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Young Siberian innovators dream of a new $300m ‘City of the Sun’

20 Oct '10
Oleg Kouzbit, Online News Managing Editor

Moscow’s Ruyan Ekspeditsia has envisioned a $300-350m Ruyan business city in the Tomsk region. Hoping to create “an ecosystem” for open entrepreneurship and unlimited collaboration, the project owner vows to open the hi-tech city to residents in three-to-five years. Although it plans to come up with only 15% of its own funds, the group is confident that venture investors will “line up” to co-finance ‘Siberian Skolkovo’.

Ruyan Ekspeditsia, a Moscow-based company with Russian-wide project interests and a focus on FMCG and brand-building, has announced plans to build a new $300-350m ‘City of the Sun’ in the Tomsk region.

According to president Alexander Kravtsov, the prospective locality is Ruyan, a city with a population of 10,000 people. The project hopes to lure Siberia’s “best and brightest …to a positive ecosystem in which true entrepreneurship can grow,” and foster a culture of open creativity, arts and friendship.

Starting with yurts

Ruyan will break ground before the end of the month; construction machinery is already on site, Interfax reports. Between now and 2015 the area is expected to develop from yurts. Used for centuries, these modern-day variants of Turkmen and Mongolian-style nomadic tent will be where the builders and first residents will live. Eventually, they will be replaced as Ruyan develops into a modern town with engineering and social infrastructure, a business school, an R&D center and other facilities.

Ruyan Ekspeditsia reportedly plans to complete the construction phase of the project within five-to-eight years; main residential areas may open doors in 2013-2015, the company management hopes.

Betting on venture investors

The firm’s own investment is pegged at $40m, paid out in $3-5m yearly installments over the life of the project, Mr. Kravtsov said, adding that he is expecting venture investors to “line up” for participation after the project “progresses past its point of no return in three-four years.”

The announced business city will occupy a small area of 5-6 sq. km next to the Ob River, close to a federal highway. The Ruyan Ekspeditsia president said that the company would be buying some land from individual owners and rent other property from the region.

Located within 100-200km from Tomsk and Siberia’s largest scientific hub, Novosibirsk, the project aims at luring gifted innovators from these two cities. But Ruyan will not just be for university and post-graduate innovators, it will be open to young entrepreneurs and inventors from all over Siberia and beyond, the investor said.

According to Ruyan Ekspeditsia deputy CEO Dmitry Fost, six small techno-parks have been mapped out for the business city, each focused on a specific R&D area while interconnected for joint commercialization efforts.

Building a dream or wishful thinking?

The company president told media “there are many young people from all over Russia already willing to come and live in Ruyan; we’re already screening them… .” But before they come and create new ideas this new “cradle of Siberia’s innovative business” needs to become a reality.

Skeptics have already labeled the idea “utopia”, drawing a parallel with the famous “City of the Sun” by Italian philosopher Tommaso Campanella. Their other concern is that the project is well beyond the innovation expertise of a firm that built its reputation in the early 2000s as a maker of shoe-care products, insect repellents and picnic gear.

Some claim that Ruyan Ekspeditsia’s top managers—all Siberian natives—want to create a local ‘counterweight’ to Russia’s most ambitious innovation cluster project, $2-3.5bn Skolkovo ‘Silicon Valley’ outside Moscow designed to house as many as 40,000 residents.

After meeting with the Ruyan management, Tomsk Governor Viktor Kress was blunt, referring to the project as a “gamble-like venture”, but promised to “follow its development”. While no actual support was promised, the governor left the door open once the first facilities take shape and the project starts helping reduce youth unemployment in the region.

Mr. Kravtsov and his managers brush off the skeptics stating that the project presented an elaborate business plan last month at Siberia’s largest innovation forum, Novosibirsk’s Interra-2010, and already has moved construction equipment to the site.

Ruyan Ekspeditsia says it has “experience in entrepreneurial project evaluation and setting up panels of outside experts from both within and beyond Russia to consider projects.”

Proof-of-concept centers as a key to success

One way to prove itself, some prominent VC experts feel, is for Ruyan Ekpeditsia to make sure Ruyan includes a proof-of-concept center (PoC) where innovators can have their ideas evaluated for their commercial potential.

Using a PoC to help innovators prepare their ‘raw’ projects for presentation to business angel communities and VC funds has been proven to be a successful route in the U.S., for example. Supporters point to the Deschpande Center at the Massachusetts Institute of Technology and the Van Lebig Center at University of California as models. A similar methodology for a Russian analog has already been created in Nizhny Novgorod.

As one angel investor puts it, “…if Ruyan Ekspeditsia hopes to raise hundreds of millions of dollars from VC funds and business angels, they will need more than a new ‘City of the Sun’ and high tech talent—they will need to prove they can bridge the gap between passionate ideas and business reality….”
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