on the money with the business of russia is business i'm peter labelle 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 i discuss this i'm joined by dimitri rape in 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 stars he is the 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 dimitri i mean is this one of the center of focus is of the i.t. sector right now well i don't think there's thirty six you can really exist with all the start ups so you can certainly exist to maybe service in government and

corporations but if you really want some growth you want some things we sure you see consumer oriented and certainly we're talking about startups is russia known as a market for that. 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 war three i do startups but certainly the infrastructure and the ecosystem and 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 or along the. 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 to say that i am somehow not completely related to their t.v. business itself so i'm representative for instance of science and technology which is a lot to do which is the second which is a practically the. university and we are standing

a little bit on another side of the pipeline so we have to field this pipeline for creation of new startups with new talents are already. taken into account that we just started what's the biggest barrier so the biggest fear right now is you have to create the whole infrastructure more or less from scratch. so and particular for the u.s. this 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 so the initiative is about like actually was first to create this call called fundi 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. pseudo science and technology school to which i am represented here was created 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 all spirit soul because this call of science and technology has to create actually exactly the talents for or make sure people don't go to silicon valley is short ok so in some sense skolkovo institute of science and technology has to help. stop the brain drain all that will see if you go sabrina green because it's called coincidence that you need to help russian terrence to realize their potential you know what is the most interesting attractive thing about the market in russia today we're excited about.

drew peterson frank you need to distinguish between two overtures to buckets of opportunities here one is related to the. internet a resource which is being driven by the mass to give me what it was called dimanche here i mean brochure is number one in my pleasure and in europe and terms of the number we're going to have two million yet we're over fifty million of you or so you can. it ignores opportunity and creates a lot of business for you commerce companies you commerce market alone is estimated or at all were probably billion dollars and then the second bucket is more a macor. acknowledge a sector which is software and services and rather one is really being driven by strong technical education which russia has. to deal with on with most i'm just saying that it's really hard for russians to create projects which are relevant on the global scale it least what's the biggest. power 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. i don't know integration and scaling up your whole well integrated is the russian market you know it would have it's not the sort of the russian market is pretty well integrated in a 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 russians building projects in one thousand that are relevant globally because our mission is digital october 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 and if we can get the cutting edge knowledge to rush into print. so the create projects which are

again 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 indonesian which was chosen is pretty much related to the historical strands we typically species nuclear and energy so these people three suspects but this is same time there are absolutely clear russian demands and one of the demand is a different the second one i would say by i mean it's 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 introduced to a new research which will help for example specialist to know the whole horizontal

of opportunities in different areas including like i did also. for speed. cation for energy in one and so on to these major sectors crowd out the other issues in areas as we just heard what the government is interested in relationally yeah absolutely i think if you look at the enterprise if you are in the poorest of poor you know which is what a dream i was referring to i think you should hear it is to build a successful business and you really need to be able to compete on the global scale not just with my heart of knowing that from russia i think a lot of people are going to promote heart of why is it hard to be the carrier i mean because the barriers are some strong you know. 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 house very strong technical education right which is cost

a what if you look at for. it's like marketing and. you know rich you're 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 yourself you have to marry what is a friend to get the difference between the consumer and european consumer to remember other think you know something about work. just sort of try to make it forward that will truly missing in russia start ups is a good product management so people who really understand what market needs and how this can be product eyes to make it a 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 mythology 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 me like in the west it's more service driven in less technologically you know go ahead so i completely agree with me to some of the trick here from my point of view is that it's pretty much historical background sold it's not only in the service but also into bring your own spirit is completely missing i mean so russia is. it's a really good discussing so i've been here 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 benefit from from all of petunias use what they have actually blind their knowledge and. i would say the main problem before was the make and use them how the knowledge will be blight in also how the how the result will be achieved because pretty much it was government already in that system where the main consumer was like i did all right. you have signed. over so

military or something like this so and at the moment we are trying to change the direction monads and actually to be oriented to on the market on the people and try to solve the practical tasks for life i would see progress being made yeah it can be that we will comment on that because what seems not to be doing enough is looking at other countries and what they're doing because realistically we're not alone in this problem with competition for talent is go i will say you know we have drawn we we have u.k. competing for same with oprah nor same telent 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 speak to developers and when he was talked over for a couple days that was the main audience squeeze book also he's looking for talent

here likewise we are russian companies or investors we often have to import some kind of quality to tell him the specifically men's you will tell him and sometimes scientific telling to always take a dim acknowledgment tone from other countries this 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 i would see exactly the same story is on. so the reason right now the global completely shell all around towards starting from the developing countries i don't know like like saudi arabia and finishing with various terrorist companies countries like ok gentlemen to jump in here we're going to go to a short break in the actual growth will continue our discussion and russia's technological sector staying.

