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Research by EY and RVC Reveals Success Factors and Actual Problems of Russian Technology Parks and Business Incubators

03.04.2014
EY RVC

Research by EY and RVC Reveals Success Factors and Actual Problems of Russian Technology Parks and Business Incubators

At the request of RVC, EY experts have prepared the analytical report "Challenges and Solutions – Business Incubators and Industrial Parks in Russia." The research determined the key factors of success of the leading Russian business incubators in terms of the start-up survival rate. During in-depth interviews with leaders of research facilities, their residents and investors have determined the most pressing current issues and formulated approaches to their solution.

The research involved 17 technology parks and 53 business incubators, which account for about 50% of the total number of potential respondents. The average "age" of the participating business incubators was 4.5 years, while this of the technology parks was 5.7 years. The research covered all the federal districts of Russia, the largest number of responding technology parks and business incubators were located in the Central and Volga federal districts. 50% of the participating technology parks and business incubators were specialized in IT, while their number in the field of high technologies (instrumentation, nanotechnology, biotechnology, and laser technology) was 36% and 22%, respectively.

One of the main factors of the respondents' success is the "survival" of their residents. According to the survey, due to the Russian innovation support system, there are now business incubators operating with the survival rates of companies at the European or American levels - the share of successful residents was over 75% in five business incubators.

The research revealed the key factors that can make it possible to achieve that high performance. First of all, you need a hard selection and use of appropriate criteria in its implementation: Residents may only be the companies that initially show a high potential. When selecting residents, most of successful objects use the criteria of employees' experience or compliance of the team with the initial project tasks. Besides, you need expert advice, whose range of competences would include the wide range of issues, including determination of the criteria for selecting projects, holding selection procedure, adjustment of the range of services offered, as well as other strategic and tactical goals. Productive operation of a technological park or business incubator is also impossible without providing a wide range of services (eg, mentoring, work with intellectual property, or prototyping). The most successful incubators are effective in stimulating the development of resident companies, providing them with an almost complete list of required services, either alone, or in cooperation with their partners.

Based on the in-depth interviews with representatives of technological parks and business incubators, the research formulated the main problems of similar organizations. They include the low level of staff training and educational services provided by the staff of technology parks and incubators themselves having insufficient business experience, as well as an acute shortage of technical staff at all the levels and (or) their high cost, thus limiting the ability of residents to recruit staff for development. Inadequate technological equipment of facilities, systematic underutilizations of the equipment already purchased and specialized facilities available also have a negative impact. Weak demand for innovative solutions from large and medium-sized Russian enterprises and lack of interaction with foreign representatives of the business environment are limiting the promotion of residents in the domestic and international markets. Another limiting factor of the development, especially for high-tech enterprises not being IT start-ups, include traditional difficulties with financing at pre-seed and seed stages. The development is also inhibited by the lack of a single, properly structured system of key performance indicators (KPI) for business incubators and technology parks created with public funds.

Survey respondents, based on their experience, offered their approaches to solving these systemic problems. Thus, creation of educational enters through public-private partnership (PPP) and the federal centre for the exchange of international experience will help to improve the professional skill of experts working in technological parks and business incubators.

One way to develop infrastructure is to participate in regional and federal programs to raise funds for the purchase of equipment, as well as cooperation with leading software vendors who can provide the necessary software at a significant discount. Development of an information system of the high-tech infrastructure will make it possible to search for equipment or premises needed with minimal effort. The infrastructure development will also be supported by creation of private engineering centres that provide equipment and services to high-tech start-ups as well as external users.

The demand for innovative solutions will be created through thematic meetings of entrepreneurs with their customers, systematic monitoring of actual problems in various industries at the federal level, and promotion of the advantages of working with the residents of the incubator / technology park to large companies. The system work on obtaining licenses and certificates will contribute to the solution of this problem. Successful residents' business development in international markets will be facilitated by the access to partnerships with foreign representatives of the innovation infrastructure, as well as connection to foreign networks and associations.

For a shift of financial flows to seed stages of start-ups, we need to create regional funds or funds in incubators and technology parks using public funds. Fundraising at the pre-seed and seed stages will be supported by training private investors and introduction of the effective KPI system of incubators that is not based on formal criteria, but on the success rate of residents. The KPI system should be based on international best practices and operation experience of the most successful Russian objects, and public funding should depend on implementation of these KPIs.

"Despite the active creation of the business incubator and technology park system, it is too early to say that the system supporting the emergence and development of technology companies has become effective," says Evgeny Kuznetsov, Director of Strategic Communications RVC. "Today, the main task is not to create new objects, but to improve the quality and efficiency of existing ones. We need to concentrate on development of a soft infrastructure – the management team competencies, relations with investors and corporations, as well as consulting and services for all the stages of the start-ups' development. The existing leadership practices can serve as an example, and we will continue to replicate the optimal development models and solutions, and develop network services that will compensate for the lack of knowledge or competencies of both management teams, and residents in the regions."

"Successful strategies for solving really complex problems facing business incubators and technology parks are based on continuous work of the management team to improve the efficiency of existing resources, and subsequent use of "success stories" to attract new resources. In this regard, many survey respondents find the issue of forming a system of key performance indicators for innovation infrastructure facilities a paramount one," says Evgeny Panasyuk, Manager, Infrastructure and Public Sector Company Service Group, EY. "Such a system would enable the state to objectively highlight the best practices and solutions, and make targeted investments in their development."


About RVC

RVC OJSC is a state fund of funds a development institution of the Russian Federation, one of the key tools leveraged by the state in the effort to create national innovation system. The authorized capital of RVC is more than 30 billion rubles. 100% of the RVC's capital belongs to the Russian Federation represented by the Federal Agency for State Property Management of the Russian Federation (Rosimushestvo). The total number of funds formed by RVC has reached 15, and their aggregate size is 25.2 billion rubles. The share of RVC is 15.7 billion rubles. RVC funds invested into 153 innovative companies. The total amount of invested assets reached 14 billion rubles.

For more information, please contact the public relations department of the Open Joint-Stock Company RVC: phone: (495) 777-0104, e-mail: pr@rusventure.ru

About EY

EY is a global leader in assurance, tax, transaction and advisory services. Our knowledge and quality of services help to strengthen the public confidence in the capital markets and economies around the world. We train prominent leaders, under the leadership of which our team never fails to meet its commitments. Thus, we make a significant contribution to improving the business environment for the benefit of our employees, customers, and society as a whole. We are cooperating with the CIS companies helping them to achieve business goals. 460 experts are working for 20 offices of our company (in Moscow, St. Petersburg, Novosibirsk, Yekaterinburg, Kazan, Krasnodar, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Bishkek, Baku, Kiev, Donetsk, Tashkent, Tbilisi, Yerevan, and Minsk).

The name EY refers to the global organization and can refer to one or more companies forming part of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a legal entity created in accordance with the applicable laws of UK, is a company limited by guarantees of its members and does not provide services to clients. See ey.com for detailed information.

EY contact information:
Andrey Podoynitsyn
E-mail: Andrey.Podoynitsyn@ru.ey.com



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