rus
Since 2007 the Rusnano Corporation has promoted the development of the Russian nanotechnology industry by investing in high-tech projects in order to foster
the innovative production.
the innovative production.
Mr. Grudev, one of the key subjects of the October forum Open Innovations has been the development of international cooperation in the new geopolitical conditions. Has any progress been made in that direction?
If we talk about international projects, the most important event of the forum was the visit of the Chinese delegation headed by the Minister of Science and Technology of the Government of the People’s Republic of China Mr. Wan Gang. On the one hand, cooperation with China poses a huge potential, on the other hand, it has long been hampered by some of the stereotypes on both sides. So far we have had successful cooperation with our Western partners; it does not seem to have been necessary to address those issues but now it is time to review our relationships. The negotiations within the Open Innovations forum were very successful, and we can say that the Russian-Chinese cooperation in science and technology has gained a powerful momentum. In particular, a memorandum on the establishment of the Trans Pacific Technology Fund (TPTF) with an initial capitalisation of US$ 200 million was signed, half of which will account for Rusnano and the other half will be owned by Asian investors, the Chinese Industrial Technology Investment Corporation (ITIC) and Singapore 360ip. The Fund will start operating in 2015 and will invest in high-tech companies in the fields of robotics, nanotechnologies, new materials and information technologies. In the future, the capital of TPTF may be doubled.
We understand that the current situation in China is not just a co-investor and not just an Asian partner but a kind of "window on the world" because being the world’s factory it receives from Western companies the latest manufacturing technologies. By developing cooperation, we make it possible for us to get access to those technologies.
When listing the investment priorities of the TPTF, you first named robotics, what are the reasons for that?
It is obvious that in the near future the market of a robotics, thanks to demand and growth rates, will become the engine of world hi-tech as in due time information technologies became it. There are objective prerequisites for that. One of them is a shortage of skilled manufacturing professionals, the so-called "smart hands". As soon as the higher education is becoming more accessible, those social groups, previously provided production companies with professionals with secondary technical or elementary engineering education, are gradually moving into the "smart heads" segment. This problem manifests itself globally, and it is discussed among our foreign partners including those representing major international corporations. Unfortunately, measures to encourage the cultivation of "smart hands" have not yielded significant effects, so until now the problem has been solved mainly by attracting migrants from countries with a low standard of living for the vacant jobs. Development of robotics is one of the keys to solving the problem of lack of industrial personnel. This is proved by the successful experience of Japanese companies, which have widely used robotic systems for decades.
Do the new vectors in Rusnano policies mean that the development of nanotechnologies has ceased to be an absolute priority for the corporation?
Of course, the investment mandate of Rusnano is wider, than what the state corporation at the beginning of the existence had. But from "nano" in our name we don’t refuse – including because the term "nanotechnologies", such as "microtechnology" several decades ago, is also a synonym of "the latest technologies". The prefix "nano" in this case indicates not so much the size effects as a link to the production sector, what IT specialists call "hardware".
If "software" we’re doing well, in the field of industrial production it is necessary to make a lot, and efforts of Rusnano are directed on it.
What sectors will be the priority for the TPTF in terms of development financing, and what scopes in principle are considered to be the most promising as far the introduction of robots is concerned?
First I need to say that the TPTF investments, like most Rusnano projects, will be designed not to support developments at their early stage; they will focus on completion and commercialisation of the already established and recognised promising technologies and know-how by letting them reach the production stage. In other words, we and our subsidiary funds invest in the developments which can be called mature. With regard to the priorities and future applications of robots, of course, first of all we are interested in the space industry, aeronautics and microelectronics as their development is strategically important for the country. However, if there is an interesting and commercially feasible project focused on consumer segment, we will not get away from it. As reported by retailers, the market has already a demand for household robots, home assistants and caregivers for people with disabilities.
Which countries besides China are planned to develop cooperation with under the conditions of international sanctions?
Despite the political situation, we continue to cooperate at different levels with all the technologically advanced countries including the Group of Eight. But problems do arise; some of our partners from countries that support sanctions are under the pressure of their supervising officers. In this context, it is essential that the Rusnano corporation was created by the Government of the Russian Federation, i.e. it belongs to the category of institutions, a cooperation with which is considered particularly undesirable in the light sanctions. Nevertheless, a number of countries, such as Israel, Singapore and South Korea stay on a reasonable track knowing that our business is mutually beneficial, out of politics and requires very careful treatment since built over the years, and you can destroy it within a few months.
