VTB Group and Russian billionaire Roman Abramovich are investing in Ivi.ru, the country’s most popular video-streaming service, as competition heats up for on-demand entertainment.
Russia’s second-biggest bank, the owner of Chelsea Football Club, and steel billionaires Alexander Abramov and Alexander Frolov’s Invest AG joined as new shareholders in a $250 million funding round, Ivi said in a statement Wednesday.
The cash will be used to expand content and fund in-house productions after Ivi paused plans for an initial public offering earlier this year that could have valued the company at $1 billion, according to Forbes. The IPO was put on hold after a Russian politician proposed legislation curtailing foreign ownership of domestic streaming services.
Ivi had the biggest share of Russia’s fractured streaming market in 2020
“Our funding needs are solved,” Oleg Tumanov, Ivi’s founder and chief executive, said by email. “It will give us maximum financial flexibility, while an IPO stays as one of the strategic options that we might consider down the road.”
The deal is among the largest Russian private-equity investments of recent years. Geopolitical tensions with the West and the 2019 arrest of prominent U.S. investor Michael Calvey have put a chill on the local market.
Existing Ivi shareholders Flashpoint Venture Capital, Baring Vostok and the Russian Direct Investment Fund also contributed to the round. Goldman Sachs Group Inc. was the exclusive financial adviser.
Founded in 2010, when most Russians downloaded movies for free on pirate websites, Ivi has grown into the country’s biggest subscription service with a market share of 32% last year, according to TMT Consulting.
The new trio of investors that bought into Ivi also participated in a $600 million private placement in Russia’s largest internet company, Yandex NV, that was part of a $1 billion share sale last year.
Ivi ranks high among other major Russian tech investments since 2017
The investors contributed about 70% of the funds for Ivi, Tumanov said. State-owned VTB is the largest new shareholder and will be represented on the board, while Baring Vostok will retain the biggest stake in the company overall.
The round marks the third time in two years Ivi raised money to fund its growth. In September 2019, it secured equity financing in a deal that including Russia’s sovereign wealth fund, RDIF, and Mubadala Investment Company. Alfa Bank provided a 3.7 billion ruble ($50 million) venture loan last year.
Its competitors include Okko, co-owned by Russia’s largest lender Sberbank PJSC, billionaire Len Blavatnik-backed Amediateka and Yandex’s Kinopoisk.
Less than 20% of households in Russia pay for streaming services, compared with 40% to 50% in Europe and 75% in the U.S., Tumanov said. He expects the market to consolidate to two to three players within five years.
Ivi produced about 10 films and TV shows last year, with the most successful series, Tenderness, proving that in-house content can be a driver bringing in new subscribers, according to Tumanov.