Central regions | Finance, business | Technology & innovation

Russian VCs step up activity; state investing in innovation found below expectations

10 Dec '12
The National Association for Innovation and IT Development (NAIRIT) has issued its new Russian innovation market report. “A sharp upsurge in activity” from Russian VC funds is the most noteworthy trend of the second half of 2012, the Association emphasizes.

In August and September, NAIRIT found a 78% increase in new deals. Between January 1 and now more than 80 deals were closed; and in the third quarter alone, venture investments surpassed $218m.

Today’s Russian situation contrasts sharply with that of the US venture sector, NAIRIT underscores. In the United States, the market is shrinking in the wake of the global financial meltdown that began in 2008. In the third quarter alone, investments in American start-ups reportedly dwindled by 12% y/y. Between January 1 and now venture investments in the U.S. fell short of expectations, topping out at less than $20bn.

In Russia, the IT and telecom sectors traditionally raised most funding in the second half of 2012 (25.2%), followed by energy and energy efficiency (14.1%), biotech and biomed (12.3%), and transport and engine-making (11.8%).

Positive trends include a 25% decrease in project commercialization horizons, a 33% increase the number of patents obtained and applied for, as well as a 47% rise in the overall number of start-ups in this country.

On the downside, however, NAIRIT reports the “extremely low effectiveness” of state investing in innovation. Not more than an estimated 22-to-28% of funds spent in Russia on innovation reaches the end user in the form of an innovation product. Russia’s so-called development institutions, including Skolkovo, RVC, Rusnano, VTB Bank and some others, have no specific KPIs to fulfill, NAIRIT pointed out, and so far have failed to reach a certain operation level the government expected from them. They prefer investing in foreign companies and supporting what the Association termed “plainly dubious” R&D efforts.

To alter the situation, NAIRIT announced it will develop a KPI system to be submitted for Russian government perusal in the first six months of next year.
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Tags: NAIRIT (4) / development institutions (2) / VC funds (2) / innovation market (0) / deals (0) /

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