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Monday, February 14, 2011

A centrifugal force of Russia’s innovation

It seems to me there’s a growing critical mass of different individual catalysts that are themselves initiating new innovation-stimulating projects.

Many of these are emanating from Moscow out to the regions. Look at the project GreenField, look at StartUp Point or Start in Garage. There’s a lot of new types of people that are emerging, who feel there’s an opportunity for Russia to develop this new innovation economy. They are actively starting to go out of Moscow and participating in regional conferences, regional innovation conventions, i-Camps, various Seliger types of programs that are bringing these young people together.

Just as you can see around the world, young people networking through new media, though Facebook, LinkedIn or alternative social networks are starting to collect themselves into groups. They are starting to begin to support one another. This is a critical phase because when all entrepreneurs view each other as competition they don’t help each other. And as young entrepreneurs realize that they are in a common cause and need to support one another sharing experience, networks and contacts, these things begin to build a critical mass.

Why are such areas as Silicon Valley successful as innovation clusters? Because of the liquidity of movement of people going from a year or two in one company to another company, and every step on the way they are building their personal networks. This is what creates a critical mass of an innovation cluster.

Up to this point in history Russia’s market economy began with ‘Big Bang’ of privatization back in the early 1990s. The people that took over many of the companies were ‘red directors’ or government officials—just people who had no prior experience in the market economy.

So, absolutely everything that happened in Russia’s evolvement in the last 20 years is more or less understandable. There were no ‘smart money’ business angels here; everything had to be developed from scratch. Corporations were bought and large-scale industries were privatized into a very small number of people’s hands.

But today the people who are in their twenties have a completely different mindset. They had 20 years of a different education, of different upbringing, of parents who themselves are first-generation entrepreneurs and worked in the world in a different way and viewed life in a different way than previous generations.

So, these young people—just as in Egypt, the Philippines, America, the Middle East or Thailand—form themselves into their own individual independent social networks. And that’s exactly what’s beginning to happen in Russia. What I can see is that many of the leaders of this effort are coming from Moscow out to the regions.

That’s my main point. They have found that the networks they built in Moscow are extremely valuable, and they can see that it’s in their own self-interest to go out into the regions to find new partners, alliances and representatives to expand their own businesses, networks and experience. So, more and more young people from Moscow who are real leaders in this new generation are bringing in their new brands and new products.

People like Yevgeny Savin with UNOVA Media, like Elena Masolova with AdVenture, Renat Garipov with GreenField, and with StartUp Point, the BIT competition, etc.—the list is growing day by day. Future Russia and the Bortnik Fund’s U.M.N.I.K are other programs. These support programs which the Russian government initially created are now spreading down to a next layer of people.

And this is the critical phase. My view is that the next five years are going to see a massive increase in liquidity of young people going around to the regions. As transportation and infrastructure improve, as lower-cost hotels are established, it will be easier for people to take a speed train from Moscow to Nizhny Novgorod or St. Pete; easier to take a flight to Samara or to the new beautiful airport in Ekaterinburg. It’s easier when you can go and stay in low-cost two- or three-star hotels. So, as this infrastructure develops more and more people will reach out to try and expand their own business and their own networks into the regions.

Marchmont is encouraging that now for more than five years. We’re trying to support these types of programs because what we’d like to see is a critical mass of these types of people developing their own businesses. We realize what role that will have in the development of Russia’s IT sector. And not only IT, by the way.

We firmly believe in the huge potential for Russia’s nanotechnology, biotechnology, energy-efficiency, automotive components. We see huge potential in Russia’s advanced sciences.

IT is an extremely important sector, really moving this world forward right now. IT has a lower cost of entry; it has a shorter investment horizon; it’s easier to develop an IT project compared to developing the new generation of metal which may require millions of dollars worth of equipment for testing. Developing new medicines per day can only be done by the largest global multinationals that have deep pockets to invest in clinical trial testing. So, a lot of these types of more advanced technologies are very difficult for new young Russian entrepreneurs and innovators to deal with; therefore IT is a natural pool for people to jump into and develop.

That’s absolutely logical and absolutely correct. I however really feel that Russia has potential to develop new medicines, new generations of metals, alternative energy sources, life sciences, and so on. I think that as these entrepreneurs become more established in the regions, they will eventually begin to help their friends in laboratories, universities and R&D centers develop their business in other more advanced scientific spheres.

Marchmont wants to position itself exactly as helper in developing that growth in other technologies emanating from Russian regions.

So, am I optimistic about the development of Russia’s regions?

Absolutely.

Am I optimistic about the development of Russia as a leader in the innovation sphere?

Absolutely.

Do we see the opportunity for creating wealth, generating value and really improving the living standards of the Russian population through this?

Absolutely.

One of the key things we want to see is when parents talk about their children they do it with pride that their children are entrepreneurs and innovators. A good friend of mine in Moscow was recently talking about the fact that for her it was very important to know that the children of her friends are creating new real things that improve life in Russia. For her it was very important to know that it’s not just about exporting the top technology to the United States or wherever—it’s about innovating the way we live here, and improving the quality of life here.

And I believe that this trend that Moscow people go out to the regions is simply going to extend the process of increasing efficiency, modernization, and the quality of life by having better ranges of products. Having a better range of products results from having better infrastructure for cold storage, refrigeration, transport. All of these things are innovations which Russians can develop here, and develop companies to provide these innovations and services inside of Russia. I think this process starts in Moscow and is going to accelerate and spread throughout the country.

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