Mikhail Antonov talks about new services for the participants of TechUspeh
Mikhail Antonov, Deputy Head of Russian Venture Company (RVC), Director for the Development of Innovation Infrastructure, spoke about the prospects of the TechUspech rating and new services for its participants. They include a spin-off center that will allow companies to develop high-risk technology projects, and an export accelerator to find partners and customers abroad.
— The TechUspech rating, organized by RVC, has been compiled for five years. Has the approach to the selection of winners changed?
— RVC started the rating in 2012. At that time, all the initiatives of the state and development institutions focused either on start-ups or on corporations, and the medium tech business segment was deprived of attention. The idea of TechUspech was to draw attention to technology companies that had already grown beyond the “startup” concept but had not yet entered the big business league.
The first rating consisted of 100 companies, then the methodology became more complex. The approach to the assessment has not changed greately, it is simple: we evaluate the viability of the business through a number of objective indicators and attract technology and market experts who can evaluate the innovativeness of a product or technology. Three years ago, we added an export component, two years ago we agreed with the Ministry of Economic Development that TechUspech became the main tool for selecting Russian technology companies to participate in the National Champions project with the National Research University Higher School of Economics. Each year, about 20 participants of TechUspech receive support under the project. Last year, we started cooperation with the SME Corporation, which actively uses our base to create its own company funnel and provide them with financial support. We expect that the pool of partners and “users” of the rating will expand, including at the expense of other development institutions.
— What trends can you highlight following the results of this year? Are there many new companies in the ranking?
— We have formed a fairly large base for the five years, this year alone we received 576 preliminary applications for participation in the rating. Our expanded base includes more than 4 thousand companies that potentially fit the criteria. The 2018 rating will be the most massive: previously a maximum of 113 companies reached the top, and now this figure is 130. This can be considered as an indicator that the medium technology business is growing. The earlier versions of TechUspech included quite a lot of companies focusing on the Russian market, now the rating includes more and more participants who have ambitions to create global solutions.
However, medium technology companies are still terra incognita. Even with a base of 500–600 companies, we cover our target segment at 30–40%. It is clear that we can catch all quite large, bright companies in the media field, but there are quite a lot of players who feel good without additional PR. Our task is to interest technology companies joining us. To do this, we need to build a comprehensive proposal, including work with all development institutions, and concentrate their specialized tools to support the rating participants. In many ways, TechUspech laid the foundation for direct communications of such companies with the state. That is, this is a method of lobbying the interests of the medium technology business.
— What will happen with the rating in the future? How will it relate to the National Technology Initiative (NTI), which is also supported by RVC?
— It is extremely important to connect TechUspech with the NTI more closely. We believe that the rating should not be about getting a certificate in a frame. Therefore, we will develop on its basis services like an export accelerator, growth sessions and other things. This line of services will be sharpened primarily for the NTI markets, so our plan for the next two years is, on the one hand, the deep integration of these companies into the initiative, and on the other hand, the development of the services, which, generally speaking, are quite unique in the world.
The medium technology business is a huge source of potential new projects, a very interesting enriched environment for entrepreneurs who already have serious and positive experience in the field of technological development. The practice of communicating with such companies shows that they have a significant number of projects that they hold because they concentrate on their core business. Most of TechUspech participants have projects and directions that are either in a frozen state or carried out in a slow mode. Therefore, a spin-off center may become one of the new services: companies that have a project, but for various reasons do not develop it inside, will be offered a set of special services used to implement this project with lower costs for the company.
We can also help formatting these projects immediately into a “venture usable” format. When a team of founders has already formed, some people have invested in this story, and then it turns out that the project is not very suitable for venture capital investors, and it is a rather inconvenient structure. Here we are counting on the fact that, say, venture capital funds oriented to the NTI will be able to enter the project at the very beginning. Therefore, a structure that is transparent to venturers can be immediately built, and they can evaluate the project at the very beginning.
These are only plans for now, but since the main function of RVC is to be a development institution, we must do unique things, acculturate unique services, unique projects. As soon as they become commonplace for the market, like business accelerators, we will gradually exit this. Initially, the site for the creation of a spin-off center could become RVC, and the environment – the NTI.
— Will these services be paid for companies?
— In my opinion, they should be either paid or investment-paid. It may be not a certain amount of money, but an equity story.
The problem is that in the Russian business culture the skills of interaction with venture investors are weak. The average age of technology companies in Russia is 18 years. They were mostly founded by people from the scientific community and were engaged in the commercialization of scientific developments. Therefore, the TechUspech list includes very few companies that would have been raised using venture investments. There are some exceptions, but only a few. This is a window of opportunity both for us and for them. We need to use hybrid methods of financing. In the meantime, in most cases companies plan to take a loan in case of urgency. This significantly slows down the work with spin-offs. In addition, the technology business in Russia has a problem with normal loans to be used for investment purposes. Now, companies have to abandon the support of ideas, because, for example, these funds must be directed at financing a state tender.
