GLOBE Forum: starting up on a new start up culture

Business initiatives from young generation
With the Russian government looking to promote a culture of greater entrepreneurialism Business RT spoke with Richard Kivel, President of the MIT Enterprise Forum on market realities and start ups at the The Globe forum at MGIMO University

­RT:  How big is the Russian start up market?

RK:“The start up market is hard to measure. You can measure the telecoms market, the health care market or the oil market. I think that what can be evaluated and give more sense in terms of size and potential is the size of entrepreneurial power which is going to be determined by the number of students and the quality of universities that are promoting the entrepreneurship in Russia. So that is how the start up market is increasing and has burgeoned.”

RT:  How many existing start ups in Russia have you heard about and how successfully were they developed in your opinion? How many of all entrepreneurs have a real possibility to implement their initiatives and ideas?

RK:  “I can say there is an endless number of ideas and ways to start companies. Through our last year visit, and this time in Russia, I am seeing start ups coming out of St.Petersburg, Novosibirsk, Perm Region, certainly there are start ups happening in Moscow. For example, I will be visiting a Digital October Forum on innovative and entrepreneurial ideas promoted for development and success. They are doing all sorts of things that are very important to develop an entrepreneurial EcoSystem. So I think that there is a tremendous opportunity to build high quality companies in Russia with practical government support and indirect state participation in terms of providing legal basement and establishing infrastructure.”

RT:  What have changed since your last speech at High School of Economics in July 2010? What progress has been made in promoting a young businessperson culture?

RK:  “I reckon there were some important things that changed around Skolkovo with official legislation being admitted and supported by the government; I am talking about the legislation which touches issues of its further development and international collaboration. Russian venture corporations have been very concerned about cultivation of a Russian entrepreneurial market space. Individual representatives of big corporations have become more aware of supporting entrepreneurial activity and become involved in intersectional communication. As you could have noticed, a number of international conferences, forums and exhibitions were organized involving zillions of business representatives from around the world who shared their ideas and were open to the wider public. That shows how Russia is committed to learning and examining the experience from outside. The borders and barriers for doing business globally are reducing. Considering the short period of time that has passed, Russia has shown an incredible performance of high quality improvements. All these play an important role in the general atmosphere and start up environment establishment. Above all, for true results to be measured we have to wait some time.”

RT:  Does Russia take enough effort to collaborate globally and to participate globally?

RK:  “I am happy to say that Russia has become more globally involved in these type of entrepreneurial activities and innovation programs. When I meet with people from Russian state structures and institutional organizations that are truly thinking globally, with open minds and tenacity, about international collaboration between countries, communities and states I am excited. Theses people are traveling around the world promoting Russia and entrepreneurship in Russia. And consequently, new partnerships and collaborations are being created. Only last week at the MIT Forum in South Korea there was a half a dozen people from Russia at the work shop. So it’s very powerful, Russia is doing a good job promoting it self and attracting people into Russia.”  

RT:  What sectors are most Russian start ups occurring in? How does it compare with other emerging economies?

RK:  “The types of company that will be created in any geography is going to be based on the history and the strength of that geography. So, for example, if you are in one part of the US you will be more likely creating family business or manufacturing, around agriculture facilities and farming, because it’s the strength of that region. On the other hand, if you are in Silicon Valley you will be creating companies more often that are doing high-tech projects, gaming, internet. And in Boston you will be more exposed to start a life science business, and so on and so forth, till we reach NYC where all major venture funds and financial hubs have been settled. Moscow is like the US it can not be painted with one broad color. Moscow has allocated a lot of strengths and powers. It is where people meet and promote changes and challenges. Novisibirsk with its tremendous scientific base, academic groups and great space area for initiating, creating, testing and installing. St. Petersburg has concentrated an impressive community of students and professionals in telecommunication sector and broad band connectivity.”

RT:  Why Moscow has been chosen as a center for allocation and establishment of major technological, innovative and scientific hubs? Isn’t decentralization the main factor for a large-scale involvement and success?

RK:  “I definitely agree. I think it’s a concern. It is important to have these efforts in Russian regions where particular strengths are concentrated. But if you are in government in Russia you can not create innovative economies in 10 areas all at once at the same time. Thus, its very important that they begin to do more around Russia, but I believe that the reason why Moscow is in focus is because they want to obtain proof of concept, they want to test it in one location with most diverse conditions. It allows the government to figure out the model that can be applicable on a broader territory. They want to learn from mistakes and prevent the whole country infrastructure from flaws. With that said, there is important work happening in the Perm region, Novosibirsk and St. Petersburg.”

RT:  What are the main obstacles for the start ups development in Russia?

RK:  “I do think that the main obstacles are around funding companies. There should be favorable conditions and more communication for global investors coming to Russia and being informed of what is happening here and if they are able to collaborate. The government is doing a good job and supporting the early stage companies, but to bring a company to the next level we need global financial strength, venture capitalists. Also I think one of the areas’ that is very important here is that the laws and the taxations should become a supportive of an entrepreneurial economy. Our panelist today gave an example of tax benefits for start up companies in Russia but actually some of those benefits are only suitable for already profitable companies with 50 or more employees, and these can not be considered start ups, as start ups are usually not profitable and certainly don’t have 50 employees. They have to bear taxes equal to big companies and other administrative expenses until they reach a profit, and the next stage of operations. But the difference is that they are working on inventions, and it needs more research and experimental work to do, although they have no extra funds for that as other companies might have.”   

RT:  What is your advice to the Russian young entrepreneurs and what should they pay attention to?

RK:  “Initiators and entrepreneurs should think more to expand their network of right contacts. A successful start up project is a collaborative work of different specialist united by one business idea and struggling for collective outcome. In that stream, I suggest to devolve communication through various social communities and professional networks. Each academic scientific laboratory, experimental hubs and campuses should establish their intercommunicative interface and attract more students and mentors for collaboration.    It is important that these scientists and researchers have an incentive that they are rewarded and motivated to attend international conferences and meet other scientists and researchers.  I think each part of Russia needs to think about its strength – whether academic or infrastructural – it need to expand in terms of establishing research centers  and than needs to build clusters of entrepreneurial support for those centers.”

Elena Lokteva, Business RT

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