How doyou view the innovation technology market as of today? Has it advanced over the years, what are the problems, and what should investors, both domestic and international, be focused on?

"The market has a wide range of problems. The biggest one today is the lack of really promising projects. The system that was designed to prop up "seed" stage projects just isn't working anymore. Five years ago a $30,000 grant was considered to be pretty good, but today it would hardly sustain two permanent support staff, let alone actual work. It's absurd! Moving further, let's talk about expert commissions, 70 percent of whom are scientists. They may rave about all of their "interesting" projects but there's practically no consideration or evaluation of their prospects for commercialization. This just isn't interesting to them. Therefore they just continue to support routine research. Universities and research institutes have no incentive whatsoever to seek marketing opportunities for their projects." What's the reason?

"First of all, their leaderships fear this would cause staff to go into business and no longer generate ideas for them and, second, who owns intellectual property is very obscure. Most projects belong to the state, so neither the university nor a research institute can claim ownership, not to mention designers themselves. If an author attempts to take his design out to the open market, he can even be sued. There have even been instances of prosecuting such people for espionage when authors were caught as they were about to take their designs abroad. What we need are legislative amendments: the author must either be granted an exclusive production license or be able to share ownership with his research institute." Let's get back to the funding issue "There's just too few funding mechanisms for small innovative businesses in addition to "three Fs" (family, friend and foe) and "outlandish" business angels. Venture funds prefer to avoid risk, despite what they say. There really needs to be more governmentbacked support for start-ups." You talked about the lack of promising projects, what's the reason for this?

"We are now reaping the fruits of an HR slump inherited from the 1990s when young people were enthralled with commerce rather than science. After they graduated, they went to the United States, Europe, Israel, what not. So we have lost a whole generation of researchers and scientists while commercial firms have hired many certified physicists, mathematicians, biologists or chemists as directors. There are

other problems too. For instance, some government officials in charge of innovation are barely aware of what they are doing and what it is all about. I believe each official working with innovations should have consultants from among scientific and business circles that are well-versed in the field, and such people must have a way of really impacting decisionmaking.

What's needed to break the logjam? "I have suggested that an association be set up to comprise three groups of players: businesses willing to apply innovation technologies in industry; designers that include universities, researchers, and small innovation businesses; and venture investors. Business angels, venture funds and grant programs should also join. It is this association that must determine what sectors need funding most. Monitoring of industries is mandatory to see where innovations are required, and technology developers and consumers ought to be linked. Instead we have now, for example, a unique welding system in aircraft manufacture whereas in shipbuilding they still weld the oldfashioned way. So there is no interaction between the two sectors. If we had a unified system, we could apply techniques already available for real technology transfer.

So this association should be pro-active in probing into where innovation is needed as well? "Certainly! Otherwise we will be facing what we have today: too many projects that no one needs. My idea is a regional venture cluster-a system that encompasses all players in the innovation market-that clearly specifies who trains personnel, who develops projects, who funds, and how and where projects must move (e.g., from a business incubator to a technopark, then to an industrial park, and so on). At each stage there must be entities that provide funds, offer staff, develop projects, etc. But we do not have it yet."

Can you descibe one of your projects? Let's take my business center as an example. I analyzed the market seven years ago and realized that there were no A or  class office premises in the city-only Ñ class, old revamped facilities. So I decided to build an A class one. But to achieve that, I needed to make it a "smart house." There was no "thinkdesign" construction system in Nizhny, so I turned to Moscow suppliers. Their price estimates stunned me - I would have been paying them back indefinitely. So I summoned my IT specialists and tasked them to develop such a system. It took them 18 months. The we tested it and and put into prac-

tice. The cost was five times lower than that the Moscow bid. Today, we've built a dozen premises like this and we're now in a dominant position in the nationwide know-how market. Not merely adjusting foreign patterns as Moscow and St. Petersburg do-we have blazed our own trail. We never even had a "seed" stage - we only had a problem to solve.

