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IVI Presentation at UNECE Conference, May 2008


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Tom Nastas Presentation at UNECE Conference in Moscow Russia

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IVI Presentation at UNECE Conference, May 2008

  1. 1. Scaling Up Innovation in Russia UNECE Conference: Moscow Russia, 23 May 2008 Innovative Ventures Inc. Haslett, MI. USA Moscow, Russia Thomas Nastas President 23 May 2008
  2. 2. Today’s Message Part I What’s Happening in the Market? The Good & the Bad Part II GoForward Plan to Accelerate $$ For Entrepreneurs/SMEs For Gov’t Policy Makers 23 May 2008
  3. 3. IVI History-Direct Invest & Advisory Canada (1992) Europe (1992/94) C$100MM-Canadian TP Fund, $10MM- Bus. Dev. Bank EU, $-Financière St Dominique, Paris USA (1986) Russia (1997) The Michigan Product HP LP, $30MM-EBRD & Dev. Fund ($5MM) USAID Africa (1993/96) E. Africa $5MM, Sub- Saharan, $200MM, South Africa,$30MM, IFC/WB 23 May 2008
  4. 4. About Me • Founder of IVI,1986. In Russia since 1997 • Moscow Bank, Member, Board of Directors, 2007 • Independent Directors Ass. Member, Board of Directors, 2008 • Moscow MBA Program, Prof of VC & Marketing, 2001 • Moscow, MBA Advising, 2001 23 May 2008
  5. 5. Part I: What’s Happening in the Market? The Good & the Bad 23 May 2008
  6. 6. Successes in the Market Since 2001 PBC Lasers & Wostec Multinationals w/R&D Labs in Russia 23 May 2008
  7. 7. Some Clouds Too: Learning Curve Lessons Optiva ($49M) liquidates: Nanotech's 1st big flame-out Startup doctors ease portfolio pain-Trustworks ($23M) Cybiko Ceases Operations Not Seeing Entrepreneurial SME Creation from MNC R&D Labs Multinationals w/R&D Labs in Russia 23 May 2008
  8. 8. Realities of VC in Russia High Rejection Rates of Russian Tech: Undeveloped Opportunity Lack of Uniqueness/Competitive Advantage in Performance (Customer Benefits) Too much $$$, too much time & too little reward (Alternative Invest Opts & Foreign Competition) Lack of People (mgt/employees) & Transparency Lack of IP/Uncertainty of IP What to do with the SMEs that are rejected? Ignore? Sympathize? Seek New Solutions? 23 May 2008
  9. 9. Reasons for Rejecting Russian Tech Deals 23 May 2008
  10. 10. Reasons for Rejecting Russian Tech Deals 23 May 2008
  11. 11. Realities of VC Investment Ex: Global Spend in Clean Tech (2006) • Corporate R&D Investment = $22 billion • Government R&D Investment = $24 Billion • VC Investment in R&D = $2 Billion Same Pattern Repeated in Most Industries: VCs Fund Commercialization, not Tech Dev. 23 May 2008
  12. 12. Reasons Why Probability Components of SME Success 80% Company has enough $$ 80% Mgt Capable & Focused 80% PD Successful 80% Mfging Successful 80% Competitors Behave as Expected 80% Customers Want Product 80% Pricing is Correct 80% IP Issued 17% Combined Probability of Success Success Rate <10% if Probability of One Event falls from 80% to 50% 23 May 2008
  13. 13. Part II: GoForward Plan to Accelerating VC $$ For Entrepreneurs/SMEs 23 May 2008
  14. 14. Action Item #1 for Entrepreneurs/SMEs 1. Invest in Tech for Domestic Mkt Link w/Corporates: User Pull, Testing, Deployment & Commercialization Solve Tech & Supply Chain Needs Don’t Worry about Small Volumes Build Locally, Upgrade Later for National & Int’l Expansion 23 May 2008
  15. 15. Opts for Russian Tech 23 May 2008
  16. 16. Opts for Russian Tech 23 May 2008
  17. 17. Examples of Domestic Growth $570Bln for Transportation Overhaul 21 May 2008 Combined Reports Ford Will Build 2nd Plant in Russia: Ford European VP Jim Tetreault 23 May 2008
  18. 18. Where’s the Customer Pain (Need) in the Industry? 1. MORE Perf, Execution & Cost Reduction Not GameChangers; blocking/tackling tech so customers meet business plan 2. MORE Local Content More Value-added Tech Tech Sold to Multiple Customers Generate Supplier Sustainability thru Multiple Products/Services 3. What Else? 23 May 2008
  19. 19. Domestic Opts to Build Bio- Tech Supply Chain in Russia Research, Testing, & Agricultural Medical Devices Drugs & Hospitals Medical Labs Feedstock/Chemicals Pharmaceuticals & Equipment Agricultural Medicinal & Laboratory Specialty Biological processing botanicals apparatus & hospitals research furniture Basic organic Pharma- University Commercial chemicals ceutical Surgical, medical medical preparations medical, dental, research research Ethyl alcohol ophthalmic hospitals mfg. Diagnostic Testing & analytical substances Clinical laboratories Organic fiber instruments & research mfg. equipment Biological Medical institutions products laboratories & Fertilizers Irradiation diagnostic apparatus & Pesticides and imaging electromedical other agricultural centers chemicals equipment Product-Oriented Service-Oriented 23 May 2008
