RUSNANO's Constraints
Internal constraints
Conflict of interest with co-investors
In line with the VC model of investing, RUSNANO does not build majority equity positions in its portfolio companies. (Chubais, Fostering Nanotechnology Innovation in Russia 2010) Virtually all of the projects it has made investments in had a private or government co-investor. The seven stages of deal review do not explicitly include negotiations with the co-investors, and the latter could also be lengthy and difficult. In other words, for applicants it is not enough to get approval from RUSNANO to finalize the dealthe project has to be of interest to a co-investor that the corporation recommends, which is another unnecessary burden that is hard to navigate around (Fay 2010).
RUSNANO’s connection to large Private Equity funds and oligarchic groups is apparent in many ways. First, many of the oligarchs are on the corporation’s Supervisory board. Second, some of RUSNANO’s investment directorssenior managers who lead the investment process have migrated to the corporation from Private Equity investment firms that belong to the oligarchs. For example, Mr. Sergey Polikarpov, Investment Director at RUSNANO, shortly before the start of his tenure at the state corporation was working at Mikhail Prokhorov’s Onexim Group. (Chistyakov 2008) It is also interesting that many of the RUSNANO projects Mr. Polikarpov is involved in have an undisclosed private co-investor. The nature of the technology projects he works on seems to be closely aligned with the direction of Onexim’s high-tech investments: alternative energy, telecom, and semiconductors. For example, Mr. Prokhorov owns a stake in the US manufacturer of hydrogen fuel cells Plugpower Inc, and the CEO of Onexim, Mr. Dmitry Rasumov has made a stunning success by investing in Megafon one of Russia’s four leading mobile telecom providers. This leads to an assumption that RUSNANO is a means of getting better deal flow for some of the PE firms. It may be unclear whether the final decision is made by the corporation or by these private firms. (Fay 2010) While minimizing risks and attracting talent through cooperation with co-investors makes sense from the operational standpoint, applicants for financing often find dealing with these coinvestors quite difficult and counterproductive.
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Back to RUSNANO's Internal Constraints: Established project review mechanisms
