that her. welcome you on the money with the business of russia is business i'm peter lavelle

russia is a competitive high tech leader in the world in this edition of on the money we discuss what it takes to be competitive what specific skills and opportunities are found in the russian market also what are the next steps and what needs to happen for foreign investment to continue to i this market. to discuss this i'm joined by dmitri reypen he is the c.e.o. of digital october technological entrepreneurship center maxime question eak he is the investment director at intel capital and we're also joined by yvonne sure stuff he has to director of research at skolkovo institute of science and technology all right gentlemen let's start up with the issue that a lot of people talk about and it's start ups in russia. talk us through that dmitri i mean is this one of the center of focuses of the i.t. sector right now. i don't think is there if you think you can really exist with all the startups so you can certainly use this to maybe sort. in government.

corporations but if you really want some growth if you want some things we sure do see consumer oriented and certainly we're talking about startups rushing only to the market for the. well in the market for startups is a strange sort of phrase i would say that yes there are startups in russia we can count them in many hundreds maybe thousands of some wharfie i do startups but certainly the infrastructure and the ecosystem in the of course especially the success stories are much fewer and much was developed in silicon valley or maybe some other places like new york city to your ear along them. what are you how do you in the late your competitors or do you want to do something completely different so in this sense i would just say that i am somehow not completely related to the eighty business itself so i'm representative for instance of science and technology which is a lot to do which is the second which is that practically the university and we are standing

a little bit on another side of the pipeline so we have to feel this pipeline for creation of new startups with new talents that are already hard. taking into account that we just started what's the biggest barrier so the biggest barrier right now is you have to create the whole infrastructure more or less from scratch . so and particular for these this call was created so why is it tell our viewers why was it created in the first place so the initiative was created by the russian government somewhere around two thousand and ten to actually did diversify the russian economy and move towards the in a very different to bring europe. ground would say the initiative is about like actually was first to create this cocoa fundy shouldn't as actually the source of support in particular start start ups and develop into premier all spirit in russia so and as a part of this called the initiative of science and technology it's called here

which i am representing here was created in as the key point of actually supporting the whole infrastructure and the whole. dipping your real. enterprise actually to create this and to bring in a spirit soul because this call of science or technology has to create actually exactly the talents for or make sure people don't go to silicon valley it is showing ok so in some sense. of science and technology has to help. stop the brain drain all of that and see if you go sabrina green because it's called super size you need to help russian cannons to realize their potential you know what is the most interesting attractive thing about the idea market in russia today we're excited about. drive through sir frank you need to

distinguish between two for which we have two buckets of opportunities here one is related to the. internet a resource which is being driven by the master. was called dimanche here i mean russia is number one in that nation in europe in terms of the number of what you have to millions yet with over fifty million of you or so you can. it ignores opportunity and creates a lot of business for you commerce companies commerce market alone is estimated or at all were probably billion dollars and then the second bucket is more in the core . knowledge of sector which is software and services and better one is really being driven by strong technical education which russia has. to do with of and with most i'm just saying that it's really hard for russians to create projects which are relevant on the global scale at least what's the biggest of all what you need to know what's really is needed right now you need to know the cutting edge of

many technologies cutting edge of the markets cutting edge of everything. it seems to me like it's very nature is pretty transparent i mean you can see what's going on out there can't you know but one thing is to see in the other thing is through being plugged in they really understand the sort of intricacies of the business models intricacies of. you know integration and scaling up your how well integrated is the russian market you know we're going to it's not necessarily the russian market is pretty well integrated in the way that people know what's going on outside of the market but. there's one story about the corners but i want to stress on the story of the russians building projects in one thousand that are relevant globally because our mission is digital october is specifically to try to if we can bring the best brains from the worst or from the east we can bring in through some telepresence lectures we can kind of we can get to the cutting edge of knowledge to rush into print. so the create projects which are applicable globally that

have customers not just in russia but also around the world in then you want to plug into the local market but how do you plug in elsewhere so first i would like to actually add to what the i completely agree with me three so russian market itself is actually and i would say the direction of winning musician which was chosen is pretty much related to the historical transfer of we typically species nuclear and energy so these people three suspect what is the same time there are absolutely clear russian demands and one of the demand is a different the second one i would say by minutes so and in this sense for example so we are pretty much integrating all these five farias together so when we are trying to really establish the interviews to bring new research which will help for example i specialise to know the whole horizontal of opportunities in different

areas including like i did also. for speed. of the creation for energy and so on to these major sectors crowd out the other issues in areas as we just heard what the government is interested in provisionally yeah absolutely i think if you look at the enterprise if you interpret. you know which was what a dream i was referring to. here it is to build a successful business and you really need to be able to compete on the global scale not just work really hard of hearing that from russia i think a lot of people are going to promote the heart of the why is it hard to compare i mean because of barriers or some strong you know it is all very was a few successful cases take for instance at your parallels you know i think russia you know got more potential and can definitely do better i think what have you. i mean for instance russia has very strong technical education right which is cost of what if you look at the. it's like marketing and. you know it's just not

