FUNDS: Seven Rivers to cross into venture capital

By bne IntelliNews November 27, 2008

Clare Nuttall in Almaty -

Almaty-based asset management firm Seven Rivers Capital has a finger in a number of pies. Already the manager of the multi-billion-dollar G4 City project and the Hanwha Kazakhstan fund, its newest vehicle, the LogyCom Perspective Innovations fund, represents its first foray into venture capital.

Seven Rivers' move to new premises in the prestigious Nurly Tau business centre in May coincided with the announcement of the LogyCom Perspective Innovations fund launch. Its $20m capital has been provided by its founders, Kazakh IT company LogyCom and the Kazakh National Innovation Fund, which is part of the Kazyna sustainable development fund. The two organizations are also the fund's sole investors at present, although additional capital may be raised in future.

"Expansion of the fund will be carried out as needed, depending on our assessment of investment projects. At present there is no acute need to attract additional working capital, but I think we may do so in future," Aliya Issina, chairwoman of Seven Rivers' board, told bne.

Seven Rivers is currently completing the registration of the fund with the Kazakh authorities, so hasn't yet started investing. However, Issina says the fund managers have already started to pick out and evaluate potential investments. "While we are completing all the procedures connected to the registration of the fund, we are drawing up a list of companies, that the fund will participate in financing," she says.

The firm plans to target companies in the IT sector that are both innovative and have commercial potential, as well as projects that will enable the transfer, adoption and growth of advanced technologies in various sectors of the economy. "It will specifically target companies in the early growth stage through to those which are about to launch, or have just launched their goods or services on the market as well as companies in the expansion stage," explains Issina.

Nothing ventured, nothing gained

Venture capital is admittedly a relatively new business in Kazakhstan. The NIF, a government-backed fund of funds, which has invested in several other local vehicles, was set up to get the industry off the ground.

Although Kazakhstan's post-independence years have seen the emergence of companies including ALSI, Glotur and LogyCom, overall the high-tech sector is also at an early stage. "The IT sector in Kazakhstan comprises just computer technology (the assembly of personal computers), software development and the provision of information services," admits Issina. "Kazakhstan is now actively searching for its niche in the IT industry and innovation sectors. The LogyCom Perspective Innovations fund will participate in the most promising projects and help them to develop as fast as possible."

However, she points to several government initiatives that are aimed at getting this sector off the ground, noting that, "I completely agree with the opinion of our president that only innovation and technologically effective projects can put our country into the top-50 most competitive countries."

In addition to the NIF, initiatives include the 2003-2015 industrial and innovation development strategy of the Republic of Kazakhstan, the 2008-2010 state development program for electronic government, and the telecommunications development programme for 2006-2008. With the new venture capital fund, Seven Rivers, LogyCom and the NIF are aiming to push this agenda further.

The LogyCom Perspective Innovations fund is part of Seven Sisters' plan to launch several funds for the Kazakh market announced when the South Korean financial group Hanwha Securities bought a 50% stake in the Kazakh firm in mid-2007. Caspian Group holds the remaining 50%. "The joint cooperation with the South Korean partner will allow us to do business at the highest international standards. We have already proceeded to the preparation of several projects' realization," Arkady Rakhilkin, chairman of Seven Rivers' board of directors, said at the time.

In December 2007, Hanwha opened the largest Kazakhstan-focused retail investment fund, the Hanwha Kazakhstan Fund. The fund, which is managed by Seven Rivers, was set up to give South Korean retail investors access to the Kazakh market.

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FUNDS: Seven Rivers to cross into venture capital

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