To Russian Hi-Tech HUBS

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|#9 | JUNE 2015

to Russian hi-tech HUBS

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CONTENTS EXECUTIVE SUMMARY

New efforts to modernize the Russian economy have taken on even greater significance since the implementation of 04. Can high-tech hubs help to modernize Russia? Western sanctions and recent volatility in global energy BY George gogolev markets. As a result, a renewed focus on technological in-

08. A strategy for the novation could be one way to diversify the Russian economy development of Russian and insulate it from external economic shocks. Most im- technoparks portantly, the commercialization of new innovations could BY Andrei shpilenko provide a long-term boost to Russian economic growth and 16. How to create a favorable consolidate gains for Russia’s emerging middle class. environment for technology The federal government, which has always played an im- hubs in Russia portant role in the development of Russia’s innovation sec- BY Russian Ministry of telecom and mass commu- tor, now faces a number of critical strategic questions of nication how to develop regional innovation ecosystems in a time of 18. Can Russia become an increased isolation from the West and decreased funding innovation leader? for science. BY oleg buklemishev One major initiative to bridge the innovation gap has been 22. Case study: Three to channel resources – both financial and administrative – centers for Russian into the creation of new technoparks, high-tech hubs and innovation. #1: Skolkovo Innovation innovation clusters. Center In the report below, we highlight the early successes and BY alexei sitnikov challenges of Russia’s modernization drive, with an em-

23. #2: Bauman Moscow phasis on the role of the state in guiding and supporting State Technical University innovation efforts at the local level, primarily through the BY evgeny starozhuk creation of new technoparks. In addition to highlighting

24. #3: The Troitsk several case studies of Russian innovation at work – includ- Technopark ing the Skolkovo Innovation Center in Moscow – the report BY sergei sharakshane analyzes the most important factors in Russia’s long-term

27. Russia’s long-term transition to an innovation economy and provides multiple transition to an innovation steps to help Russia realize its full potential for innovation. economy BY kendrick white

28. Top 10 recommendations for Russian innovation entrepreneurs BY kendrick white

28. Editor’s picks press photo press REPORT

FROM Making sense of THE EDITOR Russia’s modernization initiatives

Sanctions and the growing isolation from the West continue to infl uence the development of Russia’s innovation economy, at least in the form of the deterioration of the investment climate and increased economic instability. Modernization of the Rus- sian economy, which is now cut off from Western foreign loans and still heavily dependent on oil and gas revenues, becomes a matter of survival. In this report, we decided to look closely at the hubs where In addition, Oleg Buklemishev of Moscow State University Russian innovation is being developed today. In doing so, we gives a highly critical assessment of the current eff orts to mod- are trying to make sense of the most recent modernizing initia- ernize the Russian economy. He insists on three alternative tives and sort out the vast array of new technoparks, high-tech ways to capitalize on Russia’s advantages in order to transform hubs and innovation clusters. the economy and create new breakthroughs in the fi eld of The co-authors of our report are on-the-ground practition- innovation. ers and leading thinkers of the Russian innovation economy. This Russia Direct report also contains three case studies of George Gogolev of the Russian Venture Company (RVC), a Russian high-tech hubs and specifi c recommendations for joint-stock company created by the Russian government with Russian innovation entrepreneurs from Kendrick White, a U.S.- a mission to help set up Russia’s own venture capital industry, born entrepreneur with more than 20 years of investing and writes about the challenges of transitioning to new models of management experience in Russia. innovation in the country whose industry still largely relies on I hope you will enjoy this report. Please do not hesitate to send old internal Soviet R&D supply chains. me an email at [email protected] if you have Andrei Shpilenko of the non-profi t Association of Science any questions or suggestions. Parks in High Technology gives a detailed overview of Rus- We value your feedback, especially as we are preparing to sia’s technology parks and provides a briefi ng on the newly launch a paid subscription model for all of our reports. For adopted framework documents in this fi eld. His analysis is fol- more information about the Russia Direct paid subscription lowed by a commentary from the Russian Ministry of Telecom model, please go to our website www.russia-direct.org. and Mass Communications, which sheds light on the Russian government’s priorities in creating favorable environment for technology hubs. Ekaterina Zabrovskaya, Editor-in-Chief

Write to us [email protected] for general comments, subscription and distribution questions; Send an email to: [email protected] for your submissions, article proposals, topic suggestions, and content-related comments; [email protected] for sales and advertising.

Eugene Abov Chairman, Russia Direct, Deputy Director General, Rossiyskaya Gazeta Publishing House, Publisher, Russia Beyond The Headlines Julia Golikova Director for Development, Russia Direct, Deputy Publisher, Commercial and Foreign Partnership Director, Russia Beyond The Headlines Ekaterina Zabrovskaya Editor-in-Chief Pavel Koshkin Executive Editor Dominic Basulto Executive Editor, U.S. Ksenia Zubacheva Managing Editor Alexey Khlebnikov Senior Editor Cameron Judge-Becker Intern Olga Ivanova Publisher, Business and Product Development Director Maria Shashaeva Deputy Publisher, Circulation, Digital Strategy and Operations Antonina Osipova Marketing Director Ekaterina Olkhova Consumer Marketing and Promotion Director Helen Borisenko Research Manager Anna Sergeeva Account Manager, NY Olga Guitchounts Account Manager, DC Andrey Shimarskiy Art Director Andrey Zaitsev Associate Art Director Nikolay Shiyanov Designer Niyaz Karim Designer Nikolay Korolev Photo Editor Ilya Ovcharenko Production Designer

© Russia Direct 2015 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying, or by any information storage and retrieval system. The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of Russia Direct.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

AUTHORS

OLEG BUKLEMISHEV is an associate professor in the department of economics at Moscow State University. From 2000 to 2004 he was an assistant to the prime minister and deputy director of the secretariat of the prime minister of Russia. From 2005 to 2012, he was chief analyst and member of the board of directors at NGO MK Analytics. He is author of the book, “The Eurobond Market” (1999).

GEORGE GOGOLEV is head of the Innovation Ecosystem Development at Russian Venture Capital, a state funded agency which ﬁ nances developments in Russian high-tech. He previously served in sales, marketing and PR positions in various fast- growing tech companies in Russia. Gogolev is also an active investor and holds a Ph.D. in geography from the Russian Academy of Sciences.

SERGEI SHARAKSHANE is the spokesman for the Russian Academy of Sciences (RAS). Holding advanced degree in mathematics and philosophy, he spent 40 years working in journalism and served as an assistant to the Press Minister in two ministries during the Soviet Union. In addition to his work as a spokesman to the RAS, he is also a member of the expert council to the ‘A Just Russia’ party faction of the Russian State Duma.

ALEXEI SITNIKOV is the vice president of Institutional Development and Executive Secretary of the Board of Trustees of the Skolkovo Institute of Science and Technology. Prior to joining Skolkovo, Sitnikov served as vice president for operations and development at the New Economic School in Moscow and held the position of program coordinator for Russia at the Freeman Spogli Institute for International Studies at Stanford University.

EVGENY STAROZHUK, Ph.D., is provost of economics and innovation at Bauman Moscow State Technical University. An expert in ﬁ nancial management and credit who attended the Russian Federation Financial Academy, Starozhuk served as deputy director of the N.N. Andreyev Acoustics Institute (2007-2009). He most recently served as general director of the Atoll Research Institute.

ANDREI SHPILENKO, Ph.D., currently serves as the director of the non- proﬁ t Association of Technoparks in High Technology and chairman of the board of the Youth Innovation Center. Shpilenko is an expert and innovator in youth entrepreneurship, startup businesses, and partnerships between the public and private sectors.

KENDRICK D. WHITE is the vice rector for Innovation at the Lobachevsky State University of Nizhny Novgorod (UNN) and the director of UNN’s Technology Commercialization Center. He is also the founder of Marchmont Capital Partners, LLC, and a U.S.-born entrepreneur who has built unique know-how in commercializing early stage, high-tech investment projects over more than 20 years of investing and management experience in Russia.

2-3 Can high-tech hubs help to modernize Russia? Faced with numerous economic challenges, Russia needs a new strategy to boost its innovation development.

