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Vladimir Putin met with major investors at the Novo-Ogaryovo residence outside Moscow. During the meeting the President noted, in particular, that the state will create all the necessary conditions for investors to work, including lifting excessive pressure from the administrative and law enforcement bodies.

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President of Russia Vladimir Putin: Good afternoon, colleagues,

Our meeting was planned before the various, let’s say, turbulent developments began to take place on the global energy and later stock and currency markets. I think this will make our discussion today even more useful and interesting.

First of all, I would like to point out that all of you can see how the Central Bank of Russia and the Government react to these events.

I would like to note that both institutions have enough tools and resources to provide stability during the macroeconomic instability.

I hope – and yesterday I mentioned this when speaking at the State Duma – and not just hope, but I am confident that Russia will get over this calmly and with dignity too.

Moreover, we will get to this in a minute. I think you will support me. Russia’s key production industries have every chance to come out of this situation significantly stronger and more prepared for further, very serious competition. Of course, it must have an impact on the entire Russian economy, and this impact must be positive.

The goal of the Government and the Central Bank is to minimise any negative impact related to these processes so that Russian citizens are not affected by any adverse developments.

On my part, I would like to repeat that we will do everything to create favourable conditions for your work despite all the difficulties we are facing. You know better than anybody else that these situations do cause problems in certain areas but, on the other hand, they create additional opportunities in others.

You are people with vast experience, and I am pleased to note that you are not only involved in different business areas but also invest in the Russian economy, which is, certainly, natural for you.

I would like to highlight one specific point that is extremely important for us today – the fact that you invest in high-tech industries. It is tremendously important considering our country’s strategic goal of making a transition to an innovative economy and restructuring our economy.

On our part, we will do our best to lay the groundwork for you, to create conditions for your work, to secure this capital and investment, and to minimise various risks associated with the activity of administrative authorities and law enforcement bodies, among others.

I would like to stop here and gladly pass the floor to Prime Minister Mikhail Mishustin.

Prime Minister Mikhail Mishustin: Mr President, colleagues,

Mr President, as you already mentioned, we are meeting during the difficult conditions of volatility on the global stock exchanges. You also pointed out that the Government together with the Central Bank are doing everything necessary to stabilise the situation. In particular, they have established a government commission on enhancing economic stability.

It is a fact that any crisis is also a window of opportunity for effective investors and a time for smart investments in the high-tech sectors. Today we have with us the heads of international investment funds who have earned their wealth by promoting innovation technology and are ready to invest in the sectors which you have mentioned – artificial intelligence, biometry, robotics, technological digital platforms, as well as many other technologies.

I believe that it is extremely important to create, at this particular time, the right conditions for the work of venture funds and venture investors in Russia, as well as create a Russian market for investments.

It’s very important that tomorrow, at the Government meeting, we will actually discuss the draft law on the protection and promotion of investments, which will guarantee their safety. I am sure that the measures set out in the draft law will help reduce investor risks, help investors formulate longer term business plans and, overall, will enhance their interest in working in Russia.

I am absolutely certain that those invited will be able to tell us very many interesting things.

Vladimir Putin: In light of the current developments, I would like to say, as I already did before, that we look forward to hearing your views on what is taking place and how it works, as well as on the turn the developments can take. Of course, we would also like to hear about your suggestions, both to me and to the Government, what is lacking for effective work, and what else we should do.

Please go ahead.

Managing Partner of Altera Capital and Founder of RTP Global (ru-Net Holdings) Leonid Boguslavsky: Yes, thank you.

I will start with the news related to what we are discussing now. Our 100-percent private venture company that operates on the high-technology investment market both in Russia and abroad, which is important, has just launched a third fund that is worth $700 million. We hope it will be a very successful fund.

Mr President, you rightly noted that high information technology and artificial intelligence will critically change the world in 10 to 20 years. Now the tech giants of the US and China are laying the foundations of the new economy and new world order.

The amount of venture capital in the country in general is a major element of our development. The countries that have more venture capital and funds are ahead of others. It is not enough to carry out individual projects. It is necessary to launch large-scale technology business and wide-scale innovations in the high technology industry and talk about it loudly. Russia must foster entrepreneurship. It is essential to promote Russians who have scored success on their own. This is very important, their stories are great.

Although a number of initiatives have already been launched and a strategy drafted, it is necessary to increase government support for high technology projects in such sectors as artificial intelligence, industrial and digital technology, robots and new materials. It is very important to see the current situation as a challenge.

A striking example is what happened in China quite recently, in May 2017. The AlphaGo artificial intelligence programme defeated the world champion in Go. This is a very complicated game. It is 2,500 years old. When this happened and the programme won six games in a row, China’s State Council adopted a programme and launched a series of national projects that increased Chinese investment in artificial intelligence to $130 billion. This is how China tackled this challenge. This is very important.

We need to significantly increase the number of venture capital funds. We do not have a large venture investment market at this point. It is important that public funds be invested in private venture capital funds, thereby further developing public-private partnerships.

