Next year, companies with state participation will be recommended to create their own funds to invest in technology start-ups, as reported to Izvestia by Artem Shadrin, Director of the Department for Strategic Planning and Innovations of the Ministry of Economic Development. Another federal official familiar with the situation added that the creation of such structures in the future may become mandatory. Thus, by 2030, it is planned to increase the volume of venture capital investments in Russia to 410 billion rubles. According to experts, state-owned companies are unlikely to invest in start-ups. In their opinion, it is necessary to establish an adequate system for evaluating the performance of venture funds to avoid turning of technology investments into a simulation.
The updated innovation development plan for companies with state participation will include recommendations on how to create corporate venture funds, Artem Shadrin told Izvestia. The Ministry of Economic Development is planning to join efforts with other departments to prepare a special letter for state-owned companies, which will contain a proposal for the creation of such funds.
A federal official familiar with the discussion of the idea noted that, depending on the results of investments, the creation of corporate venture funds may become mandatory practice. With their help, it is planned to ensure a breakthrough in this market by 2030 from the current 14 billion rubles of investment per year to 410 billion (by 29 times). Such a goal is laid down in the draft strategy for the development of the market for venture and direct investments for the period up to 2025 and beyond for the period until 2030.
State-owned companies need to be encouraged to invest in innovative start-ups in order to eliminate barriers to such investments, said Alexey Basov, Investment Director of Russian Venture Company (RVC), in support of the plans of the Ministry of Economic Development. At the moment, government agencies are hampered by the caution of their managers, who are afraid to invest in risky projects as well as a lack of understanding of how to use the results of investments in their activities. However, as Aleksey Basov believes, state-owned companies may be more likely encouraged to make such investments by legislative opportunities than by obligations to create special venture funds.
In 2017, the President commissioned five companies to create their own venture capital funds: Roskosmos, Rosatom, Rostec, the United Aircraft Corporation (UAC) and United Shipbuilding Corporation (USC). According to Artem Shadrin, Rosatom maintains the largest fund at the moment — 3 billion rubles. The USC’s Press Service informed Izvestia that the fund would focus on small innovative companies.
State Corporation Roskosmos will create a venture capital fund with corporate participation in the form of an investment partnership agreement, the company’s Press Service said. Nowdays the holding is choosing the managing partner. The representative of the state corporation also added that Roskosmos’ subsidiary Russian Space Systems invested tens of millions of rubles in Skolkovo start-ups in 2016-2018. The other companies did not comment on Izvestia’s questions on the creation of venture funds.
Izvestia surveyed another 25 major state corporations from key sectors of the economy about their plans to create corporate funds. The Press Service of Russian Post replied that “they have not invested in technology start-ups yet, but the situation will change in the near future.” The postal operator plans to invest in the technology business through its subsidiary Postal Technologies, established specifically for innovation as well as use the Skolkovo infrastructure.
The Press Service of Rostelecom informed Izvestia that such a fund has already been created in the company. In 2017-2018, several hundred million rubles were spent on technology startups from it. The fund’s capital is constantly replenished by the parent company, Rostelecom added. The Russian Helicopters will begin to invest in innovative start-ups in 2019 through Skolkovo Industrial I Venture Fund, its press service reported.
Rosseti told Izvestia that work is underway to create a special fund to support scientific, technical and innovative activities. Its concept was developed, the document was approved by the company’s management bodies.
Sberbank told Izvestia that they are implementing investment programs in innovative businesses through Fort Ross Ventures management company (focused on start-ups primarily in the digital economy). In addition, the corporation implements a number of acceleration programs for start-ups, including those initiated by corporate employees.
Other polled state corporations did not promptly respond to Izvestia’s questions.
There is virtually no one in Russia to develop the venture capital market apart from state-owned companies, believes Victor Solntsev, associate professor at RANEPA. At the same time, the likelihood that state corporations will decide to invest in innovative business is rather low — at least the current level of competition in the public sector does not encourage its players to actively seek ways to gain a technological advantage. If requirements for the annual volume of investments in start-ups are imposed, the venture capital industry will revive, the expert believes. The investment standard value can reach 30% of EBITDA (earnings before interest and taxes), Viktor Solntsev believes.
There is really no tradition to invest in startups in Russia, agrees Stanislav Rozmirovich, Director of the Institute of Innovation Management at the National Research University Higher School of Economics. It is exactly the reason why Russian specialists, after having received no financial support for their products inside the country, go abroad and often successfully sell their ideas there. The public sector, given its financial capabilities, could be a key driver for the growth of the venture capital market if the government creates the necessary prerequisites, the economist added.
However, according to experts, the regulation of the public sector in the context of the venture capital market development should be comprehensive. A simple obligation to create corporate venture funds will lead to investments for the sake of investments themselves, that is, to waste of resources, says Stanislav Rozmirovich. Attractive conditions should be created encouraging investment in start-ups for the efficiency of funds to be improved. Moreover, a system for assessing the impact of measures financed from state-owned venture funds is needed. Otherwise, corporations will really just simulate innovation, rather than show practical results.