GEORGE GOGOLEV he late 20th century has seen a major evolution of the innovation model from structured vertical corporate research and development (R&D) sys- Ttems to distributed startup ecosystems. As the corporate model gradually dissolved in the 1980s and 1990s due to increased global competition and falling margins, venture capital ﬁ rms and startups have started taking over this niche. However, the effi ciency of the new model depends on the critical mass of knowledge, business, capital and proper governance concentrated in certain geographical regions.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

The most successful ecosystems in the U.S., for government. Embracing open innovation is therefore example, developed around the best universities, in- a grand challenge. cluding Stanford, MIT and Harvard. Moreover, Soviet universities for the most part were These schools provide a good interdisciplinary not involved in science and R&D activities, as R&D knowledge base, as they host a diversity of schools was done in vertically integrated applied research (Science, Arts and Humanities, Medical, Law and centers, and science was developed in the Russian of Business, Engineering) and boost the ecosystem the Academy of Sciences. around them by attracting and providing the best As a result of this division, universities are dis- human capital on the planet. tanced from the industry as well as from the process creating the needed knowledge base to feed intel- HOW RUSSIA TRIED lectual property (IP) into the innovation ecosystem. TO KEEP UP WITH THE REST They are currently in the process of learning to do OF THE WORLD large volumes of scientiﬁ c research and corporate R&D, but embracing entrepreneurship and the im- As the world was transitioning to new models of in- portance of building innovation ecosystems is still a novation, Russia after the collapse of the Soviet Union distant concept. was going through a major political and economic cri- If we take a look at the current development of sis and therefore was unable to go through a smooth regional innovation in Russia, we will notice that transition to the new model. Moscow is the only region that has a more or less The industry largely still relies on old internal Soviet complete set of institutions to grow a proper ecosys- R&D supply chains and is highly controlled by the tem. This is a result of the centralized nature of all the

Technoparks are built as a catalyst for the development of innovation clusters. In all cases the main purpose of technoparks lies in creating favorable conditions for innovative companies through building the environment and infrastructure they need.

5-4 REPORT

of innovation ecosystem initiatives as well as new approaches to creating techno and industrial parks. A number of development institutions were created including Russian Venture Capital (a state fund of funds), Rusnano (a late-stage nanotechnology investment fund) and Skolkovo (an initiative to create an innovation ecosystem from scratch near Moscow). These and other institutions started accumulating suffi cient expertise on how to develop innovation ecosystems and advise all levels of government and management teams on these issues. This triggered a new wave of creation of technoparks of a diff erent sort, which were actually aimed at modern startups. One of the biggest programs was run by the Ministry of Telecom and Mass Communications, which co-ﬁ nanced the creation of 12 technoparks with regional authorities all over the country. Novosibirsk. Akademgorodok. A year and a half ago, Russian Venture Capital In the laboratory of the commissioned a research project to Ernst & Young Institute of Theoretical and to study the current status of technoparks and busi- Applied Mechanics, Siberian ness incubators. This study showed that Russia had Branch of the U.S.S.R. slightly over 100 functioning technoparks and 110

Academy of Sciences. 1978 TASS business incubators. Most of those are owned by the state and a few are private. In terms of effi ciency, they are in general still far from global standards. economic activity in the country. Statistics from the National Business Incubator As- Other regions with high potential are St. Peters- sociation (NBIA) and European Business Network burg, Kazan and Novosibirsk, but they all lack criti- (EBN) are fairly similar and measure success rate by 27% cal ingredients, such as venture capital and anchor survival of companies after a certain period of join- corporations of global scale. ing a technopark or graduating from an incubator All of the existing regional innovation ecosystems program. The three-year are a legacy of certain Soviet, and in most cases, Usually the survival rate is 85 to 90 percent after survival rate for three years. Most of the Russian technoparks showed most of Russia‘s even tsarist science and industrial centers. Modern technoparks. Russia, however, started moving in this direction a survival rate of 27 percent. The top 5 percent of rather early, opening the ﬁ rst technopark in Tomsk in Russian technoparks, however, performed similar to 1990 (during the Soviet era), and the program con- global standards. tinued through the 1990s. Diff erences between top performing and average Most of the early technoparks were associated technoparks were mostly in the rigor of the selec- with universities. In the mid-1990s, the government tion process, the presence of independent admission started an industrial park program bringing innova- committees and the services they provided to com- tors closer to manufacturers. However, most of those panies. The best admitted only 9 percent of appli- early initiatives were not successful as they were ini- cants (compared to an 11 percent average in Europe), tially taken as a way to get additional state subsidies. had independent admission bodies and provided ex- This point was proven by a state accreditation of ex- tensive consulting services to their residents. isting technoparks completed in 2000. Others mostly considered technoparks to be a real estate business, admitted 37 percent of applicants THE CURRENT INNOVATION MODEL and had no independent admission panels. This was IN RUSSIA partly stimulated by KPIs they got at the regional and state levels, which did not stimulate long term The new wave of ‘modernization’ under president growth, but required to show either number of resi- Dmitry Medvedev in 2008-2012 brought a new wave dents or workplaces created.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

Lately best practices have been proliferating in the system and a lot of the existing and new technoparks are improving their management and strategy. Most Novosibirsk of the technoparks and incubators are still either connected to or situated next to universities and are Akademgorodok forming a larger innovation ecosystem. Akademgorodok is a great example of the current There are only a handful of universities in Russia state of the development of regional innovation that have a chance of becoming global innovation ecosystems. Built in the middle of the Cold War as hubs, and it is essential to develop the right services, ALSO READ an isolated center for the most active scientists, governance and functionality around those. Akademgorodok has long been seen as a success If we look at universities with the potential to drive Russia Direct Report of the Soviet academic system. Even when faced the local ecosystems in Russia, they too lack criti- “The Future of with the economic turmoil of the 1990s it did cal ingredients either in leadership and governance, Russia’s Innovation not lose its charm, being located in a beautiful Economy.” available land for development around them or in the Download at http:// pine forest on the Ob’ river and populated by the complexity of the research and education they do. www.russia-direct. children and grandchildren of some of the best For example, Moscow State University, being the org/archive. mid-20th century Russian scientists. Some of highest internationally ranked Russian university, them made good progress building IT companies, lacks an engineering school and has almost no art some made great high-tech niche products, but and design. no large ﬁ rms materialized. However, they created Moscow Institute of Physics and Technology, which a critical ingredient — a generation of locally bred is currently actively developing an entrepreneurial entrepreneurs. They pushed the local government community driven by its successful alumni and ranks to build a technopark, created modern prototyping the highest among Russian schools in global science, facilities and started growing the local innovation technology, engineering and math (STEM) ratings, ecosystem on the fertile soil of the highly educated has no business, arts or medical schools. Therefore, it population of Akademgorodok. Yet the progress can only play a major role in IT and materials. has been terribly slow and it is rather clear why: In order to transform any of these schools into real Most of the city is still run by the Russian Academy drivers for the knowledge economy and globally of Sciences, which is distancing itself from any competitive innovation hubs, it is crucial to dramati- possible connections with real businesses. The cally improve governance and leadership, diversify local university had originally been built as a school education and science and embrace high tech busi- to supply basic researchers to the Academy and nesses, global or local, willing to work in close prox- it still sees itself this way, being wary of what is imity to these schools. As of now, the necessary vi- going on in the outside world and skeptical of what sion is only being formed and the current leadership outside businesses want to do with their grads. burdened by the Soviet experience is not ready to Global companies love to place their R&D centers dive into the new reality. here and use the abundant high quality human capital of the region, but they are not willing to INITIATIVES FOR 2015 AND BEYOND open up any markets or engage in local merger and acquisition deals. With the absence of major Faced with the challenge of global competitiveness, economic activity, local angel investors and venture Russia is currently launching important initiatives, capitalists are virtually nonexistent. This is a case of such as the Russian government project “5-100.” It a region which has potential to become visible in the aims at boosting the international ratings of Russian global landscape, but like many Russian innovation universities. Another one is the New Technological Ini- ecosystems, is handicapped by its past. tiative, which forecasts the growth of future markets and develops ways in which the nation can play a role in those. These initiatives are pushing the system in the right direction and bringing positive change. However, still more focus is needed on certain high potential ge- ographies to build self-sustaining innovation growth

engines of a global scale. STEPANOV SLAVA

6-7 report

PRESS PHOTO A strategy for the development of Russian technoparks

One of the key ntil relatively recently, Soviet science cities were rightly considered by questions here is: Why Russian legislators as highly desirable in many industries and sectors. The Utechnoparks that replaced them, with rare exceptions, lag far behind simi- create technoparks in lar structures abroad both in terms of creating the best environment for innovative startups and commercializing the output of resident companies. the first place? What is being done to effectively treat the afflictions of Russia’s homegrown technoparks? What are the results so far, and what can we expect them to de- liver? Andrei Shpilenko Why does Russia need technoparks?

