Chill out — Russia’s Skolkovo project attempts a re-boot with a new venture fund
“Everyone should take a chill pill” raged President Putin during his session at the St Petersburg International Economic Forum last week. He was of course referring to the storm of controversy surrounding the alleged ties between Russia and the Trump Whitehouse. But Putin’s outburst reflects a wider Russian frustration. The narrative about Russia’s place in the world refuses to shift. That frustration is starting to appear in the technology industry there, where the vast, Medvedev-backed Skolkovo project to produce Russia’s answer to Silicon Valley has failed to make much of a dent on the tech world’s consciousness.
While Russian Troll Houses and alleged Russian hacking of the Democratic party’s emails get way more air-time in the tech news industry, the startups languishing in Skolkovo’s huge tech campus, a traffic-clogged hour’s drive outside of Moscow, get precious little attention.
That’s starting to change as witnessed at TechCrunch Disrupt New York recently, which saw the Skolkovo Foundation bring a selection of startups over to the USA to exhibit. There, they exhibited typical Russian innovation such as robotics, hardware and IoT, health and biotech, VR & AI technologies. The founders of the ten companies were looking at raising from $1million up to $10 million investment. But this week saw the next sign of Skolkovo’s desire to try and break out of the usual narrative.
We got a preview of this last year when Prime Minister Medvedev gave a 2 hour session at Moscow’s Open Innovation Forum which, as one Kremlin-watcher I know wryly observed, amounted to “there’s no more money”. The Skolkovo Foundation has been sucking up billion of roubles in funding with not much to show for it aside from a distant, windswept science park. All that public money has now dried up — and you might well ask where to. So Skolkovo has come up with a new strategy to breathe new life into its project, namely a new private sector fund.
If the Skolkovo Foundation funded the building works and costs of a range of tech projects from a large robotics lab to autonomous buses, Skolkovo Ventures will seek to try and boost its tech companies with private capital.
Skolkovo Ventures will work in close cooperation with three local VC-funds in Russia: I2BF, iTechCapital and Primer Capital, leveraging the existing infrastructure, experience and partnership network of the Foundation in order to help portfolio companies with business Development; international expansion; access to big industrial and strategic clients. Skolkovo Ventures is effectively now a General Partner spreading itself across those funds.
It will also create a deal pipeline and treat the startups previously nurtured under the Foundation as its initial portfolio.
The three funds total $150m under management ($50m each), and will be invested over the next four years, taking on 8-15 companies, and investment anywhere between $1m and $5m a piece in Seed, A and B funding rounds.
To give an example of what these funds have done in the past, iTech Capital has participated in syndicated deals with other Russian VCs including Runa, ru-Net, Almaz, and Finam. Some 50% of the companies its invested in generate foreign currency revenues; 100% of the companies are profitable; 50% of the companies are paying dividends. Skolkovo will run the back office of the fund and fundraising while the partner funds will run deal flow and investing.
Vasily Belov, senior VP of innovations at the Skolkovo Foundation has now been appointed CEO of the brand new private-sector spin out (Skolkovo Ventures). He told me “Our idea is that the three funds will help our startups with international expansion. And vice-versa. Anyone wanting to launch their tech company in Russia can talk to Skolkovo.” We’ll see about that last point I guess.
He says Skolkovo’s network of partners stretches across China, Singapore, Hong Kong as well at the Houston Tech Center, Techstars, Mass Challenge, and MIT.
Belov was previously CEO and cofounder of Russia;s largest mortgage. He says Skolkovo Ventures will not stop at this level, and aims to raise $500m by 2020, making it one of the biggest funds in Russia.
In other words, Skolkovo’s pot of public money has run dry and it’s now going to leverage its public-developed assets into a private sector investment vehicle. That move might turn heads in other countries. Not in Russia.
As the ever-jocular Mr Putin likes to say, take a chill-pill everyone, this is how things are done here.