May 20, 2020

Why venture builder sells turnip not grown yet? / Komsomolskaya Pravda

The first day of the Open Innovations forum, the RUSNANO stand visitors were engaged in a seemingly frivolous business: they were playing! A business role-playing game was called Build a Company. Sell the Company business game. As appears from the enthusiasm of both young and experienced people building and selling, the game was worth the candle. When Anatoly Chubais, the head of RUSNANO, visited the players and began to share his investment experience, it became obvious the game to be somehow closely connected to such concepts as technology business or commercial success. According to the backstage explanations, in the course of business game, people were immersed in a new profession of a venture builder. What does it mean? We asked Denis Kovalevich, co-author of the business game and CEO of the TechnoSpark nanotechnology center in Troitsk, to tell us about this.




— Denis, what is the reason for this new area of human activity to appear?

— On the one hand, the profession of a venture builder is just being formed, this is not taught in universities. But, in general, it has existed for 500 years, also known as technology entrepreneurship. However, today this activity has been characterized by series production. This means that entrepreneurs are not expected to establish companies in order to manage and develop them for the rest of their lives, handing them down to their children. And this is despite the fact that we know a lot of quite long-term family businesses in the history of Europe…

— So, what is the purpose to create a company if you don’t lead it as long as you live?

— To develop and sell it! To whom? For example, large technology corporations that use to buy technology startups in order to enter new markets. Why do they buy? They save time, they do not have to hire hundreds of managers and engineers, take risks by investing in advance solutions or invest in production processes that have not been well-arranged yet. They just buy a final product of the new type on the market. This is not just an independent invention, for example, a machine, a laser, or something else. This is the business of creating technology products. Venture builders have such businesses created and sold. It has much in common with the housebuilding. Starting with the foundation and finishing with the last floor and roof, the builder inserts windows, carries out decoration and sells the house to residents. Serial venture builder (‘venture’ means relation to technology and a risky business, at the same time) is a profession that we are currently trying to form within the framework of the Russian network of nanotechnology centers.

— Everything you talking about seems to contradict the life experience. There is an easily understandable logic of a farmer: grandfather planted a turnip, a big turnip grew up very big… Why sell a turnip when it’s still small?

— Why is it interesting to sell, and not grow yourself to a large size? In mathematics, there are two completely different transitions. The first one is the transition from point Zero to point One. And the second means transition from point One to any other point — ten, one hundred, one thousand… These are also completely different qualifications from the business point of view. It’s one thing to be capable of creating new companies from scratch, turning a set of opportunities and disparate resources into a business. And it’s quite a different story — to grow the business, it requires more specialized management competences, thus, providing less and less entrepreneurship. Today, technology entrepreneurship is increasingly focusing on this initial transition from nothing to point One. In this context, people who find their vocation in the venture-building, decide to stay entrepreneurs for the whole lives. As for my personal story, once I recognized that I didn’t want to be a manager or consultant. I didn’t want to move forward along the management trajectory, so, together with my partners, I had all my small accumulated experience and capital invested in creating TechnoSpark, a Troitsk nanotechnology center. So, the RUSNANO’s Fund for Infrastructure and Educational Programs became our key co-investor and partner. In TechnoSpark, like in many other nanotechnology centers today, we launched the serial startup building, a new business activity both for Russia and, in many ways, for the whole world.




— Then another question: why would a large corporation risk buying a pig in a poke? Indeed, it is not defined what the outcome of this small business would be…

— Our approach is as follows: we build a large number of companies, there are more than 100 of them today, and this applies only to TechnoSpark. The total network of nanotechnology centres comprises more than 600 new businesses launched over the past 4 years. Selling a large number of companies requires adhering to the same business model to work with our customers as any professional product manufacturer uses. Let’s take a car. When you buy a car that gets out of order quickly, you will not return to this car supplier. It’s typical of companies. Consider the history of any large technology corporation over the past 15 years, and you will see each portfolio entailing a significant number of deals to buy startups. It’s a basic method to develop and enter new markets. When corporations buy startups, they are interested in having a system partner with similar views. Without being acquainted with the reputation of the entrepreneur selling the company, they can find themselves in a situation when the seller tries to foist something completely useless. Hence, in the takeover market, the situations with inflated startup sale value and customer frustration with the purchase are widespread. We do the opposite. We are always staying completely transparent to our customers. Any company prepared for sale is overt with its technological course, engineers’ work, investments being made and business decisions, both successful and mistaken, — all of them are clearly visible. This is because a buyer should have a full understanding of how we created the company and how many contributions were made: in fact, he or she buys the amount of our time spent on creating this particular company, multiplied by the investment made. With such openness provided, a risk of buying a pig in a poke is reduced for a corporation to zero. In the same way, we do not face a risk buying cars of our usual class. As far back as 100 years ago, before cars began to be mass-produced, car buyers could have got in a trouble — many of vehicles had got out of order, being unrepairable, and so on.




