In one of our year-end roundup discussions last week Marchmont CEO Kendrick White talked about the new Marchmont strategy and hopes he has for a better year for the Marchmont readers, and Russia.
Kendrick, just recently Marchmont and its regional partners completed MARCHMONT Business LAB 2012, one of the most event-packed and heavy-duty series of regional training sessions I can remember in Marchmont’s history. It was highly successful, and it may seem logical to continue our tours of Russia, coaching innovators in commercialization. But you’re orchestrating a dramatic change in Marchmont’s business strategy for next year. Is it worthwhile swapping a time-tested model for trying new ideas?
Well Oleg, it’s time to make the change. In my opinion, now is the time to set up a real commercialization center which we’re calling the “Marchmont Venture Accelerator.”
It is, in effect, a hybrid between a proof-of-concept center (PoC), such as the MIT’s Deshpande Center in Cambridge, MA, and a consulting center focused on “packaging” innovation. The former represents the first stage of work—assessing the commercial viability of technology ideas; the latter takes the projects with the highest level of commercial viability, and forms a team around the innovator, and prepares this project for next round finance raising.
At the “packaging” stage, the Venture Accelerator will become the founder and a shareholder in a new company which will own the technology.
We have been talking about the necessity to create this type of infrastructure in Russia for years. Today, our business strategy is to move from talking and explaining theory to creating a real working and replicable example, which we can showcase to universities, techno-parks and incubators around the country. And the starting point of this prototype must be in a leading provincial city, a center of one of a dozen innovation clusters in Russia. So, we’re putting together the Accelerator in our home city of Nizhny Novgorod in partnership with the local NN University.
It’s a fundamentally different environment here, compared to Moscow or St. Petersburg. And it should be crystal clear that the focus of this Venture Accelerator will be to commercialize advanced high technologies.
Already in Moscow you can see a number of accelerators and business incubators, which very successfully focus on commercializing IT projects. Look at Fastlane Ventures or the work of Digital October, or the iAccelerator, or InCube, or the GreenField project in Moscow; look at ITMO in St. Petersburg and its accelerator. I’m very happy at the success of those. But I feel that IT is just the tip of the iceberg for Russian innovation. As we work to develop a normal innovation economy, we must develop specific mechanisms to commercialize Russia’s advance fundamental sciences into real products.
Our main goal is to show that this can be done, and show that we can lead the way in developing that pattern, and that pattern can be replicated across the entire Russian Federation, and not just its capital cities.
From a flurry of image-making conferences, forums and master-classes of the past five years to setting up a Venture Accelerator, and then to raising a VC fund—don’t you think it’s too drastic a departure in a country that doesn’t always seem to see eye to eye with its own innovation rhetoric, and in a time that some pundits say is hatching another global economic meltdown?
First of all, the global economic meltdown represents a crisis in confidence in our increasingly integrated global economy. But as the Chinese say, every crisis brings both pain and opportunities. I think that if such a crisis were to develop—which I’m increasingly confident it won’t—it would be nothing bad for Russia’s long-term development. I think it might, in fact, stimulate the process of pushing the advancement of Russia’s innovation economy, which I would highly encourage in any case.
Under any scenario, Russia has to take a leadership position in pushing its own innovation economy. This is essential to the long-term development of Russia; and this is the only way Russia can reverse its brain drain, and create the environment to not only retain the best and brightest of Russian culture but also encourage those that have left in the last ten years to return and develop their careers here. This must be the highest priority for the leadership of this country during the next ten years.
Coming back to why we are taking this new challenge, I’m sure it’s not enough to simply create a series of large-scale real estate driven techno-parks or SEZ’s; it’s essential to create the methodologies that are going to work inside
Also, it’s essential that there be funds available to support high technology development. Thus far, some of the most prominent investment VC funds in Moscow have focused on IT or real estate. But in fact, there are new funds which have been developed in recent years.