As international experience shows, every technopark in the developed world is created with specific goals in mind. One of the main goals is to generate scientific breakthroughs and knowledge. To achieve that at one site requires a combination of fundamental and applied science with cutting-edge research centers, either industry-specific or diversified across sectors. In some cases, the goal is to create small innovative enterprises, thereby providing regions with new jobs.

Insider’s guide to Russian high-tech hubs | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

When people talk about the “innovation storm,” it should be remembered that for wide-scale innovations to emerge, difficult“ circumstances are not enough. You need a sound institutional environment.“ Russian economist Alexander Auzan

Lastly, technoparks are built as a catalyst for the We are talking here about fairly advanced tech- development of innovation clusters. In all cases, ho- noparks. As the experience of the world’s best wever, the main purpose of technoparks lies in cre- technoparks demonstrates, it takes six to ten years ating favorable conditions for innovative companies to get a technopark up and running, i.e. to provide through building the environment and infrastructure the requisite technical facilities and make the park they need, and providing resident companies and attractive to businesses. That implies creating a research organizations with a host of benefi ts and technological, engineering and institutional infra- privileges. structure, and, more importantly, implementing mechanisms and programs to make doing business THE GROWTH OF RUSSIA’S in technoparks better than anywhere else. Full rec- TECHNOPARKS ognition takes about 30-40 years of operation at full capacity. Whereas many technoparks outside Russia The new technoparks are all rather reminiscent of So- have celebrated at least their twentieth anniversary, viet science cities. And it is no coincidence that the inside the country only three such organizations are fi rst wave of Russian technoparks, built in the early more than 20 years old, while one is 10-20, a hun- 1990s, appeared as part of technical colleges and dred are 3-5 years old, and sixty-fi ve are 1-3 years public research centers in academy towns and sci- old. The upshot is that in Russia today 97 percent ence cities. of technoparks are in the embryonic stage, and are Unfortunately, a good number of these parks are no hence at risk of being nipped in the bud. longer functioning — a sad consequence of the lean In Russia today, 97 years when science, innovation and industry were percent of tech- THE GOVERNMENT’S ATTEMPTS TO all pushed to the periphery of government atten- noparks are in the DEVELOP TECHNOPARKS tion. Nevertheless, the goals they set and conceptual embryonic stage, building blocks they created are one of the ingredi- and are hence at In the mid-2000s, a new impetus to set up tech- ents required to turn technoparks into healthy living risk of being nipped noparks came from the adoption of the “Concept organisms modernized and adapted to the specifi cs in the bud. of long-term socio-economic development of the and challenges of today. Hence, the objectives of today’s technoparks also include diversifying the economy of the Russian Federation, changing its structure, developing production in high-tech areas, and raising national self- esteem. Technoparks are also the basis on which to build future industrial and innovation clusters. Today, all bets are on clusters to create the environment for the “new industrialization.” To meet these expectations, every cluster must have a core and a catalyst for development in the form of a technopark as a generator of new projects and new kinds of products. Without such a generator of ideas, clusters risk becoming regressive manufacturers of a single product. As the fi rst attempts at cluster development show, clusters must always aim to improve the competitiveness of its member companies and their products in terms of R&D. Doubtless that is also the

prerogative of technoparks. RIA NOVOSTI ©SERGEY PYATAKOV/

8-9 REPORT

Russian Federation to 2020.” This document identi- brought to fruition at the technopark in Novosibirsk fi ed, among other things, the need to implement a Academy Town in Siberia and at Zhigulevsk Valley, national system of innovation, providing for the crea- a technopark in central Russia in the city of Samara. tion of technoparks. In the same period, a substantial Among the country’s most developed tech- amount of public money was allocated to the estab- noparks that fully meet their stated objectives are lishment of technoparks under a series of dedicated the IT park in Kazan, Mordovia Techno Park, Tomsk programs, including a comprehensive program to Nanotechnology Center, and Sarov Techno Park, create technoparks in Russia in the sphere of high- which is home to a supercomputer simulation cent- tech, a similar program under the auspices of the er. The multisectoral Technopolis Moscow is also Ministry of Economic Development, and a program developing rapidly. under the Ministry of Education and Science to develop innovative infrastructure at universities. WHAT IS HINDERING THE Consequently, in the period 1990-2015, Russia saw DEVELOPMENT OF TECHNOPARKS? the establishment of 179 techno parks. The record year was 2013, when 200 were registered. The examples given so far achieved success mostly “in spite of” rather than “thanks to.” Post-2013 the num- RUSSIA’S MOST SUCCESSFUL ber of techno parks in Russia began to decline, a trend TECHNOPARKS that still persists. The main reason was the lack of an established legal framework defi ning the goals, tasks The best Russian technoparks are not far short of and principles of technoparks, as well as their role in world-class in many categories, including availability the national system of innovation. of infrastructure for launching innovative startups and There is still no precise system of fi nancing and range of services on off er. government support measures, or criteria for evalu- The most famous example in this regard is the high- ating performance. The attempts to overcome this tech park in Khanty-Mansiysk Autonomous Okrug- regulatory backwardness have largely come about Yugra, which formed the basis for the Regional Engi- through the persistent eff orts of the Association of neering Center. Many interesting startups have been Technoparks in the sphere of High Technologies.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

STEPS TO IMPROVE THE SITUATION resolution of issues such as providing tax breaks and creating business incubators, thereby eliminating Taking into account the best Soviet and foreign ex- any shortcomings revealed during the accreditation perience, combined with modern approaches to set- process. ting up technoparks, the past two years have seen the Not all technoparks that apply undergo accredita- drafting and adoption of a number of framework doc- tion. It is a matter of principle for our Association uments in the fi eld of technoparks. They include the that the ranks of technoparks should not contain “Requirements for technoparks for their infrastruc- “simulacra” that allow federal agencies and regional tural facilities, their activity and operation, and the authorities to paint an overly rosy picture of prosper- list of services and their provision to techno parks ity in the fi eld. in the sphere of high technologies,” and the “Guide- lines on the activity, goals and tasks of technoparks, COMMERCIALIZING NEW and the composition, management, property, equip- INNOVATIONS ment, land plot, engineering structure and range of services of technopark residents.” If all illusions are put to one side, the problem of in- At the end of last year and the beginning of 2015, novation commercialization looms large. The govern- public consultations were held on drafting a new na- ment allocates quite considerable funds to the devel- tional technopark standard, which is expected to be opment of technoparks, but recipient institutions do approved by late June and published as the “Tech- not always utilize them eff ectively. nopark Requirements” national standard (GOST). This practice harbors two extremes that eff ectively Since 2014 there have been eff orts to campaign for nullify the eff ect of investing in innovation. At one voluntary accreditation of technoparks. Accredita- extreme, specifi c innovation projects are given pin- tion means that a technopark contains all necessary point support, for example, through grants. But this infrastructure to promote innovative business, and support is not evenly distributed across all stages of implements cost-saving programs and measures. It the chain of commercialization in the project lifecy- sends an important signal to startups and venture cle. As a result, certain stages remain “blind spots.” companies, too. Accreditation helps the managing More often than not areas such as mentoring, as- company of a technopark state its case more con- sistance in prototyping and business acceleration vincingly in the dialogue with local heads in the joint are left out, and they represent the key services

The map shows the Moscow level of innova- Saint Petersburg Perm tion in Russia by 11.7% Kazan region and provides Yekaterinburg an overview of Barnaul where the most IT Krasnodar 65% firms are located Nizhny Novgorod 1.7% 1.7% (with 65 percent Rostov-on-Don Ufa 1.7% 5% of them located in 1.7% 3.3% Vladimir 3.3% Moscow). The main Novosibirsk 1.7% characteristics of % - share of all IT companies the top 5 Russian in Russia located in 1.7% a given city IT companies are 1.7% Top 5 IT companies, data for 2014 provided below. $ 2.4 billion $ The level of innovation activity by region 1.6 billion 0.69 0.48 0.41 0.35 5,998 $ 4,241 employees 802.2 $ $ employees million 675.6 2,712 million 2,610 591 2,747 employees employees million employees

