Why Russia? Russian initiatives to support national innovation ecosystem Ilya Ponomarev ,  Chairman, Hi-tech Development S...
President’s call for modernization <ul><li>Medvedev’s “4i” initiative in 2008 </li></ul><ul><ul><li>Infrastructure </li></...
Myth #1. Russia’s ecosystem lacks finance <ul><li>Government created numerous financial institutions </li></ul><ul><ul><li...
Real problem with finance <ul><li>Limited exits within the country </li></ul><ul><li>Lack of internal demand </li></ul><ul...
Myth #2. Russia lacks adequate legislation <ul><li>Significant progress has been made during recent decade </li></ul><ul><...
Real problem with legislation <ul><li>Law enforcement </li></ul><ul><li>Some Russian laws are incompatible with usual appr...
Situation with investment targets <ul><li>Huge Soviet legacy of technological ideas </li></ul><ul><ul><li>Primarily in pla...
Main problem of Russia’s  innovation ecosystem – human resources <ul><li>No entrepreneurs, even less –experienced serial e...
Russian answer: Skolkovo project <ul><li>To develop Russian innovation ecosystem by creating a universal entry point to </...
Key principles <ul><li>Project is managed by a non-for-profit Skolkovo Foundation, governed by a special law </li></ul><ul...
Skolkovo as an innovations hub <ul><li>Skolkovo is not just a special territory, it is a development tool for the whole co...
US-Russia cooperation  to develop innovation ecosystem <ul><li>In 2009, contacts between Russian and MA organizations, inc...
Challenge for Massachusetts <ul><li>West Coast is taking the lead in Russian innovation opportunities and MA is almost abs...
Why Massachusetts and  Why now? <ul><li>Russia’s 5 technological priorities match MA core competences: </li></ul><ul><ul><...
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110118 Why Russia? Why now?

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Presentation by Ilya Ponomarev in Boston for local entrepreneurs and investors on how Massachusetts tech community can benefit from doing business with Russia.

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110118 Why Russia? Why now?

  1. 1. Why Russia? Russian initiatives to support national innovation ecosystem Ilya Ponomarev , Chairman, Hi-tech Development Subcommittee, State Duma Adviser for commercialization , Skolkovo Foundation 01 / 18/ 201 1
  2. 2. President’s call for modernization <ul><li>Medvedev’s “4i” initiative in 2008 </li></ul><ul><ul><li>Infrastructure </li></ul></ul><ul><ul><li>Institutes </li></ul></ul><ul><ul><li>Investment </li></ul></ul><ul><ul><li>Innovation </li></ul></ul><ul><li>Presidential address to the parliament in 2009 was focused on innovation </li></ul><ul><ul><li>Most fashionable discussion topic </li></ul></ul><ul><ul><li>Now everybody is on twitter, facebook, blogs, … </li></ul></ul><ul><li>Pres. Obama “reset” policy, also started in 2009, assumes that US and Russia are building common values </li></ul><ul><ul><li>Creating a compatible innovation ecosystem is a perfect example </li></ul></ul><ul><li>2010 was a year of multiple initiatives in Russia </li></ul>
  3. 3. Myth #1. Russia’s ecosystem lacks finance <ul><li>Government created numerous financial institutions </li></ul><ul><ul><li>Equity financing </li></ul></ul><ul><ul><ul><li>Rusnano – $10b investment company </li></ul></ul></ul><ul><ul><ul><li>Russian Venture Corp – $1b fund of funds </li></ul></ul></ul><ul><ul><ul><li>Rosinfocominvest – $150m PE fund </li></ul></ul></ul><ul><ul><ul><li>Bortnik Fund – seed and pre-seed grants </li></ul></ul></ul><ul><ul><li>Debt financing </li></ul></ul><ul><ul><ul><li>Vnesheconombank </li></ul></ul></ul><ul><ul><li>Infrastructure support </li></ul></ul><ul><ul><ul><li>Hi-tech parks </li></ul></ul></ul><ul><ul><ul><li>Special economic zones </li></ul></ul></ul><ul><ul><ul><li>Skolkovo Foundation as an entry point </li></ul></ul></ul><ul><ul><li>Tax vacations: </li></ul></ul><ul><ul><ul><li>Special tax regime for hi-tech companies </li></ul></ul></ul><ul><ul><ul><li>No capital gains tax for investments over 5 years </li></ul></ul></ul><ul><li>Many large businessmen are thinking about investing in hi-tech </li></ul><ul><ul><li>DST owns 10% of Facebook, recently made Mail.ru IPO </li></ul></ul><ul><li>Some VCs are formed, many with foreign capital </li></ul><ul><ul><li>Most successful Russian search engine Yandex.ru was started with Massachusetts money </li></ul></ul>
  4. 4. Real problem with finance <ul><li>Limited exits within the country </li></ul><ul><li>Lack of internal demand </li></ul><ul><ul><li>Foreign technologies usually preferred over Russian </li></ul></ul><ul><ul><li>Government is yet to come </li></ul></ul><ul><li>Deficit of physical infrastructure </li></ul><ul><ul><li>Inexpensive offices </li></ul></ul><ul><ul><li>Business services </li></ul></ul><ul><ul><li>Quality housing </li></ul></ul><ul><li>Insufficient number of experienced investors </li></ul>
