Hatchlings May Have to Fly the Coop

U.S. foreign aid cuts threaten a successful Russian incubation project headed by Atlas Group in Herndon, Va.

P> In medicine, incubators provide premature babies with a controlled environment where they can grow and develop more fully. That concept has crossed the bridge into the business world and international waters into Russia. Russian engineers have adopted the incubation principle as they grow and develop a high-tech community that they hope will be a hotbed for technological innovation.

In 1994, Leonid Kelner of The Atlas Group in Herndon, Va., and Alistair Brett of Virginia Polytechnic Institute in Blacksburg, Va., approached the United States Agency for International Development's Mission to Russia in Moscow with an idea -- the International Business and Technology Incubator. The USAID liked it and gave them a $2 million grant for two years.

As a result, a Russian high-tech community has shown the first signs of germinating. "The environment is right," said Kelner. "We are building the Lockheed Martins of Russia."

How are Kelner and Brett doing it? This is how the business incubation process works. An inventor -- or in Russia, an author -- develops an idea and presents it to a team of 14 businessmen and engineers. If the group feels the idea has strong market potential, the Moscow-based IBTI funds the project and oversees its development from concept to product.

Traditional incubation has worked in the United States for at least 20 years and in a slightly different format. An entire facility will work as the incubator, housing several newborn companies that will grow and eventually move out. IBTI, on the other hand, prefers to keep the scientists and engineers in their own environments.

Currently, the Russian high-tech community is dominated by laser optics, night-vision devices, composite materials, plasma advancements, nuclear technology and biomedical research. To date, the IBTI has funded seven projects and is funding 21 more.

"It's much more successful than we thought it would be," said Brett. "We are at a point now where [we] thought we would be two years from now."

One highly successful project is a Russian-English CD-ROM dictionary. In the first month, 6,000 copies were sold in Russia, and six months later 60,000 were sold.

The IBTI idea was driven by several forces. Kelner, a native of Russia, wanted to keep Russian scientists in their homeland. "We didn't want them to end up in another country," he said. "We wanted to keep them in Russia to help develop business." Atlas Group was formed about seven years ago to do business in Russia.

The USAID, which assists U.S. companies entering foreign markets, wanted to help Russia build new industries and saw that a high-tech community might be the answer. But the country needed a push. "The whole idea was to help the technology move from the lab to the marketplace," said Bill O'Callaghan, the small business adviser for USAID.

IBTI has set a budget for itself of up to $25,000 for each project. The U.S. money, which is gradually given to the project, goes a lot further in Russia. Brett explained that IBTI tries to pick projects that will show results within 12 months. "Right now we have about 30 projects that deserve the funding, but we don't have the money," said Brett.

Kelner thinks the IBTI project can help American companies learn to do business in Russia. Many U.S. companies want access to that market but haven't succeeded, he said. "We're looking for local companies [in Washington, D.C.,] to consider incubator as a resource to enter the Russian market," Kelner said.

And Atlas' success has inspired others. In fact, O'Callaghan has seen at least three proposals to duplicate Atlas' success in other countries. But as the grant nears its end in June, those involved in IBTI worry about the future. "When we started, we thought we could do 1,000 projects a year," said Brett. "Our dilemma is that we don't have enough money."

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