National Computer LANIT group Technoserv Softline ITG Source: Association of Innovative Regions of Russia/RIA Rating Corporation of companies

11-10 REPORT

‘‘‘‘‘‘‘‘‘ ‘ ‘‘‘‘‘‘‘‘‘‘ ‘ ‘ ‘‘ that must be provided to innovators. At the other etc. By no means do all Russian technoparks have extreme, support institutions, lacking suffi cient re- such technological infrastructure at their disposal. sources, try to maintain a number of additional busi- In addition, it is impossible to imagine a foreign ness streams over and above their basic activity of technopark without venture capital funds. But Rus- supporting innovative startups. As a result, the funds sian technoparks have virtually none. Shared know- are squandered. For instance, Russian Venture Com- ledge centers at technoparks are few and far be- pany (RVC), rather than focus squarely on creating tween. venture capital funds, additionally undertook expert, consulting and other projects. Thus, we have yet to THE ROLE OF THE STATE IN build an eff ective system of project support at all INNOVATION DEVELOPMENT stages of the life cycle with the necessary concen- tration of resources at each stage. It is inevitable for questions to arise about the role of This is one of the stated functions of technoparks, the state in the development of technoparks. Today its but very often poor goal-setting forces their man- involvement in this process leaves a lot to be desired. aging companies to focus on generating revenue, And that is despite the fact that public investment so which is most readily achieved by renting out ﬂ oor far in the development of technoparks currently totals space. It turns out that Russian technoparks have 54 billion rubles, or about $1 billion. About 60 percent prospered primarily thanks to that practice. of this sum has been spent on Skolkovo. The Rus- But leasing should not be a technopark’s main ser- sian Ministry of Communications spent 25 percent vice. The chief objectives of their managing compa- of these funds as part of its now implemented core nies should be to increase the amount of revenue program, the Ministry of Education and Science 17 and the number of innovative companies and jobs percent, and the Ministry of Economic Development generated by technopark residents. 1 percent. The investment is more than considerable, The eff ectiveness of managing companies should which, however, cannot be said of the eff ect it has be properly assessed. If up to 70 percent of revenue produced. is made up of leasing payments, it means that the Now the situation has slowly begun to change. The technopark in question is failing to meet its intended resolution of the government “On the selection of purpose, since at least 50 per cent of the managing constituent entities of the Russian Federation having company’s revenue structure should come from pro- the right to receive state support in the form of sub- viding services to residents and managing projects. sidies for reimbursement of expenses on infrastruc- In order to ensure such revenue structure, tech- ture for industrial parks and technoparks,” adopted noparks should have their own business incubator, on October 30, 2014, identiﬁ ed four key departments prototyping center, laboratories, engineering center, dealing with the creation and development of tech-

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

noparks. They are the Ministry of Economic Devel- opment, the Ministry of Education and Science, the Ministry of Communications (responsible for high- The first step has already tech technoparks), and the Ministry of Industry (in been taken towards creating charge of industrial technoparks). Thus, the ﬁ rst step has already been taken towards creating an entry an entry point inside the point inside the government for resolving issues with government for resolving technoparks and submitting and discussing proposals for improving effi ciency. issues with technoparks and The next step should be to set up a single authorized submitting and discussing body at the level of the government to coordinate the activities of the federal center and the regions proposals for improving in the creation and development of technoparks. efficiency. The absence of such coordinator with broad powers is hampering the development of program-based actions, as well as the formulation and approval of budgetary expenses, including at the level of Russian Federation constituent entities. We have often stated from various platforms that It is also necessary to overcome the departmental in order for technoparks to meet with their intended fragmentation on matters pertaining to technoparks. purpose, they require legislation on preferential tax It must be said in their defense that this disunity of treatment and other privileges currently off ered to technopark “curators” is not so much their fault as industrial parks. The activity of the latter is governed the unfortunate consequence of the prolonged lack by a separate law under which they receive state of a common government strategy in this area. support, including interest rate subsidies on loans, As a result, each department tries to create its measures to support private industrial parks through own rules of the game and use its own set of tools the Ministry of Economic Development, etc. Without Public investment to tackle industry-speciﬁ c tasks. One is focused on creating a similar environment for techno parks, they in the development developing business incubators, another on pro- will not be able to generate new innovative compa- of technoparks moting techno parks and techno-innovation special nies. In their present form, techno parks are simply currently totals economic zones (SEZs). Collectively, they essentially unable to carry out this key role. about $1 billion. perform one and the same task — creating mechanisms to commercialize innovative projects. But ultimately their eff orts and government resources are spread too thin.

WHAT OTHER MEASURES ARE REQUIRED TO SUPPORT TECHNOPARKS? For its part, the Association of Techno Parks in the sphere of High-Tech has produced a number of proposals aimed at improving legislation in this area of activity. In particular, it is proposed that the RF law “On technoparks” and the “Development strategy (creation) of technoparks” be drawn up and adopted by 2020. It is also necessary within the framework of the Interdepartmental Commission for the implementation of the Innovation Development Strat- egy of the Russian Federation to 2020 to deﬁ ne the place, role and function of technoparks in the national innovation system with a view to actualizing

this document. SERGEY FADEICHEV/TASS

13-12 REPORT

EXPERT COMMENT

CEO, Russian Venture Company Igor Agamirzian

Software technologies today have become the platform for technological development. Information technologies are at the foundation of all current industrial breakthroughs (from traditional industries to new industries). It seems that Russia has great human potential here as mathematics has always been one of the main fi elds of focus in Russia. And it is mathematics that provides the basis for software development and CAN THE GEOPOLITICAL CRISIS HELP REJUVENATE information systems manage- RUSSIAN INNOVATION? ment worldwide. The leading countries in math- The Russian economy faces the formidable task of becoming competitive in the ematics are the U.S., France new technological paradigm and simultaneously upgrading manufacturing in the and Russia, which is evident old. This can be achieved only through modernization of production. from the number of winners of A couple of years back, many Russian companies bought up not only equip- the Fields Medal (considered ment in Europe and Asia, but also other companies and fi rms, acquiring in the by many to be the Nobel Prize process modern R&D centers and new market niches. of mathematics). The Russian The ensuing crisis and political ramifi cations actualized the topic of import leadership in this area has a substitution, including in the segment of R&D and the production of innovative long history, back to the pio- products. Here, too, the value of technoparks as a tool in the unassisted front- neering Swiss mathematician line development of next generation fundamental technologies on the basis of and physicist Leonhard Euler, scientifi c and technological groundwork unique to domestic industry is multiply- who spent almost half his life in ing. After all, the economy is built on a specifi c model: R&D followed by imple- Russia and essentially became mentation and production on an industrial scale. the founder of the Russian Logic suggests that all phases of this essentially single process should be unit- mathematical school. ed by a common system and methodology of control, and a single algorithm In the 20th century, the main that provides a clear sequence of actions and eff ectiveness at each stage. Ide- achievements of Russia were ally, startups nurtured in technoparks should grow in stature and expand into not in the area of applied sci- industrial parks, where the current state support package will enable them to ences, but rather in theoretical carry out industrial-scale production of high-tech products. That is the knowl- sciences – in math and physics. edge economy in a nutshell. This background should be lev- In no way does import substitution imply autarchy, or economic self-suffi cien- eraged by today’s higher edu- cy. Russian industry thrives on collaboration with foreign investors and joint cation institutions, thus helping large-scale international projects. Russia to boost its technologi- As technoparks develop and residents become suffi ciently large-scale to move cal development and join in the into industrial parks and clusters, the ability to partner with foreign investors global technological growth. seems set to rise to a qualitatively new level.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

1514- REPORT

THE MINISTRY OF TELECOM AND MASS COMMUNICATIONS OF THE RUSSIAN FEDERATION

he Russian government today attaches great importance to the development of advanced Ttechnologies. This is seen in the gradual creation of favorable conditions for Russian companies via new legislation and in the provision of ﬁ nancial support for centers carrying out innovative research. The government is also taking measures to simplify conditions for foreign players to operate in the Rus- sian market. Supporting technoparks (“technology parks”) in this connection is one of the Russian gov-

DMITRY ASTAKHOV/TASS ernment’s key priorities in the near future. THE BUILD-OUT OF RUSSIA’S TECHNOLOGY PARKS

