Recently I did a phone interview with Axel Tillman of Russian Venture Company (RVC). Mr. Tillman is the CEO of RVC-USA, which is a company that was established to act as a representative of RVC Moscow. RVC Moscow has $1 billion of funds to promote bilateral investment opportunities between Russia and the U.S. RVC-USA is based in Boston, Massachusetts. RVC was created in June 2006 by the Russian government under the Putin administration. The Russian government realized that the future of the country “cannot rely on oil or gas,” said Mr. Tillman. He said “money must be invested in a more technology-driven and entrepreneurial structure.”
RVC is 100% owned by the federal agency. The $1 billion venture capital fund is split into the U.K., Moscow, and the United States. RVC also runs a development institute, which is a foundation that helps entrepreneurs learn different technologies.
RVC-USA was heavily involved in a competition called MassChallenge. MassChallenge is a global start-up accelerator that had a competition back in June where 125 companies competed for a $1 million prize, which will be awarded on October 23, 2012. Around 1,237 applications were received and only 125 of those were selected. Several of them were Russian companies.
RVC was a platinum sponsor of “Representing Russia” at MassChallenge 2012 to help Russian and American startups access international resources available to them. On October 1st, around 125 of those companies went down to 25. Since one of the biggest barriers for entry is being able to afford flight tickets, room, and board, RVC pays for entrepreneurs for that.
“In the U.S., it is one of the countries that acknowledges that failure can make you a better entrepreneur. Failure is part of a process that opens your mindset. In other societies, failure is not accepted and it puts a burn mark on you for the rest of your life,” said Mr. Tillman in an interview with Pulse2.
He added that there has not been a European company since the 1980’s that have become 10% as big as Microsoft. All of the European car companies like Porsche and Audi have been around for long before that.
I asked Mr. Tillman if there has been some difficulties of bringing Russian entrepreneurs to the United States because of visas. He told me that the WTO is providing 3 year business visas to entrepreneurs.
Some organizations that exist that help with Russian entrepreneurship that exist today include SK-Tech and RusNano. SK-Tech is a collaboration between MIT and Skolkovo. The mission of Skolkovo Tech is “to educate students, advance knowledge, and foster innovation in order to address critical scientific, technological, and innovation challenges and gaps facing Russia and the world.” RusNano is a late stage investor that has around $10 billion in assets. Mostly they invest in series C and D rounds. RusNano focuses mostly on medical technologies, nanotechnologies, and manufacturing.
Mr. Tillman sold me that the three Russian companies are Kernel Corp., CardioWave, and Magru. Kernel Corp. develops software to automate energy efficiency. CadioWave is a blood pressure monitoring platform with high-accuracy pulse wave sensors. And Magru is an e-publishing services company.
As of February 2012, RVC backed funds have run a portfolio of 104 companies. RVC has invested capital totaling around 9.1 billion Russian rubles (around $300 million). RVC has signed around 26 cooperation agreements with different Russian regions.
When I asked Mr. Tillman what some of the challenges are with working directly with the Russian government, he told me that RVC has a lot of leeway. There is not one single minister sitting on the board of RVC. He added that to kickstart entrepreneurship, it is essential that there should not be much interference. He also pointed out that the U.S. government is also very active in putting money into entrepreneurship. For example, the state government in Massachusetts is an entrepreneurship for funds like MassVentures.
I asked Mr. Tillman what some of the companies are in RVC’s portfolio. Maxwell Biotech is one example out of the 3 biotechs that RVCs has put money in. RVC is known for funding biotech companies when they are ready for clinical trials. Some clinical trials are done in Russia. The advantage of investing in biotech companies in Russia is that they are faster of hitting the market than in the U.S. In the United States, there is a lot more regulation whether it is for good reasons or bad reasons.
I asked why Mr. Tillman worked on chartering the RVC office in Boston versus the West Coast, an area known for medical start-ups. He told me that RVC actually does have a West Coast office and it is maintained by Dmitry Dakhvnovsky and there are two office spaces there that they want to fill up. “On the East Coast, there is a strong eye for substance and there is a tremendous wealth pool for intellectual properties,” said Mr. Tillman. “There is also a high density of Boston universities, less competition in venture capital, and easier ways to be recognized.” He also complimented the state of Massachusetts for being highly involved in entrepreneurship.