Being a skeptic by nature, I, for one, tend to squint suspiciously when I hear the word "startup". How typical is this attitude for Russian investors? And what are the reasons for it?
— The attitude is similar on both the Russian and international markets. It does not matter whether it is large, medium or private investors. When it comes to investing money, any manager starts having doubts: why should I believe in this particular technology, what will it bring? When will it start being profitable? And when it comes to state funding, the situation is even more complicated, because the funds are strictly accountable and you take great risks. So, of course, there's a lot of skepticism. But I would like to point out that over the past couple of years the attitude started to change noticeably in Russia. Because the first successful projects appeared on the market. Which had actually taken years to create. It was not so easy to make a small startup grow into a ready technology in which big business would invest. We had spent more than 2 years to show the first pilots to the market in order to increase investors’ confidence.
Could you name some of such pilots as an example?
— For example, the Promobot company. Originally it was a small Perm startup created in the laboratory of the Perm Polytechnic University. They came to us with a very simple idea - to make a snowplow robot. In the end, this idea did not work for them, but one of our accelerator’s mentors, Sergey Mitrofanov, helped the guys to rework the idea, find a new niche in the market and the target audience. Then they decided to make a promoter robot designed to help in communication, optimizing the work of employees in different companies. The first pilot was launched at Sberbank, which needed the robot to be able to explain to everyone in an accessible language how to get this or that service.
In 2015, we brought the startup to France and tried to show to the international market that there was such a technology at the Perm University. At first we were getting the replies like: "Look at the counterparts in Japan. What makes you think this startup is better?" However, getting feedback from different partners, the guys were constantly trying to improve their technology. To make it better than the Pepper robot available in Japan. Now, many people both at the government and business levels are interested in Promobot, lots of orders have been placed. Such technologies help us change people's minds. They prove that you just need to believe in the startup, help to build the right business development strategy and technology.
But not all startups are based on a sound idea.
— Of course. If you look at the Russian market, I would say that about 40% or even 50% are not worth assessing. Quite often a developer blindly believes that their technology is unique, and does not try to analyze what their competitors do. But there are quite a few tools for objective evaluation. As a development platform our task at GenerationS is to test how innovative a technology is, how it is implemented from a practical and economic point of view. We create a community of experts from a variety of industries who provide advice on what to do with a particular technology.
In addition, there is the following difficulty: some startups assume the role of "grant eaters". They stop thinking about how to do something for the business purposes, and think only about how to get through all the support measures, obtain money from everywhere and then report using standard forms.
Similar stories are happening in the West, the only difference being that "grant eaters" do not seek state support programs, but apply to...
— ...to investment funds, yes. But abroad the market is developing more intensively, and it is already much more demanding to startups than the Russian one. And universities are more active. They create all conditions for a startup to immediately enter the market, to commercialize, to learn how to earn money. The most important thing is that they do not hide it. And we have a problem with that. Even for us, the state accelerator, it can be difficult to go to universities and convince them to show technology to the market. They say: "No, we should better keep it for ourselves. And even if we don't develop it, it doesn’t matter, it’s still us who invented it". Abroad, technologies are immediately commercialized.
There are statistics according to which 52% of corporations prefer to use their own internal accelerators. And only 12% trust external accelerators to work with startups. The rest of them use both. What are the advantages and disadvantages of all these approaches?
— As for internal accelerators, it's quite a sore subject. There is a lack of competent employees in the Russian market. When launching any initiative related to innovations, there must be a person who understands very well why and where he or she is developing the innovations. After all, it is a big enough investment of money and time, both their own and those of their colleagues. It is necessary to properly arrange processes within the company, to create the correct corporate procedures so that the startup would quickly enter the pilot which would be operable and profitable immediately once it is finished. In our Russian reality, a different thing happens: the corporation begins to engage in innovation, a person appears who says: "I want this and that," but he or she has no idea what to do or how to do it. Some departments are reformatted, a lot of money and time is spent. With no result.
After that they say: okay, we got it, startups don't work.
— Exactly. We had a case with one of our major clients when there was an awesome technology funnel. 50% of this funnel immediately went to the international market and found investors after the accelerator. And our Russian company said that the funnel was not suitable for them, they did not understand how to enter into a deal with these startups. It was just the incompetence of an employee who could not properly coordinate the process and understand the technology. So it is important to find an expert inside your company who will provide the correct feedback.
There is another problem - when an accelerator is created internally, the people do not always understand how to set up the process of interaction with the market. External accelerators, which have been working for many years, build the infrastructure to scout for solutions. They have a circle of experts. They have a methodology that clearly spells out how to bring innovation to the first implementation, a platform for collecting applications. Therefore, when applying to them, a corporation saves the time needed for building this infrastructure. So, working with an external accelerator in your first year is the right thing to do.
There are companies that have already developed their own innovation policy. They go to the accelerator for expert support. For example, we worked with the Ilim company, which is quite progressive in terms of innovation. They have their own large pool of analysts looking for technological solutions. But an accelerator can provide scouting in other markets as well, which significantly expands the funnel of projects. For example, we managed to find startups for them in the Scandinavian countries and Canada.
When creating an internal accelerator it is important to look at the people you hire, the amount of time and money you will invest in the development of the processes. And to build models based on the goals set. After all, there are pros and cons in all models. You cannot say that one is worse and some other one is better. It all depends on the stage of development the corporation is at.
And what other corporations did GenerationS work with in St. Petersburg?
— Three years ago Gazprom Neft became a partner of GenerationS in the track dedicated to searching for startups in the energy and oil and gas industry. One of our tasks was to find projects whose solutions the company would be able to test at its filling stations and with the help of which it would be possible to simplify the work processes. We found over 500 relevant solutions in Russia. Out of this large pool, 18 projects were selected for acceleration. Gazprom Neft has successfully launched and completed pilot projects with two of them, and one of the startups is still working with the company on a permanent basis.
Russian startups are constantly required to focus on the global market, but we have many problems with technology exports. How do you work with foreign corporations?
— The problem we have is, by and large, one - politics. First and foremost it is the sanctions that prevent us from working globally and concluding contracts. We're trying to get away from it. And we simply show the ready-to-roll cases made together with our alumni to our promising, interesting partners. If they're really interested, they won’t say: "Russia? Sorry, we can't make a deal." On the contrary, they say: "Oh, Russia! It means a cool big market, promising technologies, a competent team. Yes, it is a problem being a state entity. But this is an entry point through which we can find a strong partner".
Moreover, there is a pool of countries with a very good attitude to Russia. We are now discussing the launch of several interstate support tools. For example, in Italy, where there are no strong accelerators of their own. But they are also interested in Russia as a market where they can find investment for their startups. And they are quite ready to register their offices in Russia.
In almost every country we have an ecosystem partner, if not a corporate customer, - a business incubator, accelerator, technology park... They are all interested in working with Russia, because they see the potential of good technology here. We are interested, because with their help we manage to attract investments into the country. It’s not that we work using the "single window" principle, striving to transfer projects abroad without leaving anything to ourselves. We always have the condition stipulated, that the startup must develop on the territory of Russia.
Do you feel a difference in the attitude towards Russia at the political and business levels?
— We try to keep away from politics. And, more often than not, we do it quite successfully. And here it is quite noteworthy that GenerationS was recognized as the best accelerator in Europe, and then ranked among the top five state-backed accelerators in the world. And the fact that our project was from Russia did not become a barrier, because first of all it was the competencies and business results that were assessed.
We actively work with the European market, among our customers are such companies as Airbus, Enel, Ferring, Michelin, and many others. It is more complicated with American companies. However, we are currently working with PepsiCo.