggest that valuations vary from country to country – in Singapore startups are pricing themselves way higher than in any other country in the region. I believe this relates to huge government support and amount of indilutiable funding available to support tech entrepreneurship.

Q: Would Phystech be interested in investing in startups in India and SEA with the new fund? 

We are not specifically focused on India right now – it is extremely promising yet very tough market for early stage international investors but would definitely consider syndicated deal brought to us by one of trusted partners. In SEA (Singapore, Malaysia, Indonesia, Vietnam, Thailand, Philippines etc) we are targeting rapidly growing high-tech ventures with upwardsd of $10,000 MRR in industrial IoT, connected platforms, cybersecurity, ed-tech, efficient energy use and new materials.

Through our extensive partnership network across tech small, mid and enterprise level businesses like Acronis, Acumatica, global portfolio of Runa Capital, as well as top tier universities we bring extra technology expertise and business development and sales channel opportunities for businesses in our portfolio and help them to scale their businesses in and out the region. We are also inviting partners for syndicated deals to leverage their unique expertise for portfolio benefits.

Which sectors are you bullish on?

Sensors, big data, cloud is something we believe will be constantly changing the world around us. We do not do consumer and mostly do not do pure mobile.

Which of your portfolio companies is betting on the fast-growing Asian markets? 

In current IT portfolio there is San-Diego based Tortuga Logic, NY-based Dash Labs that develops connected car platform for logistics, transportation and financial service companies, UK & Tokyo based Locomizer, the tech platform that translates physical behavior into digital insights about target audience affinities, allowing to effectively discover and match consumers with relevant businesses. Raxel Telematics, a telematics service provider for automotive insurers, logistics & transportation companies is rapidly growing in APAC and moving its global HQ and core team to Singapore.

With regard to financial sanctions imposed on Russia, would Phystech be investing more outside the country? 

Well – here is the funny thing about VC markets – in every crisis lies opportunity. Talking about Russian market – there is a huge domestic market for companies delivering new products in energy, IoT in oil&gas and new materials and valuations are quite reasonable. So we definitely keep our eyes on such companies while investing globally and following the markets determined by our investment strategy.

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Russian funds Impulse, Phystech Ventures invest in UK adtech startup Locomizer

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