Vinokurov: Tapping Russia’s Tech Boom

Since President Dmitry Medvedev sent his first tweetfrom Twitter’s headquarters during his landmark trip to Silicon Valley one year ago, US-Russia collaboration in technology and innovation has surged.

As the Consul General of the Russian Federation in San Francisco, working at the gateway of both Russia and Silicon Valley, I’ve been witnessing many new bridges being built to connect American and Russian high-tech companies, universities, and investors.

Among them is a new Bilateral Presidential Commission working group on innovation, which has just been created to enhance collaboration between Russia and the U.S. and promote a shared innovation agenda.

Another example is the Russian Innovation Center, representing Rusnano, Russian Venture Company, and technology hub Skolkovo, that opened recently in Silicon Valley to give U.S. investors and venture capitalists direct access to opportunities in Russia.

President Medvedev’s visit to Silicon Valley was a good illustration of Russia’s commitment to further modernize and meet its real technology potential. Learning from the experience of Silicon Valley, Skolkovo is beginning to play a key role in developing Russia’s innovation ecosystem and providing world-class investors, talent and institutions with the access and resources they need. The Russian technology hub now counts Intel, Microsoft, Cisco Systems and Boeing among its partners, with over a billion dollars already committed.

There are already many success stories in Russia.

Some of the most recent tech highlights include the Nasdaq IPO of Russian Internet search leader Yandex and the investment in security software firm Kaspersky Labs by private equity firm General Atlantic Partners.

And investment opportunities abound.

Take, for example, the Internet. Sixty million Russians, or over 40 percent of the population, use the Internet. It’s the seventh-largest audience in the world. The size of Russia’s Internet advertising market is one billion dollars and is expected to grow at 27 percent annually over the next five years. Yet, e-commerce is less than 1 percent of total retail sales while smartphone penetration is estimated to be from 8 to 10 percent.

These figures point to great areas of growth and opportunity.

Investors are taking notice. Foreign investment is growing, and the official goal to raise investment as a percentage of GDP from the current 20 to 30 percent in the next decade looks quite attainable. To encourage foreign investment, Russia recently launched a $10 billion direct investment fund to promote greater use of public-private partnerships in technology development areas.

All this explains why Goldman Sachs’ Jim O’Neill recently called Russia the top investment pick among the BRIC nations. According to most analyst reports, real GDP is estimated to grow from 4 to 5 percent in 2011 and 2012. Moreover, the long-term prospects for the Russian economy are bolstered by the government’s drive to improve its investment climate, which has included reforms in tax, intellectual property, and securities laws, stronger corporate governance, and improved educational and physical infrastructure. What’s more, membership in the World Trade Organization, which is expected soon, will reiterate Russia’s commitment to reforming and modernizing its economy and provide confidence to foreign investors.

The U.S. is only just beginning to tap Russia’s tech boom.

The recent changes in Russia’s investment and business environment along with the expansion of Russian-American technology and innovation cooperation create unprecedented opportunities.

The door is open as never before for U.S. investors and innovators who want to pursue Russia’s emerging tech frontier.

Vladimir N. Vinokurov is the consul general of the Russian Federation in San Francisco.