How Russian companies are capturing global markets: real-world experience

A truly ambitious project can never have enough domestic market. At the same time, not all companies have a clear plan for entering global markets and are able to find suitable partners. In our country, opportunities are open for projects that aim to expand, thanks to the support of the National Technology Initiative.

One of the main objectives of NTI is to create new high-tech markets in which Russian players can take a leading position. The companies in the NTI ecosystem are therefore united in their ambition to capture global markets.

Which projects from Russia are already competing with foreign ones on the global market, or even leaving them behind? We have gathered examples to tell about the experiences of companies that have entered other countries’ markets, the main barriers to exporting and how to overcome them.

Unique offer

Interest in other countries is usually attracted by Russian inventions that have no foreign counterparts.

For example, the underwater Internet of Things by NTI market company Marinet’s “Underwater Navigation and Communications Laboratory”. Over the past year, underwater IoT complexes have been delivered to the US, the UK, Norway, Spain and Switzerland.

And Technet market participant S-Innovations was the first company in the world to digitalise the creation high-temperature superconductors (HTS). Thanks to the digital solutions implemented in production, the company tripled its sales, including export revenues, in 2020. HTS wires are already being supplied to customers in South Korea, India, Japan and New Zealand.

The domestic smart band Healbe, which monitors about 30 body parameters (including automatically counting calories), has no foreign analogues — and in the US market, as well as in Japan, it sells even better than in the Russian Federation. By the end of 2020, 12.3 thousand devices worth $1.5 million have been sold in our country and abroad, double the figure for 2019. However, the Russian market only accounts for 15% of global sales. Developers attribute the popularity of the product abroad and less domestic interest to the rather high price.

A Russian-Singapore start-up, Gero, has recently joined the National Technology Initiative, which is creating an AI-based platform to slow down ageing. Last year, Gero raised $2.2m from Russian and international investors, with a total investment of about $7.5m. The company is conducting research with the European Batten Disease Consortium (BATCure), as well as New York University (on creating a molecule to combat antibiotic tolerance, results recently published in Science) and major global food companies interested in developing diet food.

“The chicken or the egg”

“An important competence is to create and sell the future, and that is why, for example, the startup Moderna at its very beginning employed superprofessionals not only from science, but also from finance and management, which is rare for us,” says Andrey Lomonosov, Deputy Head of the HealthNet NTI Legislation Working Group. “Now we all know Moderna as a successful company — a revolutionary in the field of RNA vaccines against COVID-19, but we can remember that back in 2017–2019, this company was burning more than $300m per year. To attract such investment, our startups simply have nowhere to grow competencies. In this sense, the example of a number of successful projects — confirmation of the hypothesis and creation of a prototype in Russia and entry into foreign accelerators — is illustrative. And there is already raising money and fine-tuning the product, often in the regulatory area, for developed markets in the US, Europe.”

According to Nataliya Ismagilova, representative of the EnergyNet Infrastructure Centre for International Activities, common barriers to exports include:

- difficulty in finding industrial partners/potential buyers in export markets;

- high export risks due to the lack of consulting support in terms of registration, licensing, tax and other public export market requirements;

- difficulty of obtaining investment/credit financing within export markets to finance operations/operating activities.

“The basic necessity for successful exports of startups is to have a reliable and well-established industrial partner in the export market,” explains Nataliya Ismagilova. “These are international accelerators, pre-seed and seed venture funds, venture divisions of large international companies. However, it must be borne in mind that the percentage of “cold” selection within such institutions is extremely low due to the high level of competition. Moreover, the vast majority of international acceleration programmes impose a requirement to localise the project in the export market, which becomes a virtually impossible requirement for some startups due to the impossibility of project/team relocation and the lack of local partners in export markets.”

Often our startups face the classic “the chicken or the egg” problem: investors/industrial partners ask to show proven export supplies, and potential buyers ask to show them local investors/industrial partners hedging risks in international supply and financial settlements.

