Russia reaches for the stars with its own Silicon Valley

The Observer

Skolkovo’s facilities are designed to attract the best minds in science to Moscow, but investors are still warned to be wary.

Russia is planning another revolution. Moscow has pinned its future on transforming 400 hectares (1.5 sq miles) of nondescript farmland 20 miles west of the Kremlin into a base camp for the next generation of Mark Zuckerbergs.

By 2015 these desolate fields will be transformed into a city of 35,000 boasting some of the most advanced research centres in the world, if you believe the Kremlin’s plans. This is Silikonnovaya Dolina: Russia’s Silicon Valley.

It’s no pipe dream, according to promotional material handed out to British scientists, entrepreneurs and investors last week as part of a global mission to drum up interest in the Skolkovo Innovation Centre, President Dmitry Medvedev’s pet project.

“We have plans to further explore the moon and the planets,” said a pamphlet promoting Skolkovo’s space centre, one of five planned “clusters”, alongside IT, biomedical science, energy efficiency and nuclear technology.

Investors are being promised corporate and personal tax breaks – and the opportunity of meeting Anna Chapman, the former spy and underwear model, who has been given the task of attracting young talent to Skolkovo.

Sergey Zhukov, a cosmonaut who supervised astrophysics and radiobiology research aboard the Mir space station and now heads the space cluster, said it “will not only allow thousands of people to implement their dreams of a spaceflight. It will also contribute to accelerate mankind’s technological development.”

Space is a key focus for Skolkovo, which is aiming to turn Russian ideas and scientific achievements into cash. While Russia is responsible for 40% of global space launches, it is far behind Nasa in its ability to generate money. Output per Russian space industry employee is currently worth $14,800 (£9,348) per year, less than 33 times that in the US.

The centre, which has brought Sir Richard Branson on board, plans to launch a string of new satellites and a “new generation of rocket carriers that ensure low-cost space transportation”.

But for now there is nothing there, although Viktor Vekselberg, the oligarch running the project, has assured potential investors that the groundwork has begun and the project will be completed on schedule.

Vekselberg, who is worth $13bn, according to Forbes magazine, has been drumming up international interest, and investment, in the project. Last week his whistlestop world tour visited Oxford, Cambridge and London.

The oligarch, who made his billions in natural resources and holds a stake in TNK-BP, the oil company part-owned by BP, told potential British investors and scientists at the Institute of Directors (IoD) in London last week that the project was part of Russia’s attempt to diversify away from natural resources. “Now is the time to move the economy to a new area, one where we are no longer reliant on natural resources,” he said.

But Russia’s oil history casts a long shadow. The biggest deal Skolkovo signed in London last week was a £9.3m investment agreement with BP and Imperial College London to improve the efficiency of oil refining. It is hoped the much-delayed deal will help build bridges following last summer’s armed raid on BP’s Moscow offices.

The Russian state’s history of interfering in international business is likely to be the biggest stumbling block in Skolkovo’s development. British hedge fund Hermitage was hounded out of the country and its lawyer Sergei Magnitsky died in jail after uncovering an alleged $230m fraud by police and tax officials.

Denis MacShane, Labour MP for Rotherham, has written to Lord Green, the trade minister and former HSBC chairman, to criticise UK Trade & Investment, the government’s export adviser, for hosting the conference and warned of the dangers of legitimising “a regime that is so plagued by criminality and corruption”.

“It seems irresponsible for British companies to be putting themselves in harm’s way without full disclosure about the tragedies that could befall them in Russia,” he said. “The government should add an official health and safety warning so British businesses seeking to be involved in Russia do so with their eyes open.” With reference to the Hermitage case, he said: “There has been a distinct lack of British government support when things go badly wrong.”

Vekselberg didn’t attempt to sugar the pill. “We understand the Russian problem better than anyone. This is why we need your help,” he said. “London is a beautiful town, the UK is quite nice, but, believe me, Moscow is beautiful too and Russia is not too bad a country.”

The main aim of the project is to stem the tide of clever Russians fleeing overseas and taking their potentially money-spinning ideas with them. In order to encourage local geniuses to stay the Russians will have to create an environment capable of attracting some of the best in the world. That will cost a lot of money.

Steve Geiger, an American brought in to run Skolkovo after he successfully set up a similar, smaller venture in Abu Dhabi, said the project marked a big change in Russia’s previous approach of “dumping money into a black hole” of research. “There is a huge gap between entrepreneur and large-cap company. At present there is very little reward for Russia’s scientific capital.”

The main attraction – for both Russians and overseas scientists and investors – is likely to be cash. The project has already approved $220m of grants to 330 startups. “We give free money – non-dilutive capital – you keep the equity and we don’t take a seat on the board,” Geiger told potential British investors. “That should be music to the ears of VCs [venture capitalists] here.”

The grants, which range from $50,000 to $10m, are payable within two months if the startup has secured matched funding from a private investor. “It’s not only for Russia,” he said. “It is funded by the Russian taxpayer so Russians should get most of it but if we see a good idea overseas we will invest in them.”


Silicon Alley, Silicon Saxony, Silicon Roundabout… Russia is not alone in its plans to emulate California as a global technology hub. Thanks to its proximity to Wall Street’s cash, Manhattan’s Silicon Alley was close to overtaking Silicon Valley before the dotcom bubble burst in 2000. Now Manhattan is thriving again with startups, including gossip site Gawker in SoHo, and eBay and Facebook are moving in. The auction site expects to expand its NYC office to more than 200 people, and Facebook’s chief operating officer, Sheryl Sandberg, said she was looking to “hire as much talent” as she could in the Big Apple. “We looked around and found the best place would be New York City,” she said.

Tech is also the talk of various cities in Germany. Berlin, which is said to host about 400 startups and regularly holds events designed to propel them into being fully grown companies, is billing itself, rather unimaginatively, as “Silicon Berlin”.

Munich, which hasn’t yet come up with a name to describe its tech-friendliness, claims more than 55,000 people work in R&D within a few miles of the city centre.

Max Nathan, a research fellow at research centre LSE Cities, reckons there are many parallels between Munich and California’s bay area. “Both have shifted from being mainly rural communities to hi-tech hubs. Both offer a strong economy and an excellent quality of life – something that’s helped keep people in the area.” Dresden has copied Berlin and Munich, but given itself the rather catchier name of Silicon Saxony. Almost 300 companies, many involved in solar power, have signed up to the region’s industry agreement.

In London, Old Street’s unprepossessing roundabout has had the silicon prefix since 2009. Estimates put the number of tech firms in the area at 300. Last.fm is based there, as is SoundCloud and also TweetDeck – recently bought by Twitter for £25m. There are also established tech clusters in the West End, Clerkenwell, Covent Garden, Fitzrovia and the South Bank hairy woman срочный займ на карту https://zp-pdl.com/online-payday-loans-cash-advances.php www.zp-pdl.com hairy girl

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