Nizhny's Ankudinovka technopark has been widely heralded as the dream technopark of thefuture. What's your feeling? "I sat down one day, analyzed project documentation for Satis (technopark near Sarov

Nuclear Center, Nizhny Novgorod Region) and Ankudinovka, and summed up a number of programmers who were expected to work at both sites. It proved double the number of all programmers in Nizhny Novgorod Region. Ankudinovka is a far-reaching project stretching way into the future, but I'm concered that our government officials have no expert councils to aid them. There is no independent evaluation, which is crucial." How do you teach innovation to students at the Higher School of Economics? "I refer to our program as a training business incubator. We train students using authen-

tic innovation venture management curricula, and from their fourth year at school and onward they study half time and work half time - it's a unique approach that works. Professors account for less than half of their teachers. Most are professional top managers, business people, and consultants. Lectures are few: we use modern educational techniques, from brainstorming to case studies. Students zero in on real project challenges led and aided by top managers. Teams of students representing different years of study form to push project ideas to implementation."

The power of ideas paves the way to a promising future

The history of MERA Group shows how investing in R&D is necessary for successful development. Right after its foundation in 1989 MERA bet on innovative projects. The company's background reveals many examples how a promising technology trend became a successful business.

"The first stage of MERA's activity at the end of the 80s was connected with R&D in the field of aerial measurement. At the beginning of the 90s MERA used newlyly emerged opportunities to enter international markets and began to develop software for major foreign companies. Our investment in the installation of international quality programs, attraction and development of skilled personnel, modern infrastructure and R&D helped us secure successful and long-term cooperation with international corporations as Alcatel-Lucent, Ericsson, Nortel, Siemens Mobile and others," Ponomarev explains.

Later the experience accumulated in the field of software development allowed the company to create software products under its own brand. In 2005 an independent company named MERA Systems was set up to focus on these products.

Today MERA's branded VoIP solutions are used by hundreds of operators in 74 countries. In 2007 MERA Systems founded MFI Soft to implement large-scale projects to develop and implement complex NGN-solutions for major Russian and CIS operators.

Setting up your own institute

"We still pay a lot of attention to training skilled personnel," Ponomarev continues, "in 2004 MERA Group set up the Nizhny Novgorod Institute of Information Technologies (NUT) using the facilities of the company's training center. More than 350 graduates of the Institute have become MERA's employees after special internship sessions."

MERA encourages all of its staff to be creative resources. "The potential to contribute to the permanent generation of innovative ideas in the company is never ending," Ponomarev believes. Good ideas need development, so earlier this year MERA Group's shareholders made a decision to set up its own incubator of innovative projects. The new venture is

called Mera Labs and its sole purpose is to focus on nurturing "seed" ideas and early stage development. Today research engineers of Mera Labs are developing such projects as creating new architecture for the future world web: a "semantic internet", boundlessly scalable storage of information, search engines for finding sources of real time video and audio content, a national network of digital television using the infrastructure of a cell operator etc.

"Mera Labs issues periodic reports on its research and many of these have been accepted at prestigious international conferences and we have received several patents for our invesntions," Ponomarev adds.

The role of investment capital

With so many irons in the fire and its commitment to R&D, MERA depends on Russian as well as foreign investors to implement its projects. Mera Labs, for example, uses what it calls the "portfolio" approach to investment and develops projects with different implementation horizons: from one year to five or even ten years. The way it attracts funds are also staged differently: a strategic partnership for research, an investor for project start-up and promotion, then joining the project with intellectual property, selling the license for patents received and using venture funds of international IT corporations and others.

An open window of opportunity

"Private investors and the founders of Mera Labs are always open for joint development of new technological ideas and participation in business projects," Ponomorev says, "wherever the company experts' competence can play a key role." The negotiations which Mera Labs is holding with potential partners now, is "proof of the keen interest international research-scientific and investment organizations have in implementing innovative IT projects in Russia", Ponomarev says.