Russia moves to diversify economy with technology projects

Dmitry Medvedev arrives at Skolkovo Innovation Centre The Skolkovo Innovation Centre is part of a key economic policy for the former President Dmitry Medvedev

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Twenty miles west of Moscow, a new technology race, rather like the space race of the 1960s, is opening up.

In the area of farmland, Russia is trying to build its own version of Silicon Valley - the Skolkovo Innovation Centre.

It is part of the government initiative to divert the country away from its economic dependence on oil and gas and towards a new kind of industry.

It has been a key policy for Dmitry Medvedev, the man who was Russia's president until he was replaced by Vladimir Putin at the beginning of May 2012.

The Skolkovo project is widely criticised in Russia and construction work has still not started in earnest more than two years after the proposals was announced.

Another aim of this proposed technology drive is to keep clever Russians in the country, along with their money-making ideas, rather than them leaving because they are fed up with corruption and the weight of bureaucracy.

Cash not credit

Many of these technology companies are able to start up because of funds acquired from venture capitalists.

But how do these venture capitalists decide who to back?

Start Quote

Buying things online, which is a normal thing to do in the West, is just starting here”

End Quote Richard Creitzman Fast Lane Ventures

"We look for proven business models that work abroad and we basically copy them and bring them to Russia," says Richard Creitzman at Fast Lane Ventures.

"We find the ideas, we find the people, we find the funding," he says.

"We give a management team the opportunity to start up a company, assisted with infrastructure, and let them try to build that company."

The Russian government is promoting technology and internet-based companies, and Mr Creitzman says the development at Skolkovo is a good example of using state money along with private funding.

The success of such ventures depends on Russians adapting to new ideas.

"The use of the internet and e-commerce sites, buying things online, which is a normal thing to do in the West, is just starting here," Mr Creitzman says.

"People tend not to pay by credit cards, they tend to pay the courier that delivers the item.

Start Quote

It's for the good of the state to develop new businesses”

End Quote Richard Creitzman Fast Lane Ventures

"There is less trust of credit cards, less trust of the goods, so the market isn't as developed here yet as it is in the West."

Business as usual

Looking ahead, with the new Vladimir Putin presidency, thoughts turn to what the business climate is going to be in the next few years.

"We are not planning for any major changes," says Mr Creitzman.

"Every couple of weeks there is an investment committee that sits down and goes through a range of ideas that are developed by the management, the shareholders and the business analysts," he says.

He maintains that the state has money, especially as the oil price is probably going to remain good in the medium-term - maybe three to five years.

"Skolkovo was created under President Medvedev's presidency. I don't think that is going to change. I think that will continue to have support because it's for the good of the state to develop new businesses," he says.

Ms Shalimova Ms Shalimova says she created Lokata to be a nationwide service
Branching out

Lokata is a small company taking advantage of the pro-technology climate, which received funding from Fast Lane Ventures.

Zhanna Shalimova, the chief executive, says her company allows people to search for goods and services online in the brochures and catalogues of retailers and service providers.

She has taken the idea from a German company doing the same thing and implemented it in Russia.

"We are very lucky because we have such really strong shareholders," she says.

"We have Fast Lane Ventures, who are specialists in internet start-ups as they know this industry very well," she says.

She concedes Lokata may not be a typical start-up because they have a product that was already developed and tested in Europe.

"But still I think that there are many bureaucratic things in Russia, which makes life not so easy," she says.

However, that does not deter her and she sees her business growing outside the main cities.

"Internet connectivity in Russian regions may exceed 85% by 2015. This makes the regions highly attractive for advertisers," she says.

"We created Lokata as a national service that will cover the whole country."

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