The pace of change in Russia appears slow at the moment. Ongoing events in the Crimea suggest an inward-looking country that has no ear for global opinion and is set on acting like the angry Soviet bear that we know from the Cold War.
The perception, however, can be different from reality, especially when viewed from thousands of miles away, because despite its recalcitrant political front, there is a revolution in entrepreneurship taking place in Russia.
The Russian Startup Tour began in March and included startup pitch-offs in 27 cities before culminating in a one-day, showcase event held at the Skolkovo Foundation‘s Moscow technology incubator. The event is indicative of the growth Russia’s nascent technology startup scene; the foundation plans to bring the Startup Tour to more Russian cities in 2015.
The Skolkovo Foundation is Russia’s state-sponsored push to jumpstart the country’s tech ecosystem. It’s not just promoting startups through the multi-city tech tour and competition. It’s also building a 400-hectare site on the outskirts of Moscow. That site will be a hub for up to 30,000 workers when the project is completed in 2020.
At the finale of the startup tour held earlier this month, the spotlight was on Russian robotics. Presentations ranged from glorified Meccano creations with an emphasis on Heath Robinson machines to a much more impressive kickboxing robot.
The winner of the $26,000 nationwide startup competition was ExoAtlet, an ambitious robotics company that not only aims to improve the quality of life for disabled people (an area where Russia has certainly not led the world), but also to provide disaster relief in affected zones.
There were also two second prizes. One went to Radio Gigabit, a resident of Skolkovo’s Space Technologies and Telecommunications Cluster, and the other to Nanooptic Devices, a resident of the Nuclear Cluster. The Jury’s Choice Award (as well as the Open Stage special audience award) went to Ivideon, a designer of digital planar holography.
While Skolkovo is now basking in some success, the project has generated its share of controversy. Accusations of corruption and a damning report from the Russian Prosecutor General’s Office stating that between 2010 and 2012, nearly 30 billion rubles ($600 million) out of a budget of 50 billion rubles ($1 billion) were used neglectfully ‘in the absence of budget control’, cast a shadow over its work — almost before the project was able to get off the ground.
Things have moved on since a proper audit of Skolkovo’s books. And VCs realise that Skolkovo has to exist in a country that is rich in scientific knowledge but low on marketing expertise.
“As a global investment company we know it’s important to build the early startup culture at a country level. Skolkovo in Russia has done a good job in educating and bringing up the young startup market, as well as pre-seed investments into tech companies,” said Dmitry Chikhachev, Managing Partner at Runa Capital, a $135 million global venture capital fund based in Moscow with a satellite office in Palo Alto and plans for a London office later this year.
The first stop-off on this year’s tour was the Urals city of Yekaterinburg, the catalyst for the Russian Revolution where Tsar Nicholas II and his family were murdered by the Bolsheviks on July 17, 1918. The city, Russia’s fourth-largest with more than 1.5 million people, became a major manufacturer of arms for World War II and was renamed Sverdlovsk after a local communist leader, before becoming a “closed city” to foreigners for its proximity to sensitive military zones.
This changed in 1991 when it was renamed Yekaterinburg and its closed status was revoked. In the intervening 23 years the city has become a hub for emerging mining and technology startups, attracting young entrepreneurs graduating from the city’s 16 educational institutions.
Other Russian cities are also beginning to emerge as tech hubs, and these developing innovation centers will need the support of institutions like Skolkovo, according to investors.
“The Skolkovo Foundation is really an ecosystem for the commercialisation of innovative ideas. Skolkovo is only three years old and it takes time to build a strong ecosystem of high quality,” say Lyubov Simonova, a principal at Almaz Capital Partners. “Russian companies want to build companies with billion-dollar revenues. Skolkovo is one part of the ecosystem that can make this possible,” she said.
Perhaps the peculiar and unique evolution of the Russian state is one where state-sponsored projects like Skolkovo are needed to change mindsets and create outward-facing companies, be that in Moscow, Yekaterinburg or even the steppes of Siberia.
With a third Startup Village tour earmarked for next year and another $4 billion guaranteed for Skolkovo over the next six years, there will be plenty of time to find out.