There major plans associated with the promotion of cooperation with India, Mexico and Brazil. These countries tackle issues that are close to ours, e.g. shifting from the raw-material economy to the technology-based one, and we have already made significant progress in some areas. For example, India has become one of the world’s major software outsourcing centres. Forms of interaction can be rather diverse, from consultation and information exchange to creating joint investment foundations. While Russia and the West rethink their relationship with each other, we will be interested in using intermediaries for access to the markets of developed countries. Often in the UK and the Commonwealth of Nations (British Commonwealth) is easier to work through an Indian company, and in the U.S. through the Mexican partners.
What forms of international co-operation does Rusnano use? Are you coordinating the activities of regional nano-centres in that area?
The most common and versatile option is to create a joint investment foundation as it is therefore possible to remove or mitigate the constraints faced in some countries. In general, all sort of forms of international cooperation are being practiced. For example, the chairman of the Management Company Rusnano Anatoly Chubais has served as co-chair of the EU-Russia Industrialists and Entrepreneurs Round Table. Nobody makes him do it but since the organisation works quite effectively, it would be expedient to make use of it. We are constantly working with international organisations fostering the scientific, technological and industrial cooperation. Through the Infrastructure and Educational Programs Foundation Rusnano provides support to international educational projects. In addition, the Russian-Israeli development projects are jointly funded through the Foundation jointly with the Office of the Chief Scientist of Israel.
With regard to the international activities of nanocentres, we follow the "watered what grows" principle. The fact that proactiveness is one of the innovation cornerstones, especially in small and medium businesses, with the most effective initiatives that come from below. For example, if the engineers or scientists from different countries are going to discuss any issues or projects, the effect will be greater when they meet on their own initiative and not because they are collected to fulfil international agreements signed by the presidents or governments. We inform nanocentres about opportunities, offer assistance and actively assist those who request it.
What Rusnano project companies would you consider most prominent?
Perhaps this is not quite correct in relation to other successful projects but I would like to highlight two companies, Niarmedik Pharma and ELVIS-Neotech.
Niarmedik Pharma is a manufacturer, which has been gaining popularity due to the antiviral drug Kagocel. Now they conduct clinical trials of nanovaccines, which do not infect the body unlike traditional vaccines but only simulates the effects of a virus on it. Studies have shown that the immune system responds not to the chemical composition of the virus but its shape; that means immunity can be improved by introducing a kind of dummy viruses, nanoparticles of a similar shape. This ensures no allergic reactions, simultaneous vaccination against multiple viruses or several strains of various kind and other advantages. Rusnano investments helped the company build a modern production plant in Obninsk, Kaluga region and significantly increase its market share in the market of antiviral drugs. At the end of 2013 we withdrew from Niarmedik Pharma but the return on investment was 41.1%. Moreover, this result was achieved in just two years instead of the planned five years.
ELVIS-Neotech is the Russian developer and manufacturer of security systems and business monitoring. The company’s office and manufacturing facilities are located in Zelenograd. Due to a combination of the technologies of computer vision, video analytics, thermal analysts, radar surveillance and biometric identification, the company has created a line of products that are in demand not only in Russia but also in the most developed countries, the UK, the US and Israel. In particular, the system developed by ELVIS-Neotech is operated at the largest Israeli international Ben Gurion Airport. The fact that a Russian company has won such a tender in Israel, in which, on the one hand, there are many local high-tech solution developers, on the other hand, the highest security requirements need to be met, is the matter of pride.
Can we speak about competition among investors in the fight for the most promising projects?
Russian development institutes were created so as to provide support to innovative companies at all their development stages, from seed investments by supporting startups to establishing of the industrial production. Originally Rusnano was supposed to become Private Equity. If the company, which was established with the support of Skolkovo and developed with the help of RVC or Russian Venture Company, reaches the stage of creation of industrial production, then it becomes mature for cooperation with Rusnano. We help it recreate, and then we come out of the project by selling our share to a strategic investor or through the stock exchange. Thus, it makes no point to talk about the competition between Skolkovo, RVC and Rusnano since we are tackling different issues.
In the domestic market, competition with foreign direct investment foundations such as the Baring Vostok or Russia Partners is theoretically possible only because the demand for financing is significantly higher than offer. Moreover, due to the lack of investors it would be appropriate to talk about a partnership, we will be happy to support an ambitious project together with colleagues.
