Almaz Capital venture fund is one of the leaders in the global investment market. The fund targets startups and companies in the B2B space that work with breakthrough technologies related to artificial intelligence, blockchain, cybersecurity, the Internet of Things, and edge computing. The bridge model of Almaz Capital and its presence in the European and Silicon Valley ecosystems make it possible for the venture capital firm to help IT startups from countries with developing tech markets reach the global level. Alexander Galitsky, the managing partner of the fund, considers Eastern Europe to be one of the most promising regions, where software developers strive to make it in the tech industry but don’t have the opportunity because the market is too small.
How Almaz Capital was created
The fund’s story goes back to 2004, when Alexander Galitsky, an entrepreneur and founder of the ELVIS+ company, took part in organizing the Tech Tour forum. At the international conference in Moscow, foreign venture capitalists had an opportunity to meet and talk to IT entrepreneurs from Russia and the CIS in an informal setting. At one of these meetings, Cisco representatives approached Alexander Galitsky with a proposal to establish a venture capital firm. The tech giant planned to enter new markets and wanted to invest in promising projects.
The preparation process took four years. Almaz Capital venture fund began its work in 2008; its general managing partners were Alexander Galitsky, Charles Ryan (head of the UFG asset management company), American businessman Peter Lukyanov, and Pavel Bogdanov from Russian Technologies. At the initial stage, Cisco invested $30 million in the VC firm, and another $20 million was provided by the key partners of United Financial Group. A year later, the European Bank for Reconstruction and Development joined the fund as an anchor investor with a $20 million contribution. The first fund was valued at $72 million.
Looking back, Alexander Galitsky says that Almaz Capital I was fortunate to buy Yandex shares before its initial public offering. The second major success was investing in Qik, a video messaging service. The return on these investments was more than 1000%. The fund sold the shares of the search engine during the IPO, and Qik was later bought by Skype. With a $6.2 million investment in the service, the fund managed to make $114.2 million on the sale, although at the time, the company was operating at a loss.
Once again, it was Cisco that became the main investor of Almaz Capital II, this time with a $60 million contribution. Other original investors also stayed with the company and soon were joined by the International Finance Corporation. The second fund expanded its geographic reach beyond the CIS to Eastern Europe. Alexander Galitsky explained that they cut back the funding for Russian startups due to a small number of promising B2B projects in the country. In 2017, the businessman named the Eastern European market a priority, since it had companies that could potentially enter the global markets. Almaz Capital also invested in Western startups with engineering teams from Eastern Europe.
With the launch of Almaz Capital III, the focus of the VC firm completely shifted toward the European and American markets. The European Investment Fund, which finances small and medium-sized tech enterprises and startups, joined the team of investors of the third fund as an LP. Throughout its history, Almaz Capital has invested a total of over $300 million in 50 companies. Among its most profitable exits were the sales of shares in Yandex, Qik, Sensity Systems, Xometry, and Acumatica. The third Almaz Capital, with a total investment of $191 million, was closed in 2021.
Almaz Capital’s key projects
In 2020, the number of new projects decreased significantly. The fund’s team has a very important aspect to its work, which involves meeting future partners in person and building trust-based relationships with them; however, with most of the communication moving online during the pandemic, it became more difficult to apply this approach. Up until 2021, Almaz Capital invested in projects that were already under development, after having reached agreements with the companies.
“It is difficult to invest in a business if you have only seen its leaders on a computer screen, and not in real life,” says Alexander Galitsky, commenting on the fund’s policy.
Today, the list of Almaz Capital’s main projects includes the following companies:
- Acronis, which develops hard drive management solutions and data backup software;
- GoodData, an American-Czech company that provides embedded business analytics solutions;
- GridGain, an in-memory database (IMDB) platform created by engineers from the CIS;
- Hover, which offers an app that transforms photos into 3D models (the software is used by insurance adjusters);
- Parallels, which develops virtual machine software and cross-platform remote access solutions;
- DMarket, one of the fund’s latest projects, a blockchain-based platform for trading in-game items;
- Minut, which provides IoT-based smart home security solutions.
The fund concluded several agreements after the pandemic. OneSoil, a Swiss agtech startup, and Neptune, which specializes in neural networks in machine learning, became part of the firm’s investment portfolio. Alexander Galitsky notes that from the very beginning, Almaz Capital was focused on the Western business sphere and targeted projects that may be in demand abroad. There are too few startups in Russia that could be marketed on a global scale due to slow development of the B2B space in the country.
Alexander Galitsky’s biography
Alexander Galitsky is one of the pioneers of the tech industry in Russia. The venture capitalist was born in the village of Zarechany, in Zhitomir region, and even as a child, he experimented with radio construction sets and launched homemade rockets. His interest in technology and passion for the exact sciences helped him enter MIET and get a job at the Microdevice Research Institute after graduation. By 1987, the young scientist was the head of a design department that developed software for satellites.
Galitsky made a name for himself in the international business environment in 1990, when he demonstrated his high-performance circuit board and secure communication protocol to the specialists from Sun Microsystems. In 1991, Galitsky visited Silicon Valley for the first time, and upon his return, he got excited about the idea of promoting Soviet business abroad by creating companies outside the country. The businessman managed to get the attention of American investors to his ELVIS+ company, which originally developed low Earth orbit satellite communication solutions.
In 1996, Alexander Galitsky introduced the first ever VPN for Windows. The release caused a huge scandal, as the US authorities refused to believe that a Russian company could develop such a complex product, and so they accused Sun Microsystems of handing over national encryption technology to the ELVIS+ company. After long investigation, the businessmen were cleared of all the accusations, and the story itself brought Galitsky worldwide fame and respect from the international IT community.
The businessman led the Russian company until the end of the 1990s and then he turned his attention to his company in the Netherlands. His EzWim company offered the clients telecommunication management solutions. In 2003, Galitsky was at the forefront of the Russian Tech Tour association, and a year later, he decided to pursue venture capital. Today, the IT entrepreneur can rightly be called a “global citizen” – the main office of Almaz Capital is located in California, but Galitsky spends most of his time on business trips in the European countries. The venture capitalist has virtually no business interests left In Moscow; due to the workload, he stepped down from his former positions, including the one at Skolkovo Ventures, Skolkovo Venture Investments, SkolTech, the RVC council, Moscow State University Business Incubator, and Alfa-Bank.
Alexander Galitsky has a PhD in Computer Science and has published more than a hundred articles in scientific journals. The scientist has authored 30 patents in the wireless network and VPN technology fields. The entrepreneur’s life story inspired the movie Startup that came out in 2014. This was also when he became one of the advisers in the B612 foundation, the American nonprofit organization aimed to protect the planet from colliding with asteroids and meteorites.