Russia’s efforts to develop its own Silicon Valley in the form of the 400-hectare-squared Skolkovo Innovation Center are progressing on schedule. Aside from providing a streamlined and well-oiled path for outwards-flowing foreign direct investment (see the $1 million recently funneled by the Skolkovo Foundation into U.S. Silicone Valley startup Jelastic, a bid to encourage the company to set up a hub there), its developers hope Skolkovo will act as an ‘ecosystem‘ where researchers, entrepreneurs and investors can interact in a mutually-beneficial environment of the ultra-modern. And so far, it’s working. Some 20 big international names have already signed up to join. But such things take time, says The Economist, which is skeptical about Russia’s rush-job to kickstart this initiative in just five years, with the problem of corruption continuing to spook would-be investors.
It will be much harder, however, to create the rest of the ecosystem. Silicon Valley has a critical mass of entrepreneurs and venture capitalists and, more importantly, a culture of turning whizzy ideas into profitable businesses. Such a culture takes decades to evolve. The Skolkovo Foundation, which runs the project, wants to jump-start it with cash—some $1 billion over five years. “We want to fill the institutional void and take some of the risk,” explains Alexander Lupachev, the organisation’s chief investment officer.
The aim is to build a long pipeline of start-ups to reside in Skolkovo. The Skolkovo Foundation will then provide them with some initial cash and hope that venture capitalists invest in them. Firms first apply for “resident status” and are reviewed by some of the hundreds of experts who work with the Skolkovo Foundation. If the firms pass muster, they are eligible for the city’s tax and other preferences and can apply for grants, usually $150,000. If they want more money, they have to find a matching investment from a venture capitalist.
So far, more than 500 firms have obtained resident status. Over 100 have received some money from the Skolkovo Foundation, and about half of these have attracted regular venture capital, mostly from Russian firms. Yet local capital is limited and foreign money is not pouring in—Western investors deem Russia too risky. Even the foreign venture capitalists who work with the Skolkovo Foundation do not invest directly in Russia, but funnel the cash through offshore shell companies.
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