President meets venture capitalists on innovation

US venture funds, Sigular Guff, is going to invest $250 million in Russia’s digital technology. More could follow after American venture capitalists heard from President Medvedev about Russia's modernization plans.

American venture capitalists are ready to take a risk on Russia. They invest in start-up projects in high tech industries such as IT, biotech and green companies.

The amount of money many of the venture capital groups who heard directly from President Medvedev each controls is more than all 20 Russian venture funds put together.

Drew Guff, the founder of the Siguler Guff Fund, is planning to invest $250 million in digital technology in Russia. He says the country’s low taxation rate is a strong lure.

“The low tax rate that you mentioned. I think every American in this room only wishes that there were a flat 13% and a 20% corporate tax.”

Creating an innovative and modern economy is President Medvedev’s favourite brain child, and he wants not only foreign money, but also advice.

“What do you think we are missing for the development of innovative ventures? What’s wrong? Be honest!!!”

The venture capitalists meeting with the President were happy to be direct on the issues they saw needing address.

“The make up of the economy is still around larger companies and not small and mid size companies.”

“It is hard to do business!”

“Protection of the intellectual property rights – the key thing. Corruption is the second important thing.”

Russia is building its own Silicon Valley. Skolkovo near Moscow is promised to have a special tax and customs breaks. But will people want to come? According to latest surveys, 90% of young Russians want to work in state corporations, oil and gas, and banks.

American venture capitalists say – the real break through in Russia’s innovative economy will be when the Sergey Brins and Kasperskys are popping up all over the place. Building a special town is all very well, but what’s really needed is a new entrepreneurial state of mind.