Years of economic crisis due to low oil prices has spurred people in the Russian regions to create their own companies, even in the face of a global pandemic. The Skolkovo Startup Tour draws the country's entrepreneurs together into the largest innovation event in Russia, spanning nine cities (Tver, Ufa, Samara, Petropavlovsk-Kamchatsky, Nizhny Novgorod, St. Petersburg, Krasnodar, Tomsk, and Murmansk). The event involves over 80,000 participants and gives startups from remote regions a chance to gain recognition and media attention for their achievements. Startup Tour 2021 takes place in online format, beginning in Tver on March 17.
The Man Behind Startup Tour
In order to understand how the Startup Tour came into being, it’s necessary to know a little about the man who created it. Skolkovo Startup Tour is the brainchild of none other than the Finnish entrepreneur and business angel Pekka Viljakainen. Mr. Viljakainen got involved in the Skolkovo Innovation Center project during its early days, and his years of experience in business, innovation and entrepreneurship helped it get to where it is now. Today it the innovation center has a large ecosystem of R&D centers, its own university, a technopark, and is home to 2800 startup residents scattered across multiple technology clusters. It is also helping to create new Skolkovo-affiliated innovation centers around Russia.
Pekka became an entrepreneur at thirteen, eventually building his software company into a global entity spanning twenty-seven countries and employing 20,000 people. Indeed, his company was the first to create an online banking payment application back in the 1990s, showing a level of foresight one can only envy. Upon retiring at thirty-eight, he described himself as “going crazy” within a couple of weeks after the fact, having gone from traveling over two-hundred days a year to leading a relatively quiet life. It was then that he was approached by the Russian government and other Skolkovo founders.
Pekka Viljakainen, Advisor to the Chairman of the Board of Directors, Skolkovo Foundation. Photo: Sk.ru
“They offered me a role as an independent advisor to the Skolkovo project and I have been involved ever since,” he said. “My number one condition when I joined Skolkovo was that I am not a politician, I only do business. I had a one-second termination in my contract so that if things didn’t work out, I could get on a plane and be gone the same day. My second condition was that I wanted to see every bit of data available and every door had to be open; I wanted total transparency, in other words, and they agreed to those terms.”
Although initially signed up as an external advisor, ten years later Mr. Viljakainen has made his mark on Russia’s main innovation center, becoming the founder and chairman of Skolkovo Ventures and a member of the board of directors of the Skolkovo Institute of Science and Technology, among other achievements.
One of the reasons that Skolkovo’s founders sought expertise from Finland was to create a blueprint of Finnish legislation that could be applied to the Russian startup ecosystem. Another reason was that Finland has a highly developed startup ecosystem as well as good relations with Russia; it attracts more venture capital than Germany in terms of its percentage share of GDP, even though the latter is the center of the EU market.
Pekka Viljakainen’s idea to create the signature Startup Tour and Startup Village (the follow-up stage to the Startup Tour) came into being because he saw the importance of keeping the focus on Russian entrepreneurs and innovators themselves rather than on the role of government. Young companies and would-be entrepreneurs are given a large, public platform on which to show both domestic and international audiences what they have achieved. It is also a place to exchange ideas and to learn from technology experts, coaches, representatives from development institutes, and industrial companies. While participating startups can win cash prizes in competitions (valued at 300,000 rubles in certificates), that is only part of it; they can also enter development institute and partner acceleration programs.
“The ultimate goal is to spread the message on why innovation is important,” said Mr. Viljakainen. “Entrepreneurs that own small- and medium-sized businesses make up around half the participants in Startup Tour. Depending on the city, there can be anything from two-hundred to two-hundred-and-fifty people running startup companies or planning to start a company. Then you have students from the universities who are simply curious about entrepreneurship. In that sense, we have a very education-oriented task, so the tour isn’t a promotion; we educate them and others on what Skolkovo is, what tools we have, and what entrepreneurship is. The rest of the participants comprise local corporations, including local government, local ministries, and university teachers.”
In the Depths of a Frozen Country
The Russian economy has changed significantly over the last thirty years. There was the turbulent transition from Soviet communism to the capitalism of the 1990s; then came the golden years of high oil prices and a strong currency during the 2000s through to the early 2010s, which the fall in oil prices in 2014 ended. This reliance on a core resource such as oil is known as “Dutch Disease” (a paradox when there is a spike in the value of a nation’s currency based on the exploitation of natural resources) and the decrease in oil prices greatly affected state revenues and currency strengths of nearly all major oil producers, not just Russia’s. Pekka Viljakainen saw this fall as a blessing in disguise for the country. Many of the remoter regions, particularly out in Siberia, relied on jobs from the oil sector, but when that came to an end, a lot of people were compelled to find something new to do, including starting their own businesses.