  5. 5. Myth #2. Russia lacks adequate legislation <ul><li>Significant progress has been made during recent decade </li></ul><ul><ul><li>Corporate law </li></ul></ul><ul><ul><li>Securities law </li></ul></ul><ul><ul><li>IP regulation is copied from German IP law </li></ul></ul><ul><ul><li>Tech transfer law (similar to Bayh-Dole Act) </li></ul></ul><ul><ul><li>… </li></ul></ul><ul><li>Skolkovo Law unveils possibility to solve many issues “manually” </li></ul><ul><ul><li>Taxation </li></ul></ul><ul><ul><li>Immigration </li></ul></ul><ul><ul><li>Construction permits </li></ul></ul>
  6. 6. Real problem with legislation <ul><li>Law enforcement </li></ul><ul><li>Some Russian laws are incompatible with usual approach legal acts: </li></ul><ul><ul><li>VC regulations – to be fixed soon </li></ul></ul><ul><ul><ul><li>No LLP form </li></ul></ul></ul><ul><ul><ul><li>VC funds in Russia are regulated as mutual funds </li></ul></ul></ul><ul><ul><li>Corporate legislation – options, stock series </li></ul></ul><ul><ul><li>Technology transfer act – bureaucratic </li></ul></ul><ul><li>In some Acts bad wording leaves room for unfavorable misinterpretation </li></ul><ul><ul><li>Software VAT exemption act </li></ul></ul><ul><ul><li>Privacy protection act </li></ul></ul><ul><li>Main points of immediate attention </li></ul><ul><ul><li>State procurement act </li></ul></ul><ul><ul><li>Internet crime liability definition </li></ul></ul><ul><ul><li>Bankruptcy regulations </li></ul></ul><ul><ul><li>e-Payment systems </li></ul></ul><ul><ul><li>Miscellaneous industry-specific acts ( telecom , advertisement , mass-media , …) </li></ul></ul>
  7. 7. Situation with investment targets <ul><li>Huge Soviet legacy of technological ideas </li></ul><ul><ul><li>Primarily in places like Novosibirsk Akademgorodok </li></ul></ul><ul><li>Insufficient knowledge and experience in protecting IP </li></ul><ul><li>High desire to get involved in commercial activities, but </li></ul><ul><ul><li>Lack of experience </li></ul></ul><ul><ul><li>Unadequate self valuation </li></ul></ul><ul><ul><li>Limited knowledge how to follow the market and find niches </li></ul></ul>
  8. 8. Main problem of Russia’s innovation ecosystem – human resources <ul><li>No entrepreneurs, even less –experienced serial entrepreneurs </li></ul><ul><ul><li>High entrepreneurial potential of Russians is focused on avoiding govt regulations </li></ul></ul><ul><ul><li>Russians are willingly taking economic risks, but current institutions punish such behavior </li></ul></ul><ul><li>Lack of international business experience and proper connections </li></ul><ul><ul><li>No success stories to follow </li></ul></ul><ul><ul><li>Language barrier </li></ul></ul><ul><li>Education reform is controversial </li></ul><ul><ul><li>Education, research and industry are disconnected </li></ul></ul><ul><ul><li>Heavy impact of brain drain </li></ul></ul><ul><ul><li>Demographic crisis of 1990s starts to hit </li></ul></ul><ul><ul><li>No adequate business schools, professors with first-hand experience </li></ul></ul><ul><li>Negative legacy </li></ul><ul><ul><li>Decreased level of people’s geographical mobility </li></ul></ul><ul><ul><li>Excessive concentration of business activity in Moscow, colonial policies towards other regions </li></ul></ul><ul><ul><li>Housing and utilities deterioration </li></ul></ul>
  9. 9. Russian answer: Skolkovo project <ul><li>To develop Russian innovation ecosystem by creating a universal entry point to </li></ul><ul><ul><li>Make Russian businesses global </li></ul></ul><ul><ul><li>Attract international businesses to start R&D and hi-tech manufacturing </li></ul></ul><ul><li>Create in Russia new companies and/or their divisions, to develop new hi-tech services and products </li></ul><ul><li>Develop Russia’s human resources: attract foreign specialists and support local talents in hi-tech </li></ul>
  10. 10. Key principles <ul><li>Project is managed by a non-for-profit Skolkovo Foundation, governed by a special law </li></ul><ul><li>Project participants receive set of business services as well as certain incentives for companies with revenues up to 3 bln. Rbl. (USD $100 mln.): </li></ul><ul><ul><li>0% profit tax </li></ul></ul><ul><ul><li>0% VAT (optional) </li></ul></ul><ul><ul><li>0% property tax </li></ul></ul><ul><ul><li>14% social payments </li></ul></ul><ul><ul><li>0% custom duties </li></ul></ul><ul><li>Each department is supposed to grow into self-sustainable operation </li></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li>Research </li></ul></ul><ul><ul><li>Commercialization, tech transfer and business development </li></ul></ul><ul><ul><li>Investment </li></ul></ul><ul><ul><li>Real estate </li></ul></ul><ul><li>Each service is to be provided on competitive basis </li></ul><ul><li>Business model is developed as a private-public partnership, but assumes separation of public and private funds. After a while Skolkovo Foundation should become independent of state funding </li></ul>
