CEO of RVC Aleksandr Povalko
Which industries resist innovations, why start-up accelerator competitions became harder to win and what needs to be done to prevent imitating innovation activity, Alexandr Povalko, Chief Executive Officer of Russian Venture Company (RVC) told to Indicator.Ru. The conversation took place at Saint-Petersburg International Economy Forum.
— If you compare with the economy size, Russian venture fund is quite small. And that's an understatement. We underperform comparing to the leading countries in relation to investments volume. It is quite small in respect to the number of players, but it gradually grows. We got used to that we get all at once, but growth of the venture market is evolution process. According to information of the Russian venture investment association, the market became stable on the level of 125 million dollars in 2017, and the total capital volume on the market increased for about 8-10%.
If we talk about the problems, the traditional critical problem in Russia is exit, when the company grows to the definite level, increases definite cash flow, and venture investor sells it. Investors earn on value growth, not on revenue that the company generates. In addition, we have just a few companies to sell to. Traditional buyers are financial market, or investors who need a new company as an extension of their large business (for example, Instagram and its integration to the famous social network (Aleksandr means that Instagram was bought by Facebook founder, Mark Zuckerberg — mark Indicator.Ru)), or to invest far more resources and get far more revenue. This practice only starts to develop and often the companies migrate to larger markets.
Alexandr Povalko at Saint-Petersburg International Economy Forum
RVC press service
— Integration of new technologies and new product in the existing production scheme is always a risky story. In addition, you need make the decision for that. Now we executed an agreement with VTB on creation of the corporate accelerator and this is major development in mentality of the bank leaders. It is about search for external projects, their testing and use in work. This is really major development to acknowledge that can't do anything and search for it outside.
— Blockchain as technology is a really interesting and important investment, and Russia has quite big potential to become leader in this field. In relation to financial models that are created based on these technologies: Krypto currency, funds attraction by ICO (Initial coin offering — a form of investments attraction when the company carrying out ICO sells fixed number of new krypto currency units, — mark Indicator.Ru), it, certainly, needs separate regulation. In spite of ICO openness and attractiveness, the statistic shows that the share of so-called unprotected projects is quite big. We have quite a lot of stories related not to that the company becomes bankrupt (this is normal), but with that it just disappears after the offering. There are unacceptably many of such cases and the special regulatory mechanisms should be created not to admit them.
— Yes, there is such a problem. Here you need to be honest to what you do. If you say that this is a competition for technological business, it means that you need to select technological business projects. If there is no such projects, you need to acknowledge it and not to simulate their existence. Based on our experience, I can say that accelerators and competition is a healthy, open, understandable support mechanism that stimulate extension of the participants network. People need to understand what they get from participation in this project. They know what they get as a result, they will come to you. Lately, our graduates — GenerationS accelerator graduates — attracted about 2.5 billion roubles of investments.
— They become more complicated. GenerationS and other competition that were before represented just an accelerator base and were focused on the ideas, not on real business projects. We represented ideas and business plan. Now GenerationS has quite a lot of projects that, at least have prototypes, and there are projects with products and revenue that have already built their business. The number of science driven projects grew for the last year by 1.5 times. I am talking about the projects that really require new technological solutions. It's not only IT area, it is biotechnology, robotics, machine building, and telecommunications.
— This is quite simple — not to participate in imitations. Imagine that at some competition I will say: "Guys, what you pushed to us is crap. Don't do anything about it". And then you will write not only about that a wonderful competition was held, but that they tried to push to us the not quite fresh projects, though they can be only fresh. And next time there will be no such competition, everyone will know that this is crap. You just need to be honest.
What relates to lack of good projects... Here we need to work with the limitations, including social and cultural, that are built in us.
— There was a research that revealed that we have such a characteristic as "systematic risk rejection". This means that we are not intended to make long-term investments in risky project — not only by funds, but with other resources, time. Our motto is "All at once". And it can't be in this way. Technological entrepreneurship that we try to include in the educational programs helps to disable such limitations to some extent. Of course, it is necessary to go further - to the school and even to earlier ages. It is necessary to encourage people to make their own decisions. Of course, it is also necessary to build in mechanisms that will contribute to decision-making inside corporations.
— Healthcare is traditionally conservative...
— Yes, they develop quite quickly, but are heavily integrated. In principle, this is all that is related to long technological chains — change of one chain will result in break of the rest. This is also banking sector, but they already got understanding that if you use the standard set of instruments, you will be eaten.
— We have our own understandable set of tasks. We don't just grant subsidies, we form venture mechanisms to solve technological development tasks. The things Vladimir Putin talked about are not separate projects, this is technological development of the country in general. This is about getting advantage from technological breakthrough. Search for and integration of these solutions in the economy is one of RVC tasks. But it is impossible to solve it by ourselves, it requires a great number of participants. And I am sure that National Technology Initiative and venture funds will continue to evolve in new structure of "May order".
— Roadmaps are aimed at discovery and elimination of legal barriers. First five were signed in April, and now we performed all planned volume. This is a very important part of work, though this is less interesting than work with the projects. As to EnergyNet — the roadmap works for integration of the smart distributed power energy, it is related to regulation of complicated networks, personal power energy (household power energy). In 2018, we would like to make an experiment with the use of blockchain technologies — this is related to management of complicated intelligent network. Our task is to create conditions for this.
HealthNet has several directions. To my mind, we didn't solve the task related to fast integration of new preparations on the market, but here we need to strike balance between medicine safety and speed of sales launch. The priority is implementation of new projects using big data, personal data, telemedicine, cell technologies. In 2018, it is expected to form a base to make doctors be able to prescribe medicine in electronic way. It seems to be a small thing but it requires a lot of administrative tasks to be solved.