— What human and business qualities should a venture builder have?

– Ironically, the people currently becoming venture builders along with us are characterized by their learning ability and determination to reject of their previous managerial or engineering experience. One must be prepared not only to risk his or her own money (although it appears to be present), but also to get ready for entering a new profession, the standards of which are still being generated.
Perhaps, the only must-have quality to highlight is a hard-working nature.

— Tell us about the game, how is it played?

— It’s very similar to a computer game. In the virtual world, the same rules apply and the same life situations are created that engineers and entrepreneurs are exposed to. The task is to complete five levels (by the way, a half of the participants quit the game halfway not showing enough hard work). Each player has a personal financial account, just like we have in real life. Those who successfully pass all five levels, having become an entrepreneur and having created their own companies, can sell their businesses at the end of the game. The game results just in a financial report published to show who earned how much.

— What is the game function? Is it better to get burned in the game than to lose your money and time in real life?

— Yes, it’s a first matter. We always say that the main game function is self-diagnostics. People, who have played through the game, are able to say to themselves, “the type of entrepreneurship that the guys are engaged in does not seem to be mine”. This saves a huge amount of money and time in the future when starting a real business. Therefore, the game pursues the aim of self-diagnostics. In addition, based on the results, it is possible to determine whether you are more of an employee or an entrepreneur.




— Do you have any statistics: out of the 600 companies being built for sale, what part hit the mark and what was the rest missing the target?

— In the field of nanotechnology, which we are engaged in (here it covers the range from photovoltaics and wind energy to electricity storage, from robotics to industrial biotechnologies), the company-building period is on average 15-20 years around the world. We are trying to reduce this time by half, to 7-10 years, and today we are staying exactly in the middle of the first cycle. Over the past few years, we have sold about 30 companies. These were not our planned sales. Customers just told us, “we need it, sell it”! The companies sold were newly-established. Their average age was 2.5 years. They had just started and they were already bought. Why does this happen this way? The answer is a very small market in terms of supply in Russia. Its problem is not the lack of customers, as it is often believed, but the lack of goods. If there are appropriate companies, there will be buyers. The country has multiple large and medium companies, both private and public, interested in such transactions. We will enter the market with a large offer in three-four years, when our most mature businesses will be ready for the wholesale selling. But, of course, we will still sell something as soon as we are ready.

— How does this sieve work, through which ideas, people, and technical solutions are sifted?

— Our main difference is that we don’t start a business with engineering ideas. For us, the first step to start is an idea about business. In other words, we start with an entrepreneurial opportunity. Following this chance and business hypothesis, we collect technological solutions, engineers, intellectual property, premises, necessary equipment, and all the other components on the list. In this regard, we have a sieve of our own hypotheses about what companies it makes sense to create. How is it workable for us? For example, it is unreal to build the Apple company in seven-ten years. And if to speak about a company developing various logistics robots, it is quite a feasible task. So, this is what we are doing now, in particular.




The difference between Alferov’s discovery and Yablochkov’s light bulb

What can encourage fresh-baked venture builders if not a success story? We asked Anatoly Chubais, the head of RUSNANO, to share it after he had talked to the participants of the Build a company.
Sell the Company business game.

— Anatoly Borisovich, could you tell us about the investment experience that you are most proud of?

— I have a lot of them, but if you only want one story, welcome. There is an economic sector that haven’t existed in the country until recently. Moreover, many experts, even serious-minded, were strongly convinced that this industry could not exist in Russia at all. There was a whole set of arguments to support the thesis. However, in fact, this industry has already emerged. It is called solar energy. Its significance is not only represented by environmentally advanced energy efficiency, and so on. For me personally, there is one more quite important feature. The Russian history knows a lot of cases — we all know them — when leading Russian scientists invent something like this, and then business appears anywhere, but not in our country. There are many such examples, ranging from Yablochkov with his light bulb to Sikorsky with his helicopter. As for the solar energy, Zhores Ivanovich Alferov is the classic and author of technology in this area. He was awarded the Nobel prize for heterostructures as the basis of solar energy. It is an extraordinary example of the fundamental discovery to be the Russian one as well as the created business to be born in Russia! Today, our country has a Hevel plant, located in Chuvashia, that produces solar panels, having already reached an efficiency of 22.7 percent in industrial, not laboratory, production a week ago. Take my word for it, ranked third in the world’s Top, this is one of the best solar panels available in the country. Having taken on the Russian market, we will definitely proceed to export with this sphere to have great potential.

Source: Komsomolskaya Pravda
Date: October 20, 2017

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