Today in Russia there are many technoparks, innovation clusters and special economic zones for developing the country’s future high-tech businesses. And, at the federal level, a series of measures is being implemented to support the establishment of additional technology parks. Previously, the Russian Ministry of How to create Telecom and Mass Communications oversaw an integrated program called “Establishment in the Rus- sian Federation of Technology Parks in the Sphere of a favorable Advanced Technologies.” It operated for eight years from 2007 to the end of 2014. At the end of this program’s implementation, 12 environment for technology parks had been established in 10 Rus- sian regions, which today accommodate more than 775 companies and have created almost 19 thousand technology hubs jobs. The annual income for technopark companies in 2014 was more than 40.5 billion rubles ($712.7 million). Investment from the federal center comprised in Russia 13 billion rubles ($228.6 million), while the regions in- vested 18 billion rubles ($316.8 million). This is argu- ably one of the most eff ective programs for creating an innovation infrastructure with support from the Today Russia has about 200 federal budget. registered technoparks. Thanks to In 2014, the Russian government developed a new support mechanism for establishing technol- new government initiatives, that ogy parks. It is intended to give Russian regions the number may increase in the near opportunity to reimburse part of the financial cost spent on establishing the technology park infra- future. structure using federal taxes paid by companies located in technoparks. It also creates the opportunity to reimburse some of the expenses for the payment of interest on loans, which had been taken for the construction of facilities and their infrastructure.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

A LEGAL FRAMEWORK FOR THE IT One of the main problems in INDUSTRY developing the IT industry in Besides infrastructure, it is important to establish at- Russia remains the lack of staff. tractive conditions for running an IT business in Russia. At the present time the Ministry of Telecom provides There are steps being taken the following benefi ts for accredited IT companies: by the Russian government to • Reduced rates for insurance contributions (contributions to pensions and medical insurance) — up ALSO READ narrow this gap. to 14 percent of payments for individuals (compared to 30 percent common rate in Russia); The problem • The opportunity to use a simplifi ed process to of the ‘brain percent, rising from 25 thousand to more than 42.5 recruit highly qualifi ed foreign specialists; drain’ becomes thousand scholarship positions in universities. • The right to include in expenses the cost of elec- increasingly important for Russia tronic computing technology as material expenses in in relation to global BRICS AND RUSSIA’S FUTURE their full amount; workforce mobility. TECHNOLOGICAL DEVELOPMENT • Reduced to 15,5 percent profi t tax for companies Find out what in Novosibirsk and Penza regions (compared to 20 Moscow is doing to Today, one country and just a few companies monop- percent common profi t tax rate in Russia). reverse the outflow olize the global software market. That could change of talent. Download The total number of IT companies accredited by our special report as Russia expands its role within the BRICS. This year the Ministry of Telecom is currently more than 5 “From Brain Drain it is the chairman of the BRICS. On July 9-10, the annu- thousand. Those paying a lower insurance rate dur- to Brain Gain” from al summit of these countries will be held in Ufa. Since ing 2011-2014 had more stable growth in revenue and our website: www. the start of the year, the head of the Ministry of Mass federal tax payments at a higher rate than the aver- russia-direct.org/ Communications Nikolay Nikiforov has personally archive age for the economy as a whole. held negotiations with minsters from Brazil, India, Chi- The total amount of tax on personal income, listed na, and South Africa, and they all are concerned about by these organizations for 2014 exceeded 17.8 billion the current situation. Nikiforov suggested that BRICS rubles ($313.4 million), excluding tax deductions, the should join forces to develop computer software. This, amount of income accredited companies reached in particular, guarantees access for Russia’s future de- 311.6 billion rubles ($5.5 billion), the average salary velopment in the appropriate BRICS markets, which of employees was 84,000 rubles per month ($1,480). account for half of the world’s market. This is several times greater,1 than the average in- ______come in Russia, and shows that developing the IT [1] The average monthly wage in Russia at the end of industry is a serious starting point for balanced, sci- April 2015 was 32,805 rubles ($579). Rosstat. entifi c growth in the country’s economy. Russian tech hubs by area of specialization THE TALENT GAP

On the other hand, as before, one of the main problems in developing the IT industry in Russia remains the lack of staff . There are steps being taken by the Russian government, though, to narrow this gap. As a result of joint work between the Ministry of Telecom and the Ministry of Education and Science, the number of budget places in universities for IT specialists for the 2016-17 academic year will be increased by 31 percent in comparison with the 2015- 16 academic year. In 2014, institutions managed to increase training for IT professionals from September 2015 by 34 percent. Over the past two years, government demand for IT professionals has grown by more than 70

17-16 REPORT

Can Russia become an innovation leader? The government must do more to make Russia a welcoming place for innovators and their new technologies. © SERGEY PYATAKOV/RIA NOVOSTI

OLEG BUKLEMISHEV

he oft-repeated pronouncements about mo- RUSSIA AND OTHER GLOBAL dernizing the Russian economy and overco- INNOVATORS Tming Russia’s dependence on raw materials in favor of new technologies have been almost a man- If you believe the offi cial statistics compiled by tra for years. Rosstat, over the past decade the proportion of high All kinds of innovative technoparks, clusters, in- tech and science-intensive industries has increased cubators and start-ups have been discussed at the by 2.3 percentage points to nearly a quarter of GDP. highest level of government, and the promises of full Every tenth organization in the country is putting support for domestic scientiﬁ c and technological de- various innovations into practice. As a result, in velopments have not bypassed a single government 2013 innovative products, works and services were program. implemented to the tune of 3.5 trillion rubles (about But what lies behind the sound and fury? Is Rus- $63 billion at today’s currency exchange rate). sia’s innovation economy really moving in the right But there are lies, damned lies and statistics. How direction? does one know if the village is real or a facade?

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

Unfortunately for Russia, it is most likely just a science to the practical needs of the national econo- façade. The picture is far less encouraging both in my in terms of scientifi c and technical developments. terms of statics and dynamics when Russian science and innovation is compared internationally. THREE WAYS TO CAPITALIZE ON For instance, according to the Russian Academy RUSSIA’S INNOVATION ADVANTAGES of Sciences spending on science per capita in Rus- sia is 5-6 times lower than in the leading countries. There are three important ways that Russia can trans- The number of researchers per thousand employees form these natural advantages into a genuine break- is three times higher in Finland than in Russia, and through in the fi eld of innovation. more than two times higher in Korea, Japan, Den- #1. Introduce new government policies that encour- mark, the United States and Sweden. age innovation Russia’s share of global spending on R&D is less First, it needs to be understood at the state level than two percent (the United States accounts for that economic modernization and diversifi cation is almost a third), and the fi gure is about the same in urgently required for the country’s development, and terms of patent applications — even lower than Rus- is not simply a half-forgotten political slogan from sia’s slice of global GDP. the time of Dmitry Medvedev’s presidency. Without Moreover, the current level of R&D funding in real a doubt, science and education is the cornerstone of terms is about half the level of 1990 (the Soviet Un- successful modernization. ion spent about 5 percent of GDP on R&D). The budget cuts to research and education must stop, and Russia’s top scientists and talented young- RUSSIA’S INNOVATION ADVANTAGES sters who choose this challenging pursuit should be off ered competitive base salaries, allowing them to The average Russian scientist, as acknowledged by focus on scientifi c work. President Vladimir Putin, is now 48 years old, and in However, material stimulus alone seems insuffi - some branches of knowledge (for example, the top- cient. Scientists in the Soviet Union enjoyed prestige priority nuclear industry) much older than that. The not just because of the decent salary, but also be- “road map” of Russian science to 2020 may well en- cause the image of researchers as doing something visage an increase in the proportion of employees interesting and important was actively promoted in aged 39 or under to 41.5 percent by 2018 (currently 33 movies and on television. The same could be true percent), but how it can be done at wages lower than today if TV stations in Russia swapped the endless in almost any other profession is unclear. tear-squeezing melodramas and stories of duels It is no coincidence that polls over the past decade between ugly criminals and wise policemen with a by the non-governmental research organization Le- good-quality serial about Russian scientists and the vada Center on parents’ preferred careers for their diverse, engaging work they do. The possible dip children have shown a steady decline in the populari- in ratings with the unscrupulous audience would ty of science and engineering, and even the still pres- be well compensated by the positive social eff ect, tigious job of computer programmer is beginning to which is needed now as never before to support the lose its shine. According to Levada Center, for exam- industry of science and knowledge. ple, only 15 percent of Russians in 2014 wanted their #2. Ensure the protection of property rights, in- children to pursue careers in computer programming cluding intellectual or other high technology fi elds. Second, property rights need to be properly pro- At the same time, Russia can still draw on a reserve tected, along with freedom of entrepreneurship, of important groundwork needed to break into the something that innovative industries need even innovation vanguard, namely, the well-earned repu- more than traditional ones. And introduction of new tation of Russian science and the country’s still active technologies cannot emerge as a clear competitive cutting-edge schools and technological know-how in advantage when everyone knows that hunting for several key areas. There are still talented young peo- government orders and privileges proves to be far ple who, despite everything, continue to be drawn to more benefi cial for a company than any number of fundamental science and applied research; energetic innovations. Russian businessmen who still manage — even in ex- Of course, one can create a dozen or two tech- treme investment conditions — to achieve success; noparks and incubators and give tax breaks or subsi- and the untapped potential of harnessing university dies normally available only to those innovators able

