Once upon a time, the Moskvitch Car Factory in the industrial zone of ‘Southport” in central Moscow turned out the kinds of unmarked black limousines that Important People rode around in – mostly at high speeds in the center lanes, anxious onlookers in their wake. Today, this same building turns out innovation – or tries to, given the current economic and political crisis between Russian and the industrialized world. In a move than began under Moscow’s old post-Soviet regime of Mayor Yuri Luchkov and really took off under Moscow’s current leadership, the Moskvitch Car Factory is now Technopolis (https://www.technomoscow.ru/en/
) where – as the advertising painted across one huge exterior wall acclaims – “The Future is Made Here.”
Moskvitch’s huge factory floors in buildings #5 and #24 have been repurposed into 330,000 square meters of industrial space, 7,000 square meters of clean rooms, and another 35,000 square meters given over to administrative office space. Leases are individualized, cheap, and long-term – up to 25 years in some cases. The corporate profit tax here is 15.5% (versus the usual 20%); there is 0% property tax. Even more important is the free connection tenants have to the site’s ample 60MW power grid.
Moscow's new entrepreneurial hub, Technopolis, on the site of the defunct Moskvitch Auto Factory.
Moscow’s new entrepreneurial hub, Technopolis, on the site of the defunct Moskvitch Auto Factory.
Since its inception in 2009, Technopolis has signed contracts with 32 companies. About half are joint ventures. Several are portfolio companies of Rusnano (a holding company chaired by Russia’s “Mr Privatisation” Anatoly Chubais): HCC Composite (renting 20k sq m), Crocusnanoelecronics (14k sq m), are anchor residents and important to the commercial viability of Technopolis. Others, such as Mapper, Neophotonics, Profotec are Russian “bootstrap startups.”
But the companies are not all Russian, though sanctions have curtailed – perhaps temporarily – plans to turn Technopolis into a regional manufacturing innovation hub: Dow Chemical DOW -2.03% left a $65-million joint venture carbon project underway at Technopolis when sanctions went into effect. But not all business has been affected. Schneider Electric came on board in December and is preparing its site at Technopolis; ABB signed in June. The Chinese Prime Minister paid a visit last year.
Technopolis is a Moscow City Government project. The actual land belongs to the Department of City Property. The management company of Technopolis belongs to the Department of Science, Industrial policy and entrepreneurship of Moscow. But they are not your typical government employees.
“I never ever thought I’d work for city government,” Anna Gorbatova tells me as we toured Technopolis together last month, careening around corners in the golf wagon we needed to get around the vast installation. In her high heels and stylish suit, the diminutive businesswoman looks every bit the investment banker she once was – with Russia’s legendary, pioneering Renaissance Capital – until joining Technopolis in 2012. “But then I saw the site and learned more about the project, and I thought ‘Wow!’ We came up with the name Technopolis and the slogan you see everywhere (Note: In Russian it’s like this: Здесь производят будущее) ‘The Future is Made Here’.”
Former Moscow Mayor Luchkov officially opened the site as an innovation center, but it took some time to get the operations base together. “When we took over the site some four years ago,” she continued, “it was mostly warehouses. What we found was a building with no heat and a lot of dogs roaming about. So what you see now is a major step towards our master plan to be completed by the end of next year.” That plan includes developing a hotel – hopefully with a joint partner – as accommodations are non-existent in this part of town. While there is ample, free parking on-site, Moscow traffic makes getting around town by car a cumbersome process.
One of the first and “anchor” tenants mentioned above was HCC Composite, a producer of carbon fibre headed by one of Russia’s first “entrepreneurs” Leonid Melamed, whose career as a businessman launched when Communism collapsed in 1989. High strength, low-weight carbon is crucial for airplanes, cars, ships, tennis rackets and other things. A long time associate of Chubais’s through Rusnano and other business ventures, Melamed figured his company could be a regional production hub and became one of the first companies to join Technopolis. Two partners, Holding company Composite and Rusnano, invested some $1 million into this project, and Melamed moved his business into Technopolis four months after seeing the site.
Then sanctions curtailed his plans. Now he’s waiting out the expiration in January of next year.He claims to have 100% of the Russian market for his products, but admits it’s a small market compared to the international potential. So he’s focusing on smaller companies in Europe and Asia. ”No one has yet to refuse to buy good products from us,” he boasts.
