As both oil prices and the ruble continue to fall, the Startup Tour that is about to begin its annual journey across Russia in search of promising tech companies is needed more than ever before, says Pekka Viljakainen, the project’s creator and an advisor to the president of the Skolkovo Foundation that organises the event.
Finnish investor Pekka Viljakainen says the Startup Tour aims to create regional strongholds for entrepreneurs. Photo: Sk.ru
The economic decline only serves as a warning that in a situation of rising unemployment, when major companies and the public sector will stop hiring, jobs need to be generated by somebody else, says the Finnish entrepreneur, who at the age of 13 founded a tech company that would eventually grow to employ up to 20,000 people.
“Of course we can talk about innovations and science, but it’s much more relevant … to generate new jobs,” says Viljakainen. “Russian media is treating this whole story like artificial innovation generation, but actually the ultimate reason for Skolkovo is to generate new jobs,” he added.
“The oil price of $28 is helping us: it’s making our financing difficult for sure, but it’s really helping tell the general public, all the governors and the media why the heck we are doing all this,” he says. “It’s not an entertainment project. It needs to be done.”
Last week, German Gref, head of the state banking giant Sberbank, told participants of an economic forum in Moscow that Russia had fallen behind other countries and had become a “downshifter” country. Viljakainen applauded Gref’s frankness but insists it is not too late for Russia to make up for lost time.
“For sure Russia can catch up,” he says. “If I didn’t believe it could, I wouldn’t be here.
“I’m extremely happy we’re not starting Skolkovo today, because it would be too late,” he adds. “I don’t think it’s too late, but it’s definitely not too early.”
Now in its fourth year, the three-month Startup Tour that kicks off in Irkutsk on February 1 offers a free platform for entrepreneurs to pitch their ideas and get feedback from professionals and investors in 11 cities across Russia, as well as the Belarusian capital Minsk and the Kazakh city of Almaty. A winning company will be selected in each region for attendance at a two-day Startup Village at Skolkovo in June attended by investors from around the world. But while the winners will be awarded grants, the competition is only part of the project. The ultimate aim, facilitating the creation of jobs, is to create local strongholds or communities for regional entrepreneurs, says Viljakainen.
“It’s not about money, it’s about how institutions can work together and cooperation can be built,” he explains.
In this respect, it’s not only the startups themselves that can benefit, but bigger companies that might want to buy technology from another company in their region, he said.
“For example, Gref has people trying to find small startups. Why? He understands that Sberbank cannot develop everything itself. That’s why he has people all over the world looking for technologies that will make Sberbank stronger,” says Viljakainen.
“And that’s why people should take part in the Startup Tour: companies can find inexpensive talent, and the startups can learn from others and find potential financing and media attention, which is important,” he added.
Viljakainen said the participation of university rectors is also essential. “Their role should be increased dramatically. Instead of how many diplomas they give out, they should be measured by how many well working companies they put out,” he said.
More than Moscow
In the list of regional hubs the Startup Tour will visit, Moscow and St. Petersburg are conspicuously absent.
“It’s not realistic that everything in entrepreneurship should happen in Moscow,” says Viljakainen, adding that Russia’s two biggest cities already have services such as business incubators and business angels.
“It makes more sense to go to Irkutsk. Cost-wise it’s cheaper to organize companies [there]. You can get twice as much for your money. If I were an entrepreneur, I would definitely not start my company in the main cities, and the same applies to Finland, I wouldn’t start it in Helsinki.”
Last year’s winner of the Startup Tour, the Terebra engineering company, hails from Vladivostok, the second port of call for this year’s tour.
Marat Grishkov, the Terebra project’s head, said that since winning the grant his company has begun the process of putting into practice its idea to make the equipment used in manufacturing vegetable oil more efficient.
“The grant we won certainly made a significant contribution to the project’s development,” he said. “The main thing is that the idea has started to become a reality.”
Viljakainen said that despite starting on a level playing field – with similar infrastructure and the same bureaucracy – there are notable differences in how successful various regions have been in fostering a supportive business climate. He singled out the city of Kazan as a success story.
“They are open for business and they are not afraid of foreigners. They might not love them but they want to do business with them,” he said. “I’d really like to see the next Kazan.”
The most common mistake made by Russian startups, says Viljakainen, is a failure to trust anyone else.
“Great scientific people need a different type of person to help them – businesspeople – but they are afraid they will steal from them,” he said. But he added that having invested in a number of Russian startups, in his experience, six months was usually long enough for the entrepreneurs to start trusting partners and investors.
Vasily Belov, senior vice president for innovations at the Skolkovo Foundation, said any conference’s success is judged on what concrete results it yields for its participants.
“Startups that only existed in previous years as ideas are now selling finished products,” he said. “That is exactly the result we’re working toward.”