Innovations in Russia: we are waiting for you!

Go through pubertyIrik Imamutdinov, Dan Medovnikov, Stanislav Rozmirovich

"Expert" No. 2-2009

It's a pity, we feel sorry for our innovative companies. Ray Bradbury has a story about an adult who looks like a twelve-year-old boy all his life. He has to change his family, city, and friends every few years so as not to arouse suspicion. Once again, the neighborhood boys overtook him in height and strength, local girls begin to look down on him in the literal sense of the word, the next "dad" and "mom" turn to doctors with anxiety, and the hero of the story one fine morning has to leave the old small homeland and look for a new one. Because no one should know his secret.

Let's tell each other this terrible little truth: despite all the efforts of the state, the statements of its top officials, the allocated resources and the persistent efforts of individual enthusiasts, Russian innovative companies, unlike their "peers" in the developed (Europe, USA) and actively developing (India, China, etc.) worlds, are practically not growing or they are growing, having ceased their proper Russian existence. The Soviet technological Atlantis remains under the water column. That there is the notorious "valley of death", which received an academic residence permit with the light hand of American venture capitalists, there are several such "valleys" on the life path of domestic innovative business, anti–innovation defense is well echeloned, and it is almost impossible to slip any project from the seed stage to the hundred millionth, say, business level.

Up to $1 million. Start-up capitalLast year, the topic of innovation was one of the most fashionable among the political establishment of the country and was actively promoted at various levels.

In addition to the wave of general political rhetoric, round tables and conferences, several important trends have developed in the country. A Russian venture company has entered into force, with the participation of which six venture funds have already been created with a total volume of 16 billion rubles. Finally, Rusnano Group has started investing in projects: according to data at the beginning of 2009, six such lucky people were promised more than 4 billion rubles. Thanks to the support of the Ministry of Economic Development, programs for the creation of regional venture funds and technology parks have been launched and are being developed. The laws "On the Transfer of Rights to Unified Technologies" and "On Patent Attorneys", which are important for the development of innovative activity, have been adopted.

It should be noted that all these initiatives suffer from one common drawback. It is assumed that it is enough to create institutions, infrastructures, correct legislation – and everything will work by itself, innovative activity will clog the key. This approach was formed in the late 1990s and in many ways was forced: then there was practically no experience of successful development of domestic innovative projects and companies, there was nothing to analyze and generalize. The main experts were not real innovation managers, but specialists who got acquainted with how innovations developed in foreign countries. Therefore, all the recipes were reduced to how to transfer the mechanisms of development of innovative activity developed in other countries to our soil and make the right combination of them.

According to experts, the number of newly created small innovative companies has been constantly decreasing in recent years, and those that have been operating for a long time are in a state of permanent stagnation. A few years ago, then-future Minister of Education and Science Andrei Fursenko noted that, "having reached a certain level, Russian small innovative enterprises stop growing," and reproached them for their lack of ambition. Over the past years, this remark has not lost relevance, moreover, a variety of observations confirm that the point here is not the ambition of our entrepreneurs – the problem is systemic. We tried to understand why, unlike many other countries, we have not had a single company that has grown from a technology startup to a serious world-class player in the last decade, at what stage development stops.

Russia has developed a certain system of support for small innovative businesses at an early stage. The Assistance Fund founded in the early 1990s and its various regional branches help in this. Now, in addition to them, business incubators and technology parks are being created. Using these support systems, a promising business has enough chances to survive and grow to a sales level of approximately 500 thousand – 1 million dollars. But further on, another "valley" arises in the domestic innovative business – the "valley of oblivion". Most companies that have achieved it do not die at all, but continue to exist, but they cannot make a qualitative leap into the next "weight category". Why is this happening? We asked experts directly involved in innovative business about this.

According to the results of these interviews, it turns out that this "valley of oblivion" for our innovative companies is not even one, it splits into two "sleepy hollows". One includes enterprises that have reached sales of $ 1-5 million, and the second – with sales of $ 10 million to $ 50 million. Looking ahead, let's say that further, in the range of 50 million to 100 million dollars, there is another "forbidden zone".

