Cisco to invest in Russian tech startups

NEW YORK (Reuters) - Cisco Systems Inc (CSCO.O) is set to invest in technology startups in Russia and other former Soviet states through a venture capital firm, as part of its strategy to expand into fast-growing economies.

Cisco said on Wednesday that it and Russia's Almaz Capital Partners, which has offices in Silicon Valley and Moscow, had launched a fund with an initial investment of $60 million, targeting small to medium-sized technology, media and telecommunications firms in the region.

"We see a lot of innovation in Russia. It's been developing for quite a while. I think it's the right time, and the right transition in the market for us to participate," said Hilton Romanski, vice president of Cisco's Global Corporate Development.

San Jose-based Cisco has more than $2 billion in venture capital investments under management, with nearly half in the United States while Asia Pacific accounts for another significant portion. The fastest growth was in emerging markets such as Eastern Europe, it said.

Romanski said the company had been studying the Russian startup market for over 2-1/2 years. Last year it took a stake in Ozon, a Russian online retailer.

Even with concerns about disputes with the West and tensions with Georgia, foreign investors see Russia as an attractive investment destination as it benefits from rising oil prices and economic growth rates near 10 percent a year.

Through the new fund, called Almaz Capital Russia Fund I, Cisco said it will aim not just for significant financial returns but also an opportunity to identify growing technology players and new businesses.

Targets could include communications service providers, media companies, and content development companies, Cisco said.

"It's being able to have visibility and insight and learning into new technologies and new markets. In Russia in particular, it's being able to understand what kinds of innovations are going on in the startup community," said Romanski.

Cisco is known as the world's top manufacturer of routers and switches that direct Internet traffic. But technology acquisitions has been a key part of its business strategy.

In the past few years, it has been expanding into software and online video technology. It also owns cable set-top box maker Scientific-Atlanta.

Romanski said, however, that Cisco was not aiming to use the fund for acquisitions.

"We tend not to invest with the idea that we're going to acquire the company later on. That may happen but it certainly is not the intent of the majority of the investment."

He also said that while emerging markets all came with various risks, the company saw conditions improving for foreign investors in Russia.

"I think that all of the emerging markets. carry some degree of risk," he said. "So we look at that very closely and we'll continue to evaluate it, but what's very clear is that there is a major market opportunity with more openness than there has been in the past."

(Additional reporting by Anupreeta Das; Editing by Tim Dobbyn)