100723 technology transfer business unit

Skolkovo Foundation business model

Ilya Ponomarev

discussion materials

Main principles Each component of the project should be a

separate business unit with a separate P&L Each business unit should make money

Some might have limited and carefully planned donations

Each service should be implemented on a competitive basis

Skolkovo business plan equals to summary of individual business units business plans

Business model should assume separation of public and private funding After a certain period of time Skolkovo Foundation

should not be dependent on government funding

Funding sources

Federal budget Funds primarily physical infrastructure and capital expenses

Private developers Invest into real estate to be build within Skolkovo

Corporations Sponsorship agreements (labs, particular research, university

endowment, etc.) PE and VC investments, both as GPs and LPs

R&D grants (corporate and government) and contracted R&D

Investment funds

Chinese wall between different type businesses

SKOLKOVO

Development Investment opportunities

Services

Three different type of businesses assume three different type of investors/partners

Components of Skolkovo environment Office premises Production facilities Residential space

Permanent (?) Temporary apartments

Shared facilities and services Testing and prototyping labs Financial services (both equity and debt financing) Projects incubation Customs support IP protection Physical security

University Social infrastructure

Cafes and restaurants Medical care Schools and kindergardens Shopping malls and entertaintment Hotels

Typical business unit

Skolkovo Foundation

Functional Coordinator

Endowment (non-profit fund)

100% ownership

Управляющие компании – поставщики услуг

Skolkovo customers

Управляющие компании – поставщики услуг

Managing companies – service providers

% from upside

Skolkovo Foundation

Major businesses within Skolkovo

Education Tech. Dev. Business Dev.Tech. Transfer Investments Real Estate

Tech. brokers

IP lawyers

Training and consulting

Market research

5 technological priorities

Shared labs

R&D centers

University Incubators

PE/VC funds

Construction

Management

Services

Financial control Administration

PR Corp. customers Start-up customers(benefits mgmt)

Social infra-structure mgmt

GR

Intl. Skolkovo rep. offices

Finance Office management Outsourced govt. functions: customs, tax, city mgmt, …

Security

LegalIR

Skolkovo Capital

Working with residents 4 different types of residents with 4 separate sets of

benefits and 4 different sets of policies:1. International hi-tech corporations2. R&D centers of Russian and intl. non-hi-tech

corporations3. Russian hi-tech corporations4. Start-ups

Skolkovo partners: Investment funds Banks: commercial and investment Marketing and business development Consulting Legal: patent and corporate lawyers

Business Unit “Education”

Objective: to create and manage a new university in Skolkovo, established to promote culture of entrepreneurship and innovation and to supply potential employees to Skolkovo residents: University may or may not include undergraduate

education University is to be created on the base of

partnership between leading foreign (MIT) and leading Russian (Bauman?) educational institutes

University business model

Initial capital: Skolkovo Foundation invests in the infrastructure (campus,

equipment), and establishes endowment with capital, sufficient to cover operating expenses during initial years

Revenues: Research grants (supervised by Ministry of Science and

Education) Educational activities (according to the existing Russian

legislation) Endowment revenues Sponsors contributions

Business Unit “Technological Development” Objectives:

Establishment of a network of national research labs together with leading Russian and international institutes and universities

Coordination of research activities to maximize their commercial potential

Management of shared labs for Skolkovo residents Supervised teams:

5 chief technologists according to 5 technological priorities Shared labs as an independent companies, created under

requests of Skolkovo residents National labs

Unit operates in close collaboration with the Scientific Council chaired by Alferov and Kornberg

Business model of national and shared labs

Initial capital: Skolkovo Foundation invests into equipment and lab

space For national labs – endowment is being established by

research sponsors; for shared labs – a managing company is being contracted

Revenues: Research grants (mainly through Ministry of Science

and Education and Russian Fund for Basic Research) Contracted research, for shared labs – leased time Endowment revenues and sponsorships

Business Unit “Business Development, Commercialization and Technology Transfer” Objectives:

Scouting for technologies with a strong business potential inside Russia and in other countries

Training and consulting entrepreneurs in transforming technological advances into business lines

Assisting in incorporating businesses Introducing companies to potential customers and potential investors IP management

Supervised teams: Technology brokers IP lawyers Consultants Training groups Skolkovo representation offices inside Russia (hi-tech parks, special

economic zones) Skolkovo representation offices outside Russia Market research groups

Unit uses expert panel to interact with corporations, investors, universities, etc.

