Mr. Bochtarev, Kirovsky Zavod is one of the leading Russian industrial holding companies focusing on mechanical engineering, agricultural technology and energy. Your own accelerator and VC have been active for years in Germany and especially Berlin. How do you consider the cooperation with German partners and startups so far?
Thank you for your question. At the moment teams of German fund, GPS Ventures, and Russian Corporate Fund Kirov Group Ventures work autonomously. Without any doubt, the competencies and experience of our foreign colleagues help in the development of the subsidiary in Russia. Also, we are grateful for the opportunity to exchange knowledge and competencies between our teams. We believe in the synergy and mutual benefit of our partnership. Moreover, on behalf of the Russian side, we focus our energies on the international connections of both Kirovsky Zavod and our venture fund. We are an active member and participant of AHK (German Chamber of Commerce in Russia), organize and support events such as German Business week in Russia, in 2020 we had joined the business association Deep Tech Hub. In this cooperation, we oversee the driver for the development of our primary business and businesses of our portfolio companies.
Our association SIBB makes the start-ups of our own accelerator aware of the applications rounds at Kirovsky Zavod. With all the choices in the EU and the USA, and especially given the rather modest venture market in Russia, why should a German start-up still apply for your corporate accelerator?
Free capital opportunities in Western Europe and the United States can be assessed as higher, but this does not exclude the potential of the Russian market. There are plenty of developing segments in Russia that are not yet occupied by IT-products. During our cooperation with corporations and activities within the Industrial Innovation Association, we have identified end-to-end technologies that are in demand today in the industrial segment: automation of routine processes, industrial internet of things, processing, and big data processing, including equipment. Design is getting automated; commissioning and maintenance of machines and equipment are being automated. A separate large segment are precise technologies in the agricultural industry. Russia has many large and medium industrial companies, which are now in an active stage of modernization and innovation. Thus, there is an open opportunity to get clients for startups.
As a non-EU country, Russia has a different tax system and regulatory framework. How is it relevant for the international start-ups that are interested in cooperation with Kirovsky Zavod? What are the most important aspects to consider before and during the partnership?
You are right! Managing the business activity in a new country for a company, especially for a startup, could be difficult and very resource heavy. We have built up the next partnership format – it is the development of the startup on the Russian market based on the Venture Building model. After the agreement on a shared development, we create a mutual enterprise, formalize local intellectual rights of technology realization, help with sales distribution on the territory of Russia. Today in our portfolio there is a project, that employs this model, but it is our internal entrepreneur. Plan for 2021 – to launch new products with international partners.
The Covid-19 has created completely new challenges for all players in the innovation market. The travel restrictions also slowed down the business development. How did you manage to keep up the cooperation with the start-ups from abroad despite the closed border with Russia?
Pandemic has happened at the same time as the innovational activity in Russia: techno parks, universities, regional development institutions, corporations, and governmental institutions have launched their accelerators. At the end of 2019, we had faced more than 50 active offers for startups from various accelerator types: from university ones to sectoral. In 2020, we have transferred the work with the startups into the online regime. “The industrial Accelerator” has moved to the never halting process of selecting, onboarding, acceleration, and pilot launch. The formats of collaboration with other companies have also changed: zoom conferences replaced the pitch sessions, online consultations replaced offline meetings with the experts. But the intensity of the work did not decrease - the opposite has happened. We have increased the number of expert participations on the regional events. Every month, we act as the experts in 8-10 events for the entrepreneurs. Cooperation with the partners for our activities has achieved a larger role. The international partnership has got into power, since many events turned online, now it is possible to visit the events in Minsk, Kyiv, and Nur-Sultan. We employ this possibility to increase our network with the founders and young technological businesses.
In 2020, Kirovsky Zavod has invested over XX million euros in the startups, including XX in the international teams. Could you reveal as a few details about your plans for 2021?
At present, our fund has a solid involvement with the short-list of projects, with a part of them we already discuss an investment offer. Fund’s team plans to invest into each of the technology startups no more than $300 thousand. The fund plans to aggregate around 30 industrial startups on pre-seed and seed stages into the portfolio. Portfolio companies can test hypotheses, run pilot market entries, and improve their product within the bounds of the venture building studio and accelerator of “Kirovsky Zavod”, and benefit from expert analysis and resources of the “Kirovsky Zavod Group” companies.