(Ed Note: Since visiting Technopolis and reporting this story, I note the Moscow Times on July 7 reports that Melamed was placed under house arrest by a Moscow court on suspicion of embezzling nearly $4-million, with two other employees, from the predecessor to HCC’s partner Rusnano in 2007-09. Rusnano officials say Melamed was no longer working at the company when the embezzlement is thought to have occurred; analysts interviewed by the Moscow Times say they believe this and other investigations into Rusnano are an attempt to derail Rusnano founder and chief Anatoly Chubais.)
Other Technopolis tenants have more modest means. Yevgeny Khata, Chairman and founder of data technology and on-demand printing company T8 studied in the US and UK for many years and worked for Western financial firms such as Salmon in Sillicon Valley when what he calls “the ugly face of capitalism” convinced him to return to Russia, where he worked first at BCG in Moscow and then for a local investment company based in Kiev which went bottom up with the war in neighboring Georgia put pay to any regional investment.
He took his severance money and plowed it into digital publishing and ended up re-starting his start-up three times before it actually took off in 2011. “First the software founder took the software and left – I was ripped off. Then I hired a group of software engineers who left to work for Yandex (one of Moscow’s Internet service providers). So I started yet again.” This time with a partner who wrote software; together they claim to have created a platform for digital publishing that will allow them to become the Russian Ingram.
A Russian Ingram?
He owns one of the four German-made Kolbus digital printing machines being used in the world today, capable of printing an entire book in one day. “We broke the publishing model,” he claims. “We sell the meta data first, then the books,” he explains, “and we can print on-demand and individualize a single book if we have to.” The printing is done in Moscow by a team of 16 people working in two shifts; another 30 work in distribution. The software design team and the company servers are in St Petersburg.
Khata says annual sales last year were 1 billion rubles ($17,559,420). The company is looking to expand into educational software and educational hardware markets. “We see this effort as a means to build in Russia, an efficient educational system tailored for the 21st century,” he explains.
Khata believes the local market for printed books will hold for at least another five years because ‘Russians read a lot and they spend more money on books than they do on clothes.” Last year than meant $2-Billion was spent on some 540-million books in Russia; 99% of the Russian book market is still print, he claims, but his business plan includes e-books and audio books. And he prints in languages other than Russian. “The lower ruble has actually given us an advantage in printing books for the European market,” he confides.
As to the advantages of being in Technopolis, Khata is a bit sour. “We didn’t get all the support they talked about,” he complains,“ and the banks do this ‘loan to own’ thing – which I the reverse of what you think in the West. They lend you money so THEY can ultimately own YOU. But we did get a good 15-year lease and the team here is terrific. Professionals like that, from Renaissance Bank, wouldn’t normally go into government work.”
Vladimir Krupnik, VP Business Development at semiconductor fab CrocusNano Electronics (CNE), another Technopolis “anchor,” was born in Ukraine, but moved with his family to the US in 1991. He returned to Russia three years ago with US CrocusTechnology and an investment from partner Rusnano and chose to set up at Technopolis because the premises offered location, infrastructure and a skilled workforce. “We looked all over the region before choosing Technopolis,” he told me. “We were thinking of the Kaliningrad region, but there’s no labor force there. Plus, here you have the utilities you need: electric power, water and sewage. The power quality is not perfect, but it’s the best there is in this region.”
But can the momentum and enthusiasm found at Technopolis outlast sanctions and world opinion? Or will Russia continue to be just that little bit less “au courant?”
The drop in the Ruble is having some positive side effects. “We feel the exchange rate pressure,” says Gorbatova. “But it’s also making people more efficient, sticking to their budgets.”
Khata is a but cynical about what many would consider Russia’s halcyon days of expensive oil and big spenders. “Hundred dollar a barrel oil is the worst thing for Russia,” he states. “You have no growth, no innovation. When you have no resources, you have to think, to be creative or you get creamed.”
Krupnik, whose family is still in the US, says “I like it here. I go back home, I stay for two weeks, and it’s ‘normal.’ Here you have to jump through hoops to get the results you want, and that makes your job very exiting. But Russia is getting there. It took Moses 40 years through the desert to change peoples’ mindset. Here, a bit more than 20 years have passed (since the collapse of Communism). It takes a change of generations, so I hope we’re halfway there.”