** The first public development institution created by the “fund of funds” model in 2000 to support the venture industry. However, it began operating only in 2000 and at a fairly moderate scale, because of a relatively humble capital of Rb 100mn of which, as suggested by data available, only a half was financed, and due to a very strict cap (10%) on participation in venture funds’ capital.
*** In March 2011was transformed into joint-stock company – JSC ROSNANO.
The record of the emergence of the Russian development institutions system to date (see Fig. 1) allows the following conclusions:
See in particular: Minutes of the meeting of the Commission under the RF President on modernization and technological development of Russia’s economy of 25 November 2009.
Section Institutional Issues 1) the period between late 1990s and 2008 saw a gradual shift toward shaping up institutions focused on support of projects at their later stages. In this respect a milestone development became the rise of the public corporations Vnsehseconombank and Rosnanotech. But since 2009 some of the then existing development institutions (RVC and ROSNANO) have expanded their operations to encompass earlier stages too. Plus, the newly created institutions (“Skolkovo” Foundation in particular) have become to a significant extent focused on support of projects at their early stages too;
2) there exists a steady trend to expansion of both the institutions and Funds’ resources and the size of projects they support: while between late 1990s and early 2000s it was largely “low-cost” instruments (the Fund for Assistance to Development of Small Forms of Enterprises in the Research and Technical Sphere, the Venture Innovation Fund, the Russian Development Bank), a number of institutions (Vnesheconombank, Rosnanotech, RFSI), which were created later, boast a far greater resource capacity and use it to support fairly huge projects (worth a total of some Rb 1bn each);
3) the actual launch of the institutions in question suffered from substantial delays accounting from one to several years. That said, while in the case of RVC and ROSNANO the delay was basically a technical one (dictated by the need to shape up management bodies, craft their mandates, adopt of corporate regulations and statutes, organize of tenders, etc.), in the case of the Venture Investment Fund and the Russian Investment Fund for ICT1 delays were caused by substantial deficiencies built in the respective rules and standards;
4) in a number of cases, while creating new institutions, the performance record (including the negative one) of earlier created instruments was taken into account: thus, created by the same model as the Venture Investment Fund (that is, a public “fund of funds”), RVC does not exhibit the latter’s fundamental normative defects;
5) Roughly since late 2009 there started a large-scale process of “secondary” creation of development institutions. In the frame of the process, the existing structures found new ones, with the government initiating the process just in a handful of instances (RFSI, EXIAR).
Meanwhile, in other cases those were the development institutions’ initiatives, with RVC and ROSNANO being particular active in this regard;
6) The period between 2010 and 2011 saw the rise of the trend to a rapid expansion of the national development institutions’ operations: not only has their circle been growing, but directions of their functional profiles and instruments employed expanded, and the volume of their resources and the number of innovation projects they support was on the rise.
The financial institutions established by today appear fairly versatile (see Table 16): they focus on support of both small-and medium-sized firms and large corporations’ innovation activity; they orient to different phases of a company’s development (from the seed and initial ones to maturity), and their mechanisms of support are associated with awarding grants, investment, disbursement of loans and guarantees. Let us note that different models of encouragement of innovation are realized under individual functional directions: thus, in addition to grant-based mechanism (the Fund of Assistance to Innovation), seed projects are supported through a seed investment vehicle (The Seed Investment Fund under RVC); support to venture investments is carried out via both the “fund-of-funds” model (RVC and, to a lesser ex The institution was established back in 2007, but has not yet started investment activity due to a legislatively set strict requirement to reduce the government’s participation in its capital to 51%.
RUSSIAN ECONOMY IN trends and outlooks tent, ROSNANO) and on the basis of a mechanism of a program-based support of creation of regional venture funds.
Fig. 1. Process of Creation of Russian Development Institutions In general, the system of Russian financial development institutions has undergone a dramatic transformation and become far more exuberant vis--vis its nascent state in the early 2000s: it indeed became richer in the proper sense of the word, that is, in terms of aggregate volumes of resources under management, and in a figurative sense – in terms of variety of types of the institutions in question. Furthermore, over the past two years the government has been far more active in extending the development institutions system and, particularly, in implementing its earlier designed blueprints.
