How did Ph.D. thesis develop into a business on creation and selling of thermoplastic elastomers, how to get grants for the development and why is business well developed in the crisis? This and many other things were told by the founder and director of the company “VR-Plast” – Factory “Standard Prof®” Vasily Novokshonov in an interview to Technopark “Idea”.
- Vasily, tell us about your business on the development of thermoplastic elastomers. Probably, for the average citizen that word is even not familiar...
- Thermoplastic elastomers (polymer compounds), (TPE) are materials - analogues of rubber, but unlike rubber during heating and melting, it can be processed into specific products, for example, in seals, car carpets, cable insulation. The most represented TPE on the Russian market (abbreviation for thermoplastic elastomer) are manufactured in Europe, China and Turkey. Branch of production of TEP in Russia is at a nascent stage, manufacturers can be counted on the fingers of one hand. However, the material is very popular in Russia, because its scope is very wide; for example, in the home it is used from the toothbrush handle to shoe soles.
- What is the feature of products manufactured in “VR-Plast”?
- Of course, thermoplastic elastomers have been known for a long time, but we were able to optimize the composition of these mixtures and at the same time we were able to get a good economic effect. Rubber is actively replaced by TPE, as the use of TPE is economically more profitable: it is reduced capital expenditures on the organization of production, lower energy intensity of production, and finally TPE is eco-friendly material.
- Did companies-consumers evaluate the quality of the product?
- I think the fact that we have about 400 customers of TPE and its products in Russia and the CIS speaks for itself. “VR-Plast” takes the leading positions in Russia on manufacture of products from thermoplastic elastomers. Total revenue for 2015 was more than 220 million rubles. We have shown high productivity: output per employee is 7 million rubles per year (or more than 40 tons/person of finished products per year). This includes all professionals engaged in the production, R&D and sales.
- Hardworking and highly productive team is one of the main components of the company. How do you recruit employees?
- When creating business we had two main problems: lack of current assets and lack of qualified personnel. We were able to attract working capital in sufficient quantity only two years after the beginning of the project; in addition currently we are attracting loan funds at the rate of 19.5% per annum. We had to teach personnel by ourselves, this is the most important in our production. Therefore, the level of wages in manufacturing is significantly higher than the industry average.
- Vasily, you have started to talk about creating the business. Tell us why did you decide to work in this direction?
- During training in postgraduate study of the Kazan National Research Technological University (Kazan Chemical and Technological University) I participated in many developments of applied nature related to the introduction in the production of polymer compounds. There were appeared my own ideas, and visit of various trainings and master classes, including organized by Technopark “Idea”, the Investment and Venture Fund of the Republic Tatarstan, gave an understanding of how correctly to implement my developments. To create something new and unique – it is not even half the battle, it is less. More often success comes to those who develop the trivial already known ideas in the market.
- Study in post-graduate course aroused interest in the subject, and when did business start?
- The prerequisites for the creation of the production company “VR-Plast” became my five-year developments in the field of compositions of thermoplastic elastomers. In 2009, I defended Ph.D. thesis “Compositions with improved deformation and strength properties based on mixtures of thermoplastic polyolefin with rubbers”. Then from 2009 to 2012, I was going deep into more applied topics of TPE based on styrene block copolymers. At the end of 2012 I registered LLC “VR-Plast”. Since February 2013 for two years we were selling thermoplastic elastomers, which were being produced in Tolyatti on contract manufacturing. The market of thermoplastic elastomers in Russia was more than 4 billion rubles per year, we have developed rapidly. But in parallel with the sales we have conducted and other activities: in 2013 the company won the grants for R&D under a program “START-1” in the amount of 1 million rubles from the Investment and Venture Fund of RT and 1 million rubles from the Foundation for Assistance of Innovation. Through obtaining these grants it was developed and patented new formulations of thermoplastic elastomers and technology to produce seals. Grants, received from Funds, were of course simplified the implementation of new developments and research, but actually we already had a source of income, which we have developed and diversified. The money, received in the form of grants, require complex reporting, but it assistance in the initial stages of development is very significant.
