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12 March 2020
Evgeny Borisov

How to Foster Global Technology Champions

Development Director of the Internet Initiatives Development Fund (IIDF) and Roscongress blog author Evgeny Borisov discusses necessary conditions for the creation of successful businesses and how regional approaches to entrepreneurship need to change to foster those conditions.

Why are there practically no unicorns — young privately-owned companies valued at over USD 1 billion — in Russia? Yes, the population is middling and the demand for goods is moderate. Especially for innovative, mostly untested goods that have yet to pass muster.

Early stage competition is also an issue: if someone in Tula has managed to produce and sell a ‘bicycle’, someone in Kaluga is off producing the same product, bravely wading into the competition. To what end? In a small market, each region tries to sell their own ‘bicycles’, though it would be more reasonable to help their neighbors implement what they’ve already developed, consolidating demand. And if we were to bolster this process with grants, subsidies, and investments, then we could confidently speak of, if not unicorns, then at least regional technology champions.

The IIDF portfolio includes a Cultural Region project. Developers have created a great portal for promoting regional events and launched it in Belgorod Region. There is also an educational platform for employees of the local ministry of culture, where they can develop the necessary skills of digitization, promotion, and monetization on a federal level. These kinds of portals facilitate the creation of ‘regional gems’ that end up motivating the development of domestic tourism.

Similar portals are available in many regions, but the majority of them are barely scraping by or even generating losses, despite the fact that they are vital to solving issues of a higher order. In order for the area to gain traction, it needs to consolidate. A kopek here and a kopek there will eventually add up to a strong rouble.

I stumbled upon a presentation by the Korea Venture Investment Corporation. They were discussing ‘designated’ unicorns — technological companies that are addressing global issues, integrating into major corporations, and are supported by various organizations and development institutions at the creation, development, and strategic buyer sales levels. The growth strategies are established by potential consumers of this financial asset. According to CBInsights data, South Korea already has ten unicorns, while Russia has none. Turns out, everything works for them like it does in China, Germany, and the United States.

Successful investors are all the same: they don’t love taking risks and want to know where and how they will exit (sell their financial assets) from the get-go. If they are sowing assets, then it’s targeted. If they’re focused on development, then they are coming into it with preestablished resale expectations. The asset must have an exit strategy into a corporation or an LBO/IPO.

Why not consolidate to create national unicorns? Yes, competing with Apple, Google, Facebook, or Huawei will be difficult. But it is vital. The country not only needs to provide financial (and sometimes even ideological) support, it needs the vision and strategic planning that can shape the fates of future global champions.

It’s likely that these methods will remind some people of the USSR’s Gosplan and raise questions regarding the stifling of competition. But we take similar measures in the case of inventions and patents. If you weigh the pros and cons, these measures are definitely worth it. And there’s no turning back anyway.

Material prepared by:
Evgeny Borisov,
Development Director of the Internet Initiatives Development Fund (IIDF)

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