Old risks in a new way – Newspaper Kommersant No. 34 (7479) dated 02.28.

The Ministry of Economy proposes to give VEB.RF the “right to take risks” when investing in high-tech start-ups – now the state’s ability to invest state funds in high-risk early-stage technology projects is limited, partly due to a long series of failures of such venture investments, ending in large-scale losses for the budget and high-profile criminal cases. The new mechanism for supporting innovative projects provides for the evaluation of the effectiveness of high-risk investments not for individual projects, but for the entire portfolio as a whole, and allows it to take into account not only actual results, but also those expected at the time of making decisions on transactions. For the sake of launching the high-tech investment market, it is proposed to risk 50 billion rubles. state funds is a third of this market in the Russian Federation in 2021.

The Ministry of Economy has developed a draft government decree (Kommersant has it) on supporting the Russian market of direct and venture capital investments to accelerate the development and implementation of promising technologies. The agency proposes to remove the restriction on the possibility of financing high-tech startups by the state corporation VEB.RF, giving it the “right to take risks.” The need to de facto create a new market for high-tech developments and expand state investment in them is caused by the departure of Western companies that own technologies after the start of the Russian military operation in Ukraine and the need to “adapt” the Russian economy to this situation.

“Now the mandate of VEB.RF is limited in terms of the possibilities of financing high-risk technological projects of early stages. As a result, VEB.RF funds cannot be used for their development. In this regard, it is necessary to change the rules for supporting high-tech projects so that VEB can invest in them,” the state corporation says. It should be noted that such restrictions are largely motivated by the lack of significant success of the previous stages of state and quasi-state venture investments – from the Russian Venture Corporation to Rusnano, whose investments ended in significant losses (for example, the problem of Rosnano’s debts has not been resolved, see “Kommersant” dated November 23, 2021 years) and high-profile criminal cases. However, this does not remove the need for state support for technological development in the context of the technological isolation of the Russian Federation – and the initiative of the Ministry of Economy, apparently, is aimed at simultaneously solving a number of old problems and removing restrictions that could exacerbate previous failures.

The explanatory note states that in recent years, the Russian Federation has been rapidly lagging behind developed countries in terms of the volume of venture investments. So, at the end of 2021, their volume in the country amounted to only 0.15% of GDP (in China, the UK and the USA – about 1.2%). This “restricts competition in the technology sector of the economy, which makes it unattractive for innovative companies to develop in Russia,” the document says.

According to Alexei Miroshnichenko, First Deputy Chairman of VEB.RF, the new approach, which gives VEB the “right to risk”, provides for the establishment of a portfolio approach to assessing the break-even of projects within the established investment limit, and allows taking into account not only the actual result of investments, but also “on average the expected result how it could be assessed at the time of the investment,” the state corporation said. It is proposed to allocate 50 billion rubles for the new portfolio investment program of VEB.RF in innovation. from its capital, this is approximately 30% of all venture investments in the Russian Federation in 2021.

Earlier that VEB was discussing with the government a new approach to investing in high-tech start-ups, the head of the state corporation, Igor Shuvalov, announced at the end of January. “We will have the right to form a portfolio where we share the risk with commercial banks in half, where we look at the success of the portfolio as a whole, and not at the fact that individual projects turned out to be unclaimed or unprofitable as a result, or even simply closed,”— he said.

Experts, however, still see the risks of law enforcement agencies having questions regarding the financing of state innovations, although they confirm that the problem needs to be solved. Thus, according to Dmitry Kletochkin, a partner at the Rustam Kurmaev & Partners law firm, the proposed changes are necessary, but “any venture fund understands in advance that at least 50% of investments (if counted in pieces) will have to be written off. VEB is a state organization, and none of the officials will voluntarily risk investing in a project that can go bankrupt with such a high probability, and therefore such investments should be directly allowed.”

According to Ilya Zharsky, managing partner of the Veta expert group, world practice shows the promise of such an approach, and the Central Bank will need to make minor changes specifically for VEB as the flagship of portfolio investment. “Accordingly, there will be no problems with the Ministry of Internal Affairs regarding investments,” he believes. In turn, Anton Pulyaev, a partner at the De Jure Bar Association, recalls that “when evaluating the investment procedure, law enforcement agencies will in any case evaluate the economic feasibility of spending funds and under no circumstances consider a decision an indulgence from criminal prosecution.”

Venera Petrova, Oleg Sapozhkov