1-10 million dollars. Access to financeCompanies with revenues from $1 million to $5 million primarily need investments to expand production and sales.

In Russia, according to the figurative expression of the director of the State Unitary Enterprise "Elvis" Yaroslav Petrichkovich, as with diabetes: there is a lot of sugar in the body, but the cells do not perceive it. "We have such a diabetic economy. There seemed to be money, maybe even there is, but there is no mechanism for how to invest it in these innovations. We need a huge range of mechanisms to consistently grow such a company, starting with "angelic" investment." Due to the lack of such mechanisms, the ability of small firms to access investments is severely limited: they have high risks and insufficient collateral for bank loans, they have little turnover for venture funds, and they lack experience and authority to break through to funds distributed under the Federal Target Program.

"For small companies with sales at the level of one million, the main problem is where to get the money. It is impossible to find investment resources. Of our companies, only two were able to reach the milestone of $ 10 million in sales," says Yuri Cherches, Director of the International Technology and Investment Fund. Mikhail Predtechensky, director of the International Research Center for Thermophysics and Energy, Corresponding member of the Russian Academy of Sciences, echoes him: "In order for a company that has reached the level of two million dollars in turnover per year to increase turnover by an order of magnitude, it needs access to investments: cheap loans, a large strategic investor. Meanwhile, access to state resources in Russia is negligible." Due to the lack of such access, an innovative firm, especially at the initial, most difficult stage of its formation, has to reinvest profits in its own developments (and everything related to R &D is quite expensive), which reduces the already small turnover of the enterprise and explains the departure into gray schemes of financial activity.

"It is impossible to get loans from us," says Yaroslav Petrichkovich, "only oil, weapons and drugs can be lent at 20 percent. There cannot be an innovative economy with such lending." The price of loans, even in the heyday, says Viktor Avdeev, CEO of the Unimtek group of companies, whose turnover is now more than $ 60 million, reaches 16-17% (since the beginning of the crisis, they have become even more expensive), and in the absence of collateral acceptable to bankers, guarantees for the loan are still "a certain amount of interest". Avdeev explains the success of his company with the support of state funds. Thanks to the RFBR, the Assistance Fund, the Russian Fund for Technological Development, the Moscow Committee for New Technologies, Unimtek was able to quickly go from a small company operating in a shed in a suburban industrial zone to an enterprise producing industrial batches of products in its own workshops. Viktor Bykov, CEO of NT-MDT, another successful company (revenue in 2008 was about $ 50 million), admits: "We were very much then (in 2003. – “Expert”) helped by a serious grant from the former Ministry of Industry and Science. As a result, we have made a number of breakthrough products and significantly increased our assortment and sales volume."

Insufficient capitalization is another obstacle to the growth of innovative enterprises. Attracting venture capital investments in the development of production often rests on the disagreement of the owners with the valuation of the business. The investor's position is clear: if the applicant wants to receive a significant amount, in addition to the business plan, he must have his own production, patents with an appropriate assessment. In the Russian reality, says Andrey Fedotov, marketing director of the research and production company Elan-Praktik, the innovator has only fixed assets at the minimum book value, leased space and intellectual property - patents reflected on the balance sheet at the cost of patenting costs. For a foreign innovator, intangible assets are at least half of the value of his business. And in Russia there is still no clear methodology for tax accounting of the costs of creating intangible assets. There is no opportunity and incentive to take into account assets at a real price, as a result of which the innovative business is significantly undervalued. Therefore, according to the same Rosstat, only 182 organizations in the whole country (and this is only 7.3% of the surveyed structures that carried out technological innovations) in 2007 were engaged in the acquisition of patent rights, licenses for the use of inventions, industrial designs, utility models – it makes no economic sense to sell patents or licenses. There is legislation in the form of relevant articles in the Civil Code, but there are no well-established mechanisms for its application. For example, it is known that in many countries the concept of "know-how" has a very clear definition, and if this "know-how" is fixed on any media or in a contract, then its owner, as a developer of an innovative product, has the right to enjoy tax benefits, evaluate it at market value, amortize. And try to prove to the tax inspector the fact of creating a "know-how" and justify the costs of its creation. At best, several man-hours, the cost of one fountain pen and a sheet of paper will be counted.

