Skolkovo, Russia's Would-Be Silicon Valley

Several billion dollars says there will soon be a rival to Silicon Valley. Only one problem: It's in Russia.

The Skolkovo Moscow School of Management, with its hypermodern cylindrical and rectangular complex sheathed in red, gray, and blue-green glass, looks like the Battlestar Galactica. And that is the point: to convey a sense of imminent takeoff. Skolkovo, five years old and located just beyond the MKAD, the beltway that wraps around Moscow, is training the first generation of Russian capitalists—not oligarchs, who took things that once belonged to the Soviet state and made a fortune selling them, but boot-strapping and scholarship-endowed DIY wealth creators. It also says it’s the first MBA program that teaches would-be entrepreneurs—from Russia as well as the U.S., Germany, Finland, and elsewhere—how to launch businesses in emerging markets. Business school officials like to point out that, from the air, Skolkovo resembles a painting by the Soviet abstract artist Kazimir Malevich, who was famous for doing things that had never been done.

The business school is across the street from a huge, mostly empty lot that is the future site of the Skolkovo “Inograd,” or innovation city, also known as the Silicon Valley of Russia. Together, the school (providing young, savvy business people) and the Silicon Valley of Russia (promising money and lots of engineers, programmers, mathematicians, and physicists) are expected to create Russia’s very own high-tech sector, which will generate tens of billions of dollars and help diversify an economy that is overly dependent on oil and gas. Steven Geiger, the chief operating officer of the Skolkovo Foundation, which oversees the innovation city, puts it modestly: “Skolkovo is the most exciting technological initiative in the world—full stop.”

Since President Dmitry Medvedev announced plans, in March 2010, for the Inograd, Geiger says, the government has amended 200 laws encouraging investment in Skolkovo, pumped a small fortune into the project (roughly $290 million in 2011 and an expected $4 billion over the next two years), and hired a French architecture firm, AREP, to design it. The innovation city will include computer labs, meeting spaces, and its own university for 1,200 graduate students that is loosely modeled after Stanford University, Silicon Valley’s feeder school. There will be a great deal of partnering and incubating. (Oddly, officials from the Skolkovo business school and the Skolkovo Foundation like to pretend they have very little to do with each other—even though they have the same name, were created at about the same time, sit within a few hundred feet of each other, and share close ties with Massachusetts Institute of Technology.)

“Can innovation be top-down?” Geiger says. “It can be.” He says the Russians, starting with Medvedev and Viktor Vekselberg, the oil magnate charged with leading Skolkovo, “are very ambitious.” Then he segues seamlessly into a disquisition on “building synergies” and “developing the ecosystem.” (Skolkovo cheerleaders love to say “ecosystem.”)

There’s just one problem with Skolkovo. It’s in Russia—hardly a ripe culture for studying business management or launching a startup. In the World Bank’s 2010 Ease of Doing Business report, for instance, Russia ranked No. 123 out of 183 countries surveyed, behind Botswana, Yemen, and Uganda, among others. “We don’t teach ethics,” Wilfried Vanhonacker, the business school dean, says. “It’s not for me to judge what’s right or wrong.”

When Skolkovo Foundation officials talk about Skolkovo, they imagine this guy: Dima, let’s say, in a gray, toothless, frequently intoxicated backwater five time zones east of Moscow. Dima is an engineer with a brilliant idea, something to do with nanotechnology or intergalactic search engines. Unfortunately he barely has enough rubles for a shot of bootlegged vodka, let alone laptops. No problem: The Skolkovo Foundation will give Dima some seed capital—say, $50,000 to start, and upwards of $1 million, $3 million, even $8 million if he shows promise—and in a matter of months, maybe a year, after he’s come up with a working prototype and partnered with one of the recently hatched titans of commerce from the Skolkovo business school, Dima will become the next Sergey Brin, and in a few years the Silicon Valley of Russia will vaporize Silicon Valley, and Russia will finally become a modern country like Poland or Belize, and then California and America will die. Victory!

Problem is, if Dima the engineer is smart, he’ll emigrate as soon as possible to the U.S., Israel, Europe—any place that protects intellectual property rights, and he doesn’t have to worry about a local mobster or government official (who are often the same person) co-opting his big, bright idea before trafficking his daughter. It’s worth recalling that Brin’s family left Russia.

The Russians are undeterred.

Kamil Isaev, the head of Intel’s research and development operations in Russia, notes that Russians have a history of state-sponsored innovation—the Soviets built secret cities where they designed nuclear bombs and other weapons of mass destruction—and that there’s a nascent tech sector in the country, starting with search engines Yandex and Rambler, and Kaspersky Lab, the Moscow-based producer of computer-security systems. Intel, like Cisco Systems, has already signed a “memorandum of intent,” which means it publicly supports Skolkovo—a good idea in a country in which the Kremlin is usually more important than shareholders or the bottom line—and is still haggling over the details. For now, Isaev urges patience. Andrey Zuzin, who runs the Skolkovo initiative at Cisco, estimates that it will take three to five years to see real results. “Potemkin village—this is easy to do,” Isaev says. “If you want a substantial Potemkin village, which makes it not Potemkin, this takes time.”

Julia Davis, an American who was one of 45 members of the Moscow School of Management’s first graduating class in 2010, says starting a business school in Russia also poses challenges and that MIT, where Skolkovo students spend two months studying entrepreneurship, has helped mightily. “They opened their whole ecosystem to us,” says Davis, now a manager of business development at the global memory platform Evernote in Mountain View, Calif. She adds, slightly defensively: “Westerners come from this very biased perspective that they can’t seem to get past. I think it is important to remember that just because [capitalism] doesn’t look like the way it looks here doesn’t mean it doesn’t exist.”

Vanhonacker, the business school dean, argues that the school is private, having been launched by Ruben Vardanian, the president of the Russian investment bank Troika Dialog. But, says Sergei Guriev, a faculty member, the school received its mortgage from the state-run Gazprombank.

Vanhonacker and Alan Kantrow, a professor who toggles between MIT and Skolkovo, market the business school as a boot camp that prepares students for the realities of global commerce. “You bet your ass that it’s more difficult to do this stuff well and honorably in these environments,” Kantrow says. “It’s much, much tougher. … But if you do learn how to flourish when you don’t have everything stable and nice, you’re going to be able to operate in places other people can’t.”

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