— How can a spin-off center help companies attract financing?
— It will be a kind of platform with development institutions nearby that are specifically targeted to finance such projects. For example, the SME Corporation, the Industry Development Fund, the Innovation Promotion Fund. Attracting these structures will allow finding the initial money, and this is a year or a year and a half of the company’s development, after which its fate will be more or less understood. If it is positive, then this is the most tasty morsel for venture capitalists: there is a development, there is a prototype, some sales have already appeared. If we enable companies to optimally choose the initial financing, the least risky, the most comfortable for themselves, for example, through a spin-off center, then this will also be a factor for attracting interesting technology projects.
— Has RVC already launched an export accelerator to push companies, including the TechUspech rating participants, to the external market? How does it work?
— In contrast to the spin-off center, which is still being discussed at RVC at the project level, the export accelerator has already proved its right to exist. The story is that many companies cannot independently formulate a value proposal for international partners and even describe concisely what they are doing. We took the basic methodology from one of the most powerful accelerators, which is designed to “land” European companies on Asian and other foreign markets. Its operator is PwC Luxembourg. But, of course, Russian companies have their own specifics. It is important for them to stick their nose and have a look: if they had their nose punched – it’s bad, if they didn’t – they would try to stick their head. Therefore, we focused on the key pain of companies, namely, the understanding of the market and the target segments they could enter. Since these are end-to-end technologies, they can be applied in various fields, but often the creators themselves do not see the full range of possible applications. We are ready to facilitate the search for such niches, because we believe that this will reduce risks when entering the foreign market. This approach resonates with the companies, as it allows saving time significantly.
Now the export accelerator works in three directions, which were formed on the basis of the NTI end-to-end technologies list. We chose Big data, the Internet of Things and artificial intelligence, taking into account the fact that now there is a demand for these solutions in the Asian market. According to marketing research, this is one of the fastest growing segments with still relatively little competition, and our companies have technological advantages. It is illustrative that we had about 60 applications for the accelerator, of which we selected 15 — the competition is rather high. Most of the participants are developing solutions in the field of one of the NTI markets — “Neuronet”.
We give the companies selected for more intensive work the opportunity to communicate in detail with the technology and a market expert in the target market, in the segment that they think is the most promising. This is the key moment of acceleration: they are told not just about the Internet of Things market in China, but about a specific, very narrow segment in which the expert knows all the insides and understands what the competitors want. At the end, the companies receive an analytical report and additionally from us a list of potential partners and customers, recommendations for finalizing proposals. These services were free for the companies as part of the pilot project.
An important point: when we talk about the export accelerator and the launch of technology companies to foreign markets, you will not see hundreds and thousands of companies. This is the task of the Russian Export Center (REC). The technology business is very rigidly segmented — a narrow segment cannot have a large number of players and a large number of potential customers. For example, we have experience in launching a business mission for four of our companies — two from the export accelerator and two from the TechUspech rating — to South Korea. This is actually a large and important work: we decided on the segments, potential partners in South Korea, which greatly increases the chances of successful contracting. The final result, of course, is determined by the quality of the proposed solutions, and they, as a rule, are quite at the level. It is very important to have experience in the Asian markets: if you tell the Koreans what you did with the Chinese, they will screw up their faces, but it will be more important for them than what you did with the British.
We also see that access to international markets is possible through the formation of consortia, so we begin to interact with similar development institutions abroad. This will allow creating such projects when a Russian startup cooperates, for example, with a Korean one and they make a global product together.
— In what direction will the export accelerator continue to develop?
— This is our first, unique story, focused on the NTI new technologies, and this focus will continue to determine our development. The same end-to-end technologies will remain basic, but we will invite companies with products that are applicable to a specific industry or market. We have yet to discuss with the working groups of the NTI where it is possible to recapture a certain segment due to some specific solution. For example, Diakont company creates robotic analyzers for nuclear power plants, which make measurements directly in the reactor. Its share in the US atomic energy market is 40%. This is an example of a company with high-tech solutions that has won over a large segment of the competitive market.
We also want to build a line of offers with other development institutions, in particular, for financial support of potential transactions. This is the mandate of REC and VEB, and now the SME Corporation, and the Innovation Promotion Fund. Our role here is to give development institutions qualified clients, that is, companies that come and know what they need money for, what kind of industry exhibitions they need.
— Will you go to new countries or will the focus remain on China and South Korea?
— We will proceed from the companies’ requests. Now Europe, North America are relevant for many companies. One of the areas where it would be possible to expand the presence is the Middle East. There is a big demand for business missions to India, Iran, Iraq and the United Arab Emirates. Many companies would like to enter the markets of these countries.
The interview is prepared by Tatyana Yedovina