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Alexander Smbatyan : “New technologies have taken the central stage in Moscow city’s development plans”

Tech investor and advisor to Moscow deputy mayor Alexander Smbatyan comments on the opportunities brought by technology in the fields of human capital and city development

Jan 11, 2018
So far, your fund Genome Ventures has invested essentially in Russian companies. What makes the Russian market attractive in your eyes?

Genome Ventures isn’t an ordinary venture fund. We are a venture building company. It is not so much about the market as it is about people who are capable of building global success stories.

Today this can be done from Russia or any other country; but Russia has a considerable, largely untapped potential in human capital, knowledge and breakthrough ideas. What’s more, the Russian market, given its complexity, is a great testing ground. This is why Genome Ventures is building an ecosystem where this potential can be unlocked and transformed into global success stories.

What makes this market difficult or challenging?

It has always been challenging to do business in Russia. But this just equips entrepreneurs with the necessary survival skills such as grit and learning agility. The greatest challenge Russian entrepreneurs face every day is the ability to convert talent into successful ventures. We have the highest rates of education attainment across the world — but although many recognize Russia as a talent hub, very few dare to find, teach, accelerate and lead these talents.

Over the past years, many Russian funds have globalized their activities. Why has your fund remained essentially focused on Russia?

Since we are not a traditional venture fund, we partner with accomplished innovators and leaders. Whilst they have talent, ambition and technical expertise, we empower them with top-notch teams, Russian and global market expertise and funding, and whatever else is needed to create a truly ground-breaking product. This is much more than traditional venture funding.

Thanks to this support, the companies we launch may quickly enter the global market, even though they started from Russia. Those in our portfolio have already started their expansion to the US, UAE and EU markets. We see great opportunities for technologies developed in Russia to become successful across the globe.

Why does Genome focus on education technologies and smart cities?

Let me reformulate it. We do have a particular focus on developing human capital and designing the environments and spaces where they live, work, learn and are entertained. We truly believe that here in Russia, especially in Moscow, we need to accelerate our effort to place human capital growth high on the agenda. Facing the digital transformation requires to leverage our talents, infrastructure and technological advancement.

Education is a $5 trillion market, double the size of the oil and gas industry. It is a field that won’t be disrupted, at least in developed countries, yet the pace of technology adoption has been accelerating and will soon hit a tipping point.

Surely EdTech is a bit of a buzzword right now, but look at the gap between real market demand and what is being offered. EdTech leaders and entrepreneurs should develop result-oriented models based on real market data and experience. EdTech is poised to become one of the most profitable markets in the digital industry.

However, there are high entry barriers, product development cycle is longer and to be competitive tomorrow, you have to invest today.

You’re an advisor to the deputy mayor in charge of Moscow’s economic development. How important is technology in the city’s development plans?

It is difficult today to imagine a global city without a focus on new technologies. These take the central stage in Moscow mayor Sergey Sobyanin’s program.

We’re talking about technology for the people, technologies that create an environment where citizens and visitors can feel safe, comfortable and mobile. As the mayor put it: "Our support of technological modernization aims to make Moscow a convenient, comfortable, safe and friendly place to live, work or study."

How do these tech-oriented policies translate concretely for inhabitants?

Moscow has been very successful in integrating technology in daily life in a variety of fields. Let me provide a few examples:

Data is used in a variety of ways — in transport systems, video surveillance, medical services, business and public administration, etc. The city has a Traffic Management Center with a situation room where data from all street cameras are continuously collected and analyzed. The data collected from this Traffic Management Center is also use by Yandex.Transport, a popular mobile trip-planning app.

Another example is the city’s video surveillance system, with 160,000 cameras located in all areas. Their main function is to prevent offenses and control the work of housing and communal services. The data from the cameras stored in the Unified Storage Center also helps disclose crimes. Thus, in 2015, 1,727 offenses were discovered thanks to records from the cameras. More than 3,000 of these devices were using a face recognition system which can recognize identity, gender and age on a video.

As for medical services, we have set up a Unified Medical Records System (EMIAS) which integrates data from all public healthcare institutions in the city. All medical records, including prescriptions and sick leaves, are now processed electronically. Patients can sign up for an appointment on the web site or through an app. So far, more than 34 million doctor appointments have been set via the portal and the app: in 2017, the average monthly number of appointments set exceeded 1.7 million. The app has been downloaded more than 540,000 times via iOS or Android

Another demonstration of the city’s focus on technologies is the Digital Business Hub, which has asserted itself as the key venue for city digitalization and innovations.

This being said, in order to be globally competitive, we need to increase the proportion of services in the city’s GDP. Since tech companies account nowadays for the better part of the service industry, it is important to develop further the tech ecosystem and create new incentives for local tech entrepreneurs.

Do the Moscow city authorities wish to attract more foreign tech players? Can they enjoy specific benefits?

Like other global cities, we are looking to attract foreign direct investments, venture investors and high-tech companies, especially those who may outsource their R&D to Moscow-based companies or launch their own R&D centers in Moscow.

Priority is also given to investors and tech companies who regard Moscow as one of their key markets, and aim to localize their product. We understand that foreigners coming to Moscow may be intimidated, so there is a large support system for those companies — be it in terms of infrastructure (with privileged land buyout prices, special economic zones and industrial parks), financial incentives, R&D or partnership partnership support programs.

The city’s centralized system of data collection is a great competitive advantage in the data economy, it opens up unique opportunities for innovation, development and piloting of new services. There is a real demand on the Moscow market for new tech players, including foreign ones. And a very friendly atmosphere!