Despite the adoption of the fourth chapter of the Civil Code, which permits the transfer of intellectual property acquired at the expense of the state to its developers, due to the lack of real mechanisms for the implementation of this right, this very property remains a bone of contention in relations between institutions acting as subjects of the state and innovative enterprises formed around them.

10-100 million dollars. Limiting marketsFor those few firms that were able to reach the sales level of 10-50 million dollars, the issue of investment loses its urgency.

As the well-known innovative investor Alexander Galitsky says, this is already beyond the small innovative business. According to Yuri Cherches, it is not so difficult for enterprises with revenue of more than $ 10 million to find money – they can get loans. They know how to come to the ministry and win the tender. The experts and heads of enterprises interviewed by us call problematic for the growth of innovative companies in this "price" segment in Russia not so much the lack of financing mechanisms for projects at different stages of the development of the production structure, as the extremely small capacity of the business itself on innovations. Rosstat data show that only 10.8% of enterprises were engaged in innovative activities in 2007, while technological innovations were introduced in 9.4% of Russian companies. The costs of technological innovations amounted to 207.5 billion rubles and decreased in comparable prices by 3% compared to 2006. Probably, the statistics for 2008, taking into account the economic crisis that began at the end of last summer, will hardly be more fun for innovators. According to Ivan Bortnik, Chairman of the Supervisory Board of the Fund for Assistance to the Development of Small Forms of Enterprises in the Scientific and Technical Sphere, underfunded demand, primarily from large industry, is one of the main barriers to innovative business in Russia. The capacity of the domestic economy is small. If we exclude raw materials from the total GDP, then less than a third will remain for everything else, which is less than a trillion rubles. Even in such a seemingly advanced high-tech segment of the innovative economy as IT and telecom, there is no talk of orders for tens of millions of dollars, contract amounts rarely exceed a million or two dollars. Alexander Galitsky estimates the domestic ICT market at only 2-5% of the global one.

This is also recognized by the heads of companies. According to Viktor Bykov, there is still insufficient critical mass of industry in the country, which is necessary for the self-development of innovative companies. For them, this is a serious deterrent. The CEO of the company "Mikran" tells (revenue in 2008 – about $ 25 million) Victor Gunter: "Our future investment projects are primarily focused on the domestic market. It is necessary to saturate your market first – it is quite large, it is necessary to win back the positions that Russia has surrendered. We are quite successfully competing in the domestic market today with such world market giants as Alcatel, Nokia, Ericsson. And then we need to export. We already see that the domestic market is limited – in two or three years we will be suffocating on it. In the meantime, we need to accumulate some strength."

Andrey Fedotov gives eloquent figures on the industry that interests his company precisely because of the specifics of its activities. In the metalworking industry, the volume of consumption of new equipment in Russia in 2007 amounted to only $ 600 million. This is more than 25 times less than that of the leader of industrial modernization – China, which bought metalworking mills for $ 15.4 billion and has been ranked first in the world for several years by this indicator. This is three times less than India ($1.8 billion), which ranks only ninth in the world ranking. The reason is obvious: in China, for many years, there has been a continuous growth of industries that export engineering products and consumer goods. In Russia, demand is formed mainly at the expense of enterprises that are somehow tied to raw materials producers with a low level of product conversion.

Not only is the volume of modernization of large domestic industry: metallurgy, mechanical engineering, large chemistry, oil industry (before which the task of updating worn–out fixed assets is particularly acute) is already small, so also orders for the most part go to foreign equipment. It is impossible to condemn enterprises for this, says Ivan Bortnik. It is easier for them to deal, even if not with the most high-tech foreign equipment, but repeatedly tested and, moreover, guaranteed service, and the financial schemes for its acquisition are not in doubt, and often it is also cheaper than what Russian manufacturers offer. Such an unpatriotic approach is more painful for domestic enterprises, whose problems are aggravated, according to the head of Elan-Praktik Andrey Fedotov, due to insufficient awareness of potential consumers of innovative products - the same large enterprises – about the real state of advanced technologies in Russia and abroad.