There is a real competition in overseas markets between Private Equity foundations, so it is crucial that we can offer a number of advantages to foreign companies. For example, markets such as the pharmaceutical or aerospace industries in developed countries are divided between several major players and are heavily regulated thus minimising the chances of younger companies to independently develop their businesses. We can offer them much more comfortable conditions for growth.
What else is the specificity of Russia in comparison with foreign innovation markets?
One of our main problems is quite a low demand for innovative products. We have repeatedly faced with a situation, when a product designed and produced in Russia is in high demand e.g. in the US, but it is not known and is not in demand in the domestic market. This is partly due to the fact that our portfolio companies mainly produce not final products and materials, but components and spare parts. Of course, it is gratifying that Russian products are in demand among those we are taught to look up to but the fact that our domestic innovations contribute to the development of foreign companies while our people keep applying old technologies. For example, there was such a story with the composite reinforcement manufactured by the company Galen. The nanostructured polymer it is made of is basalt fibre reinforced, non-corrodible and is significantly lighter than steel but is not inferior to the latter in terms of strength. The reinforcement manufactured in Cheboksary, yet not so much in demand in Russia, but its already buying companies from Germany, Norway, Poland and even the Gulf countries, for example, reinforcement made by Galen will be used for the construction of the metro in Doha, capital of Qatar.
What steps are necessary for the development of the demand for high-tech products?
This is one of the most controversial issues. From the experience, non-market and artificial measures to encourage demand often fail. For example, in Germany the public at first was very happy about the programme for subsidising the installation of wind turbines on private land, then it was laughed at, and now the cry so to speak.
In my opinion, in order to support the demand for new technologies in the first place you need to have a sound policy in the field of technical regulation. At least, in the priority sectors of the economy standards and norms should meet the actual level of development of science and technology without hindering innovations. For example, outdated building codes turned out to be one of the main obstacles to marketing composite building bars of Galen.
About a year ago, Rusnano was restructured, in particular, the management company was established. How effective were these measures?
Changes were needed to reshape the corporation in order to make it closer to the international investment market and easy to work with for foreign partners, both investors and portfolio companies. We had to do a bulk of preparatory work, in particular to convince the government of the feasibility of establishing such a business unit, as the Management Company. In the course of restructuring we optimised the internal structure of the company, by making it more compact, and therefore more efficient.
Thank you for the interesting interview.
The interview was taken by Dmitry Gudilin
If we talk about international projects, the most important event of the forum was the visit of the Chinese delegation headed by the Minister of Science and Technology of the Government of the People’s Republic of China Mr. Wan Gang. On the one hand, cooperation with China poses a huge potential, on the other hand, it has long been hampered by some of the stereotypes on both sides. So far we have had successful cooperation with our Western partners; it does not seem to have been necessary to address those issues but now it is time to review our relationships. The negotiations within the Open Innovations forum were very successful, and we can say that the Russian-Chinese cooperation in science and technology has gained a powerful momentum. In particular, a memorandum on the establishment of the Trans Pacific Technology Fund (TPTF) with an initial capitalisation of US$ 200 million was signed, half of which will account for Rusnano and the other half will be owned by Asian investors, the Chinese Industrial Technology Investment Corporation (ITIC) and Singapore 360ip. The Fund will start operating in 2015 and will invest in high-tech companies in the fields of robotics, nanotechnologies, new materials and information technologies. In the future, the capital of TPTF may be doubled.
We understand that the current situation in China is not just a co-investor and not just an Asian partner but a kind of "window on the world" because being the world’s factory it receives from Western companies the latest manufacturing technologies. By developing cooperation, we make it possible for us to get access to those technologies.
When listing the investment priorities of the TPTF, you first named robotics, what are the reasons for that?
It is obvious that in the near future the market of a robotics, thanks to demand and growth rates, will become the engine of world hi-tech as in due time information technologies became it. There are objective prerequisites for that. One of them is a shortage of skilled manufacturing professionals, the so-called "smart hands". As soon as the higher education is becoming more accessible, those social groups, previously provided production companies with professionals with secondary technical or elementary engineering education, are gradually moving into the "smart heads" segment. This problem manifests itself globally, and it is discussed among our foreign partners including those representing major international corporations. Unfortunately, measures to encourage the cultivation of "smart hands" have not yielded significant effects, so until now the problem has been solved mainly by attracting migrants from countries with a low standard of living for the vacant jobs. Development of robotics is one of the keys to solving the problem of lack of industrial personnel. This is proved by the successful experience of Japanese companies, which have widely used robotic systems for decades.
