The gap between science and industry is bridgeable
Vladimir Varukhin has fulfilled several commercialized projects. He is a chemist who has graduated from the N. Novgorod State University Chemistry Department. He has dedicated twenty years to research work in the Institute of Metaloorganic Chemistry of the RAS. Now he is the director of LLC SPE “UltraVut”. He introduced his first innovation in 1991.
So, you are the representative of the very rare, listed almost in the Red Book, species, known as “Successful Russian Innovator”?
Apparently, yes (laughing)
For some reason, I was expecting to meet a scientist, not a businessman
And I am both. The fact is that one of the requirements of the Extension Work Fund for small businesses in the scientific and technical sphere (or as everyone called it after the first director – Bortnik Fund) is creating a new, separate company for each project that receives funding. And a director of the company becomes a director of the project.
And what other conditions are there?
It is obligatory to protect intellectual property
Most of our innovators over the years decide to obtain a patent, but here this is one of the conditions for start-up…
This game is for forward-minded people (smiling)
But when you started, in 1991, Russia had neither investment funds, nor infrastructure, nothing at all…
There were not even bank loans, remember? Start-up was made for personal funds. Reduce to discipline, you know.
What was the project?
We developed a technology to produce cartridges for gas weapon (and it turned out that we had chosen the right way – it is easy to make money on expendable materials). There was a boom then in Russia for personal protective devices, and the gas guns were quite safe but looked menacing. Even police had acquired the gas guns, and actually they were our first customers. As a result, my colleagues and I had started a production at the Tula Cartridge Plant and opened two gun shops – they are still working, but don’t belong to us— we sold it at the time. By the way, the first money we had earned was from selling, not the production. That was the point when I left the Institute and became a businessman.
But later you came back?
Ten years later, in 2001. And I was surprised by the number of excellent, but not implemented, developments, and also great ideas. At that time, a large number of military enterprises, which lost the state order, were declassified. This sector has traditionally focused on the most advanced technologies and their authors could speak openly about their ideas, but they didn’t have any experience in commercialization. And then I started looking for interesting projects and trying to commercialize them. Soon I realized that it was exactly what I wanted to do. My friends and I didn’t think about the implementation in the factory, we were preparing documents, writing projects, and receiving funding.
In the Bortnik Fund?
Yes. Four of our projects were selected from five projects we presented to the Fund.
Tell us about them.
The first project was a new technology for the effective treatment of the industrial effluents. The second project was know-how to produce nonflammable polyurethane foam – thermal insulation material, which is widely used in construction, but with traditionally low-fire properties. The third project (in collaboration with Sarov scientists) was application of thermal power stations wastes (ash micro-spheres) as a filler for the polyurethane, which helped to increase its strength several times (other additives by increasing the density, decreasing the strength). The fourth project was a creation of a new Ultra-disperse water — coal fuel which is intended to be an alternative to the liquid energy products with an oil base (diesel and heating oil). It doesn’t require technical re-equipment of the boiler houses and low-speed diesel engines.
Impressive. And how does it look in practice?
The first tranche of the Bortnik Fund is intended to cover the expenses on employees’ salaries during the year at a new small innovative enterprise. During this time it is necessary to find an investor. I will disclose a secret: it is a better to have your project 70% done at that time, because one year is a very short period of time to find an investor. For now we have found money only for development of the project “UltraVut” and this money belongs to the para-public organization – N. Novgorod Venture Fund. It is very important to know that if the Bortnik Fund gives you money, it doesn’t mean that it is time to celebrate. During the first year, 90% of the projects are screened out. That is kind of a lottery.
And once you have won it, what is the prize?
The Bortnik Fund adds 100% to the investors’ money within a year and if it is successful, makes it in the third year. The aim of the game is the creation of a business plan and introduction of a new technology.
Have you already introduced something?
It is ironic: we had introduced the project that had not passed to the Fund. This is a technology to protect steel during heat treatment. Spraying a protective reagent on the product, we exclude such processes as scaling, burning out of carbon and alloying components of alloys, which means heating treatment at high temperature (that reduces the time for this operation), saving time and money for lathe work (it is possible to put thread on the stage of forging— it is saved after the furnace) and also the quality of material is higher. This technology was introduced in the Gorky Automotive Plant, Gorky Machine Building Plant, and JSC “Thermal”. We make money on production and selling the reagent (again expendable materials – useful experience of the cartridges).
Vladimir Andreevich, having such experience in introducing new technologies in Russia, what would you call our main challenges of commercialization investment?
It is believed that the problem is that in Russia, there is a gap between science and industry. It’s a stereotype. Practice shows that if you want, this gap is bridgeable. Prepare a project until its implementation is possible. But this is not enough. It is important to raise an interest among producers. Otherwise, there will be a problem of quality. There are examples that in Russia and in the West, the goods are produced using the same technology, but the quality of the goods is different. Russian — worse. Therefore, for investors, especially for foreign investors, there is a quite serious problem of quality control.
Is this problem solvable?
In Russia there are practically no business angels, they are all abroad. And to implement and run production requires a lot of money. Therefore, the risk for the investor should be acceptable. I think there is a need in another state agency, an investment fund that would be involved in the financing of the implementation into production. China has done so and the quality control is provided by the government. And not just quality — but also expense control, fulfillment of obligations in time, etc.
And anyway we can see that foreign corporations open new productions in Russia, such as automobile assembly…
It is important to understand that in our case we are talking about introducing radically new technologies. Believe me, it is much harder than to establish an assembly for machines. And then there is a dilemma: to build new plants costs a lot of money, and to master new technologies in existing industries is difficult because of the psychology of our directors, which is still Soviet. Even in the case of investments, the introduction should be fed by the energy of an enthusiast who will make everything work and control the process. Otherwise, it will not work.
Can we say that the main problem of innovation in Russia is a still low culture of domestic production?
Prepared by Alexander Blagov.