Alexander Galitsky on the game of contradictions and the ability to invest money
15.07.2022 | 12:00
Alexander Vladimirovich Galitsky is an entrepreneur, venture capitalist, founder and managing partner of the Almaz Capital fund. When considering a startup as an investment target, the businessman prioritizes his own impressions and personal contacts, as he considers this approach to be strategically significant.
He’s able to calculate the large needs of a particular startup in the innovation flow. Today he deals mainly with Eastern European projects and considers the most noteworthy ones to be deeptech startups in the B2B segment with the prospect of entering the global market. Earlier he was known as the youngest chief designer in the Soviet defense industry and as one of the developers of VPN for Windows.
Almaz Capital - background
In 2004, Alexander Galitsky was proposed to become President of the first European Techtour in Russia. The international forum aimed to search for promising startups in the former Soviet. For the meeting with investors, Galitsky's team chose 25 most interesting companies for venture investment, from among over 200.
During one of his meetings with entrepreneurs, Galitsky was approached by representatives of the US company Cisco. They proposed to establish a venture fund, where they would have direct participation, to invest in Russian startups.
Galitsky accepted the offer on condition that the business became transnational from the very beginning, and all the projects were aimed to enter Silicon Valley. In 2008, the Almaz Capital fund, headquartered in California, was established. According to Alexander Galitsky, many people believed in Almaz Capital. The European Bank for Reconstruction and Development and UFG were among the limited partners, each contributing $20 million. Cisco Systems, as an anchor investor, entered with $32 million.
Alexander Galitsky became the managing partner, and the general partners were Charles Ryan, head of the UFG management company, the American entrepreneur Peter Lukyanov, and Pavel Bogdanov, ex- partner of the Russian Technologies venture fund. Subsequently, in 2013, Lukyanov's place was taken by Jeffrey Baer, former general partner of U. S. Venture Partners, who had been working worked with Galitsky on Wi-Fi and VPN development projects.
Fund growth vectors
Originally Almaz Capital was focused on the search for promising projects in Russia and the CIS, but by 2014 the vector of interests had shifted toward Eastern Europe. By that time Alexander Galitsky and the partners had decided to establish Almaz II, but without the participation of Peter Lukyanov, due to misunderstandings that arose between them. A second fund was not formed until 2013. Once again, Cisco became the anchor investor of Almaz Capital II. The company invested $60 million in the fund. The previous participants also remained, joined by the International Finance Corporation.
The volume of assets by that time had increased to $174 million.
The second fund added international projects with engineers from Eastern European countries as a priority. Only projects with promising IT technologies of interest to the global market were under consideration. However, the fund stopped investing in Russian startups at the request of the fund's institutional investors because of the geopolitical situation that had developed by that time.
In 2014, after the sale of shares in Yandex and QIK, a new stage of Almaz began.
The investor of the third fund was the European Bank for Reconstruction and Development. The European Investment Fund also joined the ranks of institutional investors. Almaz Capital III was closed in 2021 with a total of $191 million.
During the period of its activity Almaz Capital has invested in 50 startups for the total amount of $300 million. The most successful exits of the fund were sales of shares in Qik, Yandex, Sensity Systems, Acumatica and Xometry.
Alexander Galitsky's startup philosophy
Alexander Galitsky's success is due to his philosophy. The entrepreneur considers personal acquaintance and the building of trusting relationships with future partners to be a special point in his work. When communications went online during the pandemic, the process of new investments changed, but didn’t stop. In two years, in 2020-2021, the fund invested in new 5 projects. In 2022, it invested in 3 new more.
The fund is interested in startups with global potential, focusing on B2B. B2C companies lose out in this respect, as they don’t have the necessary flexibility and cannot play the global game.
Alexander Galitsky clearly states the goal of any investment is to turn money around. A founder should understand that they and an investor have common goals, the main one being to make a profit. That is, even during due diligence, a complete evaluation of the startup takes place, and if there’re any doubts, it makes sense to abandon the project at once. The so-called game of contradictions begins when a founder tries to stop the sale of a startup at a favorable moment and tries their best to keep their company. Such excesses, according to Galitsky, must be ruled out as early as during design study.
The Fund has obligations to partners who invested funds based on profit. Here it’s appropriate to quote Galitsky from an interview with RB: “You need to understand that if I entered a company as an investor, your company is up for sale the same day.”
Involvement in Russian state business - truth and rumors
Alexander Galitsky is focused on his own business. He used to take part in several nationwide projects, but in recent years they’ve lost relevance for him. At the moment, the entrepreneur is not listed in any of them.
- Leaving Skolkovo and Skolkovo Venture Investments. Many sources continue to mention Alexander Galitsky as a Skolkovo director, although this is not true. In late 2021, he applied for resignation from the board. According to the 25 March 2022 extract, Alexander Galitsky was removed from the Skolkovo board. And resignation from Skolkovo Venture Investments is dated 20 July 2020.
The businessman cited the reason for his exit as the fact that he didn’t see any way for him to remain as effective as was at Almaz. And while in the 2010s Skolkovo was a major international center and the project was of interest to global investors, later on the company's development vector shifted and fell out of the entrepreneur's priorities.
- Leaving RVC. Alexander Galitsky decided to leave the RVC Venture Market Council and Advisory Board, as he was more interested in transnationals.
- Leaving the IT Development Panel under the Russian Ministry of Communications and Mass Media (formerly the Russian Ministry of Information Technology and Communications). Activities there also took time and were still relevant.
- Leaving Alfa-Bank. Alexander Galitsky viewed his work on Alfa-Bank's board as an opportunity to learn the European banking system inside out and understand where it’s worth investing in fintech. Information that the entrepreneur had left the board was published on Alfa-Bank's website on 1 March 2022.
Information about Galitsky's participation in the MSU business incubator is also partially true. The entrepreneur took part in only one meeting, and then the project closed.
Galitsky also left the board of Megafon and the Russian Quantum Center.
Alexander Galitsky’s brief bio
- He was born on 9 February 1955 in Zhitomir region.
- After graduation from MIET, he started working at the Microdevice Research Institute. At the same time, he defended his PhD thesis.
- In 1987, he was appointed chief designer of satellite hardware and software. Due to the age difference, he was professionally known as just Sasha.
- In March 1990, Galitsky was appointed as CEO of ELVIS with about 400 staff.
- In 1991, he visited Silicon Valley, from where he returned with a firm conviction to promote Soviet developments in the West through venture investment.
- To cut through the US red tape, that same year he founded ELVIS+. He worked at creating Wi-Fi and VPN.
- In 2008, he established the Almaz Capital international venture fund. The volume of the 3 funds is $400+ mln.