Do the new vectors in Rusnano policies mean that the development of nanotechnologies has ceased to be an absolute priority for the corporation?
Of course, the investment mandate of Rusnano is wider, than what the state corporation at the beginning of the existence had. But from "nano" in our name we don’t refuse – including because the term "nanotechnologies", such as "microtechnology" several decades ago, is also a synonym of "the latest technologies". The prefix "nano" in this case indicates not so much the size effects as a link to the production sector, what IT specialists call "hardware".
If "software" we’re doing well, in the field of industrial production it is necessary to make a lot, and efforts of Rusnano are directed on it.
What sectors will be the priority for the TPTF in terms of development financing, and what scopes in principle are considered to be the most promising as far the introduction of robots is concerned?
First I need to say that the TPTF investments, like most Rusnano projects, will be designed not to support developments at their early stage; they will focus on completion and commercialisation of the already established and recognised promising technologies and know-how by letting them reach the production stage. In other words, we and our subsidiary funds invest in the developments which can be called mature. With regard to the priorities and future applications of robots, of course, first of all we are interested in the space industry, aeronautics and microelectronics as their development is strategically important for the country. However, if there is an interesting and commercially feasible project focused on consumer segment, we will not get away from it. As reported by retailers, the market has already a demand for household robots, home assistants and caregivers for people with disabilities.
Which countries besides China are planned to develop cooperation with under the conditions of international sanctions?
Despite the political situation, we continue to cooperate at different levels with all the technologically advanced countries including the Group of Eight. But problems do arise; some of our partners from countries that support sanctions are under the pressure of their supervising officers. In this context, it is essential that the Rusnano corporation was created by the Government of the Russian Federation, i.e. it belongs to the category of institutions, a cooperation with which is considered particularly undesirable in the light sanctions. Nevertheless, a number of countries, such as Israel, Singapore and South Korea stay on a reasonable track knowing that our business is mutually beneficial, out of politics and requires very careful treatment since built over the years, and you can destroy it within a few months.
There major plans associated with the promotion of cooperation with India, Mexico and Brazil. These countries tackle issues that are close to ours, e.g. shifting from the raw-material economy to the technology-based one, and we have already made significant progress in some areas. For example, India has become one of the world’s major software outsourcing centres. Forms of interaction can be rather diverse, from consultation and information exchange to creating joint investment foundations. While Russia and the West rethink their relationship with each other, we will be interested in using intermediaries for access to the markets of developed countries. Often in the UK and the Commonwealth of Nations (British Commonwealth) is easier to work through an Indian company, and in the U.S. through the Mexican partners.
What forms of international co-operation does Rusnano use? Are you coordinating the activities of regional nano-centres in that area?
The most common and versatile option is to create a joint investment foundation as it is therefore possible to remove or mitigate the constraints faced in some countries. In general, all sort of forms of international cooperation are being practiced. For example, the chairman of the Management Company Rusnano Anatoly Chubais has served as co-chair of the EU-Russia Industrialists and Entrepreneurs Round Table. Nobody makes him do it but since the organisation works quite effectively, it would be expedient to make use of it. We are constantly working with international organisations fostering the scientific, technological and industrial cooperation. Through the Infrastructure and Educational Programs Foundation Rusnano provides support to international educational projects. In addition, the Russian-Israeli development projects are jointly funded through the Foundation jointly with the Office of the Chief Scientist of Israel.
With regard to the international activities of nanocentres, we follow the "watered what grows" principle. The fact that proactiveness is one of the innovation cornerstones, especially in small and medium businesses, with the most effective initiatives that come from below. For example, if the engineers or scientists from different countries are going to discuss any issues or projects, the effect will be greater when they meet on their own initiative and not because they are collected to fulfil international agreements signed by the presidents or governments. We inform nanocentres about opportunities, offer assistance and actively assist those who request it.
What Rusnano project companies would you consider most prominent?
Perhaps this is not quite correct in relation to other successful projects but I would like to highlight two companies, Niarmedik Pharma and ELVIS-Neotech.