19-18 REPORT DONNAT SOROKIN/TASS

to hire special well-paid lawyers and lobbyists. In the First Circle], you can be assured that noth- And one can certainly be proud of what has been ing will come of it. When there is now a stigma at- achieved at the Skolkovo Innovation Center outside tached to accepting a grant from a foreign organiza- of Moscow, where entrepreneurs and researchers get tion, there will be an inability to attract the best and 15% by a little bit better than the rest of the country. But the brightest to science. Like it or not, but a diverse it would be much better from an innovation point of global marketplace of research ideas and results has view if the eff orts were spent primarily on progres- already taken shape, and Russia is only a small and of Russians in sively improving the business climate and promoting hardly the most advanced player. 2014 wanted competition not only inside special isolated zones, No one can erect a barrier in the way of people’s their children to but everywhere. Only then can high tech output be desire to succeed through realizing their skills and pursue careers actively commercialized, and such incubators and talents. Therefore, Russia’s only chance to win the in computer subsidies become genuinely productive. global competition is not to create a new Iron Curtain programming Otherwise, the rest of the country will miss out on that only will accelerate the existing brain drain, but or other high this positive experience, and the small number of is- to create the best environment for Russia’s young technology fi elds. lands of prosperity will sooner or later sink into the talent to thrive, so that armed with new knowledge (Levada Center) surrounding swamp. and experience from study and internships abroad, #3. Abandon isolationism they always want to return home. The last but not the least, in the interests of mod- However, the case of the non-profi t Dynasty Foun- ernization, the policy of isolationism and xenophobia dation, recently declared a “foreign agent,” shows needs to be abandoned once and for all. As shown that in spite of everything, the Iron Curtain mental- too often in the course of human history, it is incom- ity and sharashka-style modernization are alive and patible with progress in the fi eld of science and in- well, and continue to march triumphantly across the novation, and with progress in general. country. Yet, it is precisely this foundation, set up by Above all, it hinders the fi ght against pseudosci- one of the nation’s most prominent tech entrepre- ence, which, despite the best eff orts of the scientifi c neurs, Dmitry Zimin, that did so much to discover community in recent years to expose false disser- and nurture young scientifi c talent in Russia. The fact tations and infl ated degrees, continues to fl ourish. that Zimin thought it wise to leave Russia sends a “Locked-in syndrome” is a typical feature of many very loud and clear signal that drowns out the offi cial Russian scientifi c communities, and the lack of real mantra of modernization. competition and clear-cut comparisons between Whatever happens in the long run, it will take a genuine and phony science allows them to stand in considerable amount of time and eff ort to expose the way of the next generation of Russian talent. the prevailing xenophobic notions that are patently If someone wants to build a modern Russian inno- false and deeply detrimental to the future of Russian vation paradise on the basis of the sharashkas [the science and innovation. But nothing less is required hard-labor experimental design bureaus vividly de- if we want to see Russia become a leading innovative scribed by Alexander Solzhenitsyn in his 1968 novel power in the twenty-fi rst century.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

2120- REPORT

Case study: Three centers for Russian innovation #1: Skolkovo Innovation Center #2: Bauman Moscow State Technical University #3: The Troitsk Technopark

Skolkovo didn’t have a name ﬁ rst. The idea was to create a science and technology enclave with special legal and regulatory regimes, fuel it with a sizable government subsidy and support research and development (R&D) and startups in one of two areas: Russia’s segments of comparative advantage (IT, space, nuclear) or high demand and large market (bi- omedicine and energy effi ciency). Principles applied to the enclave called for it to be globally competitive, free of corruption and equally friendly to the startup community and big transnational corporations.

GETTY IMAGES Skolkovo Innovation Center has never been considered by its founding fathers as a toy project, just a carbon copy of similar centers in other countries. Rather, it was a direct answer to the challenges of ALEXEI SITNIKOV the 2008 crisis. The government could not aff ord to spend more, so the economy needed to make more. he idea to wean Russia off its dependency on The goal of Skolkovo was never to restructure the oil and gas exports is as old as the Russian Russian economy; Instead, the goal was and is to Tmarket economy itself. Russian government test new approaches to R&D, as well as new busi- throughout the 1990s and 2000s have been experi- ness practices to be applied outside of Skolkovo. The menting with several turnkey solutions to the prob- Center today hosts about 1,000 startups. It has raised lem. A number of free economic zones, high-tech nearly 60 percent of development funding from the hubs and incubators emerged throughout Russia’s private sector. The startups came to Skolkovo from territory. All received government funding and had nearly 50 regions of Russia and already have gener- one purpose – to stir high-tech development and ated a turnover of about $1 billion. production. Yet against the background of high and These results show that the model works. Support- rising oil and gas prices, these new creations were ing high-tech research with the right set of regula- nowhere on the list of priorities for private investors. tions, some funding and mentorship work just as Then the 2008 ﬁ nancial crisis happened. The de- well in Russia as in any other country. The experi- valuation of the ruble began to deplete the govern- ence of Skolkovo also shows that the main challenge ment’s hard currency reserves, unemployment levels in developing the innovation center is not in the in- started to impact consumer demand, and big corpo- frastructure, regulation or funding. It is in the ability rations found themselves near default on their dollar to source, engage and empower human capital. A and euro-denominated debt. If before the crisis there nationwide transformation will occur only and if the was a belief that Russia had been the “island of stabil- models such as Skolkovo are fueled with the critical ity in stormy waters,” the dynamics of the crisis have mass of human talent, hungry for challenge and dis- eroded this belief completely. covery.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

#2: Bauman Moscow State Technical University

EVGENY STAROZHUK

he activities of Bauman Moscow State Techni- cal University (BMSTU), a leading university for Tengineering education in Russia, has for a long time been aimed at the scientifi c and technical support of Russia’s defense industry and the superiority of the country in the aerospace industry. For this reason, the university’s cooperation with private companies in the sphere of innovation has only recently become a priority area for development. Today, the leading role is given to cooperation with Russian companies. However, the university is also prepared to work with foreign companies. An example of this could be the recent agreement between NOVOSTI © SERGEY PYATAKOV/RIA BMSTU, Kaluga Region, and the Austrian manufac- turer of communications and navigation equipment, We cannot The most signifi cant changes were caused by eco- Frequentis. The purpose of the agreement is to co- nomic instability. Prices increased for equipment pur- operate in a range of areas, including development allow chased by the university, especially technologically of micro-electronic components in the sphere of air ourselves advanced scientifi c machinery. traffi c management and fl ight safety. Investors have become more careful, especially in Furthermore, BMSTU is collaborating with such in- to be left regard to expensive projects. This has aggravated ternational engineering giants as General Electric, on the the situation even more in the area of venture capital Siemens, and Mitsubishi Electric. investments in advanced technology projects, which In many cases, BMSTU’s partnerships with foreign sidelines. in Russia are still insuffi ciently developed. companies are based in areas where the university In regards to the eff ect sanctions are having on for- traditionally has a high degree of expertise: in me- eign companies’ cooperation with BMSTU, one must chanical engineering, instrumentation and micro- take into account that business needs to develop electronics. In the near future, priority areas for sci- competitive advantages by developing technical in- entifi c and technical development and for expanding novations to prevail over unstable political trends. international cooperation include additive technology, Ultimately, if the mutual benefi ts of cooperation be- composite materials, nanoplasmonics and complex tween companies and the university are obvious to functional systems, ion-plasma technology, robotics both parties, the company will take the necessary and supercomputers, information and communica- steps to establish cooperation. tion technologies, and biomedical equipment. These Furthermore, it should be noted that the economic technologies are the precursors of future scientifi c policy that has been implemented in Russia is aimed and technical progress in the world, and we cannot at replacing imported products with those from the allow ourselves to be left on the sidelines. domestic market. This cannot be achieved without the participation THE EFFECT OF WESTERN of scientifi c-research organizations. The policies for SANCTIONS import replacement will lead to localization of advanced technological products in Russia. One can The recent exacerbation of the political situation that hope that this will create the foundation for long- led to the introduction of sanctions against Russia by term development of Russia’s scientifi c-research and a number of nations could not help but aff ect BMSTU. educational organizations.