Some of them are led by Russian Venture Company, such as the RVC BioFund; others are led by private individuals such as Alexander Galitsky with his Almaz Capital fund, or Sergei Belousov with Runa Capital, who, by the way, is now starting a new fund focusing on quantum mechanics. Also, look at Grishin Robotics, a new fund set up by Dmitry Grishin, the co-founder and chairman of Mail.ru Group.
This is a tremendous leap forward for this country; an unbelievably important statement of where the direction of Russia’s innovation potential and intellectual creativity can lead.
So, you need mechanisms to commercialize early-stage technologies and prepare real business ideas coming from technology and fundamental science; and you also need dedicated funds to invest in all this. There must be a bridge between the labs and the real world.
Marchmont and its partners are now also raising a venture fund to focus on high technologies; we hope to put it together in early 2013, and for this VC Seed Fund to work very closely with our new Venture Accelerator.
What does this change in business approach mean to you personally? Will it bring about the fulfillment of your dreams to create something here in Russia, or is it a move you’re forced to undertake after all other options were considered and eventually scrapped?
For me, this is simply an evolutionary process.
I was working at the initial stages in 1992 and 1993 developing the first-ever SME business training support center in Nizhny Novgorod, and working with entrepreneurs who had little or no understanding of market economics. So, I was deeply involved in the privatization phase of Russia’s development, and in supporting the first generation of Russia’s new entrepreneurs. Today, these people lead substantial businesses—and I am very proud of this pioneering work.
The next stage of my own development was working as an advisor to the Russian Privatization Center (RPC) on post-privatization restructuring of large enterprises. As the PwC advisor to the General Director of the Volga-Vyatka Privatization Center, I was able to train 22 Russian consultants in three regional offices on business planning methodologies, which led to dozens of new businesses being created between 1995 and 1998.
The following stage was post-devaluation import substitution and small business support; I led Central Russia Regional Venture Fund whose investors included the EBRD and Germany’s KfW. But during that phase, which lasted between 1998 and 2005, I understood that investing in import substitution only had a certain window of time, and the future of Russia was in developing its high technologies sectors. So, I created Marchmont to endeavor to work in that area.
What we started with in 2005 was consulting; then we got into the media business in 2007. Then we got into the event business in 2008, promoting the development of regional Business Angels clubs around the country. This led to the creation of the Marchmont Business Leaders Investment Forums in 2009-2011. 2012 marked a new beginning of concentrated master-classes on how to set up PoC’s held in ten techno-park incubators across Russia. So, there has been a specifically planned evolution in our approach.
My feeling is that this infrastructure education process is now completed. Now is the time to create a network of proof-of-concept centers in Russia. And I’m very happy to take a leadership role in setting up the first one focusing on high tech in NN.
Well, strictly speaking, I’m not the first one to do so, of course; there are other centers in Moscow. But they mostly focus on IT, and they often wait for regional projects to come to them. I want to pioneer doing something else outside
I say, “Let’s create the infrastructure that goes out into the regions so that people do not have to leave and go to Moscow, or Silicon Valley, or Tel-Aviv, or Cambridge. They can stay in their home town with their family roots and develop their own innovation clusters.”
This is my vision; and the Marchmont Venture Accelerator is simply the next step in that vision.
As the year 2012 is drawing to a close, what would you wish yourself and the readers of the Marchmont website for the upcoming 2013?
I wish for people to be able to feel that they can achieve their dreams within their own local communities. I don’t want people to feel that to achieve those, they have to leave Russia. This is a tragedy which Russia as a nation cannot afford.
I think we need to create a society here that encourages people to develop their own quality of life within
their own ecosystems. But that means people should actively decide what they want to do, and really go for that.
So, I wish people to really think about their dreams and goals in life; think of what they love doing and how they can find the way to pursue their ideas close to their families and friends. Each of us must be leaders in our own way, and not wait for others to follow.
I personally wish the readers of Marchmont a very wonderful New Year, and merry Christmas, and that everyone understand the blessings that we have on this planet. We have challenging times, but I have absolute confidence that we’re up to meeting the challenges. It takes open-mindedness; and it takes strength and courage.
Best wishes and happy holidays for the New Year!