a good you have to be able to not only build a competitive product but you know to also market it and to market your same way you have to marry legislature and you have to get the different areas going to consume consume or to remember other think you know something about. just sort of try to make it thought that what's really missing in russia startups is a good product management so people who really understand what the market needs and how this can be product i still make it to the service so and so you're saying geeks are not good at marketing. just marketing and it's also. in russia for the seventy years of communism time is the service mentality well so the genuine desire to make create something of value for somebody else. whether it's being paid for it or it doesn't get paid but that's kind of i think deep rooted disservice when

tended to be just kind of coming back but still with all the private property it's totally. you can't really see seems to me like in the west it's more service driven in less technological hero go ahead so i completely agree with me too so all of the trick here from my point of view is that it's pretty much historical background sold it's not only in service but also into print your own spirit is completely missing i mean so russia is. it's a really good discussable so i've been on it for fifteen years and i've seen it grow we made it's growing right now because the new generation is getting in this business and actually trying to to benefit from from all of petunias use what they have by actually it blind their knowledge and. i would say the main problem before was the making isn't how the knowledge will be blight you know also how the how the result will be achieved because pretty much it was government oriented system where the main consumer were like i don't know russian and you have signed his. military

all of something like this so and at the moment we are trying to change the direction monads and actually to be oriented on the market on the people and try to solve the practical tasks for life i would see progress being made yeah i'd like to be a little comment on that because what russia seems not to be doing enough is look at our countries and what they're doing because realistically we're not alone in this problem i mean the competition for tell him to go out will you know we have drawn to you we have u.k. competing for same interpret your same pellant which could always be based in silicon valley and russia has the same issues as you know all the other countries in europe also are and i would say that even just a recent example when mark zuckerberg came to russia he came specifically to. to developers and when he was to dish talked over for a couple days that was the main audience squeeze book also is looking for talent

here like wise we are russian companies or investors we often have to import some kind of quality tell on the specific women's role telling and sometimes scientific talent always mistaken acknowledgement on from other countries this is actually very funny situations so they're. hearing that from the interpret you're a party you're really the people who is actually on implication side but so i would see exactly the same story is on. so the reason right now the global community shell all around towards starting from the developing countries i don't know like like saudi arabia and finishing with severe established companies countries like ok gentlemen to jump in here we're going to go to a short break and enter the actual growth will continue our discussion and what is technological sector stay.

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welcome back to on the money where the business of russia's business i'm peter sagal to remind you we're talking about russia's innovation in technology but first let's look at how much is innovation seen as developing. the russian technology sector the first thing that comes to mind are russian scientists toiling away at a top secret lab somewhere in siberia a savage stereotype that persists to this day however the reality is much more exciting i t. new clear space and other technologies are experiencing dramatic growth with the state support and encouragement the sector has been getting in the past several

years russian high tech ideas have great potential to turn into world class businesses many of them are developed here at the skolkovo innovation center which is russia's largest innovation supporter and a new global technology hub already nearly eight hundred startup ideas at skolkovo have resident status and many of them receive financial assistance according to bloomberg global innovation and tax russia ranks the world's fourteenth most innovative country its peers with norway and belgium and is well ahead of china and even israel one of the signs for this is hyper development of the russian internet russian has become the internet second most used language according to a recent web survey by w. three techs russian internet giants such as yan dix and mail dot are you. group are prospering their revenues rose around forty percent in two thousand and twelve yandex share of russian web searches is more than double that for google and other

fast growing website is conduct which is europe's largest social network investments into the high tech is growing remarkably both domestic and foreign investments into russian firms more than doubled in value from two hundred twenty million dollars in two thousand and ten to five hundred fifty million in two thousand and eleven russian resourcefulness and ingenuity our modern competitive advantages the challenge now is matching these great talents with financial and business acumen and this challenge is accepted we still look and on the money our team. india is a government supportive of the sector i mean it i mean we presence we know that of course but i mean a lot of people say you don't need the government you know incubators things like that i mean if there's money out there and there's innovation and there's entrepreneurship that's all you really need so things you can do without the

government and if you want to be. there are sort of either wall hanging fruit or things that really can quickly benefit a lot of people so we can do it on your own so we're private center so we most of the things we do ourselves but for certain activities we ask for government support and so supportive you know the unsupportive so we had to. come to talk to sort of support sort of things the minister of communication come to just start over and talk about things and also what about iraq we're seeing and we all live in this kind of a it's just a matter of execution sort of typically in rushing through that we all pretty high up then we can manage through the bureaucracy but that takes an effort and time but still it's manageable you know your endeavor is a good investment it's definitely a good thing so far yes so i would just to add to it that this is not only government money. involved in this it's pretty much also involvement of the big companies including state owned companies for example right now running program to

