четверг, 8 июля 2010 г.

What Skolkovo is now? What will make Skolkovo a blast?

This summarizes my personal opinion on the current (July 2010) status of the Skolkovo project to all interested English-speaking comrades.

If you don't know what Skolkovo is: it is one of the numerous attempts by the Russian government to replicate Silicon Valley in Russia (near Moscow) to rehab the country's economy from the heavy addictive drug called Oil & Gas.

"Skolkovo: you got it completely wrong" or "Skolkovo: the next Russia's long-awaited step-change and turnaround " are all populist slogans, rather fitting well into the mindsets of mass public and often lack any rational and conceptual approach, and even more often the solutions.

Let's rephrase: "Don't ask what Skolkovo can do for you, ask what you can do for Skolkovo. Or any other similar project :)"


What can move the Skolkovo project on a completely new level is a clear business goal. The pronounced targets of "modernization", "innovation", "creating a hub for Russian innovation" and "simply returning immigrant scientists home" (please send me more!) are just slogans, not business goals. Any VC would turn you down in 20 seconds after you start pitching. Skolkovo lacks a clear goal.

Remember J F Kennedy: "Send a man to the Moon and return him safely by the end of the decade". Now try to recall if it worked, with all the politics, JFK's opponents  and superiority of us, the Soviets, in space. Building Communism by 1980 is another thing - you need to know exactly what Communism is, in exact numbers. We didn't. Do we know exactly what Skolkovo measured success is?


If I were a Skolkovo board member, I would state these goals publicly and more down to the ground (these are realistic examples):

1. Accumulate a pull of 1,500* at least privately funded high-tech startups in the priority industries, with at least 20% of them being domestically (important!) acquired or IPO'ed within 12-36 month from the start of operation. These startups must originate at least 40% of their revenues by that time from sales overseas. Origin of these startups' owners/investors/entrepreneurs will never matter at all.

2. Create an eco-system of at least i) 70 angels, ii) 20 seed funds, iii) 200 venture funds (round A and on) to compete to finance those 1,500 startups. These funds must be all at least partly privately-owned. Have a look at math behind VC fund numbers at Silicon Valley. These investors must compete to invest in each of those startups.

3. Create an operational eco-system of office landlords, lawyers, accountants, experts and so on, available to those startups at competitive hourly rates or for 1-20% equity stakes (remember Google at Stanford). Such overhead expenses should not exceed $1,000/month for every startup within 0-24 months since it started working.

4. Provide IP protection to all of these startups, depending on their targeted markets, inside Russia/CIS, North America, South-East Asia and Europe with a cost of international provision of no more than $3,000/case and final patent application of no more than $20,000 per patent.

* All numbers in this section are hypothetical

Push strategy had never worked (except Japan, though partly). Neither in post-war Russia, nor in Dubai, Finland, Israel or China, with social and financial costs rising substantially. In Japan it  i) worked for strong cultural reasons and ii) did not replace the private entrepreneurial initiative (remember Sony guys traveling to the US with their first radio, then a Walkman).

Pull strategy worked even in post-war Russia with imprisoned Korolyov and sort-of-free Cholomey, the Soviet rocket scientists - i) they both competed for the same goal of technological superiority in space, and ii) had a clear goal communicated by the Soviet government. There is no need to overestimate the government's role, as at that time there was no other source of demand for high-tech innovation. Remember: we are the nation that launched first Sputnik, first man into space, first woman, did the first outer space walk,  and even launched the first space station. Why do you think it happened? And try to google what the conditions of work were for decades for both of them.


Right now Skolkovo looks like a badly over-funded startup that does not have a business model, clear milestones, understanding of the markets and international competition, talents needed and the final goals. We only hear about $XXmln again invested.

It is explainable: history repeated, just like with Internet Bubble - too much (oil) money, too few alternatives where to invest, moreover the government machine did not prove an effective system to invest wisely for the past 10 years. The only thing a I really like about Skolkovo for now - it is a much more focused on economy than Sochi-2014, which is an even more questionable federal spending.

Dimitri Popov

I am most likely mistaken, as important pieces of information on the project may be,  for some reason, did not become available to me at this point. I will be more than happy to explore your arguments. Should you have questions on facts mentioned in the post I will be there to help you with sources.

6 комментариев:

  1. Анонимный10 июля 2010 г., 15:59

    It is so much clear, Dimitri, that if the project's data and decisions stay away from the public view, Skolkovo is doomed, for a reason quite different from those why Silicon Valley replication attempts failed in other places.

    And you are right: the key govt role is in a) creating security for the rights of entrepreneurs, investors and engineers, and b) creating gov't demand for high-tech products.

  2. It is always hard to evaluate efficiency when talking about emerging economies and private-public partnerships, especially in 'new Russian economy'.
    One of the wide-spread approaches of running governmental programs in today's Russia is not to reach a difference but to transfer a foreign experience into Russia along with tentative attempts to implement it through similar strategies the developed countries did. One of the beloved perceptions our government executives has when developing a certain competitive strategy is that Russia needs same competitive ways and a national distinctive character, however traditionally avoided.

    Skolkovo case is not a pure business case as it involves complicated stakeholder interests and not-transparent economy.
    So, I think there's a certain difference between pump-and-dump and make-value strategies.
    Best regrads, Vitaly

  3. VCs rarely compete to fund start-ups; instead, thousands of start-ups compete for a small handful of investments - and those investments can often be against the best interests of the original founders. VC money obliges immature companies to 'swing for the fences' in the hope of achieving big success, with the result that only one in ten projects makes money to compensate for the failures of the remaining companies in the portfolio. Skolkovo could help by fostering collaboration and by allowing companies to boot-strap in a lower cost, lower corruption environment; at least, that is the hope.

  4. @wrightbyname
    Thank you for the post, thoughtful indeed. What exactly in the current Skolkovo setup makes you think that their eco-system will make seed startup costs significantly lower, and that the selection decisions on behalf of Skolkovo will be optimal?

    There is a way of doing so: co-invest with office and other infrastructure, only when a startup is selected by private money.

    I do completely agree that the group factor, when startups work on the same floor, significantly reduces the risks of their failures. However, I am not persuaded that Skolkovo, being located close to Moscow, third most expensive city in the world, is an optimal location for this kind of operation. "Plug and Play" in Silicon Valley as well as other locations on Earth can easily compete with Skolkovo by costs, as well as by established infrastructure and access to markets/investments/talent.

  5. Dear Dimitry, how can we discuss this topic much deeper? Would you please contact me ASAP?


Буду признателен за комментарий по делу