23-22 REPORT

As a result of the reforms of the 1990s, almost 80 percent of industry- based applied science was elimi- RG nated, engineering bureaus perished, #3: the initial phase of the innovation process, in which pilot production small and medium-sized businesses (including start- dried up, and the The Troitsk Technopark ups) implement scientifi c ideas. manufacturing The testing ground for this solution is the Troitsk sector was largely SERGEI SHARAKSHANE Technopark at the Lebedev Physical Institute (LPI) of destroyed. the Russian Academy of Sciences. This world-class he economic transition toward innovation and scientifi c institution has produced seven Nobel lau- import substitution raises the problem of de- reates. The key component of the technopark model Tveloping small innovative enterprises. The crux lies in the search for ways to connect fundamental of the matter is that, as a result of the reforms of research to practical applications. the 1990s, almost 80 percent of industry-based applied science was eliminated, engineering bureaus THE RUSSIAN SILICON VALLEY? perished, pilot production dried up, and the manufacturing sector was largely destroyed. Stroll around the technopark campus, created in The only optimistic conclusion to be drawn is that 2008 outside Moscow, and every 20-30 meters you the country must learn to work in real-world condi- will literally stumble across new innovative enterpris- tions, i.e. to recreate a system that would enable many es, known as “residents.” Despite being described as achievements of academic research to be put into small, they create products in high demand both at practice. home and abroad. Nevertheless, retracing the last century’s path of The reason for that is the organic bond between applied science would be a mistake. New experience the technopark and the research institution. Part of is needed, along with fundamentally new organiza- this intrinsically new model is that the technopark is tional, scientifi c and commercial forms and intercon- a subdivision of the LPI, in which regard, new resi- nections between them. dents have to meet special criteria. The country needs a clear market-oriented model Every organization applying for residency is obliged of scientifi c and industrial infrastructure that covers to state its case before the LPI scientifi c council and

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

demonstrate the extent to which it is knowledge-in- al parks” in Western terminology. They are generally tensive. As a result of the strict fi ltering process, half set up on the basis of former industrial enterprises. of the resident employees registered here are them- However, the experience of Western Europe and selves LPI scientists: they work on the implementa- the United States shows that if technoparks are al- tion of scientifi c ideas up to and including product lowed to operate without constant communication commercialization. with the scientifi c “founding father,” they quickly What immediately catches the eye is the high level degenerate and die. A technopark will function bet- of global competitiveness, the “overtaking without ter and — more importantly — longer if it maintains ACADEMY catching up” ethos, and the great prospects for im- contact with an academic institution. That is why the port substitution. There is no escaping the fact that entire Troitsk technopark is bound to the LPI through OF SCIENCES if production is based on imported technology, back- the activities and research of the latter. The Russian wardness is built in from the start, which only intensi- Not only the technopark benefi ts, but also the in- Academy of fi es as the creator of the technology moves forward stitution, whose staff can work in transitional areas Sciences (RAS), in the meantime. But if innovation proceeds from a from pure science to applied engineering. Their sci- headquartered in Moscow, is the fundamental research laboratory, a business incuba- entifi c ideas turn into technological solutions, and highest scientifi c tor, it forces global competitors to play catch-up. become either devices or technologies that can then institution of the be implemented in the wider industrial sphere. country and the THE REQUIREMENTS FOR BUILDING A Furthermore, the technopark is a kind of trinity: it leading center for combines not only science and innovation, but also basic research in WORLD-CLASS TECHNOPARK natural and social training, providing an infl ow of young people into sciences. The It is worth noting that the Troitsk Technopark found its science. For students at leading physics institutions, Academy includes feet in just seven years. Practice shows that the activi- the technopark has turned out to be a valuable train- 9 departments, 3 ties of this young venture are in tune with the coun- ing base. regional branches, try’s top priorities: rearmament, Arctic exploration, and 14 regional scientifi c centers. and the creation of 25 million high tech jobs. Hence, LEGISLATIVE OBSTACLES FOR the Troitsk hub can serve as a model in the implemen- RUSSIA’S TECHNOPARKS tation of the government’s strategic objectives. On the topic of Troitsk Technopark, it would be The LPI’s technopark represents the most promising amiss not to mention its founder, Professor Vladimir model for the entire system of the Russian Academy Nevolin, LPI deputy director, doctor of physics and of Sciences, since despite all the upheavals of the last mathematics, and Honored Scientist of Russia. He quarter century, Russian science still possesses great has visited a host of countries, including many fact- development potential. fi nding trips to technoparks in the United States, Of course, in isolation, the research institute can- Germany and Britain. not shoulder the weight of such a technopark. Nev- Based on this experience, Nevolin set about creat- ertheless, the LPI is the largest institute of the Rus- ing the Moskovrechye Technopark at the Moscow sian Academy of Sciences, and home to very many Engineering Physics Institute — generally considered professionals carrying out research in diff erent areas. to be the fi rst technopark in Moscow. He took into However, clusters of institutions, for instance, can account the Soviet Union’s rich experience of imple- already adopt the practice of the LPI. One example menting technological innovations in industry. That is the science city of Troitsk itself — with its eight in- was where the concept of the “science-education- stitutes under the Russian Academy of Sciences and industry” triangle took hold as the basis for shaping two non-academic research institutions. an innovative infrastructure. Each houses a lot of interesting developments. The Here, then, are the basic requirements resulting LPI made them an off er: Let’s create a Troitsk Sci- from this concept. For an industrial park set up un- entifi c Center Technopark on the basis of the LPI’s der a scientifi c institution (as in the case of the LPI), Troitsk hub with due regard to its organizational and it makes no sense to create a symbiosis with an ex- methodical achievements. All agreed. isting industrial enterprise. There is no large contin- One legislative “but” remains. The executive authori- gent of qualifi ed employees, and no expanded pro- ties are fond of repeating that an academic institution duction base. That is not a minus, but a plus. Many should be engaged in pure science, and if something technoparks in Russia (Kazan, Naberezhnye Chelny, innovative comes from it, it should be taken from you Pereslavl, and elsewhere) would be labeled “industri- because it’s not part of your brief. For some reason it’s

25-24 REPORT

necessary to prove time and again that a generator of Top 6 innovations of high tech projects can only be created on the basis of a major research institution. Troitsk Technopark Unfortunately, that widespread belief is reﬂ ected in a law adopted by the Moscow City Duma, in ac- A micromachine with femtosecond lasers for cordance with which a technopark can operate only 1 surface treatment of materials at the nanoscale; under the aegis of a commercial managing company. As a non-commercial organization, the LPI is A powerful categorically opposed to the bottom line having pri- 2 femtosecond macy in the development of its scientiﬁ c technopark. laser complex — 10 The institute makes no attempt to maximize revenue terawatts (more than from resident companies, since it would quickly turn the capacity of all the world’s power plants in the world A technopark will function better combined); and — more importantly — longer if it maintains contact with an academic institution.