- Did the profit from sales go to increase production capacity?
- Yes, in the mid-2013, at the expense of profits from sales of thermoplastic elastomers, we acquired the first production line of seals. But that still was not enough. However, at the end of the year we gave us another gift - in the fourth quarter we became winners of a program “Leasing-grant” from the Ministry of Economy of the Republic of Tatarstan for the partial financing of leasing. And then we were able to lease equipment for the production of plastic hoses with braid and without, one-, two-, and three-layers. Our garden hoses made of thermoplastic elastomers significantly surpass analogues of PVC and are cheaper than rubber by 30-40%. There are no analogues in Russia.
- What was the profit in the company’s first year of operation?
- In 2013, we sold products in the amount of more than 43 million rubles. While at the year end the company had only 6 employees.
- Was the next year, 2014, as successful?
- I think now we can say that 2014 was more successful for us: we were able to significantly expand own facilities for the production of seals by buying another 4 lines. In addition, we had new products: coextruded sealants for windows and doors (over 100 items), garden hoses (over 20 items), fire-resistant seals.
- But at the same time, work was being continued on the new products, wasn’t it?
- Yes, on the results of the execution of the design and development of the company, at the end of 2014, we won a grant of 2 million rubles for the continuation of R&D from the Foundation for Assistance of Innovation. Also at the end of 2014, we won a leasing grant in the amount of 2.1 million rubles in partial funding of leasing for the purchase of own equipment for the production of thermoplastic elastomers. The volume of sold production of “VR-Plast” for 2014 amounted to more than 106 million rubles. At the end of the year the company had already 20 employees.
- And in 2015 you began to produce thermoplastic elastomers, didn’t you?
- Yes, in 2015 we launched our own production line for thermoplastic elastomers. The company has mastered a full cycle of production from raw material to final product. The full cycle allowed to reduce transportation costs of raw materials. Besides, now we can quickly produce thermoplastic elastomer with various characteristics for our own needs. In the same year we acquired new lines for the production of seals, line production of thermal expanding profiles. A full warehouse of finished products of about 1000 sq. m. also worked. At the end of 2015, we had more than 40 employees. For the year we sold products worth more than 220 million rubles.
- It seems that the word “crisis” is not familiar to you. How has this year been for you?
- To date, “VR-Plast” is the engineering company that creates new competitive products, which has few analogues in Russia. The company has one patent for utility model, two invention patents and three registered trademarks, including the factory “Standard Prof®”. In 2013, the cost of the intellectual property on the independent evaluation of LLC “Pulsar Ecosystems” was 5.9 million rubles. This year we have continued the expansion of the production base; have introduced a new direction – the production of waterproofing profiles. Additionally, we bought the second line for the production of polymer compounds.
Today the production areas of the company are divided into areas such as:
The development plans for 2016 are the significant expansion of production capacity, the increase in volumes of sold products up to 2000 tons/year and the expansion of the product range.
- What motivates the company in crisis?
- The main driver of the company’s development during the crisis years is the replacement of imported polymer profiles of Russian, which before the crisis took market share of less than 25%. Therefore, in spite of the contraction of the market in the crisis, every year we double the volume of production and sales, we leave on qualitatively new level of factory production .
- What are your plans for 2017?
- We plan to construct our own building, while maintaining the dynamics of development, two years later we will not fit on the leased 4,000 sq. m. today. We plan to deepen in the subject of polymer compounds, to introduce to the market new unique brands, on which research is being conducted at the moment in the laboratory of “VR-Plast”.
- Will you still participate in competitions and grants?
- In 2016, we won in a program “Commercialization” of the Foundation for Assistance of Innovation and currently we are executing state contract for the funds received. Now of special interest are grants for the purchase of equipment, in this direction, we plan to apply for grants in 2017 and 2018.
- Vasily, thank you for the interesting interview and good luck in your business!
Text: Press Service of Technopark “Idea”
Photo: “VR-Plast”
