PHLburg Technologies, Inc.
Where Has the Good IT Gone?
April 12, 2005
By Sveta Skibinsky
“The fund plans to invest $1.5 million into two or three hi-tech companies at an early development stage and ‘grow’ them for further resale or to attract other large investors,” said the press statement of an American venture fund, founded in March by PHLburg Technologies, Mirantis and Landbridge Capital. The companies behind the fund operate in the fields of venture financing, international business organization and technology commercialization respectively. They say their fund’s key difference from some 40 others operating in Russia comes in its balance of responsibilities. The American backers will take
A lack of infrastructure and investment culture in the country has long been blamed for the comparatively low investment levels in the Russian IT sector. “Yes, there are no databases like the [British] Library House, where companies can post their ideas and financial needs for investors, but it doesn’t mean the firms are not there,” said Albina Nikkonen, director of the Russian Venture Capital Association (RVCA). Nikkonen said the lack of such databanks resulted from the considerable financial costs associated with their maintainance, and more importantly, from a lack of intellectual property rights protection in Russia, which makes companies fear publicity. Nikkonen added that the search for
Picky Prince Charming
By no means a little barrier to investment could be the fund’s selection policy. After all, there are plenty of technology enterprises in the country. So, what kind would suit the new venture fund? In an e-mail following the fund’s press statement, the president of PHLburg Technologies, Neil Godick, said that the fund was looking for companies that must first and foremost be working with breakthrough technology that could be brought out onto the world stage and turned into a global business. “We acknowledge that there are many start-up companies in Russia, especially in the north-west,” Godick said in a telephone interview. He said that the fund’s partners in the north-west and Moscow had visited some start-up enterprises, but the fund was more interested in companies whose technology could be taken as a basis for a global company. Not too much to ask? Apparently not, say other venture fund managers working on the domestic market, although they also support Nikkonen’s position: all good things come to those who wait and plan. “Russia has high-potential technology projects and people that are ready to turn the technology into a marketable product,” Dmitry Lisenkov, manager of Russian Technology Fund, said in an e-mail. The company, backed by Finnish and British investors, has been involved in several projects on the local market and is in the process of preparing one company for an IPO. “The right selection process and successful project supervision can help a company become a successful project operating not only in Russia but internationally within a reasonable amount of time,” Lisenkov said. The formation of a fund that is ready to invest in Russian venture companies at the start-up and ‘seed’ stages was especially welcome, Lisenkov said, given the “serious lack of venture capital in the country.”
What the new investment fund hopes is that the information gap will be closed once Russia develops a series of techno-parks so popular in the U.S. and India, and which have recently won the backing of state officials. “It seems Western investors finally believe in the government’s intentions of reforming the science and technology development. And it is specifically venture capital that should at this stage become the economic tool that will ensure innovation growth,” the fund’s press statement said. Earlier this year the Kremlin announced its intention to provide taxbreaks for companies operating in technology parks or ‘zones,’ while Information Technology and Communications Minister Leonid Reiman
However, unless the American Venture Fund finds a company that meets its criteria and is at a breakthrough stage within its field, the $1.5 million that it announced as “ready to be invested” may go nowhere fast. When asked about the urgency in the fund’s statement, PHLburg Technologies’ Godick kept the reply quite cool, calm, and collected. “The capital is not burning a hole in our pocket. We will be patient to find the best chance,” Godick said.
Apart from the creation of a special technology zone on the campus of St. Petersburg’s Bonch-Bruyevich telecommunications institute, at least three other techno-parks are expected in the city, experts say. One will be based at the Institute of Optics and Mechanics (ITMO); another will be created by software association Russoft on a two-hectare plot near the Pionerskaya subway station; a third is a project planned by Noble Prize winning scientist Jores Alfyorov. The techno-park concept envisages the construction of a modern research and office facility that will have the infrastructure and telecommunication networks necessary for the operations of innovative IT development