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. Last Updated: 07/27/2016

Motivating People to Participate in Skolkovo

ReutersMedvedev using a video camera during a June visit to the California headquarters of Cisco Systems, which has agreed to participate in the Skolkovo project.

Motivating people to participate in an innovative economy has been a key success for the government as it attempts to lure investors to participate in a new technology center in Skolkovo, said Sergei Belousov, a technology entrepreneur.

In the past, the main outlet for talented, motivated people has been in sectors where there is a lot of money up for grabs but that are not necessarily going to make the country more successful, said Belousov, chairman and founder of two software companies, Parallels and Acronis.

"Four years ago, during the boom of the Russian economy, we had motivated people who would reach a certain level of promotion in Parallels and then say, 'I want to be a builder,'" Belousov said in an interview. "Someone might be a software engineer by training, but he would be motivated to do real estate because he has a friend who built 20 houses and made $5 million."

"The motivation used to be to do those things, and now the motivation is changing," he said.

The innovation city, a touchstone of President Dmitry Medvedev's plan to modernize the Russian economy, has already drummed up interest from technology firms Siemens, Microsoft, Google, Nokia and Intel. Cisco Systems will become the first tenant, promising to invest $1 billion during Medvedev's visit to California last week.

For his part, Belousov said he would be happy to cooperate with the government.

As part of a drive to foster innovation among small businesses, he is co-founding a $30 million early-stage investment fund to provide seed money for software and Internet start-up companies.

The fund, Runa Capital, will invest in technology areas of rapid growth, including machine learning, virtualization, mobile software and cloud computing.

“There will be an incubator,” Belousov told The Moscow Times. “It will be involved closely with incomplete teams and will help them compete — to come up with a business model, to raise initial funding, to write a business plan and to supervise the business development.”

Runa Capital, co-founded with Alexander Galitsky, founder of Almaz Capital Partners, will be supported by the Runapark business incubator, which will provide the environment for Russian startups to develop.

While motivating people is a key ingredient in turning Skolkovo into a success, Belousov said much depends on other factors if the city is to become a center of innovation: lowering administrative barriers, developing an investment-friendly ecosystem, building infrastructure and investing in education.

While the government has promised to reduce red tape for investors at Skolkovo, cutting through Russia’s notoriously convoluted bureaucracy may take some doing. According to the World Bank’s Doing Business 2010 report, Russia ranks a dismal 120th out of 183 countries.

“There is a lot of promise that has not yet been delivered,” Belousov said.

Equipping Skolkovo with the necessary infrastructure, including business support services, will be a key test for whether it can attract small businesses to set up shop there — and elsewhere.

“In China, India and Russia, that's how you do business — you employ your own cleaners, security guards, cooks and electricians," Belousov said. "In Singapore or the U.S., it's delivered as part of the infrastructure service. There is a promise that it will be much easier in Skolkovo."

Belousov, who splits much of the year between his offices in Moscow and Seattle, has worked with small businesses for years. One of Parallels’ main products is “cloud services” — the hosting and administration of various computing platforms over the Internet. Offering computing through the cloud reduces the barriers to entry for small and medium-sized businesses, Belousov said.

“It’s not the cost, it’s not the flexibility — it’s the simplicity," he said. "Small business doesn’t want to think about IT, small business wants to use IT and get benefit from IT, but not be an expert in IT."

The government has scored an early success in facilitating investment in education, which Belousov called key for the creation of an innovative economy. Billionaire Viktor Vekselberg, who is heading Skolkovo's development, has reached a preliminary deal under which the Massachusetts Institute of Technology will consider opening laboratories and other education facilities in the innovation center.

The government is also creating some big financial incentives at Skolkovo. The State Duma's Economic Policy and Entrepreneurship Committee on Monday approved legislation outlining tax breaks for the project, including no value-added tax for 10 years and no property taxes.

But despite the promise of an advantageous environment for entrepreneurs, Skolkovo has also drawn some high-profile criticism from those concerned that the project will turn into a boondoggle for senior officials and business executives. Others have expressed doubt that it will help Russia shed its image as a risky destination for foreign capital.

"There are a lot of dangers in doing anything new. That's totally normal,” Belousov said. "One of the dangers of any such initiative would be to make it restrictive. … Any restrictions put on innovation — geographical, national, corporate — would be bad in general, and particularly in the context of Russia.”

Ultimately, the goal must be to change the perception of doing business, a task that will take time, he said. “Perceptions are perceptions,” he said. “How do you fix perceptions? You wait, you show success stories, you do positive PR.”

While the Kremlin’s primary goal for Skolkovo has been to help develop an innovative economy in Russia, it has made no secret of the fact that it hopes such a center will also reverse the country’s “brain drain,” in which hundreds of thousands of highly trained Russians have left the country looking for better opportunities abroad.

But the goal should not necessarily be to bring Russians back from abroad, Belousov said. Instead, the government should ensure that they have a way to participate in the global economy.

“I don't believe in non-global innovation,” Belousov said. “It's not necessarily about ‘bringing them back.’ It's about getting them to participate in this global technology development. They just need to be leverageable rather than living in Skolkovo with their families."