“If the oil price were $200 a barrel, nobody would care about business, because money would flow into the system anyway,” he said. “I honestly think that that was the very last moment to start changing the country in this respect.”
A question that the media frequently asks Mr. Viljakainen is what Russian region produces the best startups and entrepreneurs, although he doesn’t see this as necessarily the best measure of success. More important is the level of activity overall across the regions, especially in the remote areas where one would expect there to be less happening. Certainly, there are niche sectors that some regions do better than others and right now there are IT, heavy industry, and biomedical clusters dotted around the country, with more are popping up.
“When you compare here to the western countries like Europe and the US, Russia has far fewer consumer driven companies,” said Mr. Viljakainen. “Most of the companies here are business-to-business because there is a lot of digitalization and automation in heavy industries. On the other hand, consumer markets are heavily dominated by large companies, so it is quite difficult for a new startup to enter the consumer segment of the market here.”
According to him, roughly seventy percent of Finnish startup companies are consumer oriented and thirty percent are B2B. In Russia, only ten percent are consumer oriented and the remaining ninety percent are B2B. Yet, in spite of obstacles like sanctions and the Covid-19 pandemic, he views Russian startups as very competitive on a global scale. Indeed, Yakutia, Russia’s coldest region and home to the coldest city on earth (Yakutsk), has produced three startup companies that have reached unicorn stage (a privately held company worth over $1 billion).
Startup Tour 2019, Yakutia. Photo: Sk.ru
“These are some of the good stories coming out of the regions that people generally don’t hear about,” he said. “In Yakutia, where it regularly gets to -40C, there are new consumer companies. Whether it is a taxi service or whatever, I love the fact that you have a company from a small town in the middle of nowhere, in the depths of a frozen country, it enters the US market with its application and makes $1 billion. I think that is a wonderful story, and there are three such unicorn stories in the pipeline in Yakutsk alone. This shows that a good company can be found anywhere these days. The Yakutia story is a perfect example of this.”
Pekka’s passion for the regional entrepreneurs is apparent from the get-go; he sees a drive in them that he considers to be crucial in becoming a successful entrepreneur. The lack of opportunities in the remote regions, as opposed to large cities like Moscow and St. Petersburg, he attributes as the main factor behind this drive.
“I think that the ratio of startups per capita in the regions is higher than in big cities. There are too many opportunities in big cities, so drive is somewhat lacking in comparison to the regions,” he said. “Take St Petersburg, for example; young people there have a lot of options, because there are big companies and there are many restaurants. The point is that when there are fewer opportunities, there is greater drive. The guys in Yakutia and other regions are very driven because they have to be.
“One of the first places I visited six years ago was Khanty-Mansiysk out in Siberia, a place famous for its oil and frozen mammoths. It’s a small town but every person I met there was talking business. There were also four hundred young people at the local university saying that they want to do business. This was six years ago at the height of the economic crisis! My love of the regions is because I’ve come across so many really interesting stories, where the people have that right type of hunger.”
But what is it about Finland that has allowed it to create a successful, developed startup ecosystem that has given birth to large, global companies like Nokia and Supercell and generates many new companies every year? Why is it a good model for Russia?
“The first reason is education,” said Pekka. “The second reason is that we don’t have oil so we have to do something else. It has nothing to do with genes, it is a matter of education and having that hunger. The Russian regions have entrepreneurs with that kind of hunger. Prior to the 2014 crisis, Skolkovo was not taken as seriously as after the collapse of oil prices. Then all of a sudden every regional governor was trying to see how many hi-tech jobs they could create in each area.”
For Startup Tour 2021, Mr. Viljakainen said that he expects to see many projects related to industrialization, pharmaceuticals, energy efficiency, recycling, waste management, as well as the agricultural technologies sector, which seen strong growth in recent years. Startup Tour 2021 has an “all doors open” policy, so a startup company does not have to be a Skolkovo resident in order to partake and anyone can view the event.
“While Europeans, Americans and Chinese are in their lockdowns and are wondering about what is happening in Russia and what will be the next Sputnik V or Yandex, the easiest way to find out is to watch our Startup Tour 2021! Anyone can join in by registering online and you can watch from the comfort of your own home.”
For further information on Startup Tour 2021, visit the event website: https://startup-tour.ru/
Register to view Startup Tour 2021 online at: https://startup-tour.ru/registration