Technology broker business model

Technology broker – is a private company with offices both in Russia and abroad, working to create of new companies and/or patents, to bring them to international markets, and to facilitate entry of international hi-tech companies to Russia Technology brokers receiving a time-limited mandate to represent Skolkovo

Foundation on a certain territory and/or for a certain industries Skolkovo Foundation compensate operating costs of commissioned

brokers at a minimal level, excluding possibilities for them to make profit from such compensation

Each company, created with the participation of tech. broker, gives agreed part of its equity to the specially created endowment/fund, established by Skolkovo Foundation No entry into pre-existing companies is assumed Broker is not investing live money into companies, but pays for numerous

services, required to bring technologies to the market Technology broker receives 20% of upside, generated for the

endowment upon liquidity event (M&A or IPO)

Business Unit “Investments and Financial Services”

Objective – provide full scale of financial services for start-ups and spin-offs, from pre-seed stage to IPO support

Supervised elements: Variety of business incubators Network of PE and VC funds Skolkovo Capital investment fund

Coordinates with other national development bodies (Rusnano, RVC, Vnesheconombank)

Business incubators

Different business models should be supported With or without equity participation With or without investments and/or grants With individual or shared office space

Skolkovo Foundation provides office space for incubators at a special price Limited time for partner incubators to reach agreed

objectives Incubator management company raises money to

pay for its operating costs

Working with investment funds

Skolkovo Capital investment fund Financially and organizationally independent business

unit Skolkovo Foundation – limited partner (?) Primarily serves projects introduced by Presidential

Commission for Modernizing the Economy Third-party funds

Free (or special-terms) office with residential space Right of first refusal for projects generated by

“business development” unit in return for participation in mentoring and providing expertise

Business unit “Real Estate” Urban planning department is to determine the

development concept, main construction areas, particular premises, and set of services provided for Skolkovo residents

Skolkovo Foundation is to invest into engineering infrastructure, buys electricity, water, sewage and other utilities, eliminates development risks, and constructs premises, unattractive for private investors

Premises that are normally attractive for investors, like office, residential, hotels, entertainment, shopping space, etc., are constructed by private investors

Facilities management and services are provided by private suppliers, selected on a competitive market

Real estate policies for Skolkovo residents 4 different development areas for 4 different type of resident

companies (see above) Rental price at market level / slightly above market

Skolkovo residents can apply for partial reimbursement of rental/services costs according to policy to be developed

Apartment sale for residents’ employees: Rental within Skolkovo core objects Possibility to buy ONLY through a special mortgage program at

adjoining territories, developed by private constructors: Residents’ employees are getting very low interest rate while being

employed (loans provided by partner banks) Non-employees are getting significantly-higher-than-market interest rate

Business Unit «Business Development,

Commercialization and Tech Transfer»

Initial operations plan

Objectives

To create under Skolkovo umbrella scalable commercialization and technology transfer mechanisms and nation-wide pipeline of projects with high export potential, attractive for investments

To bring leading technologies from abroad and to support organization of hi-tech manufacturing facilities in Russia, using Skolkovo as an entry point

Positioning among other Skolkovo business units

Education

Tech. Dev.

IncubationBusiness Dev.

Investments

Real EstatePR & marketing

Lines of operation1. Creation of new companies, based on Russian technologies:

Search for potentially marketable technologies in Russia and creation of “technologies funnel” Exhibitions, project competitions, conferences and seminars Work with universities, research institutes, cooperation with Rusnano, RVC, Bortnik Fund, etc. Working with entrepreneurs directly

Development of a business model and product lines together with selected project teams Organizing adequate IP protection Preparing investment memorandums and teasers for investors in Russia, sales kits for potential customers Presentation of prepared projects to the investors and potential customers

2. Entry of Russian companies (both existing and newly formed) to the international markets Development of entry strategy Development of product lines for particular market Staffing with local personnel and training of Russian managers to work on particular market Partnerships development (first customers, investors, research groups) Formation of consortiums for participation in local tenders (government and large corporations), assisting in

certification Participation in exhibitions and trade shows

3. Licensing of Russian IP to international corporations4. Scouting for potential acquisition/investment targets overseas, which can be invested and benefit

from cooperation with Russian investors5. Scouting for overseas hi-tech companies, which might be interested in transferring their

manufacturing and/or R&D to Russia Identifying targets Developing Russia entry strategy and building necessary partnerships (industries, research, finance) Eliminating bulk of government-associated risks (negotiating permits and licenses, land allocations, organizing

corporate GR, etc.) Staffing and training

Key performance indicators

1. Number of companies registered with Skolkovo Foundation2. Number of patents registered by companies, registered

with Skolkovo Foundation, or by patent attorneys, registered with Skolkovo Foundation, and number of companies and/or patents, brought from outside to Russia

3. Total value of companies, registered with Skolkovo Foundation

4. Number of working places created in Russia5. Amount of taxes paid in Russia6. Number of representation offices worldwide and in Russia7. Number of companies/technologies in the pipeline

