SPIEF-2018 participants discussed state support of innovative business
The St. Petersburg International Economic Forum held a panel session ‘State support for innovation: effective tool to provide leadership.’ The discussion was attended by representatives of innovative companies, Russian and foreign experts. The session was organized by RVC.
In his opening speech the moderator Vladislav Butenko, who is Managing Director of The Boston Consulting Group in Russia, noted how relevant the theme was in connection with the new May decrees by President of Russia:
‘The president believes that Russia must focus on making huge strides in technology development. In recent years, Russia has done much to promote innovation, yet the result does not quite meet expectations. Now we have new goals, for which it may be necessary to review sizes and forms of state support.‘
What problems does innovation business have to face and what support can government provide? The participants of the discussion expressed their opinions in this regard. The main proposals were to provide innovative companies with ‘long-term’ money and affordable loans, to limit bureaucratic obstacles and to minimize the government impact in regulating high-tech business, to change the taxation system for innovative companies, to develop the education system and to open training centers for new-level specialists.
According to Oleg Fomichev, State Secretary — Deputy Minister of Economic Development of Russia, the government’s current innovative policy is outdated and needs to be changed:
‘In recent years we have managed to create an innovative system with modern development institutions, venture capital market. The ecosystem has begun to develop, but all of this may be irrelevant unless we have a new innovative strategy which can solve problems. Since 2008, development institutions have not been capitalized and they are forced to carry out venture financing with borrowed funds. A lot of work has been done to increase their efficiency. Their main problem is that available resources are not comparable with the objectives. In the face of a tight budget deficit, the government reduced allocation of funds to support innovation. Now we need to try to formulate an innovative agenda, taking into account the President’s May decrees and the emergence of new ministries, such as those of science and higher education.’
According to Alexander Povalko, RVC's CEO, Russia has perspectives to develop venture investment market:
‘The core logic behind RVC project is to transfer resources, including federal ones, to market mechanisms. Where no officials can break it, where decisions will be made out of efficiency and long-term perspectives. Today we have lots of project teams that need funding. Many of these companies can get this financing whether from private investors, or from public administration.
Our second line of activity is to implement National Technological Initiative. We are driven to work hard for it. For three years we have established a scientific community, now the project involving thousand experts, who give off a lot of energy. It is important not to squander it away, but channel it into creating flagship innovative companies. There are opportunities for this. The main thing is to put more trust in teams behind innovative projects. There should be mutual trust between the state and business.’
Innovative business can be developed at the expense of highly qualified specialists and they need to be supported in the first place, says Alexey Katkov, a managing partner of Sistema:
‘If we are to break new grounds, we need constant flow of new people, new staff. The government and corporations will prosper If high-level specialists want to come and work here. The main thing is to motivate these people, and they will do all the designing and implementing.‘
Vitaly Milke, adviser to the president on economy and finance at JSC Business Alliance, proposes to focus on supporting science research and promoting second higher education:
‘DNA research holds a lot of promise. Developments in this area can rejuvenate pharmaceuticals industry, whose markets are huge. Just as important is to digitalize the industry, to enrich it with artificial intelligence. It is necessary to motivate middle-aged people to qualify for a second higher education, perhaps on budget basis. We must learn and improve our skills as long as we live so that national companies can employ specialists with new competencies’.
Alexey Ivanchenko, deputy chairman at Vnesheconombank, is sure that Russia has talented developers and demand for innovations, but companies need long-term support:
‘There is a market and all goes well in the early stages. But then these startups reach a dead-end. There are three options. The first is to go abroad and to get eaten up. The second is to get grants for new ideas. The third is to ‘die.’ For example, we have a flying motorcycle. The guys developed the technology and even had orders for it. But while they were fine-tuning it, the giants ‘ate’ them up. In Perm, they made a Promobot. Then they had an order for a thousand pieces, but the company does not have the money to manufacture this batch. Therefore, we have come to conclusion that it is important to continue financing projects in the subsequent stages even if the business model has passed the tests.‘
The state should not interfere with business in the first place, it may support startups in the early stages, but then they should be given the opportunity to develop innovations independently without facing bureaucratic barriers, said Vasiliy Latsanich, CEO of PJSC VimpelCom.
‘The main thing is to let it happen without even supporting it. In Silicon Valley no one gives special support to start-ups because they have ample opportunities to develop on their own. The mobile industry is now ready to launch 5G technology, and there are investments to develop it. The main thing is to open the gates and let the start-ups pass and go unrestrictedly. The rest they’ll do themselves.’
Sergei Nedoroslev, president of ‘STAN’ believes that companies need ‘long-term’ loans:
‘Today our entire margin is eaten up by loan repayments. If a company is to keep growing, it needs long-term and low-cost loans. It may be necessary to change the taxation and maybe to improve the education system and specialist-training courses.’
Sergei Solonin, the General Director of the Fintech Association, believes that government should be integrated in the process of innovatization:
‘The world is changing fast. No state will be able to regulate innovation business unless it is part of the very process of innovatization. We chose to collaborate, launched a number of educational programs. Now Russia is investing heavily into blockchain technology because the government immediately decided that no one will restrict or prohibit it. As a result, we have managed to attract a lot of participants.’
International members of the session also spoke about how important it is to nourish an investment culture in innovation. Kamran Charles Vosugi, Managing Director of Michelin Russian Tire Manufacturing Company LLC, says:
‘In France, the government is committed to financial risk in supporting innovation. Banks do not take this risk so the government takes responsibility, protecting strategic directions for large innovative companies. What is important is the government gives supports without being an interferent’.
Dirk Alborn, Chief Executive Officer of Hyperloop Transportation Technologies:
‘The Germans are very similar to the Russians — they do not accept failure. Our people do not want to take risks. Businessmen are afraid to lift off the ground. Often, they are satisfied with the current position, the current market volumes. The government should push businesses to evolve themselves and to create fundamentally new products and markets. But then it is important to ‘disappear’ from this process in due time and allow businesses to develop at will.’
RVC JSC is a governmental fund of funds, the Institute of Development of the Russia's venture investment industry. The main objectives of RVC JSC: promote creation of Russia's own venture capital industry and execute functions of the Project Office of the National Technology Initiative (NTI). The authorized capital of RVC JSC is more than 30 billion roubles. One hundred per cent of the RVC capital is owned by the Russian Federation represented by the Federal Agency for Management of State Property of the Russian Federation (Rosimushchestvo). The total number of funds formed by RVC JSC has reached 26, their total size is 35.7 billion roubles. The share of RVC JSC is 22.7 billion rubles. The number of innovative companies approved for investment by RVC funds has reached 223. The total amount of monetary funds approved for investment is 18.2 billion roubles.