It would seem that in the conditions of a constrained domestic market, more capacious foreign markets should be of interest. But it is very difficult for a Russian innovator to work there. According to Viktor Avdeev, CEO of the Unimtek group of companies, it is almost impossible for small companies to export high–tech products (at best, they are bought if they really have valuable technology, or simply poach groups of specialists), and it is very difficult for medium-sized companies. Moreover, convincing the buyer of quality, reliability and superiority over analogues is not the most difficult of obstacles. For full-fledged work in the foreign market, it is necessary to create appropriate trade and service structures that require significant material resources to support, which an enterprise with a turnover of even tens of millions of dollars does not have.

For poor buyers (small and medium-sized enterprises, for example, in China or India), preferential terms are important: installments, small prepayment, and the like. Domestic innovators cannot offer such financial conditions. This is hindered by customs and currency legislation (for example, the deadline for the return of foreign exchange earnings should not exceed 180 days) and the unavailability of preferential credit lines or loan guarantees. There are also specific obstacles associated with the certification of products or their passage through customs. Andrey Fedotov gives an anecdotal example from the experience of "Elan-practitioner". When the company exported the vacuum unit abroad, the customs inspector first demanded justification for the price that was too high, in his opinion, and he proceeded from the cost per kilogram criterion when calculating, and when he was shown world prices for similar products, he demanded justification for underestimating the cost of exported equipment by 60%.

At the same time, they lack the appropriate qualifications to enter the world market, and there are not enough funds to overcome the existing barriers. "The problem is huge, incredible," says Yuri Cherches, head of the International Fund for Technology and Investment, "The foreign market is not waiting for a Russian high–tech product in any form. If we are talking about some small company, even with good technology, then it is unlikely that it will solve such a task itself. A Russian product can enter the foreign market only if it is sold on behalf of a company with some other jurisdiction: in Europe - European, in the USA – American. That is, it should cease to be a Russian product. The most rational decision today to enter the world market is to make a foreign company and transfer all rights to it."

So it turns out that many of our "champions" who were able to make this breakthrough and could become the locomotives of the country's innovative development – such as Parallels, Acronis, IPG-Photonics – have become foreign companies with Russian roots.

Over 100 millionIn this "forbidden zone" for the successful development of innovative business, state competitions and purely market development mechanisms are not enough.

Do the state and society need innovative billionaires? If so, it is necessary to rebuild the cultural environment and state policy, pump up investors. You need to believe in billions on a new product or service first, and then earn them. Believe that a scientist-developer can be rich, replicate success stories. So far, innovative success stories of Russian origin have a foreign residence permit and are little known at home. According to Yaroslav Petrichkovich, the majority of high-tech companies in our country are "dugout". "You look around the surrounding information field – there is nothing, and there, in the dugout, guys are sitting and working for the largest companies in the world or for themselves. Innovators are not in the focus of television, the press, they are not interesting to anyone. Meanwhile, there are people who have invested in the high-tech business and received a tenfold profit. But they are not known, they are not the heroes of the media. As a result, innovative business, which is considered particularly risky in the world, seems extremely risky in Russia, because no one sees positive examples and does not know about success stories. And successful entrepreneurs prefer not to get involved with their native state. And to flow away to the West." Alexander Galitsky is sure: "While at the federal level, instead of innovative successes, the variants of Dom-2 will be turned and Russian technocrat boys driving around in Ferraris will be known only to a narrow circle of foreign experts, the situation with a hundred million technology business in Russia will not change."

Despite the scale of our country, it can be assumed that there are not so many innovative companies that have survived to this day. With sales of up to $ 1 million – about a thousand, a maximum of two, 10 million – not much more than a hundred, over 50 million and up to 100 million – at most a couple dozen, more than 100 million – units. And this simplifies the task of state managers. You can work with the "survivors" point-by-point, and this is what our government should do in the near future.

Portal "Eternal youth" www.vechnayamolodost.ru21.01.2009