RUSNANO's Advantages
My analysis of the Russian Corporation of Nanotechnologies reveals that its competitive advantages come from the internal resources of the corporation and the environment in which it operates. The former comprise money and talent within the corporation, the latter⎯a lucrative and fast-growing market in Russia (Schenker 2007).
Money
In 2009, Russia was home to nine state corporations, each of them entrusted with a unique mission, well funded and exclusively privileged in their field of activity. State corporations are involved in five broad fields: finance, technology, energy, defense, and infrastructure. The size of their balance sheets ranged from 84 billion rubles⎯roughly $2.9 billion⎯to several hundred billion dollars. RUSNANO had access to $4.5 billion of government funds (Деловая газета "Взгляд" 2010) and an investment capital base of roughly $10 billion. (Chubais, Fostering Nanotechnology Innovation in Russia 2010)
Figure 2. What are state corporations? (Деловая газета "Взгляд" 2010)
In view of the fact that RUSNANO has been active in attracting and partnering with domestic and foreign co-investors (RUSNANO 2009), the total amount of capital the corporation has access to is much larger than $10 billion.
The corporation has already established VC investment vehicles in cooperation with foreign financial institutions. For example, it announced the creation of a $1 billion fund with the European Bank of Reconstruction and Development (RUSNANO 2009) in addition to a $100 million fund with Draper Fischer Jurvetson and VTB⎯a leading Russian bank. (RUSNANO 2009) During the end-of-year 2009 press conference, Mr. Chubais has confirmed the deal with EBRD and shared with journalists that his corporation attracted an additional $500 million from Venture Capitalists in Boston: “we have signed a deal with our MIT venture capital partners to create a fund, $500 million plus $500 million, that is $500 million from us and $500 million from them⎯we are talking about $1 billion of investments here!” (RIANOVOSTI 2009)
In addition, RUSNANO has the unique authority to issue government-guaranteed debt securities (Government of the Russian Federation 2009), which expands the corporation’s financial resources further by a very large magnitude only limited by Russia’s willingness to increase sovereign debt. This ability to issue sovereign debt makes RUSNANO a truly unique investment company, and in this regard it has an immense advantage over privately held VC firms both in Russia and around the world.
Overall, the company has been able to tap into vast financial resources both in Russia and in the West, and this clearly attracts entrepreneurs from different countries. Some observers point out that for many entrepreneurs and tech firms RUSNANO is an alternative to an IPO exit. Tseitlin goes as far as calling the corporation a “Russian NASDAQ” (Tseitlin 2009) suggesting that an investment from the company can be effectively turned into liquid assets for use elsewhere. It should be noted that this view is highly questionable: while RUSNANO is able to deploy its financial might at will, it does so only if such a move makes perfect business sense. Furthermore, due to the fact the investment decision process at RUSNANO is highly formalized (Fay 2010), and both the corporation and the co-investors have direct control over the joint ventures they invest in, the possibility of exit through a deal with the state corporation is virtually non-existent.
According to the National Venture Capital Association’s survey, “An overwhelming percentage of VCs (90 percent) predict that the number of venture capital firms will decline over the next five years. Most of these respondents (72 percent) believe the industry will contract between one and 30 percent.” (National Venture Capital Association 2009) The survey also highlights a trend toward an increase in the size of late-stage investments, which suggests that RUSNANO should be viewed by tech firms as an attractive partner. However, as will be discussed further in this paper, the restrictions that the state corporation is facing prevent it from capitalizing on the situation and gaining a lead over its global money-constrained competitors.
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