Thus, according to Nataliya Ismagilova, technology startups wishing to export should move simultaneously in two directions — to find industrial partners/local investors in export markets, and to promote first exports of products and technologies themselves in order to verify the “product market fit” hypothesis.

They also need to contract a consulting firm with extensive experience in structuring projects and transactions in the relevant export markets. In doing so, it should preferably be localised in the relevant export market and have sufficient experience of actual projects and insider information regarding that export market. This, of course, increases costs. International (regional) accelerators and ventures are dealing with the problem, but here we come back to the selection problem described above.

Passed the quest

Nevertheless, NTI companies manage to make it through. In August 2021, the US Food and Drug Administration (FDA) granted approval for the sale of ExoAtlet II Russian medical exoskeletons in the US.

The Russian ExoAtlet project has developed an exoskeleton for the medical and social rehabilitation of patients with the consequences of spinal cord injury, stroke, cerebral palsy, multiple sclerosis and other diseases. The authorisation was handled by the company’s US office, which opened in 2018. In order to conduct clinical trials, ExoAtlet has passed the Good Clinical Practice ethics committee.

Previously, the ExoAtlet II has been medically certified in Europe (CE Mark), South Korea (KFDA) and Russia (RU). The company’s portfolio includes medical exoskeletons for adults (ExoAtlet I, II) and children (ExoAtlet Bambini).

“Our dream is to give people all over the world a chance to recover. To do this, we are creating new exorehabilitation techniques, new versions of exoskeletons, with which we are entering new markets. And each time, due to regulatory requirements, we have to re-validate their effectiveness and safety. These are always different quests that require separate resources and time, not always predictable in advance. The FDA is our next giant victory,” said Yekaterina Bereziy, co-founder of ExoAtlet.

The Russian company Intellogic (also a HealthNet marketplace) has received the European CE Mark quality certificate this year. This will enable it to sell the Botkin.AI system, which is designed to analyse and detect pathologies on medical tests, abroad. The first contracts will be signed this year.

Perm-based INSYTE Electronics, which is developing a platform solution for smart homes and energy efficiency management with support from EnergyNet NTI, also received a certificate of registration in the United States.

Even the UN has taken an interest in Russian inventions. At the begining of this year, the International Telecommunication Union announced the purchase of a scanner to detect solid and liquid explosives from the Russian company STC Ratek (SafeNet).

Joint production with Japan is being launched this year by Argus-Spectrum, which is introducing wireless firefighting technology (alarms, alerts, etc.) around the world. Together with Japan’s Hochiki, it announced the launch of the Ekho wireless fire alarm system in Australia in June. In the Russian market and CIS countries the product is known under the brand name Strelets-PRO. In 2020, Ekho passed the certification of radio communication devices for compliance with European EN54 standards in the UK. It is used at 150,000 sites around the world, including the Queen’s castle in Scotland, the universities of Cambridge and Eton, the State Hermitage Museum and the Tretyakov Gallery. In 2020, 30 new medical centres built across Russia as part of the fight against coronavirus infection were equipped with the Strelets-PRO radio system.

To undervalued markets

“I often hear “we want to go to Europe, the US” — yes, there is a lot more money in those markets, but it is also a lot more expensive to enter, especially to meet regulatory requirements,” notes Andrey Lomonosov. “Many of our startups with a ready-made product underestimate in some ways the markets of developing countries close to us: Latin America, Asia. From the few examples of small companies exporting independently in these regions, it seems easier to succeed, all other things being equal.”

But progress is being made in this area too. For example, domestic drone manufacturers have started cooperating with Brazil. In July this year, OJSC State Transport Leasing Company (GTLC), Industrial Drones LLC (Aeronet NTI) and the Brazilian company BirdView Drone BioControl entered into a trilateral agreement of intent to export Russian-made drones. The document was signed on the sidelines of MAKS-2021. The agreement provides for the leasing of domestic drones for agricultural work in Brazil. This is the first such project in the field of unmanned transport, a landmark for all innovative vehicle manufacturers in Russia.

