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IVI Presentation at UNECE Conference, May 2008
1. Scaling Up Innovation in Russia
UNECE Conference:
Moscow Russia, 23 May 2008
Innovative Ventures Inc.
Haslett, MI. USA
Moscow, Russia
Thomas Nastas
President
Tom@IVIpe.com
www.IVIpe.com
23 May 2008 www.IVIpe.com
Info@IVIpe.com
2. Todayâs Message
Part I
Whatâs Happening in the Market?
The Good & the Bad
Part II
GoForward Plan to Accelerate $$
For Entrepreneurs/SMEs
For Govât Policy Makers
23 May 2008 www.IVIpe.com
Info@IVIpe.com
3. IVI History-Direct Invest &
Advisory
Canada (1992)
Europe (1992/94)
C$100MM-Canadian
TP Fund, $10MM-
Bus. Dev. Bank
EU, $-FinanciĂšre
St Dominique,
Paris
USA (1986)
Russia (1997)
The Michigan Product
HP LP, $30MM-EBRD &
Dev. Fund ($5MM)
USAID
Africa (1993/96)
E. Africa $5MM, Sub-
Saharan, $200MM, South
Africa,$30MM, IFC/WB
23 May 2008 www.IVIpe.com
Info@IVIpe.com
4. About Me
âą Founder of IVI,1986. In
Russia since 1997
âą Moscow Bank, Member,
Board of Directors, 2007
âą Independent Directors Ass.
Member, Board of Directors,
2008
âą Moscow MBA Program, Prof
of VC & Marketing, 2001
âą Moscow, MBA Advising, 2001
23 May 2008 www.IVIpe.com
Info@IVIpe.com
5. Part I: Whatâs Happening in
the Market?
The Good & the Bad
23 May 2008 www.IVIpe.com
Info@IVIpe.com
6. Successes in the Market
Since 2001
PBC Lasers
& Wostec
Multinationals w/R&D Labs in Russia
23 May 2008 www.IVIpe.com
Info@IVIpe.com
7. Some Clouds Too: Learning
Curve Lessons
Optiva ($49M) liquidates:
Nanotech's 1st big flame-out
Startup doctors ease portfolio
pain-Trustworks ($23M)
Cybiko Ceases
Operations
Not Seeing Entrepreneurial SME Creation
from MNC R&D Labs
Multinationals w/R&D Labs in Russia
23 May 2008 www.IVIpe.com
Info@IVIpe.com
8. Realities of VC in Russia
High Rejection Rates of Russian Tech:
Undeveloped Opportunity
Lack of Uniqueness/Competitive Advantage in
Performance (Customer Benefits)
Too much $$$, too much time & too little reward
(Alternative Invest Opts & Foreign Competition)
Lack of People (mgt/employees) & Transparency
Lack of IP/Uncertainty of IP
What to do with the SMEs that are rejected?
Ignore? Sympathize? Seek New Solutions?
23 May 2008 www.IVIpe.com
Info@IVIpe.com
11. Realities of VC Investment
Ex: Global Spend in Clean Tech
(2006)
âą Corporate R&D Investment = $22 billion
âą Government R&D Investment = $24 Billion
âą VC Investment in R&D = $2 Billion
Same Pattern Repeated in Most Industries:
VCs Fund Commercialization, not Tech Dev.
