What is Skolkovo? Russian initiatives to support national innovation ecosystem Ilya Ponomarev , Chairman, Hi-tech Development Subcommittee, State Duma Advisor for commercialization , Skolkovo Foundation 30 / 11 /2010

Presidents call for modernization

• Medvedevs 4i initiative

• • Infrastructure

• • Institutes

• • Investment

• • Innovation

• Presidential address to the parliament in 2009 was focused on innovation

• • Most fashionable discussion topic

• Pres. Obama reset policy assumes that US and Russia are building common values

• • Creating a compatible innovation ecosystem is a perfect example

Myth #1. Russias ecosystem lacks finance

• Government created numerous financial institutions

• • Equity financing

• • • Rusnano $10b investment company

• • • Russian Venture Corp $1b fund of funds

• • • Rosinfocominvest $150m PE fund

• • • Bortnik Fund seed and pre-seed grants

• • Debt financing

• • • Vnesheconombank

• • Infrastructure support

• • • Hi-tech parks

• • • Special economic zones

• • • Skolkovo Foundation as an entry point

• Many large businessmen are thinking about investing in hi-tech

• Some VCs are formed, many with foreign capital

Real problem with finance

• No exits within the country

• Lack of internal demand

• • Foreign technologies usually preferred over Russian

• • Government is absent

• Deficit of physical infrastructure

• • Inexpensive offices

• • Business services

• • Quality housing

• No experienced investors

Myth #2. All is needed is some legislation changes

• Russias legislation made a significant progress during recent decade

• • Corporate law

• • Securities law

• • IP regulation is copied from German IP law

• • Tech transfer law (similar to Bayh-Dole Act)

• Skolkovo Law unveils possibility to solve many issues manually

• • Taxation

• • Immigration

• • Construction permits

Real problem with legislation

• Law enforcement

• Some Russian laws are incompatible with usual approach legal acts:

• • VC regulations to be fixed soon

• • • No LLP form

• • • VC funds in Russia are regulated as mutual funds

• • Corporate legislation options, stock series

• • Technology transfer act bureaucratic

• In some Acts bad wording leaves room for unfavorable misinterpretation

• • Software VAT exemption act

• • Privacy protection act

• Main points of immediate attention

• • State procurement act

• • Internet crime liability definition

• • Bankruptcy regulations

• • e-Payment systems

• • Miscellaneous industry-specific acts ( telecom , advertisement , mass-media , )

Myth #3. Russias R&D is full of projects

• Huge Soviet legacy of technological ideas

• • Primarily in places like Novosibirsk Akademgorodok

• No practical knowledge of handling IP rights

• High desire to get involved in commercial activities, but

• • No experience

• • Unadequate self valuation

• • No desire to follow the market and find niches

Main problem of Russias innovation ecosystem human resources

• No entrepreneurs, even less experienced serial entrepreneurs

• • High entrepreneurial potential of Russians is focused on avoiding govt regulations

• • Russians are willingly taking economic risks, but current institutions punish such behavior

• Lack of international business experience and proper connections

• • No success stories to follow

• • Language barrier

• Education reform is controversial

• • Education, research and industry are disconnected

• • Heavy impact of brain drain

• • Demographic crisis of 1990s starts to hit

• • No adequate business schools, professors with first-hand experience

• Negative legacy

• • Decreased level of peoples geographical mobility

• • Excessive concentration of business activity in Moscow, colonial policies towards other regions

• • Housing and utilities deterioration

Objectives of Skolkovo

• To develop Russian innovation ecosystem by creating a universal entry point to

• • Globalize Russian businesses

• • Localize international businesses to start R&D and hi-tech manufacturing

• Create in Russia new companies and/or their divisions, to develop new hi-tech services and products

• Attract foreign specialists and support local talents in hi-tech

Key principles

• Project is managed by a non-for-profit Skolkovo Foundation, governed by a special law

• Project participants receive set of business services as well as certain incentives for companies with revenues up to 3 bln. Rbl.:

• • 0% profit tax

• • 0% VAT (optional)

• • 0% property tax

• • 14% social payments

• • 0% custom duties

• Each structure unit of Skolkovo is an independent business with its own P&L

• • Each department is supposed to grow into self-sustainable operation

• • Each service is to be provided on competitive basis

• 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

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On-site project components

• Office premises

• Labs and small-scale manufacturing

• Residential space

• Shared facilities and services:

• • Prototyping centers

• • Financial services

• • Business incubators

• • Customs

• • IP support

• • Security

• New technology university (Russian MIT)

• Social and recreation space

• • Cafes and restaurants

• • Medical care

• • Schools and kindergartens

• • Entertainment

Admission

• By decision of Skolkovo Foundation Board, based on simple and transparent Admission Policy

• • By recommendation of accredited partners (funds, hi-tech parks, business incubators, etc.)

• Different types of residents with different set of incentives:

• • Intl. hi-tech companies (?)

• • R&D centers of Russian/intl. low-tech companies

• • Mature Russian hi-tech companies ( ?)

• • Hi-tech startups

• Different types of partners ( ? ) :