Table Characteristics of Main Existing Financial Development Institutions Year of Modus Forms of Stages supDevelopment institution incorpora- Legal form Participants Resources operandi support ported tion 1 2 3 4 5 6 7 Fund for assistance to 1994 Federal Russian Funding Grants Pre-seed, Budget development of small public budg- Federation small inno- seed allocations forms of entrepreneurship et institution vation firms’ in 2010 – in the scientific-technical R&D at the Rb 3.4bn, sphere (The Fund for expense of 2011. – 4bn, assistance to innovation) public funds 2012 – 4bn Section Institutional Issues cont’d 1 2 3 4 5 6 7 Russian Venture Com- 2006 Open-end Russian The state Investment Seed As of late pany (RVC) joint-stock Federation fund of Venture 2010, net company funds for Later stages assets worth seed, venture a total of and direct Rb 34.5bn investment The seed Investment 2009 LLC RVC – 99%; Investment Investment Seed Authorized Fund under RVC Fund for fund for capital of assistance to early stages Rb 2bn innovation – 1%.
Regional venture funds 2006–2009 Closed-end Regional «Classical» Investment Venture As of early mutual in- funds for venture 2012, the vestment assistance to funds aggregate funds for investment volume was particularly to small- Rb 9.2bn risky (ven- sized enterture) in- prises in the vestment research and technical sphere (funded in equal proportion out of the federal and regional budgets) – 50%; outsider investors– 50% Foundation for Develop- 2010 Non-for- Russian Funding of Grants Pre-seed Budget ment of the New Tech- profit or- Academy of innovation Seed allocations nologies Development ganization Sciences, projects of Venture in 2010 – and Commercialization Vneshe- companies t Rb 10.3bn, Centre (“Skolkovo Foun- conombank, participating 2011. – dation” Fund for in the inno- 15.5bn, assistance to vation center 2012 – innovations, 27.1bn Bauman Technical University, ROSNANO, RVC The Russian Investment 2007 Open-end Russian Sectoral Investment As a rule, Authorized Fund for information and joint-stock Federation direct in- late capital – communication technolo- company vestment Rb 1.45 bn gies (Rosinfocominvest) fund Russian Fund for Techno- 1992 Federal state Russian Support of Loans As a rule, n/a logical Development autonomous Federation R&D on the late (RFTD) institution reverse basis RUSSIAN ECONOMY IN trends and outlooks cont’d 1 2 3 4 5 6 7 ROSNANO 2007 Open-end Russian Financing of Investment Creation and Net assets as of joint-stock Federation innovation development June 2011- company companies, of produc- Rb 61.3bn;
venture and tion long-term investment borrowings funds (under state guarantees) – Rb 43bn; Russian Federation’s contribution to the authorized capital in 2011 – Rb 47.2bn Bank for Development 2007* Public cor- Russian State devel- Loans, in- As a rule, As of late and Foreign Economic poration Federation opment vestment, late 2010, assets Activity (Vnesheconom- bank, in- guarantees were worth a bank) cluding total of exercise of Rb 1,782.8bn support of investment projects The state specialized 1994 Closed-end Vneshe- Specialized Loans, guar- As a rule, Assets as of Russian export-import joint-stock conombank bank for antees late October bank (Roseximbank) company support of 2011 – export Rb 9.1bn Russian Bank for Small 1999 Open-end Vneshe- Support to Loans (incl. As a rule, Operational and Medium Enterprises joint-stock conombank SME microfinanc- late assets as of Support (SME Bank) company through ing), leasing, early 2012 - target fi- investment Rb 103.9 bn nancing of regional partners represented by banks and infrastructure organizations Russian Fund for Direct 2011 Open-end Vneshecono Large in- Investment As a rule, Russian Investment (RFDI) joint-stock mbank vestment in late Federation’s company leading target condomestic tribution to corporations Vneshein a propor- conomtion equal to bank’s in foreign 2011 – institutional Rb 62.6bn.** investors’ Russian Agency for Ex- 2011 Open-end Vnesheco- Insuring Insurance – Authorized port Credit and Invest- joint-stock nombank Russian capital – ment Insurance (EXIAR) company exporters Rb 30bn and investors’ business and ;political risks * The year of creation of a public corporation by reorganization of the Bank for Foreign Economic Activity of the USSR, which had been operating in various forms since 1922.
