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Russian startups will perish in the “valley of death”

Our country needs scientific centers and engineering schools and companies

Русские стартапы погибнут в «долине смерти»
Alexander Sitnikov

<source srcset=”/p/144217/m-144217.jpg” media=”(min-width: 428px) and (max-width: 671px)”/><source srcset=”/p/144217/l-144217.jpg” media=”(min-width: 672px)”/>Русские стартапы погибнут в «долине смерти»

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Portal Statista.com published an infographic about top 5 countries with the best result in the growth of start-UPS in 2015. First China — 8.8%, the United States — 8.3%, India 7.7%, UK 4% and closes the top five leaders of Germany — 2.8%.

Known American financier bill gross, commenting on the results, called on the major capital of the USA be involved in this case. “I am convinced that a startup as an organization, is one of the greatest forms, which makes the world a better place, he said. — If you take a group of people having the right to a fair incentives, and to reduce them to the startup, it is possible to release the incredible human potential”.

At the same time, bill gross does not idealize investments in new business and lists the main problems faced by Americans on the path to innovative success. According to him, the starting money was an insurmountable obstacle only 14% beginner, most were able to solve this problem. Losers of the other 42% missed on-time and late development; 32% are unable to build a cohesive team; 28% – have the wrong idea and 24% incorrectly chose a business model. They all “died” in the so-called “valley of death”.

“Nine out of ten fail. This is a hard and sad truth, says Neal Patel, a member of several startups. — However, statistics should not deter entrepreneurs, although is required to induce them to work smarter and faster.”

Economist Herman Joyce, an expert on venture capital projects, said that “in 2015, for the first time in 35 years the number of business deaths exceeded the number of births of businesses. The census Bureau reported that last year there were 400,000 start-UPS, 470000 closed”. This means that many participants of the venture market, placing their long-term money in new projects, a great risk. We are talking about huge sums. According to recent reports, in 2015 in us startups has invested $ 70 billion

Note that market risk in addition to investment funds are the so-called business angels — informal participants. Almost all of them are millionaires and billionaires. In the USA the number of such investors exceeds 300 thousand people who annually invest in new projects by $ 30 billion simply speaking, practically the entire business elite of America is involved in this process. Recall that business angels use the direct funding mechanism in which startups generally receive money for a period of 3-7 years in exchange for a minority stake. There are other schemes, in principle, do not change the essence of things.

This raises a curious question: why “sharks of capitalism” spend significant funds to Ghost projects, many of which will burst as a soap bubble? At first glance, it may seem that this is facilitated by progressive legal norms, in particular, the laws of the Stevenson-Wydler “technological innovation” and Bai-Share “On patents”. Meanwhile, the reasons “startpackage boom” lie in the peculiarities of American public-private partnerships and tax benefits, which can take advantage of the only “powers that be”. In this regard, to speak about equal access to venture capital market in the United States.

An independent survey of the U.S. venture capital market showed that two-thirds of the money the founders drew from family or other friendly sources, 17% – at the expense of credits and other loans, the rest for funds and crowdfunding. The lion’s share of investments was allocated to a small number of companies funded by billionaires and multimillionaires. About 10% of startups got 90% of the capital. They have been successful. Please note that about 30% of ordinary beginnings who passed the “valley of death”, was only able to reach break-even point, we have worked on zero. As many have shown extremely low profit, is not proportional to risk. Their products — mostly software and mobile app medical devices — became obsolete in a few months. In reality, really successful was only one-twentieth of the startup.

It is curious that among the founders were more than half Hispanic, 20% African Americans, and almost all men (92%) of which were young people (20-34 years). With regard to professional knowledge, only half of entrepreneurs and innovators has a bachelor. “The reality of startups is speculation on the theme of the “American dream”, i.e. a lottery ticket to a rich life. Chances are, but they are minimal, — said the blogger @afred1994. We know the names of the lucky ones, although not many, but forget about those millions who find themselves at the bottom”.

Those entrepreneurs who are not included in the establishment, but are successful because of the talent, I advise you to share. Venture capitalist Tim Draper, one of the first investors in Hotmail and Skype, said that, for example, the project DroneDeplo, in which he participated, was carried out in the framework of the Federal aviation administration to integrate drones in U.S. airspace. At the same time he had to enter the number of other related startups, however, real income has brought the beginnings associated with DroneDeplo.

But if the US per thousand inhabitants account for approximately one business angel, we have — hundreds of times smaller. In General, the Russian venture market, having no active business angels and normal operating funds, degrades. Everything that happens in this sphere is reminiscent of the imitation of activity. People who tried to get grants for the development, complaining about the dictatorship of the curators on the one hand, and a lack of interest on the other.

“With funding through state funds project managers face enormous bureaucratic machine, the need to be attentive to every useless piece of paper, the signature of the official, correct drawing up of the report and other nasty details that are not affiliated with the project itself. Alas, for the state (in the person of the funds) is not important is the result and report is assessed purely by formal features, such as correct registration, filing on time, having all the signatures,” writes members maxtsaturyan.

Take, for example, the most popular segment of the Russian startups — the Internet and IT technologies. Money for “pre-seeding” stage, simply no, although in reality we are talking about relatively small amounts that could haul and regional business (of course, if did not pay the bribe tax). The number of transactions at this level decreased from 134 in 2014, 125 in 2015, with an average investment size amounted to 1.61 million, and it’s a huge country with 140-million population.

Those who managed to pass the “pre stage”, that is, to prove the survivability of their ideas, rise to the level of “seeding”. In 2015, these “lucky” in Russia had accumulated 61, they got 24,72 million (a year — ed.). On this level breaks every second “prepose”, whose funding is provided from “peradventure sources”, including “seeding” funds, various state Fund, grantovye program and, of course, business angels.

Followed directly the start-UPS that, in fact, should reach pre-production level. Here begins the financing in full. By the way, if to consider in General the segment of Internet and IT technologies, the amount of venture investment in our country decreased from 59.8 million in 2014 to 34.2 million rubles in 2015.

The lack of interest in the development of this business in our country has observed the investment company “Rye, Man & Gor Securities” (RMG). “State institutions of development of the venture market — RVC (Russian venture company), SKOLKOVO, ASI, etc.— failed the tasks for which you have created — added picture of Stepan Danilov, founder of startups DoDocs.ru and Meyou. — They spent significant budgets on informational sensation in the form of contests, events, beautiful Analytics, registered positive articles in the media. Instead of the simplest to organize a bunch of “infrastructure + seed money + competence”, public institutions overtook infochip, and the Pro tools implementation overtaken the desires of the audience even thought”.

Meanwhile, the Russian science developed quite successfully in traditional research centers and engineering schools, as evidenced by the successes of our military-industrial complex. “Surprise, surprise: Russia is again a world power,” writes Jonathan Adelman, Professor of international studies at the University of Denver, linking this fact with the presence in our country of the latest technologies national origin. It turns out that created in the Soviet years of design and research institutes that finally got the necessary funding, were better than advertised in US startups. Note, however, that these self-organizing and innovative enterprises have the right to your success. But RVC, SKOLKOVO and other venture capital firm will have a “new Kulibin” with the necessary support.

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