Niarmedik Pharma is a manufacturer, which has been gaining popularity due to the antiviral drug Kagocel. Now they conduct clinical trials of nanovaccines, which do not infect the body unlike traditional vaccines but only simulates the effects of a virus on it. Studies have shown that the immune system responds not to the chemical composition of the virus but its shape; that means immunity can be improved by introducing a kind of dummy viruses, nanoparticles of a similar shape. This ensures no allergic reactions, simultaneous vaccination against multiple viruses or several strains of various kind and other advantages. Rusnano investments helped the company build a modern production plant in Obninsk, Kaluga region and significantly increase its market share in the market of antiviral drugs. At the end of 2013 we withdrew from Niarmedik Pharma but the return on investment was 41.1%. Moreover, this result was achieved in just two years instead of the planned five years.
ELVIS-Neotech is the Russian developer and manufacturer of security systems and business monitoring. The company’s office and manufacturing facilities are located in Zelenograd. Due to a combination of the technologies of computer vision, video analytics, thermal analysts, radar surveillance and biometric identification, the company has created a line of products that are in demand not only in Russia but also in the most developed countries, the UK, the US and Israel. In particular, the system developed by ELVIS-Neotech is operated at the largest Israeli international Ben Gurion Airport. The fact that a Russian company has won such a tender in Israel, in which, on the one hand, there are many local high-tech solution developers, on the other hand, the highest security requirements need to be met, is the matter of pride.
Can we speak about competition among investors in the fight for the most promising projects?
Russian development institutes were created so as to provide support to innovative companies at all their development stages, from seed investments by supporting startups to establishing of the industrial production. Originally Rusnano was supposed to become Private Equity. If the company, which was established with the support of Skolkovo and developed with the help of RVC or Russian Venture Company, reaches the stage of creation of industrial production, then it becomes mature for cooperation with Rusnano. We help it recreate, and then we come out of the project by selling our share to a strategic investor or through the stock exchange. Thus, it makes no point to talk about the competition between Skolkovo, RVC and Rusnano since we are tackling different issues.
In the domestic market, competition with foreign direct investment foundations such as the Baring Vostok or Russia Partners is theoretically possible only because the demand for financing is significantly higher than offer. Moreover, due to the lack of investors it would be appropriate to talk about a partnership, we will be happy to support an ambitious project together with colleagues.
There is a real competition in overseas markets between Private Equity foundations, so it is crucial that we can offer a number of advantages to foreign companies. For example, markets such as the pharmaceutical or aerospace industries in developed countries are divided between several major players and are heavily regulated thus minimising the chances of younger companies to independently develop their businesses. We can offer them much more comfortable conditions for growth.
What else is the specificity of Russia in comparison with foreign innovation markets?
One of our main problems is quite a low demand for innovative products. We have repeatedly faced with a situation, when a product designed and produced in Russia is in high demand e.g. in the US, but it is not known and is not in demand in the domestic market. This is partly due to the fact that our portfolio companies mainly produce not final products and materials, but components and spare parts. Of course, it is gratifying that Russian products are in demand among those we are taught to look up to but the fact that our domestic innovations contribute to the development of foreign companies while our people keep applying old technologies. For example, there was such a story with the composite reinforcement manufactured by the company Galen. The nanostructured polymer it is made of is basalt fibre reinforced, non-corrodible and is significantly lighter than steel but is not inferior to the latter in terms of strength. The reinforcement manufactured in Cheboksary, yet not so much in demand in Russia, but its already buying companies from Germany, Norway, Poland and even the Gulf countries, for example, reinforcement made by Galen will be used for the construction of the metro in Doha, capital of Qatar.
What steps are necessary for the development of the demand for high-tech products?
This is one of the most controversial issues. From the experience, non-market and artificial measures to encourage demand often fail. For example, in Germany the public at first was very happy about the programme for subsidising the installation of wind turbines on private land, then it was laughed at, and now the cry so to speak.
In my opinion, in order to support the demand for new technologies in the first place you need to have a sound policy in the field of technical regulation. At least, in the priority sectors of the economy standards and norms should meet the actual level of development of science and technology without hindering innovations. For example, outdated building codes turned out to be one of the main obstacles to marketing composite building bars of Galen.
About a year ago, Rusnano was restructured, in particular, the management company was established. How effective were these measures?
Changes were needed to reshape the corporation in order to make it closer to the international investment market and easy to work with for foreign partners, both investors and portfolio companies. We had to do a bulk of preparatory work, in particular to convince the government of the feasibility of establishing such a business unit, as the Management Company. In the course of restructuring we optimised the internal structure of the company, by making it more compact, and therefore more efficient.
Thank you for the interesting interview.
The interview was taken by Dmitry Gudilin
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