Starta Ventures launches their Venture Fund II based on a hybrid model of investing and participating in blockchain startups
Starta Capital Fund II launched by Starta Ventures is the first Russian fund with a “no management fee” model and architecture open to new investors. The size of the new fund is $ 20 million. New fund will allow to co-invest in blockchain startups via smart contract security tokens.
Indeed, Starta’s Fund II is one of the first funds in the world to employ this unique method of fund management.
As for the specifics, the fund will operate in a hybrid mode, giving investors not only the opportunity to join the fund as an LP, the traditional model in the venture industry, but also to take an equity participation in individual transactions via the use of smart contract security tokens that align with individual companies’ equity. .
The second hybrid characteristic of the fund is investing in blockchain startups at the pre-ICO stage. Typically, this stage requires a fiat investment into the startup. Thus, in addition to traditional exits, further liquidity events are added in the distribution of cryptographic tokens produced by startups and when they are sold by the fund on token exchanges. The volume of investments in this direction will be about 30%.
Formation of Starta Capital Fund II begins in March, with first fund investments to be made in May 2018. The fund is targeted at investors with check sizes starting at $1 million USD, with an investment period of 4–5 years. The fund’s strategy is aimed at investing in early stage startups , followed by upround investing in successful portfolio companies. The majority of of the funds will be invested in follow-on rounds of companies that have graduated from the Starta Accelerator program in New York. Seed stage investments will be up to $200k. A-round check size will be up to $1 million and, taking into account funds invested by co-investors, the total size of investment rounds can be 3–5 times higher.
Alexey Girin, co-founder and general partner of Starta Ventures:
“Starta Capital Fund II is unique in its structure and investment focus — it fully reflects Starta’s vision on how venture capital will work in the future. The main industry trends that we implement in the new model of the fund are hybrid co-investment, where private investors join professional venture investors, AND the synergy between traditional venture with the potential of the cryptocurrency market. Through the mechanism of syndicated transactions, we’re attracting co-investment capital that is 3–5 times higher than the value of the fund itself. The Starta Ventures group acts as lead investor in transactions, distributing the funds on the basis of its expertise. The team has specialized in investing into early-stage startups and accelerating them since 2011. Total capitalization of more than 50 portfolio startups, as assessed by upround investors exceeds $400 million.”
Since the main fund will not charge a management fee to it’s LP’s, fees will come from Co-investors, or deal-to-deal investors, who will pay the following fees for joining Starta Capital Fund II deals: up to a 10% setup fee and up to a 15% fee on exits or sales of respective investments. The standard 2/20 model for the venture industry assumes payment to managing partners at a total of 20% at entrance (management fee 2% per year for 10 years of fund management) and 20% at the exit as carry interest — a premium for success. LPs that joined Starta Capital Fund II do not pay a management fee, and for investors, the benefit of is that 100% of their invested funds will in turn be invested.
The no management fee trend is gaining acceptance at the international level as funds such as BGV II and Knight Assets have implemented similar LP-friendly terms.
Scaling the Expertise
During their previous years of work, Starta Ventures’ team has already laid out a basis for growing the hybrid investment model, streamlining the process of selecting prospective hi-tech startups from across Europe. As of March 1st, 2018 over 50 of Starta’s post-acceleration companies had follow-on investments from Starta Capital Fund I and our network of co-investors. Most portfolio companies have gone on to investment new rounds. In 2017, this list includes: Insense, Сindicator, Revealbot, Navigine, Snovio, Friendly Data, Cardiomo, HoverSurf and Bino.
Given our experience in raising funds with co-investors and relying on the existing international structure and expertise of partners, the group set the task of making a co-investment model accessible to a wider range of investors. Co-investment will be implemented through a special platform, which will work simultaneously with the launch of Starta Capital Fund II. At the moment, under the general brand of the group, are units such as Starta Capital Fund Ι and Starta Capital Fund II, Starta Accelerator, Sputnik Space (coworking space in New York), and Token Rockets (acceleration program for blockchainization of startups). The overall mission is to realize the global potential of European companies in America.