  11. 11. Skolkovo as an innovations hub <ul><li>Skolkovo is not just a special territory, it is a development tool for the whole country </li></ul><ul><ul><li>Up to 2014 residents are not required to be physically located in Skolkovo </li></ul></ul><ul><ul><li>Admission is not a formal bureaucratic procedure, but decision of competent Skolkovo Foundation Board </li></ul></ul><ul><ul><ul><li>50% Russians, 50% foreigners </li></ul></ul></ul><ul><ul><li>Simple application at Skolkovo web site and 5 minutes presentation to the Board </li></ul></ul><ul><ul><li>Board does not verify the quality of the project, but makes the binary yes/no decision, whether it complies with Foundation mandate </li></ul></ul><ul><ul><li>Regional network is based on hi-tech parks and SEZs </li></ul></ul><ul><li>Skolkovo as a territory will be developed around new university – “Russian MIT” </li></ul>
  12. 12. US-Russia cooperation to develop innovation ecosystem <ul><li>In 2009, contacts between Russian and MA organizations, incl. MIT, began to outline practical cooperation. Rusnano develops close cooperation with MIT for training and discusses joint projects </li></ul><ul><li>Jan. 2010 Russian Government delegation, led by First Vice Prime Minister visits MIT. Decision to initiate Skolkovo Project has been made </li></ul><ul><li>Feb. 2010 US State Dept. takes “RusTechDel” delegation made of 10 West Coast CEO’s (incl. eBay, CISCO, twitter, …) to Moscow and Novosibirsk </li></ul><ul><li>March 2010 - another Russian delegation in Cambridge/Boston </li></ul><ul><ul><li>Cooperation agreement signed with Novosibirsk hi-tech park </li></ul></ul><ul><ul><li>Russian sponsorship for MassChallenge.org business plan competition </li></ul></ul><ul><ul><li>Negotiations begun with MIT to become a co-founder of Skolkovo Project </li></ul></ul><ul><li>April 2010 – Massachusetts Senate invites Pres. Medvedev to come to MA </li></ul><ul><li>May 2010, Delegation of 20 prominent venture capitalists to Moscow (VC Trip), supported by State Dept. No participation from MA. </li></ul><ul><li>June 2010, Skolkovo Board of Directors announced - 6 Russians, 6 foreigners, incl. 3 Americans – all from West Coast. </li></ul><ul><li>June 2010, Pres. Medvedev visits Silicon Valley, not MA. </li></ul><ul><ul><li>Several high-profile agreements were signed </li></ul></ul><ul><ul><li>President ordered to open Skolkovo project office in Bay Area </li></ul></ul><ul><ul><li>Agreement with MIT signed in US Chamber of Commerce “lobby,” not main hall, and only after enormous pressure from Russian side </li></ul></ul><ul><li>September 2010 – NYAS delivers report “Yaroslavl Roadmap 10-15-20” </li></ul>
  13. 13. Challenge for Massachusetts <ul><li>West Coast is taking the lead in Russian innovation opportunities and MA is almost absent: </li></ul><ul><ul><li>Silicon Valley has international brand recognition as the trademark of innovation </li></ul></ul><ul><ul><li>West Coast corporations are effectively lobbying their interests in DC, particularly with State and Commerce Departments </li></ul></ul><ul><ul><li>East Coast people in DC Administration are mainly Harvard graduates, concerned with policy; while Stanford grads push business and innovation </li></ul></ul>
  14. 14. Why Massachusetts and Why now? <ul><li>Russia’s 5 technological priorities match MA core competences: </li></ul><ul><ul><li>Biotech and life sciences </li></ul></ul><ul><ul><li>Cleantech - new energy sources </li></ul></ul><ul><ul><li>IT and supercomputing </li></ul></ul><ul><ul><li>Space and telecom </li></ul></ul><ul><ul><li>Nuclear technologies </li></ul></ul><ul><li>Russia can become resource for manufacturing facilities, R&D personnel, scientific advances to be commercialized, clinical trials </li></ul><ul><ul><li>MA can host Russian corp. offices, tech holding companies, provide training to entrepreneurs and financing of new companies. </li></ul></ul><ul><li>Russia’s domestic market, especially for new energy and biotech projects with underlying layer in nanotechnologies, is very promising </li></ul><ul><li>Right now major Russian businessmen are looking to form joint ventures to invest into hi-tech, and actively touring West – primarily Silicon Valley </li></ul>
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