To the team at Sistema Asia Capital, Russia’s unique position at the intersection of Europe and Asia allowed its executives to enter this region smoothly. “[Soviet] Russia used to be a multinational country with several Central Asian republics. So we have always been cosmopolitan,” says Sergey Savchenko, CEO of Sistema Asia, in an interview with The Edge Singapore.
Born in the former Soviet Union, Savchenko himself has Chinese and Korean ancestry. “Russia can best be described as ‘Eurasia’. We’re kind of a blend of the two.”
But what does a Russian venture capital (VC) fund see in the Asian countries so far south from them? For one, with a population of some 600 million, Southeast Asia is indeed a significant market. Furthermore, not that many large economic regions are still above to chalk up GDP growth of above 5%. “We couldn’t find any other place in the world who actually grew with the speed,” he adds.
Sistema first ventured into South Asia by way of India, where it was the first private sector conglomerate from Russia to invest in the highgrowth Indian telecom sector. In 2015, it launched its VC fund, the Sistema Asia Fund, sponsored by Sistema PJSFC, a publicly-traded diversified Russian holding company.
While eager to tap on the region’s potential, Leonid Musatov, executive director of Sistema Asia Capital, outlines the VC’s clear focus on fundamentals and pragmatism. “We don’t buy a dream. We need to see the real business. We need to see that [founders] really walk the talk in terms of numbers,” he says.
That high hurdle drives Sistema to pick the cream of the crop. The fund has accomplished two exits: first with the Bangalore-based e-gifting platform Qwikcilver in March 2019, and the second with Indian e-pharmacy Netmeds in August this year.
“We actually saw that Qwikcilver will be our first exit. From our investment [in 2016], it was very clear from the way this company operated and its market position in India — it was near a monopoly situation,” explains Musatov.
As for Netmeds, it bears all the hallmarks of a success story. This company caught the attention of Sistema when it added pharmaceutical products to its impressive distribution arsenal, says Musatov. Its competitors, however, were working against the current by turning existing pharmacy businesses into largescale distributors, though they lacked experience with logistics.
“They came essentially from the idea of building a pharmacy and gaining some volume, and then securing good distribution deals. So, it was a different kind of evolution and most of them struggle, because distribution is not a natural part of their DNA,” he says.
Sistema recently set up a second fund based out of Singapore. This fund, of more than US$100 million ($136 million), will be operational by end of the year. The focus will be enterprise technology, digital technologies that can be used in smart cities. Singapore has a government-led push to become a Smart Nation and various tech providers at both the infrastructure and application levels have commenced trials and pilots.
The way Sistema sees it, this addressable and conducive market will make it easier for it to flex its chops. On one hand, it is on the hunt for interesting enterprise and Deep Tech solutions in Russia, of which there are plentiful, thanks to the country’s large numbers of scientists and programmers.
Yet, these Russian technology capabilities are available at a cost lower than what is normally seen in other markets such as Southeast Asia and Europe, where there is growing demand. By operating in Singapore, Sistema plans to bridge the gap on one hand, and help grow and capture the market on the other, says Musatov.
Earlier this year, Sistema Asia Capital appointed its new CEO in Edward Tay, formerly of British Telecom, IBM, Keppel Communications and Hewlett Packard. “Teamwork is a very strong characteristic [at Sistema Asia Capital]. The gentlemen here have worked together for a long time, but I’ve always felt I’m a part of the family,” says Tay.
“There’s a strong emphasis on building long-lasting relationships with founders... and I think, coming from this very strong background, we will be successful in Southeast Asia [too],” he adds.
