Financing the Knowledge SocietySeed and Venture Capital Financing, the roles of the public and the private sector

Claes de Neergaard

CEO Industrifonden

The commercialisation of R&D – the driving forces

The technology transfer challenge – how does Sweden tackle it?

The regional dimension of venture capital financing

Can EU policy to improve technology transfers2007-2013 benefit from the Swedish experience?

T H E M E S

The commercialisation of R&D – the driving forces

The technology transfer challenge – how does Sweden tackle it?

The regional dimension of venture capital financing

Can EU policy to improve technology transfers2007-2013 benefit from the Swedish experience?

T H E M E S

What do we get out of R&D investments?

Financial Times Nov 8, 2005

0 1 2 3 4 5

Businesssector

Universities& colleges

Governmentorganisations

R&D expenditures in relation to GDP 2003

Per cent of GDPSource: OECD 2005

New ZealandIreland (2001)

NorwayUnited Kingdom

Netherlands (2001)CanadaFrance

BelgiumDenmark (2001)

GermanyUnited States

KoreaJapan

FinlandSweden

Israel

Commercialisation of R&D– EU vs. the US

• Stronger output from US research clusters

• Stronger tax incentives in the US

• Stronger incentives for US universities

• The US capital market is more powerful

• US military spending boosts research

• US one homogenous market.EU still too fragmented

EU does not catch up!

The road map from idea to invoice

Technology transfer

Basic Applied

R&D

Market

Collaboration industry –

research organizations

Licensing

Creation of a

new company

Good ideas can end up in

Knowledge Market

©Jan Edling

The Valleyof Death

“”

The commercialisation of R&D – the driving forces

The technology transfer challenge – how does Sweden tackle it?

The regional dimension of venture capital financing

Can EU policy to improve technology transfers2007-2013 benefit from the Swedish experience?

T H E M E S

Enhancement of Technology Transfer – some Swedish measures

• Increase government funding for R&D

• Focus on cutting edge research in centres of excellence

• Public/private partnership program in sixindustry branches

• Improve the effectiveness of both Tech Transfer Offices in universities and Joint Research Institutes

• Innovationsbron – a dedicated financing vehicle for the commercialisation of research

• Maintain a strong Industrifonden

• A welcoming approach to venture capital

Basic R&D Applied R&D Pre-seed Seed Start-up

Financing in different stages

Expansion

Commercial financingPre-commercial financing

Private sector

Public sector

Conclusions from a joint US-EU report

• The venture markets in US and EU invest too little in early stage start-ups

• Constitutes a “market failure”

• Public sector measures are justified to plug this gap

• Public measures should

– work with markets and not crowd out private investment

– support funds with the necessary track record and economies of scale

Source: Department of Commerce and EU Commission, 2005

Venture capital investments in EU-15 2004

SeedEUR 148

m

Total investments EUR 12,000 million

Start-upEUR 2,200 million

ExpansionEUR 7,900 m

Market

Criteria for an effective innovation system

Idea

Increases flow of high quality business ideas

Provides rigorous screening

Involves business angels

Brings in marketperspective early

Based on centresof excellence

South

WestEast

Stockholm Uppsala

Umeå

Luleå

Seed capital

Three focus areas

Sevenregionalcompanies

Infrastructure - Incubators

Academia – Business co-op.

Invests in high-tech companies in ICT,Life Science and Industrial and Energy Ventures

Direct investments in about 100 companiesCo-owner in 11 regional VC-companiesand Innovationsbron

Independent trust set up by the Swedish government in 1979

Total equity: SEK 3.2 billion Invested capital: SEK 1.6 billion

Regional venture capital companies

Venture capital investments

0.230.21

0.160.15

0.12 0.12 0.11 0.10 0.100.08

0.07 0.060.04 0.04

Sw

eden UK

Spa

in

Den

mar

kH

unga

ryP

ortu

gal

Fran

ce

Nor

way

Eur

ope

Net

herla

nds

Finl

and

Bel

gium

Ger

man

y

Italy

Percent of GDP

EVCA 2005

The commercialisation of R&D – the driving forces

The technology transfer challenge – how does Sweden tackle it?

The regional dimension of venture capital financing

Can EU policy to improve technology transfers2007-2013 benefit from the Swedish experience?

T H E M E S

The regional dimension of venture capital

• Private sector venture funds usually covers Sweden or the Nordic countries from one or several capitals

• There is room for smaller regional venture funds for early stage investments in proximity to companies

• Co-investment funds copied on the model developed in Scotland are helpful additions

• Proximity to companies is an advantage but company selection can be too much influenced by regional/local preferences

• Regional investment funds should not be seen as a tool of regional policy but of innovation policy

The commercialisation of R&D – the driving forces

The technology transfer challenge – how does Sweden tackle it?

The regional dimension of venture capital financing

Can EU policy to improve technology transfers2007-2013 benefit from the Swedish experience?

T H E M E S

Can EU policy to improve technology transfers benefit from the Swedish experience ?

Can EU policy to improve technology transfers benefit from the Swedish experience ?

• Measures to stimulate commercialisation of research must get a high priority

• Create two European incubator support programs;one for Life Science and one for Technology

• Focus on national and European R&D centres of excellence

• Positive attitude to mixing financing from the Commission, European Investment Bank, European Investment Fundand national sources

• Do not go too far in defining “European interest”. Good research benefits all EU-countries