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You Just Have to Believe in Start-ups. GenerationS Director on How Russian Start-ups Live

Source: Business Petersburg

At the end of 2019, GenerationS, the platform for corporate innovation development from RVC, was included in the top 5 best state accelerators, according to UBI Global. DP talked with GenerationS Director Ekaterina Petrova about how Russian start-ups live. How easy it is for them to find a common language with corporations and why investors are still afraid to invest in innovation.

— Being a sceptic by nature, for example, when I hear the word “start-up”, I squint suspiciously. How prevailing is this attitude among Russian investors? And how justified is it?

— The ratio is similar in both the Russian and international markets. It doesn’t matter whether large, medium-sized businesses or private investors make investments. When there is a need for investing money, any manager begins to doubt: why should I believe in this particular technology, and what will it bring? When will it bring an income? And if the money is state-owned, then the situation is even more complicated because it is strictly accountable, and you are at considerable risk. So, of course, there is much scepticism. But I want to note that in Russia, over the past couple of years, the attitude has begun to change notably. Because the first successful projects appeared on the market. Which actually were created longer than one year. It was not so easy to grow a ready-made technology from a small start-up in which big businesses would invest. More than two years, we spent on showing the first pilots to the market, which will increase investors' confidence.

— What kind of pilots are they, for example?

— For instance, Promobot Company. Initially, it was a small start-up from the city of Perm, which was created in the laboratory of the Perm Polytechnic University. They came to us with a straightforward idea - to make a snow thrower robot. As a result, this idea did not work for them. Still, one of the mentors in our accelerator, Sergey Mitrofanov, helped the guys to rework the idea, find a new niche in the market and the target audience. Then they decided to make a robot promoter, which will help to communicate, optimise the work of employees in different companies. The first pilot was launched at Sberbank, which needed the robot to be able to explain in an accessible language to each person how to receive one or another service.

In 2015, we went with them to France, tried to show the international market that there is such technology at Perm University. We were first answered: “Look at the counterparts in Japan. Why do you think this start-up is better?” But, receiving feedback from different partners, the guys always sought to improve their technology. Make it more potent than the Pepper robot in Japan. Now Promobot is attractive to many at the level of both the state and business; many orders are received. Such technologies help us change people's minds. They prove that you just need to believe in a start-up, to help build the right strategy for the development of business and technology.

— But not all start-ups have a reasonable idea at their heart.

— Of course. If you look at the Russian market, I would say that about 40% or even 50% cannot be estimated. It is quite often the developer blindly believes that his technology is unique, and does not try to analyse what his competitors are doing. However, there are quite a lot of tools for an objective assessment. Our task, as a GenerationS development platform, is to check how innovative the technology is, how feasible it is from a practical and economical point of view. We are creating an expert community of people from different industries who give recommendations — what to do with this or that technology.

Besides, there is one more difficulty — some start-ups are moving into the position of “grant-eaters”. They stop thinking about the need to do something for the tasks of the business. Still, they think about how to go through all the support measures, get money everywhere and then report in standard forms.

— In the West, similar stories occur, with the only difference being that the “grant-eaters” do not use state support programs, but ...

— ... investment funds, yes. But abroad, nevertheless, the market is developing more intensively, and it is already much more demanding of start-ups than the Russian one. And universities are more active. They create all the conditions for a start-up to immediately enter the market, commercialise, and learn to earn money. Most importantly — do not hide it. And we have a problem with this. It is even complicated for us — a state accelerator — to enter universities and convince them that we need to show technology to the market. They say: “No, let it be better with us. And even if we do not develop it, it’s all the same, but we came up with it.” Abroad, however, technologies are immediately commercialised.

— There are statistics according to which 52% of corporations prefer to use their own internal accelerators. And only 12% fully trust their work with start-ups to external accelerators. The rest use both of them. What are the advantages and disadvantages of all these approaches?

— If we talk about internal accelerators, then this is a pretty sore subject. There are not enough qualified employees in the Russian market. When launching any initiative related to innovation, there must be a person who understands very well why and where he is developing innovation. Indeed, this is a rather significant investment of money and time, both of one's own and of colleagues. It is necessary to build processes within the company, to create the right corporate procedures so that the start-up quickly entered the pilot. At the exit, it was already possible to work and earn money. In Russian reality, a different situation occurs: a corporation begins to engage in innovation, and a person appears who says: “I want,” but does not understand at all what to do and how to do it. Some departments are reorganised; a lot of money and time is spent. The result is zero.

