RUSNANO's Constraints
Internal constraints
Established project review mechanisms
The current project review process established in RUSNANO comprises seven stages:
1. Filing an application
2. Initial evaluation
3. Scientific and technical appraisal
4. Investment appraisal
5. Review of the project by the scientific and technical council
6. Project approval
7. Financing (Chubais, Chairman's Address 2007)
Although the corporation claims to be able to reach the financing stage within 6 months of application (Chubais, Chairman's Address 2007), in practice RUSNANO has not been able to close deals in such a short period, and project review for some of the most suitable technologies can last as long as 2 years. (Fay 2010) The slow speed of the decision making process puts RUSNANO at a disadvantage in competition with established venture capital firms, who sometimes make multi-million dollar investments within as few as two or three days (Elfond 2010).
Size of investments
In addition to the time limitations, the application process requires considerable financial and human resources; Dmitry Tseitlin estimates that foreign firms who decide to seek financing from RUSNANO should allocate close to US$1,000,000 to complete the process (Tseitlin 2009), with no guarantee of reaching the final stage.
These process inefficiencies have become well known in Silicon Valleya place where RUSNANO has concentrated a vast deal of its marketing efforts. Many Silicon Valley entrepreneurs do not even consider seeking funds from RUSNANO precisely because of the hurdles associated with the unusually bureaucratic and expensive review process. (Fay 2010) At the same time, the state corporation’s managers do not see how they could streamline the review of 26 projects, and insist on the lengthy analysis currently in place. (Деловая газета "Взгляд" 2009) Therefore, the corporation’s focus on growth companies outside of Russia is compromised further simply because these companies often need fast access to capital, and cannot afford to make significant investments of money and human resources into fundraising.
Therefore, the pool of the projects that RUSNANO is able to support with its vast financial resources is limited by the size of the businesses it can build through the investment. The corporation only pays interest to relatively large deals (Agamirzian 2010), which by nature are limited in number. Such companies are hard to find and even harder to persuade to move their technology to Russia.
Continue to RUSNANO's Internal Constraints: Conflict of interest with co-investors
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