  20. 20. Action Item #2 for Entrepreneurs/SMEs 2. Benchmark Your Tech to Competitors & Alternative Often & Early Define Strengths & Weaknesses Test Under Different Operating & Customer Conditions Invest to Overcome Deficiencies 23 May 2008
  21. 21. Part II: GoForward Plan to Accelerating $$ For Gov’t Policy Makers 23 May 2008
  22. 22. GoForward Plan: Action Item #1 for Gov’t Policy Makers 1. Create ‘ Tech Proof of Concept’ Fund Transform ideas = deals Generate data to confirm performance, show weaknesses vs. competition & alternatives. Benchmark to int’l standards 23 May 2008
  23. 23. Chubais Opens Landmark Power Unit But industry players are skeptical about the efficiency and modernity of the Russian-made turbines. 23 May 2008
  24. 24. GoForward Plan: Action Item #2 for Gov’t Policy Makers 2. Capitalize a ‘Mini-Grant’ Program Define biz opts for a technology Cost is US$3,000-US$10,000/technology Not a biz plan, but 3-4 page document on tech’s potential 23 May 2008
  25. 25. GoForward Plan: Action Item #3 for Gov’t Policy Makers 3.Create an IP Fund Fund costs of Filing IP, especially Int’l Pay-back as a Royalty on Sales Funded by Russian Gov’t Initiative/PPP 23 May 2008
  26. 26. GoForward Plan: Action Item #4 for Gov’t Policy Makers 4. Inventory Your Tech & Publish as a Database on the Internet Org by tech, product & mkt Benefits by cost & performance Stage of dev., R&D, PD, Testing, Plan w/Timetable, milestones, budgets IP issued/filed & competing IP 23 May 2008
  27. 27. GoForward Plan: Action Item #5 for Gov’t Policy Makers 5. Establish a Biz Dev Office Scouts for Opts in SMEs & Institutes Develops projects for ‘Mini-Grant’ & ‘Proof of Concept’ Funds Promote to Customers Keeps the Team Focused. Align Interests Sell Data or Provide Answers? Incentives: Cash/Salary or Equity? Transparent or Opaque? Responsive or Egocentric? 23 May 2008
  28. 28. GoForward Plan: Action Item #6 for Gov’t Policy Makers 6. Organize R&D & Supply Chain Competitions for Users of Tech Go After Corporates & Corporate Investors vs. Financial Investors Interaction between R&D developers & Corporations & Corporate VC Corporations fund R&D, guide development & access opts in the supply chain Lower dev risk & get to market quickly Establish Industry Consortiums 23 May 2008
  29. 29. Technology In Many Places! Just Look & Define Slaughter Raising Genetic Engineering & Breeding Butcher Distribution, Storage & Retail Locations Processing- Ham, Kielbasa Delivery 23 May 2008
  30. 30. 23 May 2008
  31. 31. Thomas D. Nastas Tel. 7.985.923.47.27 Innovative Ventures Inc. Moscow, Russia Haslett, MI USA 23 May 2008
  32. 32. Back-up Slides Follow 23 May 2008
  33. 33. What’s Working Against Early Stage Tech & VC in Russia Plenty of $: It’s Competition: Domestic Growth, FMCGs, F&B, Retailing, Financial Services, Media, etc. Keeps Entrepreneurs in Non-Tech From Other Asset Classes w/Quicker & > Profits, e.g., Stocks & Real Estate From Israel, Ireland, USA, etc., with Good Deals, Technologies, Entrepreneurs & Successes 23 May 2008
  34. 34. Best Practices Factors of Best Practice Success Engaged Institutes engaged in econ dev Institutes with & committed to tech transfer Active Have mechanism for tech Leadership commercialization 23 May 2008
  35. 35. Best Practices Factors of Best Practice Success Capital is Programs for Available commercialization, pre-seed, & seed financing gaps (help establish & build SMEs) Active informal angel networks Investors include private & and public entities 23 May 2008
  36. 36. Best Practices Factors of Best Practice Success Discretionary Receive significant federal R&D Funding funding Centers serve as anchors for a region’s bioscience base 23 May 2008
  37. 37. Best Practices Factors of Best Practice Success Talent Pool Talent is the #1 the variable to build comparative advantage Educational institutions responsive to training students to meet the needs for workers at all skill levels, e.g., scientists, technicians, & production workers 23 May 2008
  38. 38. Best Practices Factors of Best Practice Success Specialized Leading bioscience regions Facilities and have private markets that Equipment provide facilities for bioscience SMEs Specialized bioscience incubators and research parks are a growing trend Access to specialized facilities and equipment 23 May 2008
  39. 39. Best Practices Factors of Best Practice States/Regions Success Patience and Building a critical mass takes Long-term years or even decades Perspective Early technology pioneers took 25 years, now 12 to 14 years to mature 23 May 2008