— After that they say: we got it — start-ups don't work.

— Exactly. We had a case with one of the major customers when there was just an incredible technological funnel. About 50% of this funnel immediately after the accelerator went to the international market and found investors. And our Russian company said that the funnel is not quite what we need; we do not understand how to enter into a deal with these start-ups. It was merely the incompetence of an employee who was unable to coordinate the process and understand the technology properly. In other words, it is crucial to find an expert within your company who will give the right feedback.

There is another problem — when the accelerator is created inside, then people do not always understand how to build a process of interaction with the market. External accelerators, which have been working for more than one year, make the infrastructure for scouting solutions. They have a circle of experts. They have a technique that spells out how to bring innovation to its first implementation, a platform for collecting applications. That is, turning to them, the corporation saves time on the creation of this infrastructure. So in the first year to work with an external accelerator is the right thing to do.

Some companies have already developed their own innovation policies. They go to the accelerator for expert support. For example, we worked with the Ilim company, which is quite progressive in terms of innovation. They have their large pool of analysts, with the help of whom they are looking for technological solutions. Nevertheless, the accelerator can provide scouting, including in other markets, which significantly expands the funnel of projects. So, for example, we managed to find start-ups for them in the Scandinavian countries and Canada.

When creating an internal accelerator, it is important to look at the people you hire, the amount of time and money that you will invest in the development of processes. And based on the set goals, to rebuild the model. Indeed, there are pros and cons to all models. This is not to say that one is worse, the other is better. It all depends on what stage of development the corporation is at.

— And with what other corporations did GenerationS work in St. Petersburg?

— Three years ago, Gazprom Neft became a partner of the GenerationS track to search for start-ups in the energy and oil and gas sectors. One of our tasks was to search for projects whose solutions the company would be able to test at its gas stations and with which it would be possible to simplify work processes. We have found more than 500 relevant solutions in Russia. From this large pool, 18 projects for acceleration were selected for the track. Gazprom Neft successfully launched and completed pilot projects with two of them; one of the start-ups is still cooperating with the company on an ongoing basis.

— Russian start-ups are required continuously to focus on the global market. Nevertheless, we have many problems with the export of technology. How do you build work with foreign corporations?

— We have one issue — the political one. First of all, sanctions that prevent us from working globally and concluding contracts. We are trying to distance ourselves from this. And we, with our graduates, show ready-made cases to partners who are prospective and exciting to us. If they are really interested, then they do not say: “Russia? Sorry, we cannot make an agreement.” On the contrary, they say: “Oh, Russia! There is a cool and large market out there, promising technology, and a competent team. Yes, the difficulty is that you are state-owned. But this is the entry point through which we can find a strong partner.”

Also, there is a number of countries that treat Russia very well. Now we are discussing the launch of several interstate support instruments. For example, in Italy, with no their own influential accelerators. At the same time, they are interested in Russia as a market where they can find investments for their start-ups. Moreover, they are ready to register an office in the Russian Federation.

In almost every country, we have, if not a corporate customer, then an ecosystem partner — a business incubator, accelerator, a technology park ... They are all interested in working with Russia, as they see that there is the potential of sound technology. We are interested in this because, with their help, it is possible to attract investment in the country. We do not work in the logic of a “single window”, with the task of transferring projects abroad and not leave anything to ourselves. We always have a condition that a start-up should develop on the territory of the Russian Federation.

— Do you feel the difference in attitudes towards Russia on the political and business levels?

— We try to stay out of the political agenda. Most often, we succeed in that. It is significant that GenerationS was recognized as the best accelerator in Europe, and then entered the top five world state accelerators. Moreover, the fact that our project was from Russia did not become a barrier, because competencies and business results were first assessed.

We are actively working with the European market; our customers are companies such as Airbus, Enel, Ferring, Michelin, and many others. It is more complicated with American companies. Nevertheless, we are now working with PepsiCo.

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