STC Meditex, in consortium with Cardiomarker (NTI HealthNet market), which has developed the Acoustery service that allows you to “hear” in a person’s cough for signs of COVID-19 infection, this year launched sales in Uzbekistan, Indonesia, the United Arab Emirates (UAE) and Singapore.

Reach an agreement with the locals

In the EnergyNet market, as in many others, export entry is also hampered by industry barriers. These include, according to Nataliya Ismagilova:

- lack of universal standardisation of processes and technologies (need to bring products/technologies in line with technical standards of the export market);

- licensing/certification of activities related to any infrastructure works;

- a high degree of monopolisation of export markets in the energy sector.

Under these conditions, piloting of NTI EnergyNet projects, products and technologies in foreign markets is only possible in partnership with regional energy companies and/or research centres. This is the path that most successful startups take.

For example, the Novosibirsk company Energozapas is preparing to win over consumers in India and Saudi Arabia — the only Russian project to develop a new-generation gravity industrial energy storage, a finalist in the French nuclear company Orano (Startup call — 2019). Negotiations for supplies are underway with Indian energy sector companies SECI and Adani, as well as with the Abu Dhabi Catalyst Partners fund.

Another EnergyNet project is entering the Saudi Arabian market, the Kanatokhod, developed by Future Lab. It is the world’s first robotic tool for real-time monitoring and maintenance of power lines under voltage. A contract has already been signed with a local partner for a pilot project in Saudi Arabia. Pilot projects will also be conducted in Turkey and Greece.

And VOLTS, a supplier of energy storage systems and modern household energy solutions, signed a memorandum of cooperation with the large Malaysian firm ITRAMAS at the beginning of July.

Neuri LLC (“Neuronet NTI”), which is building infrastructure for the automated collection, analysis and storage of big neural data through human-machine interaction based on next-generation game attractions and computer games driven by signals from the user’s brain, is also entering markets this year in China, Singapore, India and Japan. The company has signed memorandums of understanding with local companies that will represent it in these markets.

Help from inside

In Russia, companies with advanced developments are supported through the roadmaps of the National Technology Initiative, RVC, Skolkovo Foundation and others.

This summer, the government approved rules for granting budget subsidies to exporters of high-tech products. With these funds, companies will be able to offset a large part of their R&D costs when creating new industrial products for foreign markets, as well as when bringing them up to foreign standards. The money will be allocated on a competitive basis — 11.9 billion roubles have been budgeted for this support over the next three years. The initiative was adopted as part of the national project “International Cooperation and Export”.

Other support mechanisms include:

• Corporate Competitiveness Enhancement Programmes (CCEP, Resolution of the Government of the Russian Federation dated 23 February 2019 №191), under which exporters may count on preferential loans for projects (trade and investment financing, including “construction” abroad), a guaranteed low interest rate for the entire duration of the CCEP, the possibility for additional preferences under other support instruments (transportation, certification, etc.).
• Programmes for subsidising transport costs (Decree of the Government of the Russian Federation dated 26 April 2017 №496).
• Subsidising the costs of registering intellectual property (Resolution of the Government of the Russian Federation dated 15 December 2016 №1368).
• Preferential financing (Decree of the Government of the Russian Federation dated 8 June 2015 №566).

“It must, however, be borne in mind that within each of the above support mechanisms there are significant limitations in terms of the selection criteria. The CCEPs do not cover the energy sector, transportation subsidies involve a competitive selection process that often does not allow startups to get it for the logistics of pilot deliveries, preferential financing applies only to technologies included in the list of high-tech products,” says Nataliya Ismagilova.

The expert believes that other measures are needed to reach more promising startups, including participants in the National Technology Initiative. These include, for example, preferential loans for export projects (product and technology supply, project piloting), preferential loans for soft landing programmes for establishing representative offices in foreign markets, and tax incentives for companies implementing product/technology piloting in foreign markets.