In frozen Siberia, Russia tries to seed a start-up culture

Vladimir Kovalyov zips around on a self-balancing electric scooter, barely the size of a skateboard, that he thinks might be the next big thing in personal transportation. It’s his invention. But he says he never could have made a working model without generous help from a very unlikely business partner: the Kremlin.

Mr. Kovalyov is developing his idea in a “business incubator” on the outskirts of this leafy Siberian city. It is a state-funded haven for entrepreneurs who find it near impossible to get a good idea off the ground in Russia’s corrupt, monopolistic, and cronyist version of capitalism.

The idea is to hatch innovations away from the frosted-over economy, providing seed money, office space, and advice until inventors can find business partners. Though only about 10 percent of these ideas ever get sold, often to companies abroad, managers say they’re not in it for short-term profit.

Over the past two years the Kremlin has begun pumping cash into projects like this.

They’re all part of President Dmitry Medvedev’s grand vision of modernizing Russia by weaning it from reliance on raw-material exports and applying oil revenues to stimulate the growth of an entrepreneurial high-tech economy.

“We’re trying to change a culture,” says Anton Titkov, director of the incubator. “We have fertile minds in Russia ... but a very poor record of nurturing inventions.... We need to provide bridges for young people who come to us with ideas but have no business plan or investment prospects.”

The big question hanging over such facilities is: Can they transform Russia’s business culture?

Much of the economy is controlled by huge industrial monopolies with little incentive to innovate, while superwealthy oligarchs seem more interested in snapping up proven assets in the West than in backing start-ups in far-flung Russian communities that often lack basic infrastructure. Russia’s banking system remains averse to the risks entailed in bankrolling inventors.

“In the absence of dynamic private-sector interest, innovation has to be a state strategy,” says Yelena Taila­sheva, a business reporter with the Tomsky Novosti newspaper. “There’s a lot of interest at the top now, with both Medvedev and [Prime Minister Vladimir] Putin talking a lot about ways to get more changes happening that will transform the economy. But these impulses, coming from the top, don’t yet seem to be making much difference down below.”

The state-led approach to promoting innovation boils down to establishing a “ministry of inventions,” say critics, who claim it’s doomed to fail because it substitutes bureaucratic decisions for market signals.

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