23 May 2008 www.IVIpe.com
Info@IVIpe.com
12. Reasons Why
Probability
Components of SME Success
80%
Company has enough $$
80%
Mgt Capable & Focused
80%
PD Successful
80%
Mfging Successful
80%
Competitors Behave as Expected
80%
Customers Want Product
80%
Pricing is Correct
80%
IP Issued
17%
Combined Probability of Success
Success Rate <10% if Probability of One Event falls
from 80% to 50%
23 May 2008 www.IVIpe.com
Info@IVIpe.com
13. Part II: GoForward Plan to
Accelerating VC $$
For Entrepreneurs/SMEs
23 May 2008 www.IVIpe.com
Info@IVIpe.com
14. Action Item #1 for
Entrepreneurs/SMEs
1. Invest in Tech for Domestic Mkt
Link w/Corporates: User Pull, Testing,
Deployment & Commercialization
Solve Tech & Supply Chain Needs
Donât Worry about Small Volumes
Build Locally, Upgrade Later for National &
Intâl Expansion
23 May 2008 www.IVIpe.com
Info@IVIpe.com
17. Examples of Domestic Growth
$570Bln for
Transportation Overhaul
21 May 2008 Combined
Reports
Ford Will Build 2nd Plant in Russia:
Ford European VP Jim Tetreault
23 May 2008 www.IVIpe.com
Info@IVIpe.com
18. Whereâs the Customer Pain
(Need) in the Industry?
1. MORE Perf, Execution & Cost Reduction
Not GameChangers; blocking/tackling tech so
customers meet business plan
2. MORE Local Content
More Value-added Tech
Tech Sold to Multiple Customers
Generate Supplier Sustainability thru Multiple
Products/Services
3. What Else?
23 May 2008 www.IVIpe.com
Info@IVIpe.com
19. Domestic Opts to Build Bio-
Tech Supply Chain in Russia
Research, Testing, &
Agricultural Medical Devices
Drugs & Hospitals
Medical Labs
Feedstock/Chemicals Pharmaceuticals & Equipment
Agricultural Medicinal & Laboratory Specialty Biological
processing botanicals apparatus & hospitals research
furniture
Basic organic Pharma- University Commercial
chemicals ceutical Surgical, medical medical
preparations medical, dental, research research
Ethyl alcohol
ophthalmic hospitals
mfg. Diagnostic Testing
& analytical
substances Clinical laboratories
Organic fiber instruments &
research
mfg. equipment
Biological Medical
institutions
products laboratories &
Fertilizers Irradiation
diagnostic
apparatus &
Pesticides and imaging
electromedical
other agricultural
centers
chemicals equipment
Product-Oriented www.IVIpe.com Service-Oriented
23 May 2008
Info@IVIpe.com
20. Action Item #2 for
Entrepreneurs/SMEs
2. Benchmark Your Tech to Competitors
& Alternative
Often & Early
Define Strengths & Weaknesses
Test Under Different Operating &
Customer Conditions
Invest to Overcome Deficiencies
23 May 2008 www.IVIpe.com
Info@IVIpe.com
21. Part II: GoForward Plan to
Accelerating $$
For Govât Policy Makers
23 May 2008 www.IVIpe.com
Info@IVIpe.com
22. GoForward Plan: Action Item
#1 for Govât Policy Makers
1. Create â Tech Proof of Conceptâ Fund
Transform ideas = deals
Generate data to confirm performance,
show weaknesses vs. competition &
alternatives.
Benchmark to intâl standards
23 May 2008 www.IVIpe.com
Info@IVIpe.com
23. Chubais Opens Landmark Power Unit
But industry players are skeptical about the
efficiency and modernity of the Russian-made
turbines.
23 May 2008 www.IVIpe.com
Info@IVIpe.com
24. GoForward Plan: Action Item
#2 for Govât Policy Makers
2. Capitalize a âMini-Grantâ Program
Define biz opts for a technology
Cost is US$3,000-US$10,000/technology
Not a biz plan, but 3-4 page document on
techâs potential
23 May 2008 www.IVIpe.com
Info@IVIpe.com
25. GoForward Plan: Action Item
#3 for Govât Policy Makers
3.Create an IP Fund
Fund costs of Filing IP, especially Intâl
Pay-back as a Royalty on Sales
Funded by Russian Govât Initiative/PPP
23 May 2008 www.IVIpe.com
Info@IVIpe.com
26. GoForward Plan: Action Item
#4 for Govât Policy Makers
4. Inventory Your Tech & Publish as a
Database on the Internet
Org by tech, product & mkt
Benefits by cost & performance
Stage of dev., R&D, PD, Testing,
Plan w/Timetable, milestones,
budgets
IP issued/filed & competing IP
23 May 2008 www.IVIpe.com
Info@IVIpe.com
27. GoForward Plan: Action Item
#5 for Govât Policy Makers
5. Establish a Biz Dev Office
Scouts for Opts in SMEs & Institutes
Develops projects for âMini-Grantâ & âProof of
Conceptâ Funds
Promote to Customers
Keeps the Team Focused. Align Interests
Sell Data or Provide Answers?
