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Posted at 07:00 AM ET, 10/11/2011

Moscow’s new high-tech hub: Riddle, mystery or enigma?

A pedestrian stands on Bagration bridge which leads to the Moscow International Business Center, also known as Moscow-City. (Andrey Rudakov - BLOOMBERG)
Russia’s version of Silicon Valley — an "innovation city" built from scratch on the outskirts of Moscow — is finally starting to take shape. The project, popularly known as Skolkovo, has already lined up over $1 billion in financing from Western tech giants such as Cisco and Nokia as well as the official government support of both Prime Minister Vladimir Putin and President Dmitri Medvedev. All Skolkovo needs, quite simply, is an influx of the right technology start-ups to make it work. Which begs the question: Is it really possible to create a state-planned high-tech hub in an emerging market like Russia, where Western institutions such as IPOs and venture capital are virtually unknown and the free-wheeling, risk-taking culture of Silicon Valley has yet to take root?

Given the arc and narrative of Russian history, it is easy to envision two different scenarios for Moscow’s Skolkovo project:either a Potemkin village, erected quickly to impress visiting emissaries and the ruling authorities but lacking any substantive resources, or a new innovation hub to rival any in the West. Remember that the imperial Petersburg was a city literally dredged from the northern swamps of the country at the beginning of the 18th century to appease Peter the Great, who wanted quickly to Westernize a Russia he saw as backwards. To do so, Russia’s most famous monarch brought on board the leading architects and creative minds of his generation and built the Venice of the North.

What will it take to make Skolkovo work on the scale of a Petersburg and not a Potemkin?

Most importantly, it will require the types of incentives — both financial and creative — that will encourage the best and the brightest in Russia to choose careers in technology and technical fields when they could easily be making fortunes in natural resources and finance. It is the same choice ahead of many young American graduates — either a career in investment banking or with an established Fortune 500 company, or a risky attempt to create a new company with a speculative new technology. For now, the odds appear to be stacked against Moscow - the nation’s business regulations are notoriously difficult to negotiate, with the country ranking among the most difficult in the world to do business in.

Skyscrapers are seen under construction at the Moscow International Business Center, also known as Moscow-City. (Andrey Rudakov - BLOOMBERG)
A whole branch of innovation, however, argues that what the Russians are attempting to do is the right way to go about innovation. Carve out a business district free of government controls and let it develop in an organic manner — free from bureaucratic inertia. Skolkovo promises to create an environment specifically tailored to the needs of entrepreneurs and technology innovators. If the rest of Russia tends to stifle innovation and creativity, Skolkovo promises to be the exception — a place where it is acceptable to fail, and where it may be possible to make it big.

As Steve Jobs pointed out, the best tech hubs tend to be built from a strong organic base, and Moscow is blessed in many ways with all the advantages of a tech hub like Silicon Valley. There has always been a thriving creative class in Russia’s capital — regardless of the political regime. Moreover, the Russians have historically excelled at computer science and other technical disciplines. Keep in mind that the “Sputnik Moment” for America came largely at the hands of the brightest creative minds in Moscow.

Walk around the center of Moscow and it is easy to envision a bright future for the city. There is an abundance of wealth there, and if this wealth could be funneled into the tech sector, one imagines a new generation of Russian technology entrepreneurs taking root. There are billboards in Moscow not just for the latest European luxuries — but also for events like nanotechnology conferences and science festivals.

Russia has always been a nation of incongruities, “a riddle wrapped in a mystery, inside of an enigma”, as Winston Churchill put it. People often forget that Russia, straddling a vast continent between West and East, has looked to Asia as much as Europe for inspiration. With the vast growing fortunes of China and the export-driven economies of Asia as within reach as the wealthy nations of Europe, it is easy to see Russia creating the same types of technology companies as one might find in China, which also has plenty of state interference. Whereas China has created its versions of Western Internet start-ups, Russia also has its share of emerging Internet companies — like Yandex (the Russian Google) and VKontakte (the Russian Facebook).

Tolstoy once remarked that ”all happy families are alike; each unhappy family is unhappy in its own way.” The same can be said for tech hubs — the most successful ones tend to share the same characteristics, while the unsuccessful ones seem to lack different factors for success. When Moscow stops producing only Google and Facebook clones, and instead, entirely new types of start-ups with a vision to change the world for the better, it might be possible one day to talk of Moscow’s Skolkovo in the same breath as Silicon Valley.

Read more news and ideas on Innovations:

Basulto | Innovators, data will set you free

Basulto | What big banks should fear

The incubation of an incubator

PHOTOS | Steve Jobs and the patents that changed our lives

By  |  07:00 AM ET, 10/11/2011

Categories:  Business, Dominic Basulto, Morning Read, Technology, Urban Development

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