Anatoly Chubais' Column

Anatoly Chubais: “High Risks Are a Distinctive Feature of Innovative Economy”

13 November 2019

Chairman of the Board of RUSNANO Management Company Anatoly Chubais took part in the 12th St. Petersburg International Innovation Forum (SPIIF). He devoted his speech at the plenary session entitled National Competitiveness: Opportunities, Development Ways, Best Practices to the specifics of innovative economy development.

Chairman of the Board of RUSNANO Management Company Anatoly Chubais took part in the 12th St. Petersburg International Innovation Forum (SPIIF)

Chairman of the Board of RUSNANO Management Company Anatoly Chubais took part in the 12th St. Petersburg International Innovation Forum (SPIIF)

According to the Head of RUSNANO Management Company, the tasks of a traditional and a technological investor creating an innovative product are fundamentally different. “A technology investor cannot work professionally if he or she lacks in-depth understanding of the technology. He must not just have a clear idea of what he has invested in, but he must also know potential buyers of technology, represent potential competitors and conduct serious scientific analysis of how these technologies will change in 5-10 years,” explained Anatoly Chubais.

The main distinctive feature of the innovation economy is high investment risks, and the Private Equity and Venture Capital (PE/VC) industry has developed mechanisms to hedge these risks,” he said. The basic mechanism for a venture capital fund is a portfolio approach, in which even if eight out of ten projects fail, one will survive and another project will be so effective that it will be able to recoup all the investments made. “A portfolio for the funds is as fundamental a thing as a barque with a lot of sails for sailors: even if some of the sails can't withstand the storm, the ship will continue to move using the remaining ones,” said the Head of RUSNANO Management Company to give an example.

The problem, he said, is that the system of control and supervision in Russia is set in the opposite direction from innovations and does not accept the inevitable risks in the industry. “Today, for the inspectors, the presence of unsuccessful investment in the fund's portfolio is an article of the Criminal Code, providing for 10 to 15 years of high security prison sentence,“ stated Anatoly Chubais.

At the same time, without an active role of the state, only on market principles, the innovation industry has never been born in any of the developed countries, including the examples of South Korea, Taiwan and China, said the Head of RUSNANO Management Company with full confidence. “There would have been no Silicon Valley in California if it had not been for 10-12 years of large-scale state-funded investment by the U.S. Department of Defense,” he reminded.

Russia also sets the right direction for the growth of technological investment in the national project Digital Economy, from augmented reality to the Internet of things and 5G, noted Anatoly Chubais. In his opinion, an equally important task of the state is to create institutions of innovative economy, including the institution of venture investment, which is still in its infancy, said the Head of RUSNANO Management Company. “The share of the PE/VC industry in Russia is 20 times less than in Poland and 600 times less than in the United States,” were the statistics he provided, “about half of the framework of the innovation economy has been built so far.”

The 12th St. Petersburg International Innovation Forum (SPIIF) is the largest platform in the Northern Capital for promoting scientific and production potential. The projects and initiatives presented at the Forum serve to strengthen the image of St. Petersburg as the leading think tank of Russia and the world. The main topic of the 12th St. Petersburg International Innovation Forum is Export as an Instrument of Innovative Economy Development.

Additional information

Reference

RUSNANO Joint-Stock Company was founded in March 2011 through reorganization of state corporation Russian Corporation of Nanotechnologies. JSC RUSNANO contributes to implementation of the state policy on the development of the nanotechnology industry by investing directly and through investment funds of nanotechnology in financially effective high-technology projects providing the development of new production facilities in the Russian Federation. Its primary investment focus is in electronics, optoelectronics and telecommunications, healthcare and biotechnology, metallurgy and metalwork, energy, mechanical engineering and instrument making, construction and industrial materials, chemicals and petrochemicals. 100 percent of RUSNANO’s shares are state owned. Thanks to RUSNANO’s investments, there are currently 115 factories and R&D Centers opened in 37 regions in Russia. JSC RUSNANO has profit for the last 5 years.

Management of assets of RUSNANO JSC is carried out by Limited Liability Company established in December 2013, RUSNANO Management Company. Anatoly Chubais is the Chairman of its Executive Board.

Work to establish nanotechnology infrastructure and carry out educational programs is fulfilled by RUSNANO’s Fund for Infrastructure and Educational Programs, which was also established during the reorganization of the Russian Corporation of Nanotechnologies.