Incentives: Cash/Salary or Equity?
Transparent or Opaque? Responsive or Egocentric?
23 May 2008 www.IVIpe.com
Info@IVIpe.com
28. GoForward Plan: Action Item
#6 for Govât Policy Makers
6. Organize R&D & Supply Chain
Competitions for Users of Tech
Go After Corporates & Corporate Investors
vs. Financial Investors
Interaction between R&D developers &
Corporations & Corporate VC
Corporations fund R&D, guide development
& access opts in the supply chain
Lower dev risk & get to market quickly
Establish Industry Consortiums
23 May 2008 www.IVIpe.com
Info@IVIpe.com
29. Technology In Many Places!
Just Look & Define
Slaughter Raising Genetic Engineering
& Breeding
Butcher
Distribution, Storage & Retail Locations
Processing- Ham, Kielbasa
Delivery
23 May 2008 www.IVIpe.com
Info@IVIpe.com
31. Thomas D. Nastas
Tom@IVIpe.com
www.IVIpe.com
Tel. 7.985.923.47.27
Innovative Ventures Inc. Moscow, Russia
Haslett, MI USA
23 May 2008 www.IVIpe.com
Info@IVIpe.com
33. Whatâs Working Against Early
Stage Tech & VC in Russia
Plenty of $: Itâs Competition:
Domestic Growth, FMCGs, F&B, Retailing,
Financial Services, Media, etc.
Keeps Entrepreneurs in Non-Tech
From Other Asset Classes w/Quicker & >
Profits, e.g., Stocks & Real Estate
From Israel, Ireland, USA, etc., with Good
Deals, Technologies, Entrepreneurs &
Successes
23 May 2008 www.IVIpe.com
Info@IVIpe.com
34. Best Practices
Factors of Best Practice
Success
Engaged Institutes engaged in econ dev
Institutes with & committed to tech transfer
Active
Have mechanism for tech
Leadership
commercialization
23 May 2008 www.IVIpe.com
Info@IVIpe.com
35. Best Practices
Factors of Best Practice
Success
Capital is Programs for
Available commercialization, pre-seed, &
seed financing gaps (help
establish & build SMEs)
Active informal angel networks
Investors include private & and
public entities
23 May 2008 www.IVIpe.com
Info@IVIpe.com
36. Best Practices
Factors of Best Practice
Success
Discretionary Receive significant federal
R&D Funding funding
Centers serve as anchors for a
regionâs bioscience base
23 May 2008 www.IVIpe.com
Info@IVIpe.com
37. Best Practices
Factors of Best Practice
Success
Talent Pool Talent is the #1 the variable
to build comparative advantage
Educational institutions
responsive to training students
to meet the needs for workers
at all skill levels, e.g.,
scientists, technicians, &
production workers
23 May 2008 www.IVIpe.com
Info@IVIpe.com
38. Best Practices
Factors of Best Practice
Success
Specialized Leading bioscience regions
Facilities and have private markets that
Equipment provide facilities for bioscience
SMEs
Specialized bioscience
incubators and research parks
are a growing trend
Access to specialized facilities
and equipment
23 May 2008 www.IVIpe.com
Info@IVIpe.com
39. Best Practices
Factors of Best Practice States/Regions
Success
Patience and Building a critical mass takes
Long-term years or even decades
Perspective
Early technology pioneers took
25 years, now 12 to 14 years to
mature
23 May 2008 www.IVIpe.com
Info@IVIpe.com