We need to provide a generally comfortable environment for investors. Honestly, it is not as comfortable as we would like it to be. Several innovation high-tech centres need to be set up in a number of Russian cities – in St Petersburg, in Siberia and in the Far East. These centres will enjoy special tax benefits and special rules for hiring foreigners.

These centres should also become hubs for new education ecosystems from elementary schools to business schools. There is the excellent experience of Sirius and the Moscow State University initiative. But this is not enough. If the right conditions are created, the flow of highly qualified Russian professionals returning from abroad will increase.

And the last proposal. I believe it is important to establish research and engineering labs in the army, where capable recruits will be able to serve in a high-tech environment. I think this will greatly accelerate the development of high technology in our country.

Vladimir Putin: We are already doing this. Did you know that?

Leonid Boguslavsky: Very good.

Vladimir Putin: In Anapa.

Leonid Boguslavsky: But it needs to be expanded, on a broader scale.

Vladimir Putin: On a broader scale. I agree.

Sirius is only taking its first steps, in fact. But we really hope, and I really hope that a similar education ecosystem will be built around the innovation centre there.

Leonid Boguslavsky: We need several such centres.

Vladimir Putin: Yes, you are absolutely right.

Leonid Boguslavsky: Otherwise, it will be a pinpoint project.

Vladimir Putin: One in the Far East, and in Siberia, and in the European part of course.

I agree completely. Thank you. I took some notes.

Go ahead, please.

Managing Partner of Almaz Capital Partners Alexander Galitsky: Mr President,

I will focus on a number of points. Perhaps, the first essential point is the importance of consuming innovations, because if you take any technology-oriented businessperson, they are looking for a large market, most importantly, a fast-growing market. We cannot compete with the United States or China in terms of the market size, but innovation consumption growth rates also matter.

Based on this, we need – and we can do this in Russia – to ensure good rates of innovation consumption. On the one hand, this will allow us to keep specialists and entrepreneurs in Russia and to draw in investment, because no one doubts the professionalism of our engineers either in Russia or internationally.

So, stimulating the consumption of products created by Russian companies and the acquisition of these companies by Russian strategists and state corporations, is one of the foundations for promoting the venture industry and entrepreneurship in Russia.

The second important point has already been mentioned. It’s about the importance of various industries, such as artificial intelligence, or the internet in general. They are changing the economy and industry in general. Business models are changing, and corporate operations are changing as well.

So, the initiative that you put forward in 2018, if memory serves, to create corporate venture capital funds is a fairly positive step which, however, includes a challenge. International practice shows that strategists can do a good job supporting companies in the later stages after they overcome this barrier and become profitable, break even and have properly established themselves in the market. But strategic companies, especially state corporations, of course, do not have a culture of working with start-up businesses and companies in the early stages of their development.

Very often, fledgling companies that use innovative technology even come into conflict with the strategies of larger companies and state corporations, since the latter are trying to maintain their market competitiveness and their past strategies (based on international practice), which is why many start-up businesses tend to form around large companies. Accordingly, from this point of view, these companies can also grow those who understand how to grow a business from an idea to full development. This is what the role of a venture capitalist is about. We, or rather, the money that we manage, is often referred to as smart money, because we help overcome this barrier and what is known as the dead zone when a company starts from scratch and becomes successful.

What should be done in Russia, what would be a reasonable step is to create so-called funds of funds when state corporations and strategic companies and maybe pension funds and insurance companies will become the creators of these funds, as is done in the world in general and in other countries. And these funds of funds will in turn invest in specialised venture funds in the areas mentioned by Mr Boguslavsky: artificial intelligence or, probably, the transformation of our construction industry because there are plenty of high-tech possibilities there.

It is possible to choose various areas for this. This should become our practice. I will not talk about amounts now, but last year, I think, about $200–300 million were invested, in all, in high-tech companies compared to the figures mentioned by Mr Boguslavsky.

Vladimir Putin: Can you explain? Funds of funds – how do they work in practice? Simply give me an example. How are they established? In specific terms.

Alexander Galitsky: In specific terms: a pool of money is created.

Vladimir Putin: Let’s assume that one of our state-owned companies…

Alexander Galitsky: Not just one. It is better when several companies create a pool and determine development strategies. It is possible to develop artificial intelligence or make more intellectual or upgrade our construction industry.

A specialised fund is being created on behalf of which a management team takes part in a tender. This team attracts money from this fund of funds and maybe from other participants in the market.

Vladimir Putin: And fulfils this task.

Alexander Galitsky: And this company invests money in start-ups that grow from an idea.

Vladimir Putin: Got you. This is indeed an adjustment to what I suggested, probably, in 2018.

Alexander Galitsky: Yes.

Vladimir Putin: I suggested that our major companies create these funds and be assigned tasks that will be at least close to the area of their activity. Your proposal is a bit different.

Alexander Galitsky: Yes, it is different because as global practice shows, disagreements crop up in major companies.

Vladimir Putin: I agree. This is what happens here in practice.

I see one difficulty. It is significant although seems to be technical: it will be very difficult to persuade one’s colleagues, the heads of these funds to pitch in to create a common fund. But I understand what you are saying.