into a wheeler-dealer seeking to “sell” its premises Coordinate-temporal ﬁ eld generators for the to the highest bidder. The Troitsk hub’s managing 3 GLONASS system with the highest level of organization, therefore, is the LPI itself, which has precision anywhere in Russia; proven its capacity to act as such. Regrettably, there Ultra-large capacitors — an original LPI is no federal law on technoparks at present, although 4 brainchild. Charging such capacitor for 10 attempts have been made to draw one up. hours, the stored energy can power a smart home for 10 hours, or start a haulage truck in Arctic DEVELOPMENT OF THE INNOVATION conditions at -50°C; ECOSYSTEM AROUND THE RUSSIAN Silicon carbide, which is used to store spent ACADEMY OF SCIENCES 5 nuclear fuel and create large gamma-ray telescopes for studying black holes etc., and which The Troitsk hub eff ectively shows how the innovation can also be used to view Earth from space at ecosystem around the Russian Academy of Sciences’ ultra-high resolution. Roscosmos and Rosatom are fundamental research institutes should develop. Moreo- very interested in such products. Silicon carbide ver, the LPI is ready to point the way through dissemi- is used to make so-called “foam glass” — an nating organizational and methodological ideas, con- environmentally friendly thermal insulator used in ducting seminars on the basis of the technopark, and construction, superior to all other such products by sharing best practices. In fact, the technopark is itself a a factor of 10; startup on the scale of tomorrow’s national economy, Tools with diamond cutting surfaces, and and represents the embryonic phase of the transfer of 6 milling cutters more than a meter in diameter technology from the sector of science to the sector of used to cut through and recycle huge disused industry, design and implementation of new tech solu- concrete structures. These can be applied to tions. Today Russia boasts a number of innovative in- replace the surface of runways for next-generation stitutes, but their approach is too one-sided: They give aircraft; only this tool can remove such high- consideration only to ready-made projects. The LPI, on strength concrete. Several airports in Russia have the other hand, seeks to create an incubator of new in- already been modernized in this way. The tool is novations, i.e. a place where they are conceived and nur- needed for diff erent kinds of drilling, e.g. during the tured. Such technopark literally points the way forward construction of subway systems. to becoming an innovative country.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015 RUSSIA-DIRECT.ORG

Russia’s long-term transition to an innovation economy

ers, it is not entirely clear why Russian leaders often There are growing signs that Russia’s make the choices that they make. Russia is primarily youngest entrepreneurs are creating interested in protecting its independence, even if this means that sometimes decisions can appear to be il- the basis for a new innovation-based logical to outsiders. This desire for independence ex- economy. tends to banking, telecoms, minerals and mining, and many other spheres. KENDRICK WHITE While it may appear to be self-defeating, there is certain logic in Russia’s approach to development, and In spite of the negative impact that sanctions have for any sincere partners willing to take these nuances had on Russia’s economy, there is in fact a certain into consideration, there can be great rewards for the paradox at play here. In business plan competitions long-term development of business partnerships in across Russia over the past year, more and more op- Russia. portunities were visible which involve domestically There is reason to believe in the future of Russia’s developed new technology discoveries that are better younger generation of innovation driven entrepre- able today to attract local angel investors, as well as neurs. If all goes according to plan, they will eventu- interested corporate investors and partners. ally establish Russia as a leading innovation economy The Lobachevsky State University of Nizhny in the global economy. Novgorod, for example, has seen a dramatic increase For example, there are great opportunities in Russia’s in interest on the part of the corporate and invest- biomedical and diagnostics segments. Advances in 3D ment communities, including both domestic and in- modeling, early-stage cancer detection, on the spot ternational partners, seeking to cooperate and bet- wound healing and resolution enhancement represent ter understand what technology solutions Nizhny signifi cant breakthroughs worthy of being introduced Novgorod can off er. into global markets in the nearest future. Many local Russian enterprises were historically able to make off the shelf purchases of high tech solutions TOP U.S.-RUSSIAN HI-TECH FORUMS from Western suppliers. Today, these markets have #1: Open Innovations Forum and Technology Show been closed to them. There’s evidence that they are This fi ve-day forum dedicates each day to a different aspect of technology’s impact fi nally turning to the vast scientifi c community within on human life, with guest speakers and demonstrations showcasing cutting edge Russia to satisfy their technology demands. It is even innovation. When/Where: October 28 – November 1, 2015, Moscow, Russia. possible that the sanctions may be a sort of blessing in disguise for much of the Russian research community #2: Russian-American Innovation Technology Week (RANIT) The 20th annual meeting of RANIT seeks to build mutually benefi cial partnerships as funding will surely continue to support these eff orts between the U.S., Eurasia, and Russia through the development of pharmaceutical and as enterprises fi nd their traditional channels closed. biotech innovations. When/Where: June 11-25, 2015 in several locations in the U.S. Those not afraid of the short-term unpredictabil- ity and risk inherent in Russia’s long-term transition #3: Russia-U.S. Innovation Week from a commodity driven economy to an innovation- Russia-U.S. Innovation Week is an invite-only conference whose aim is to establish American-Russian business cooperation in the sphere of innovation development. The driven economy must understand that this process event brings together an elite group of business and government representatives from only started 22 years ago, and will require another 20 both countries. When/Where: TBA. years to complete. Keeping the long-term nature of this transition in mind is essential for any of Russia’s #4: 2016 IASP Conference partners to keep in mind. The International Association of Science Parks and Areas of Innovation (IASP) World Conference is a key platform for heads and senior offi cials of science parks of various There will always be periods of advancement and re- countries to meet and share experiences. When/Where: TBA. treat in this complex transition, and for most foreign-

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By Kendrick White

TOP 10 RECOMMENDATIONS FOR RUSSIAN INNOVATION ENTREPRENEURS

Entrepreneurs should consider their projects, Practice pitching your idea to your friends and 1 from the outset, to be driven by global market 6 family and then keep developing your pitch demands. Experienced, smart money investors are to potential partners, buyers, and investors. Your keen to see not just local market potential, but also pitch can be customized to your audience and you international market expansion potential. should continuously get feedback on your pitch and Pay attention to your project’s unique constantly update this. 2 intellectual property and ability to solve Be prepared for your team to “pivot.“ What this specifi c problems with a unique approach. 7 means is that what you start out with as your Having a plan in place to protect one’s intellectual initial project idea is very likely to change many property, through either secret know-how or patent times prior to your securing funding and start-up protection alternatives, is also critical to maximizing capital. Even after that, you will likely alter your the value of any new innovation idea. business model and initial business plans many Be ready to tell potential investors about times before you achieve a certain critical scale of 3 your track record and past success stories operations. and lessons learned. Sometimes an entrepreneur’s Entrepreneurs must seek out smart money greatest failures proved to provide the greatest 8 investors, meaning these who also know your insights. product and market segments, and who can help to Talk about your partners and those that advise you, not just throw money at your project. 4 currently are supporting you. In other words, Don’t be afraid of failure and mistakes. Way show that you have built a team around you that 9 too many entrepreneurs become afraid supports what you are doing. There is nothing more that their projects might not be competitive and risky for an early stage investor than to back a lone therefore are afraid to start in the fi rst place. horse who tells that he can do it all, all by himself. . Seek out the local leaders of the innovation Prepare your business model canvas as the 10ecosystem, and partner with them in order 5 fi rst step in your project development. What’s to secure successful long-term opportunities. your core value proposition? What’s your core Local business angel clubs, local universities, local market of buyers? Have you already talked to venture fund managers, local high tech enterprises them and confi rmed that your solution is actually led by experienced Russian entrepreneurs. Global a key problem for your market? What’s your enterprises should work to align themselves with business model? What’s your IP protection and the future generation of innovation driven leaders. commercialization roadmap?

EDITOR’S PICKS

TOP 5 TWITTER ACCOUNTS BOOKS AND ARTICLES FOR RUSSIAN #INNOVATION ON RUSSIAN INNOVATION

@nnikiforov Nikolay Nikiforov is the Minister of Telecom and Mass 1.Loren Graham, Lonely Ideas: Can Russia Compete? Cambridge, Communications of Russia, which is one of the government bodies MA: The MIT Press, 2013. fostering the growth of technoparks. 2.Doren Chadee and Banjo Roxas, Insitutional Environment, @IASPnetwork Updates from the International Association of Innovation Capacity and Firm Performance in Russia. Critical Science Parks and Areas of Innovation (IASP). Perspectives on International Business 9 (1/2), 2013, pp. 19-39. @USRIC_en The U.S.-Russia Innovation Corridor connects start-up 3.Zhanna Mingaleva and Irina Mirskikh, On Innovation and companies and universities. Knowledge Economy in Russia. International Journal of Social, Education, Economics and Management Engineering, 4 (6), 2010, @EWDN_Russia East-West Digital News (EWDN) is an pp. 169-178. http://waset.org/publications/12397/on-innovation- international information company dedicated to Russian digital and-knowledge-economy-in-russia. industries. 4.Chun-Yao Tseng, Technological Innovation in the BRIC @i_regions Tweets from the Association of Innovative Regions of Economies. Research-Technology Management 52 (2), March-April Russia. 2009, pp. 29-35.

INSIDER’S GUIDE TO RUSSIAN HIGH-TECH HUBS | #9 | JUNE 2015