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Russia’s startups and corporations hook up at Startup Village

Annual IT event Startup Village in Russia saw blockchain take centre stage and support from the country’s government

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Just days after Russian president Vladimir Putin announced the development of a digital economy as one of the government’s priorities, open-air tech festival Startup Village attempted to fuel partnerships between startups and big corporations.

The event, now running for the fifth year, took place in June at Skolkovo Innovation Centre on the outskirts of Moscow. It drew in more than 20,000 people from over 80 countries, with large corporations and the government paying special attention to the event.

One area that has developed rapidly in recent months is blockchain technology, said Sergei Khodakov, operations director at Skolkovo’s IT cluster. “Companies are experimenting with that technology, and a large number of startups are being launched in that area.”

Maxim Azrilyan, chief technical architect at Alpha Bank, said: “The area of blockchain is very young – it has been around for less than 10 years – but there are no doubts that there will be demand for blockchain solutions from banks and their business partners.

“Reducing time for processing transactions is just one of the advantages of blockchain. Alfa Bank is looking closely at the activities of startups in that area and is open to cooperation.”

Sergey Simanovsky, project manager at Golos Fund, was more reserved. “At this point, Russian startups are mostly testing the waters when it comes to blockchain. The problem is that many just see a wave of hype but don’t understand the technology. However, I’m sure the situation will change for the better over time,” he said.

Another major trend is everything involving the development of artificial intelligence – from information security to the automatisation of business processes. “This is a major driver, which helps to create a large number of startups, said Khodakov.

Meanwhile, judging by this year’s line-up, areas popular in previous years, such as big data and virtual reality, continue to be closely explored by startups.

This latest event was held at a time when Russia’s economy is slowly coming out of a recession and showing moderate growth.

But the effect of the country’s overall economic conditions on the startup scene is ambiguous, as relatively low production and labour costs in post-crisis Russia provide an advantage for startups aiming at foreign markets.

“We are primarily looking for startups with a focus not just on Russia, but internationally,” said Khodakov. “Companies for which the next step would be entering the Middle East, Asia or Western Europe. Companies of that kind are not just more attractive for potential investors, but they also have better development prospects.”

However, as the economy is still slow, the local startup scene is very competitive. “Competition for venture capital and for access to local customers is very tough,” said Khodakov.

Putin calls for digital economy development

Another major development that provided context for this year’s Startup Village was the Russian authorities’ proclaimed focus on development of digital technology as one of the main drivers of the economy.

The event took place just days after Putin called for the development of the digital economy in his speech at the St Petersburg International Economic Forum.

In addition to promising new legislation that he claimed would facilitate the development of the IT industry, Putin called on Russian corporations, state-run and private alike, to pay closer attention to startups and even create special divisions that will specifically focus on work with startups.

One sign of the government’s seriousness about the IT industry was a visit to Startup Village by deputy prime minister Arkady Dvorkovich, who opened the event.

In his address, Dvorkovich praised Skolkovo as the country’s IT hub and a launch pad for startups. “In Russia, people with ideas and people with money don’t always meet, but Skolkovo has everything in place for that to happen,” he said.

Government interest expected to give startups a boost

Meanwhile, large corporations – from multinational giants operating in Russia to local government-controlled companies – are already showing increased interest in working with startups.

“Our goal is to engage with a large cohort of startups so that we can have at least 10 validated solutions that we can take to market in the current year,” Manju Bansal, global head of SAP Startup Focus, said at a panel session focused to collaboration between corporations and startups.

“There is a robust startup community in Russia and we want local developers to focus on creating enterprise B2B solutions that will be of interest of SAP customers, both in Russia and globally. It does not matter where the startups are physically located, their solutions are made available to our entire global customer base.”

Yevgeny Charkin, CIO at Russian Railways, the country’s state-controlled railway monopoly, said: “For us, a digital strategy is absolutely crucial because we believe that traditional means of raising efficiency will be exhausted in the longer term.

“Digital technologies provide opportunities for railways to retain and increase competitiveness. Startups are a colossal potential source of increasing efficiency, so we are creating a system for working with startups, and that work has already borne fruit.”

Observers expect the government’s increased focus on the IT industry to give the sector a serious boost.

While the older generation of Russia’s IT companies that are now known internationally, such as Mail.Ru Group, Yandex and Kaspersky Lab, were formed with little government support, newer companies could take advantage of the increased interest.

“Currently, we’re seeing an entire range of instruments that help to develop the IT industry and create new companies,” said Khodakov, adding that the IT cluster at Skolkovo Innovation Centre includes 525 startups.

“Thanks to the new initiatives aimed at supporting the IT industry, we’ll see a larger number of companies in that area over the next five to 10 years that will be known not just in Russia, but also internationally,” he said.

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