Russia investing $4B in ‘innovation city’ Skolkovo to inseminate startup culture

The Russian government is spending billions of dollars to manufacture startup culture.

Skolkovo is a science park outside of Moscow that aims to be the “Russian Silicon Valley.” It is the country’s largest state-sponsored innovation hub, and it will receive around $4 billion in state funding between now and 2020.

Skolkovo Foundation president Viktor Vekselberg said he expects to raise more than $11 billion in private investment by 2020 and that Skolkovo will not need government financing after 2025. He also predicted that this “innovation city” will contribute $6.5 billion to Russia’s economy over that time period, and he ultimately hopes it will add $45 billion to national GDP.

Skolkovo was announced in 2009 by Prime Minister Dmitry Medvedev. It has been called his “pet project” and a “pipe dream.” He has taken measures, such as special tax and regulatory breaks and easing immigration policies, to provide an “oasis” from Russia’s notoriously inefficient bureaucracy and get Skolkovo running. The Foundation involves a business school, office space for hundreds of startups, and as many as 15,000 scientists. There are also plans for corporate research-and-development centers, with interest from companies including Cisco, Nokia, and Microsoft.

The goal was to help transition Russia into the digital age and cement it as a global technological and economic leader. It is also intended to foster innovation in a country long plagued by a “one-dimensional economy.” Russia has a wealth of scientific and technical talent, but its cultural legacy (and corruption) does not promote entrepreneurialism, and many talented people leave for other, more vibrant environments.

However, it faces some roadblocks. Last year an investigation found examples of “questionable financial practices,” and some of the Foundation’s leaders were fired. Russian tech news site East West Digital News reported that there were widespread rumors of Skolkovo’s “imminent demise.” People around the world have expressed skepticism about whether it is possible to artificially create a tech hub. Furthermore, is it possible to promote a free-thinking, innovative, experimental atmosphere with heavy involvement from the Russian government?

Russia has around 100 billionaires and the world’s eighth largest economy. It has the largest Internet and mobile market in Europe, and its consumer market is growing fast. Venture capital is now available in Russia with a number of domestic and international firms making investments.

However, money (and talent) only get you so far. VentureBeat contributor Elmira Bayrasli wrote that the single greatest obstacle to economic growth in Russia is “the government’s crushing of the innovative spirit that is the essential prerequisite to entrepreneurship.” Skolkovo may be designed as a bubble that protects and nurtures entrepreneurs, but people are still wary of consequences for pushing the boundaries.

In the meantime, billions of dollars helps.