In Russia's Siberian Silicon Valley, Business Is Good But Risks Can Be High

Jul 4, 2017
Originally published on July 5, 2017 7:48 am

Residents in a suburb of Siberia's capital, Novosibirsk, like to say the world's smartest street runs through their leafy community.

The broad avenue that cuts through the taiga, or Siberian woodland, is named after Mikhail Lavrentyev, a mathematician who established the Soviet Union's version of Silicon Valley here during the Cold War.

To keep up with the Americans, the Kremlin built Akademgorodok — literally "academic town" — 2,000 miles east of Moscow, far from distractions and prying eyes. Over the years, it became home to tens of thousands of Soviet scientists who were lured by faster promotions and better living conditions to research everything from nuclear physics to hydrodynamics.

Now, 60 years after its founding and more than two decades after the Soviet Union fell apart, Akademgorodok continues to innovate, despite a brain drain and legal challenges confronting some of its most successful entrepreneurs.

Two dozen research institutes — most of them four-story concrete blocks — are partially hidden behind the trees. But there are also gleaming shopping centers and a Siberian Burger joint, signs of how far Akademgorodok has come since 1991, when the Soviet Union collapsed and rocket scientists there fell on hard times.

"Scientists were earning $5 to $10 a month," recalls Irina Travina, the head of the local IT business association. "We understood that in order to survive, we either had to leave the country and find a place where we'd get paid more — or try to earn a living in our country by other means."

Many did leave, flocking to research labs and tech companies in the United States and Western Europe. Travina, a programmer at the Institute of Automation and Electrometry, was among those who stayed. She founded a software company that today has customers in more than 30 countries.

But just as the free market opened up new opportunities, it also exposed Akademgorodok to global competition from other innovation centers.

Inspired during a visit to India's tech hub of Bangalore, President Vladimir Putin came to Novosibirsk in 2005, promising to help develop Russian technology parks. Academpark was founded two years later. Some $250 million — half government, half private money — has been invested into the project, whose mission is to accelerate existing tech businesses and incubate new ones.

Now, more than a decade on, the technology park is home to more than 200 companies with 5,000 employees. Academpark's landmark main building — two tilted orange towers joined by a sky bridge — soars over the surrounding forest.

Success stories include nanotechnology firm OCSiAl, precision laser manufacturer Tekhnoscan and banking software company CFT.

Yet despite government investment and the achievements of individual companies, local commentator Alexei Mazur says Akademgorodok has to a large extent become an upscale bedroom community for Novosibirsk. Having lost its original scientific raison d'être, the community draws residents with its sylvan setting and excellent schools.

"The Soviet Union needed science because it needed the atomic bomb, the space program and international prestige," Mazur says. "For the current government, science isn't the same priority."

Even so, Akademgorodok has preserved its identity as a tight-knit community of very smart people. That's why most residents were shocked when air purifier maker Tion was raided and its 35-year-old founder, Dmitry Trubitsyn, was placed under house arrest in June.

Investigators accuse Trubitsyn of selling fake air purifiers to hundreds of hospitals across Russia and are pressing charges that carry jail time. Trubitsyn's friends and colleagues, including Academpark's director, Vladimir Nikonov, have rallied to his support.

If Trubitsyn is convicted, it wouldn't be the first time that a successful Russian business might find itself under new ownership after murky legal proceedings leading to a hostile takeover. The very success of such companies can make them vulnerable.

"Such events do take place from time to time in Russia," Nikonov says. "So I can't rule out the possibility that someone took interest in the company."

Travina, the local business association head, is more outspoken.

"It's 100 percent certain that this case will have a horrible effect on the local investment and innovation climate," Travina warns.

Alexander Lyskovsky, an Akademgorodok native who founded Alawar, a game company, in 1999, seems less worried.

"Nobody is stopping us from doing our work and making money by selling to the whole world," he said.

"Beholder," one of Alawar's recent releases, takes place in an Orwellian dystopia where players have to spy on their neighbors and report back to the authorities.

But Lyskovsky insists that he's not interested in politics. He just wants to sell games.

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