Globalisation has turbo-charged intelligent capitalists’ ability to copy an idea "made in America" overseas. So it is no surprise to see online retailer Ozon, a company often dubbed the Russian Amazon, last week buying clothing store Sapato, Russia’s Zappos, for an undisclosed sum. The deal is clearly deja vu – Amazon bought Zappos in 2009, as many commentators have already noted. Yet the transaction has even more than this pleasing symmetry going on beneath the surface, when one examines carefully the hidden wiring of its financial backers.
This Russian transaction is almost a perfect example of a number of international and local investors spotting something that looks like a Western market trend, and flinging weight behind their success with operational support, connections and money. Those who have done so appear to be a well-connected circle of investors.
Perhaps most intriguing is the web of contacts which surround Fast Lane Ventures, a company set up in 2010. Sapato is Fast Lane’s first exit from a portfolio of 15 companies, which have attracted investment worth $60m in the short time since it was founded.
The company was set up by Pascal Clément, president of Direct Group, formerly known as PPE, according to this interview with Fast Lane chief executive Marina Treshchova. As of 2006, reports said PPE was backed by Ozon’s largest shareholder, private equity firm Baring Vostok. It is unclear if PPE is still owned by Baring Vostok, although I sent an e-mail to both firms to check, and could not find any thing in the public domain. This tie-up suggests they remain on good terms.
The remainder of the syndicate is equally fascinating when explored in depth. Two of the investors in Sapato have pulled off one of the great European venture deals of recent years by backing Germany-based coupons business City Deal, which was sold to US rival Groupon in 2010. These firms are eVenture Capital Partners, backed by local retailer Otto Group as a cornerstone limited partner, and Swedish investment firm Investment AB Kinnevik.
Through hanging on to Groupon stock after the sale of City Deal, Kinnevik revealed in November it had made a circa 70 times paper return from its investment. It is no surprise its partner in both deals eVenture, which invested at the same time as Kinnevik has retained some of the stock in the Ozon deal, according to Andreas Haug, a general partner at the firm. Haug also pointed out the firm had not only sold and partly retained stock in City Deal when it sold to Groupon, but had done the same with Darberry.ru and Qpod, Russian and Japanese coupon companies respectively, which also sold to Groupon. It is also a shareholder in Fast Lane, Haug added. eVenture’s main backer Otto Group also dates its expansion into the Russian market back to a strategic tie-up with Clément’s PPE Group.
Intel Capital, the corporate venturing unit of chip maker Intel that first backed Sapato last year in a $12m funding round, also retained its entire stock in Ozon, according to Igor Taber, a Russia-based investment director at Intel. Taber said: "In general, the maturity of investor appetite in the Russian market has changed. This transaction is the latest reflection of much stronger financial and corporate investors in Russia. We know the market well and expected this for a time and many investors are now interested in the market."
Ozon’s syndicate is arguably as interesting, although its success story is probably better known. The deal to buy Sapato follows September’s $100m round to back Ozon led by Russia-based investment firm Ru-Net and including Japan-based retailer Rakuten, which has an active corporate venturing unit. The deal was joined by venture capital firm Index Ventures and private equity firm Alpha Associates.
It is understood one of the logical outcomes of this round was that Ozon would buy a local company, of which Sapato was regarded as the most attractive. This transaction seemingly leaves Ozon well place to pursue a flotation or a possible trade sale, perhaps even to Amazon.
While most venture transactions are said to have many fathers, the Sapato-Ozon deal seems to have a quantity of interconnections that parallels nowhere as much as Silicon Valley.