create fifteen center for research indication innovation in some sort of distributed research center in. cross-cutting areas so it's actually again it will be concentrated on within five farias it's the nuclear id by me and seen energy or space so in each center is typically between like six to twelve million u.s. dollars per year and the funding for this center is reserved for five years so this is who funds it is this is the same percent fund that leaves the customer is that much money right now for example we have several of kishen in our pipeline to create the centers for all of which are strongly supported by the b. companies that we can produce like ross. like like are the big internet. for example go and we are a lot of people would say you know when you think of the companies that you just

met you know i don't think of them as being very savvy technologically at times ok to be this is this is exactly the point i mean so this company they understand that they have to increase their level of being technological companies and go towards like not to extract the resources but rather to develop new technologies always least use these new technologies instruct in this new resources whenever with whatever the government's involved they always ask the question do they get it ok. for example you don't care but all being the largest fund in the world and also being the corporate venture fund and this theme of corporate venture funds in now is no very. popular but this is a hot topic within the russian. big industry community so there is even a quote for you are indeed directors who are talking about corporate venture capital. i don't think people really perceive it was a corporate fund because the margins. so low believe that it's really there is all from the word lose connection with the specific instances for intel but we can

maybe yeah i mean we've been doing this for several decades globally and i think a truth is private sector over time because demonstrated that it can do better than government and so well in this area roger is right about pretty obvious but if it still to be mislead you michel faces an issue and that is a complete government needs to step up and needs to expand their hand in whatever shape or form you know develop a team and technological community i think that's important and if you look at some of our portfolio companies. geography in russia they have in one shape or form help call cohen of think about you know goes a long way towards attract international capital into russia and i'm not talking about our existing people who are starting thing to invest now which the driver what would you sell to an investor the reason why to come here. well you know russia has a lot to offer interims of again first of all domestic demand it's the largest internet in the nation in europe over

a fifty million of internet users if you look at the disposable income that has also been growing in the last ten years in the double digits or high single digits remaining so there's a lot of consumer demand that needs to be taken care of and it's really tough for foreign players to come and compete here so luckily companies have this advantage of knowing local know ways around infrastructure issues you know do you mind and yvonne talked about and being really have an edge against local players for important players and we have this opportunity to the create barriers or build up on the barriers and you know create a loyal customer base before you know a foreign players will come in i just ask questions. so you have a one thousand four hundred companies all around the world four hundred one hundred just one hundred ok one hundred. four hundred one. so i'm sure that some of those companies would really benefit from entering russian markets for example we have

a few examples and again right now there are very few a large advanced start ups for example one was air b.n. b. the other was a survey monkey who came to the russian market initially because some p.r. activity said you just talked over to get an event and things so the came to us to get some expertise about how they actually enter into russian consumer internet market but i'm sure you with your even the russians are able to have all the facts parties so that may be another thing that you know it's a living but maybe a little less relevant for startups because traditionally you know you would want to. build up on your market truman show drago people for expanding into emerging markets like russia but for established companies and you know we don't need to go far here look at the goal and russia as a corporation assumes all the ninety's. and we have all we're eight hundred years now in russia working on projects not something about us law called for for this market so i think you could definitely see large corporations like. dory and

business in russia for you know years now decades you know people always talk about brain drain and before we started the program to me you said people are coming back can you elaborate a little bit well we can people not getting that much do you want to come back can't you work for russia but in california well i want to live in the states for years and they came back so i would be an example for exactly. what i call the. old move the in the russia at this time both politically maybe economical is so people just kind of. huge crowds on the plains but there are other ways of people who get engaged here and those examples we have maybe a small examples giving somebody give a lecture to the presence of example of somebody coming back and establishing a lead. maybe they have somebody higher former or current speaking person to become a top manager in

a startup that they funded so that's going to be small things but each of those things are important so maybe just to illustrate i'm always better to to demonstrate some success story i could tell that it's right now it's called cortef we have twenty first masters students and they have like over there within the year master program and. all these very talented boys and girls they spend at mit you know really actually after these three year so we have like several in very prestigious internet. including ninety four so and something like this so we can fly five projects we're really in which i really to be a start up absolutely. brilliant ideas behind it and this is like twenty people we can't right now five or five projects the sole running and probably another ten coming soon so and this is just demonstrating actually what happens if

you put the russian tail and within the right in a very tough and supportive eco system you're almost i mean when will people start so that when the word russia is mentioned they will think technology went back and well i hope so i wrote we were sort of we're everywhere we've been discussing various there were some success cases to be looked at and you know it could be build upon we're not quite as yet in terms of really have been on the wall the ecosystem able to generate new high quality to acknowledge a company were able to compete globally with. still you know something we need to continue working on the last word. doldrums thirty couple russian companies could lose to the new york stock exchange and have a market cap that's sort of for over there we ended up on a very good nope many thanks to my guests here in the studio and thanks to our

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