** It is planned that within next 5 years the Government will form the Fund’s capital in a volume of USD 10bn.
Sources: the development institutions’ official web-pages, official reporting, federal acts on the federal budget.
Section Institutional Issues 6.3.2. The Development Institutions’ Operational Objectives and Priorities, and Conditions of Projects Support Whilst considering the totality of objectives developed for public financial development institutions (Table 17), it is worthwhile to note that most of them cite assistance to the public policy implementation in the respective area as a principal operational profile, while tasks and targets that complement it are likewise formulated very broadly. Notably, mission of some financial development institution stretches beyond the framework of delivery of solely financial services and outlines a broader sphere of their operations. This, the Fund for Assistant to Innovation is to help attract extrabudgetary investment in the area of small-sized innovationbased entrepreneurship, while RVC is tasked to deliver technological and consulting assistance to the innovation market agents and bolster the infrastructure supporting innovation clusters, as well as professionalism of participants in the innovation ecosystem and encouragement of demand for innovation corporations’ produce.
Objectives of the two largest development institutions, Vnesheconombank and ROSNANO, are somewhat nonpareil ones and worth a particular notice. In case of Vnesheconombank, in addition to general objectives, targets and tasks for each of its major operational directions were set (including support of investment projects) in a very concrete form and with measures on their improvement. Meanwhile, ROSNANO’s peculiarity lies in a fairly specific (at least, vis--vis other institutions) and very ambitious objective, namely, the being first strategy, as far as the global markets for nanotechnological projects are concerned.
Table Operational Objectives, Tasks and Priorities of Development Instutions Development institu- Objectives Sectoral and/or subject-wise priorities tion 1 2 Fund for Mission: assistance to implementation of the state scientific-technical policy In the frame of the «Start» program:
assistance to and bottom-up research projects, efficient employment of the scientific- • 5 thematic directions:
innovation technical capacity and engagement of scientific and technical achievements - IT;
in the production sphere to bolster development of small forms of enter- Medicine of the future;
prises in the scientific-technical sphere, whose operations imply practical - Modern materials and technologies of introduction (development) of intellectual deliverables, - small-sized innotheir development;
vation entrepreneurship agents, the innovation infrastructure, generation of - New devices and apps;
job opportunities for an efficient building on the existing national scientific - biotechnology;
and technical potential.
• 80 sub-directions.
In the frame of the «Development» pro- Implementation of the public policy on development and support of gram:
small-sized enterprises in the scientific-technical sphere;
- Sub-program in the energy-saving - Delivery of a direct financial, information and other support to smallsphere («Energo»);
sized innovation enterprises which implement projects on development of - Sub-program in the sphere of diagnew kinds of science-intensive products and technologies on the basis of nostics, prevention and treatment of the belonging to them intellectual property;
most socially significant diseases - Creation and bolstering of the infrastructure of support of small-sized («Frama»);
- Sub-program in the IT sphere («Soft») - Assistance to generation of new job opportunities for an efficient building on the existing national scientific and technical potential;
- Attraction of extrabudgetary investment in the sphere of small sized innovation-based entrepreneurship;
- Cadres training (including engagement of the youth in innovation activities) RUSSIAN ECONOMY IN trends and outlooks cont’d 1 2 Russian Mission: ensuring an accelerated unfolding of an efficient and competitive Venture funds with participation of RVC:
Venture on a global scale national innovation system by creating a self-developing • Current priority directions of developCompany venture industry in interaction with other development institutions with the ment of science, technologies and technics help of engagement of private venture capital, bolstering innovation-based of the Russian Federation: