Optical/IP Networks

Cisco Creates Russian Investment Fund

Cisco Systems Inc. (Nasdaq: CSCO) has set up a "venture capital initiative" to invest in startups and local investment funds in Russia, and has already pumped some cash into a Russian e-commerce Website, the company announced Tuesday. (See Cisco Invests in Russia.)

The vendor, which has already hired a Moscow-based investment manager, is looking for "direct investment opportunities into technology-related startups as well as investments into local venture capital teams targeting the technology industry."

The company, which says it has deployed more than $1 billion in venture capital funds during the past 10 years, has not specified whether a certain amount of money has been set aside for Russian investments, and had not returned calls seeking further information as this article was published.

Cisco's first investment is in Ozon , Russia's equivalent of Amazon.com, which boasts more than 120,000 unique visitors per day. While Cisco won't say how much it invested, its cash is part of a new $18 million round led by Index Ventures , which has a healthy track record in backing new tech startups such as Skype Ltd. (See EBay Buys Skype for $2.6B.)

Cisco is banking on an increasing uptick in Internet usage in the country, where the majority of online activity is still via dial-up connections. But broadband takeup is increasing –- Russia recently passed the 1 million DSL subscriber mark –- and investment in new infrastructure is intensifying, with carriers such as Golden Telecom Inc. investing in fixed and wireless access gear. (See DSL Dominates B'band Growth, Golden Offers Public WiFi, and Golden Fibers Nizhny.)

Russia is also one of the world's major mobile growth markets, with more than 150 million subscribers at the end of 2006. (See Top 10 Emerging Mobile Markets .)

Cisco already has interests in the Russian market, having developed a "regional alliance" with JSC Sitronics (London: SITR), a hardware and OSS vendor active across Eastern Europe. It also has a number of existing customers in the country, such as Moscow City Telephone Network (MGTS) and Mobile TeleSystems OJSC (MTS) (NYSE: MBT). (See Cisco, Sitronics Team, Russian Vendor Plans $500M IPO, and Cisco, Personeta Team.)

News of the Russian fund follows Cisco's creation of an investment vehicle in another of the larger emerging markets, India, announced late last year. There, Cisco has set aside $100 million to pump into technology firms as part of a broader investment plan, which includes the creation of new R&D facilities. (See Cisco Hearts India.)

— Ray Le Maistre, International News Editor, Light Reading

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