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welcome back to on the money with 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 wretches innovation scene is 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. nuclear 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 a 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 yandex and mail dot ru 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 investment 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 . twenty ten to five hundred and fifty million in twenty 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.

deal is the government support of this 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 incubate or it's 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 but things you can do without the government and if you want to be. there are sort of either wall hanging fruits or things that really can quickly benefit all the people so we can do it on your own so we have 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 these are supportive so we had to. come to talk to sort of support sort of things the minister of communication. can talk about things and also what about iraq we're seeing and we all live in this coerce it's just a matter of execution sort of typically in russia was that we all pretty high up

there we can manage through the bureaucracy but it takes an effort and time but still it's manageable you know your endeavor is it a good investment it's definitely a good thing so far yes so i would just to add that this is not only government money involved in it 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 education innovation in some sort of distributed research center in. cross-cutting areas so it's actually again it will be concentrated on within five feet areas it's the nuclei by me and seen energy or species. so and 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 kishen in our pipeline to create the centers for all of which are strongly supported by the b. companies the big companies like ross. like like are they 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 mentioned 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 instructing these new resources whenever with whenever the government is involved they always ask the question do they get it ok do you mean. for example you don't care if it will be the largest mentioned fund in the world and also be a corporate pension fund and this theme of corporate venture funds in no is no very . popular but this is

a hot topic within the russian. big industry community so there is even a quote for e r. and d. directors who are talking about corporate venture capital. i don't think people really perceive capital as a corporate fund because you. believe that really there is or lose connection with the specific instances for him to all but we can maybe yeah i mean we've been doing this for several decades go out what we're looking to control is private sector. has demonstrated that it can do better than government and so well in this area rogers wrote about this but i still have the. visual face of this new show there is a pretty good government needs to step up. needs to extend your hand in whatever shape or form you know develop in a t.v. 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

going to think about you know goes a long way towards attract international capital into russia and i'm not talking about how it works is if you don't hear something thing to this now what's the driver what would you sell to an investor the reason why to come here. well you know russia has a lot to offer again first of all domestic demand it's a largest internet now 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 to high single digit remains 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 noways their own infrastructure. you know do you mind and yvonne talked about and we really have an edge against local players sort of foreign players and we have this opportunity to 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 person other 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 russia markets for example we had a few examples and again right now there are very few pretty large events you 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 think so the came to us to get some expertise about how they actually enter into russian consumer internet market but i'm sure you've had your even the russians are able to have all the facts parties so that maybe another thing that you know absolutely anything about maybe a little less relevant for startups because traditionally you know you would want to. build up on your market treatment for expand into emerging markets like russia

but for established companies and you know we don't need to go far here look at the end goal. as a corporation assumes ninety is eighty one and we have all we're. now. working on global projects not something that is law called for for this market so i think you could definitely see large corporations large companies dorrian 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 that people are coming back can you elaborate a little bit well we can people not giving 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 smoothie in russia at this time both politically maybe economical and so people

just kind of. huge crowds on the planes 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 caution 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 and so maybe just to illustrate i'm always better to to demonstrate some success story i could tell that's right now it's called if we have twenty fields to master students and they have like they are within the year master program and. all these very talented boys and girls they spend at mit you know really actually after this year so we have like several in very prestigious internet. of competition including ninety four so

and something like this so we can't fly five projects we're really. really two to be a startup 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 happen if you put the russian tail and within the right in a very tough and supportive eco system you're almost certainly going to win more people started when the word russia is mentioned they will think technology when exactly when all hope somehow rover will soar over there every way we've been discussing various there for some success cases to be looked at and you know it can 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 knowledge

a company of are able to compete globally. still you know something we need to continue working on the last word. in indulgence thirty couple russian companies could lose to the new york stock exchange and have a market cap that this 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 viewers for watching us here on the money see you next time and stay with our theme . i'm in sochi the only city in europe i'm the host of the twenty fourteen winter olympics. c. . thank you.

so much. thanks. doc there's a. days it. takes. to succeed it's so true.

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