Government fund of funds
Development institute of the Russian Federation

Press about RVC

"Venture business is young activity type"

11.05.2018
Source: Izvestia

How to teach an unmanned motor vehicle drive without accidents and why invest in companies that will become bankrupts

Head of the National research center Mikhail Kovalchuk and CEO of Russian Venture Company Alexandr Povalko talked about innovation entrepreneurship, National Technology Initiative and future of the market of unmanned motor vehicles

Mikhail Kovalchuk: Russian Venture Company, RVC — one of the public institutions created to support science driven and high technology business in the country. If anyone has a genius idea and he wants to make it business, the money are necessary for that. However, the bank will not give money for unconfirmed idea: it may not work, the risk is too high. On the other hand, if the project "works out", big revenue can be received from it. Venture funds and companies are engaged in such high-risk investments. They give money to tens of companies most part of which become bankrupt in some time. Two or three companies survive, but they by far warrant all others and sometimes bring great profit to the investor.

This is venture business and today it is, as a rule, related to the science-driven and high technology industries. RVC is engaged in this business since 2006, but now a new development stage has come. It is related to the National Technology Initiative, with the fact that the President V.V. Putin has recently marked a clear course to involve young generation in science and science-driven business.

So, what is RVC today?

Alexandr Povalko: You are right: today one of the main RVC functions is the project office of the National Technology Initiative. However, at the same time, we preserve the functions of the public fund of funds: we search for and support managing teams — private companies — that can attract the funds from market. Today we have 26 venture funds in our portfolio, where about half money are private.

Now we have new tasks set before us and those set forth by the President, and those that gradually formed during work on the National Technology Initiative. First of all, we need to attract new funds from the market to develop venture investments and technological entrepreneurship.

Head of the National Research Center Mikhail Kovalchuk:
Photo: IZVESTIYA/Aleksey Mayshev

M. K.: What place do you take in the innovation landscape of the country?

A. P.: RVC is totally financed by the State. In 2007, a one-time payment was made from the budget, from that time we work with this amount. We select management companies that take risks related to search for the projects and growing them up.

We work with the projects of a bit later stages than, for example, Bortnik fund — Fund for advancement of small enterprises in the science and technical sphere. It is engaged in investments in the seed stage projects, provides initial funds for development and leading the technology to the prototype stage — in fact, until the idea confirms to be working. Bortnik funds gives grants — non-refundable money. We have a little different format: our funds invest in venture projects, i.e. acquire share in the project companies.

M. K.: How does it look in practice?

A. P.: Management company undertakes to find the projects and enter into them. To form projects portfolio that addresses strategy requirements of each created fund. Investment strategy is created for each of them. At the moment it is executed as the investment partnership agreement, previously they were closed unit funds.

There are private members in each management company and each fund. I.e. these companies risk not only State funding, but private money, as well.

The first funds had dominating (not too much) public capital — 51%. Now, in the newly created funds, our share is usually 30%, the rest are private funds.

M. K.: And here you grew up the innovation project, it started to return investments. What's next?

A. P.: And then the fund is looking for the buyer for the project company. This is another advantage of activity of such funds: you always know how you can exit the project. As a rule, good investors consider exit options on entering the project.

M. K.: What's the age of participants of the project teams receiving support from RVC funds?

A. P.: Venture business is young activity type. Mainly we interact with quite young people who are very motivated to be engaged in high technology business. They are groups of people with, as a rule, good physics and mathematics or economic education. They have a very precise idea of how they want to live in the near future. They want to build interesting businesses, develop technologies, can work with the investors, including on external markets. There appear more and more such guys.

M. K.: Now you represent the National Technology Initiative project office. What does it mean and what is NTI?

A. P.: Entry barrier for developed and full-fledged markets is quite high. New company will need quite serious support.

National Technology Initiative is very simple: new markets that will be formed by 2035 emerge now. If you start working now, search for the projects, teams, companies, support them in a targeted way, there is a possibility to grow a line of Russian companies — global leaders — by 2035. They will take leading positions in the perspective industries - unmanned aircrafts, neuro-, bio-, genetic technologies. For this purpose, it is necessary to overcome technological and legal barriers. A vivid example: unmanned motor vehicles don't have access to the general use roads yet. Such barriers need to be removed, and a lot of accompanying issues should be solved.

CEO of Russian Venture Company Alexandr Povalko
Photo: IZVESTIYA/Aleksey Mayshev

There should be enough people whose effort are focused on the tasks related with these markets. These people should be prepared, trained according to the requirements that are potentially connected to the relevant industry. This is essence of the National Technology Initiative.

M. K.: How the priority NTI directions were selected? How many of them exist?

A. P.: The main instrument are roadmaps for the perspective markets. Today, seven roadmaps are adopted. Three of them are related to transportation: Autonet, Aeronet and Marinet. NeuroNet is everything that is related with neurotechnologies, VR/AR — virtual and augmented reality is included. Technet — production technologies, digital twins, use of the digital and new production technologies. Healthnet — personalized medicine, new medicine, and medical equipment. Energynet — power energy.

M. SEAL. K.: Is the initiative's purpose to develop new markets?

A. P.: Not even to develop — to create! We should create them.

In addition, the most part of new markets is related to what we do best: these are developments of information systems, scientific solutions. Strong mathematics and physics schools haven't disappeared.

However, in order to make a market work, for example, the market of unmanned motor vehicles, it should be provided with the maps used to drive. There should be very accurate binding of the maps, actually a digital twin, as the machine makes the decision comparing the map stored in its memory with the real environment. Sensors that will provide this information to it are required. There should be legal justification to let the motor vehicle to drive the road.

At some moment, we will need to make a decision that we let the vehicles to the streets and in what form. May be, there should be a driver that should sit in it and at some moment takes control — Japan acted in this way. There is the other solution in California: they allow to some companies without prior arrangement access to the roads. But in any case, this is our future, nothing to do with it.

M. K.: President Vladimir Putin, presenting Address to the Federal Assembly told that there is only one danger — of technological weakness. The world evolves extremely quickly at the moment. Development is going in such huge temps that it is so easy to become outsiders. That is why the National Technology Initiative was adopted: in order to analyse and prepare future markets, train people to go to them.

We should treat future in the absolutely different way. We need to understand on the level of national security and independence that our sovereignty is under the threat, if not our unmanned aircrafts will fly in the sky, not our unmanned motor vehicles will drive the roads.

A. P.: If we allow even the least technological weakness, inevitable substitution will happen.

M. K.: I promote simple business for several years: today military colonization switched to technological. Its object, unlike previous years, are not developing countries, but developed States. If you cannot create new technologies, the external ones substitute them, and the country, actually, is turned to technological colony. This is a key issue. Despite our leading positions in the most technologically complicated industries — nuclear and space, if we do not develop technologically, we will get out of the leaders. It is necessary to learn, teach children, develop new technologies including nature-like ones, create new markets, new rules of life in new digital world.

Created by: Dmitry Ludmirskiy




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