Alexander Galitsky: And now the last point. The success of the venture industry and the high technology industry in general is naturally determined by experience and knowledge. Many of our people who were born in Russia hold key positions in leading companies in all countries: both in America and Asia. They hold very high positions.

On the other hand, very many people from Russia have recently set up, in the past few years, so-called unicorn start-up companies with a value of over a billion. I have such companies in my portfolio. This also applies to Veeam, Acronis, Parallels, RingCentral, and Very Wild.

I can quote many companies that have surpassed the $1 billion mark. When I meet these people they are rooting for what is happening in Russia. They are ready to help.

The fact that the issue of safe, comfortable conditions was raised is a positive sign. All this experience and everything else can be transferred to this country. I think this is a key moment for progress in high technology in Russia.

Vladimir Putin: Please go ahead.

Co-founder and CEO of Yandex Group Arkady Volozh: I just wanted to develop this idea that the new digital economy relies on creative people. Unlike other industries, in this new economy it is people that are the generators of a value-added product. Not raw materials, not even money – but people. In this sense, we are in a good position: we are sitting on a goldmine as we have many talented people, and a very good engineering education system – this is an asset.

So what we need to do is create an environment in which these people, these product generators will feel good, brainstorm and share ideas, and these ideas will multiply. Countries are now competing over who will provide a better environment for creative people like this.

Perhaps this is the language to describe some of the target indicators for state agency performance: whether their policies or proposed legislation contribute to the improvement of this environment or disrupt it. This is more difficult to quantify. It is clear that tonnes and cubic metres are much easier to account for, but this should also be taken into account. Any wrong action could lead to an outflow of people, that is, jeopardise the generation of a value-added product domestically, because it will be generated somewhere else.

There are two distinctive aspects to creating such an environment: one is everyday amenities, modern cities, this much is clear. The other is interest and opportunity. This is something that attracts any scientist, any entrepreneur, any engineer, in my opinion – good opportunities.

We must learn to create tech companies that will be popular around the world. We must create competitive technology brands made in Russia. This is one part.

Another aspect is competition. We used to compete all the time. Companies, countries competed only in technology. When the internet was starting, it was a new industry, and everyone said, let technology develop freely, and there is no need to regulate anything, because it is a new industry. Meaning, the less regulation, the faster everything grows.

Now there is no internet as such, but there are digital technologies that have penetrated into real life, into a real, regulated, and overregulated life. It is regulated because it is good, because it means security and so on. But to enable growth, for technology to grow, competition has now shifted from purely technological to regulatory competition as well. So we need advanced technology regulation here.

Unmanned vehicles are the best example I have. If you take autonomous transport regulatory documents in China or America, take a transport authority decision on how to regulate this area, the opening paragraph usually says: “We believe our country should be the most advanced in this field of technology; therefore…” The ensuing regulations are based on this overall approach, and it is said directly in the document.

As a result, today in America, autonomous cars drive around cities in everyday life. In Russia, they drive only here, in Innopolis. Innopolis is good, but it is a small place with a simplified environment. We want these vehicles to drive on real streets, but we cannot do it, because regulations constrain us.

So we go to America, and test them in Las Vegas or Detroit. We have reached an agreement with Kazakhstan. But we need to allow it here in Russia, because advanced technology regulation is a competitive advantage as much as the technology itself.

Vladimir Putin: Thank you, Mr Volozh.

Please.

CEO and Chairman of the Management Board of the Russian Direct Investment Fund Kirill Dmitriev: Mr President,

We support the proposals made by our colleagues, which are based on their extremely successful investment experience. It is important that they actually established very successful companies in Russia. We support initiatives on growing the venture capital industry, and on state-owned companies investing in venture capital funds.

The Russian Direct Investment Fund actively invests in our technology companies. Through the network of our partnerships, we bring them to global markets. But we are also announcing that this year we will launch a programme to invest in venture capital funds. We will not only invest in companies but also in venture funds, helping them develop.

We will also actively help Russian state-owned companies in their venture programmes: in particular, we plan to launch a number of funds together with large state-owned companies, including launching such a fund with Transneft in the near future.

You also said that it is very important to build up a new investment cycle to increase investment. Today we are also announcing that following your instruction and the Russian Government’s decision (Mr Mishustin supported this), we are launching an infrastructure fund of up to 600 billion rubles.

This fund will allow implementing many low-margin projects due to the fact that it will finance the infrastructure of these projects, but most of the funds will come from private investors. Accordingly, private money will go to infrastructure, and this will provide greater transparency of investments in infrastructure and allow for implementing a significant number of projects.

And in conclusion, we would also like to note that, despite the external turbulence, our investors certainly plan to actively invest in Russia. They see unique macroeconomic conditions and very low debt compared to the global level, which is 325 percent of world GDP.

In Russia, the national debt is very low, and the macroeconomic policy is very stable. Investors confirm their desire to invest and see that Russia has overcome many difficult situations before, and this one will be successfully overcome, too.

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