Business model Skolkovo Foundation creates subsidiary non-profit endowment,

and places some funds into it Endowment negotiates on competitive basis with private

companies (technology brokers) to manage part of its funds during agreed period of time (usually 8 years)

Selected companies are mandated to represent Skolkovo Foundation to facilitate business development in a certain region (for example – US East Coast) and/or industry (for example – pharma)

Selected companies are entitled for quarterly management fees Endowment receive equity (or royalty share) in companies, that

are created with its assistance (usually 10-25%) In case of exit (M&A or IPO), and other profits (dividends, sales

commissions, royalties, etc.) generated by created companies, endowment pays responsible technology broker success fee, usually 20% of upside

Staffing Skolkovo Foundation management - 4 pers.

1. Vice-President – Endowment Chairman2. Assistant VP3. 2 secretaries

Typical technology broker: Skolkovo office – 6 pers.

1. Director of operations, Russia – Pipeline manager2. Marketing manager3. Events manager4. Analyst/consultant5. Patent attorney6. Secretary

Intl. office – 8 pers.1. Managing partner – funds2. Managing partner – corporations3. Managing partner – GR and business associations4. CFO5. Marketing/events manager6. Sales representative(s)7. Lawyer8. Secretary

Action plan2010 August preparation of contracts with first two brokers August preparation of contract with SVTC and VEB-Capital to establish microelectronics operations September opening office September-October endowment registration September signing first brokers contracts September presentation of innovations roadmap on Yaroslavl Forum September nation-wide conference of hi-tech parks and special economic zones (in Novosibirsk), establishing

regional partnerships, opening Siberian representation office September presentation of Skolkovo in Shanghai World Expo “Russian Day” September presentation of Skolkovo in S.-Petersburg “Innovation Week” October VCs visit to Russia (jointly with Rusnano and RVC) October opening Skolkovo office in Boston October visit of Russian regional authorities to US, commercialization/tech. transfer training seminar October-November preparation of an intl. road show (London, Boston, …) November opening Skolkovo office in Silicon Valley November opening Skolkovo office in Europe (Lausanne? London?) November presentation of Skolkovo on Moscow “Innovation Week” November opening Urals representation office (Perm?) December road-show December training seminar for Russian entrepreneurs in US

2011 2 additional technology brokers, 2 new overseas offices, 2 new Russian regional offices 5 trade shows/exhibitions worldwide 2 trips of potential international partners to Russia 4 seminars for entrepreneurs outside Russia, 2 seminars for regional officials outside Russia 6 seminars for entrepreneurs inside Russia

Skolkovo Foundation costs vs action plan

Operations line Skolkovo Foundation exposure (thousands rubles) Deliverables

2010 2011 2012 2013 2010 2011 2012 2013

Establishing network of technology brokers

2 brokers, 3 offices 4 brokers, 5 offices 5 brokers, 6 offices

Skolkovo representation offices

Boston, Silicon Valley, Europe Boston, Silicon Valley, 2xEurope, Asia

Boston, Silicon Valley, 2xEurope, 2xAsia

Boston, Silicon Valley, 2xEurope, 2xAsia

Projects’ scouting in Russia 8 projects in pipeline, 3 regional offices: Moscow, Urals, Siberia

25 projects in pipeline, 5 regions: Moscow, Novosibirsk, Tomsk, S.-Petersburg, Perm

50 projects in pipeline, 5 successes, 7 regional offices: Moscow, Novosibirsk, Tomsk, S.-Petersburg, Perm, Kazan, Tyumen

80 projects in pipeline, 10 successes, 7 regional offices

IP support 1 patent attorney 4 patent attorneys, 10 patents 6 patent attorneys, 40 patents 8 patent attorneys, 70 patents

Training and consulting 1 seminar for entrepreneurs outside Russia, 1 seminar for regional officials outside Russia, 2 seminars inside Russia

4 seminars for entrepreneurs outside Russia, 2 seminars for regional officials outside Russia, 6 seminars inside Russia

6 seminars for entrepreneurs outside Russia, 8 seminars inside Russia

8 seminars for entrepreneurs outside Russia, 10 seminars inside Russia

Transfer of foreign projects into Russia

4 projects in work 6 projects in work 8 projects in work

Companies marketing, working with potential customers, trade shows and events

Skolkovo presentation in 2 locations, 1 trip of potential partners to Russia

Participation in 5 major international trade shows according to technological priorities, 2 trips of potential partners to Russia

Participation in 5 major intl. trade shows according to technological priorities and in 5 additional conferences, 2 trips of potential partners to Russia

Participation in 5 major international trade shows according to technological priorities and in 10 additional conferences

Skolkovo Foundation personnel (before tax)

Salaries

Disposables

Travel and communications

TOTAL