Starta Ventures new partners
The partners of the new fund are the co-founders and partners of the original international Starta Ventures fund: Alexei Girin, Dmitry Himmelberg, Ekaterina Dorozhkina, Sergey Vasilyev and Serge Milman. Earlier, in 2013, Starta Capital Fund I was launched under the Starta brand, the founders of which were Alexey Girin, Sergey Vasilyev and Lyudmila Golubkova.
In 2017, after the investing period of Starta Capital was over, Lyudmila Golubkova decided to withdraw from operational participation in the group’s work, focusing on the development of her own projects.
The Starta team was strengthened by Serge Milman, a financier with more than 15 years of experience in asset management and investment, lending his expertise in the direction of blockchain startups and project tokenization. At the beginning of 2018, Dmitri Himmelberg joined the group. As an expert in the field of finance, with 10 years of experience in senior management positions of large corporations, Dmitry Himmelberg will focus on developing investment partnerships and building the systematic work of the group in the direction of hybrid investment.
The Starta Ventures group includes Starta Capital Fund I, the Accelerator in New York (Starta Accelerator), Token Rockets, startup blockchain accelerator, and Sputnik Space, a coworking space in New York. All divisions have different investors and a different focus, but are united by a common goal — to realize the global potential of European founders together with Starta’s investors. The mission of the Starta Accelerator program, launched in 2016, is the cultural and business adaptation in the US of hi-tech startups from across Europe, as well as their integration into the investment ecosystem. Coworking at Sputnik Space is a springboard for European companies in the heart of Manhattan. In addition to traditional hard-infrastructure, participants get access to Starta networking and the opportunity to take advantage of the expertise of accelerator mentors and managing partners. In 2017, the group underwent a transformation, entering the market of cryptocurrency fundraising and investing in blockchain startups.
Starta Ventures Partners:
Alexey Girin, co-founder and general partner of Starta Ventures.
Business angel, private investor. Master of Economics. More than 15 years of experience in the field of auditing and finance, and for more than 10 years in the venture capital industry, founder of the Starta Capital Fund I (2011). In 2015 together with partners, he launched Starta Accelerator in New York. In 2017, in partnership with Cross Coin (Singapore), he implemented the ICO process to attract funds from private investors into the pool of shares of the teams undergoing the accelerator program at Starta Accelerator.
Dmitry Himmelberg, managing partner of Starta Ventures.
Expert in financial industry with more than 20 years of experience in senior positions of large companies and corporations. He holds an MBA from the Maastricht School of Business (Netherlands). He worked in engineering, direct investment, gambling, retail and defense industries before joining Starta in 2016–17. He also served as CFO and advisor to X5 Retail Group, the largest Russian food retailer. As part of Starta Dmitry is responsible for the post-investment support of the teams, the development of investment partnerships and the construction of the group’s work on the direction of hybrid investment.
Sergey Vasiliev, co-founder and managing partner of Starta Ventures.
A financier and an expert in technology businesses, with more than 10 years of experience in the venture market. He sources prospective startups and represents the fund at startup competitions and in industry ratings.
Partners in New York
Ekaterina Dorozhkina, co-founder of Starta Ventures, CEO of Starta Accelerator.
Katya is a marketer and entrepreneur, who led the promotion of business in international financial and IT companies for more than 10 years. She received her Masters in International Economics and is currently a Ph.D. candidate; she is also a graduate of the venture investment program at the UC Berkeley Business School, California. In 2015, she joined Starta as a managing partner of the fund, and a co-founder and head of the accelerator in New York, where she built a systematic process of working with startups and helping European entrepreneurs adjust to life in New York. She also launched a hub for startups called Sputnik Space and Starta Academy, an educational program. In 2017, she consolidated Starta initiatives under the umbrella of a large-scale holding company, Starta Ventures. She is the head of the Starta Accelerator and is a managing partner of Starta Ventures.
Serge Milman, managing partner of Starta Ventures.
A financier with more than 15 years of experience in asset management, derivatives trading and investing. He is the founder of the investment company Ronin Asset Management and hedge fund Dellwood Capital Partners. In the group, Serge focuses on startup tokenization and portfolio management. He actively mentors startups in the Starta Accelerator and the program for blockchain projects called Token Rockets.