Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
InnovationandPPPfinancingProductiveandcounter‐productivemeasuresfrompublicpolicies
PierreKladny,ManagingPartneratValleyRoadCapitalandPresidentSECAforFrenchspeaking
SwitzerlandFebruary2014©
Topics
1. InnovativeStartupsandSMEsinSwitzerland,whatistheproblem?
2. CurrentstatusofSwissgovernmentalsupportforinnovation.
3. Majorhurdlesandconstraintsaheadandhowtoaddressthem.
4. Isthe(current)non‐interventionistapproachacceptable?
5. Whatareinvestmentprofessionalspromotingandhowtobepragmaticaboutit?
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 2
InnovativecompaniesinSwitzerland
• Switzerlandisforyearsontopoftheinnovationbest‐in‐classlist.
• Withonly3.6%ofyoungpeopleunemployed,Switzerlandenjoysaverycomfortableposition.
• Theentrepreneurialratio(6%)isslightlyhigherthanEuropeanaverage(5.4%)butnotsignificantly.
• Withnearly2%ofGDPinvestedinacademicR&D(CHF9bn/year),Switzerlandenjoysastronggovernmentalsupportforinnovationatacademiclevel.
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 3
InnovativecompaniesinSwitzerland(2)
• Innovativeentrepreneurscreateeveryyearabout2’000companies,whichcanbeclassifiedas“high‐tech”.
• Thedepletionrateisroughly50%after5yearsofexistence.
• Theaveragenumberofemployeesislow(5).
• ThecompoundcontributiontoGDPofyounginnovativecompaniesislow(~1%).
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 4
Whatistheproblem?
• OnlyahandfulofinnovativecompaniesreceiveVCfinancing(<2%).
• Veryfewinnovativecompanieseverreachmorethan100employees(<0.5%).
• Serialentrepreneursarealmostnon‐existent.
• Exitvaluationsarelow.• Taxationcanbearealdeterrent(>90%taxrates).
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 5
CurrentstatusofCHgovernmentalsupport
• SupportisgrantedatFederalandCantonallevels.• MainFederalprogram:CTI(CHF150m/year)tofinanceR&Dinpartnershipwithacademia.
• SomemarginalprogramsinthefinancingofGreentechnology.
• Cantonalprogramsareverydiversebutareessentiallyintheformofsmallamounts(CHF50k‐100k)grantedasloanstoearlystageinnovativecompaniesorestablishedinnovativeSMEs.AverageamountperCanton:CHF25m/year.
• TotalyearlyamountisapproximatelyofCHF600m.
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 6
Howdoesthiscompare?
USAhasthebulk(0.35%ofGDP)andEUislaggingbehind(0.06%).SwitzerlandisslightlybetterthanEU(0.1%ofGDP).ButthisisnotthecasewithacademicR&Dbudgets!
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 7
Boulevard of Broke Dreams, J. Lerner©
EntrepreneurialattitudeinCH
• Notinvolvedinentrepreneurialactivity,buthaveapositiveperceptionoftheirownentrepreneurialcapacityandtheopportunitieswheretheylive–>18%.
• Seegoodopportunitytostartafirmintheareawheretheylive‐>33%.
• Theyhavetheskillsrequiredandknowledgetostartabusiness‐>37%.
• Fearoffailure‐>36%.• Entrepreneurialintention‐>7%
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 8
Majorhurdlesandconstraints
1. TransformationofacademicR&Dintofastgrowingenterprises.
2. Taxationofinvestors.3. Stockmarketforinnovativestartups(exit).4. Relaunchearly‐stageVCactivity
(ecosystemandperformance).5. Reducecostoffailure(bothfinancialand
social).
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 9
AcademicR&Dtoinnovativebusiness
• WithinALLuniversitiesteachandencourageentrepreneurialactivity(sabbaticals,endowmentfunds,programs).
• CreateeffectiveandbusinessfriendlyIPtransferframeworks.
• Fundincubatorsandaccelerators.• Invitesuccessfulalumnaetospeakandencouragewould‐beentrepreneurs.
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 10
Taxationofinvestors
• Thecurrenttaxationregimeforcapitalgainsis0%...But!
• Regular,businessangel‐typeinvestorsaretaxedasprofessionalsandpayupto48%taxesoncapitalgains.
• Thisdifferentiationisappliedarbitrarilyex‐post,creatingastronguncertaintyandfear.
• InvestorsALWAYSreasonintermsofrisk/rewardratioAFTERtax.
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 11
StockmarketforEuropeanIPO’s
• TheaverageUSVCIRRis17.9%,whiletheaverageEuropeanVCIRRis1.06%.
• Themaincausesare:– Screeningskills(longerexperienceintheUS).– Useofconvertibleinstruments(higherleverageonvaluation).
– Replacementrateofmanagingfounders(manager‐shareholderagencyproblem).
– Exitvaluations(NoNASDAQinEurope).
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 12
Source: RECAF 2003
Early‐stageVCactivitytopromote
• Becauseoftheperformanceissuesdescribed,institutionalmoneyhasdriftedawayfromEUVCactivity.
• Iftheplayersintheeco‐systemimprovetheirperformance,investorswillreturn,butitwilltaketime.
• Thegovernmentcanplayanactiveroleinfosteringsuchecosystemwiththerightdosageofsupportandfinancing.
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 13
Reducecostoffailure
• Bankruptcylawispunitiveandoverlyfavorabletocreditors.
• Personalresponsibilityofboardmembersbecomescommonplace.
• Publiccondemnationoffailureisstillthenormandfailedentrepreneursareostracized.
• Bank’s“blacklistsarestillthenorm”.• Thishasaverynegativeimpactonentrepreneurialactivity,bothinconversionratesandrecyclingofentrepreneurialexperience.
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 14
Isnon‐interventionismacceptable?
• TheSwissgovernmentisnotoriousforavoidinganyinterventionintheprivateeconomy,whichcouldskewcompetitionrulesamongbusinesses.
• ThishassometimesdriventodogmaticapproachesofinnovationfinancingandaclearimbalancebetweenacademicR&Dbudgetsandtransformationrates.
• Cross‐overfinancing(fromacademiatobusiness)shouldbesupportedbytheState.
• Legalframeworkshouldbeamendedtoaddressweaknessesofcurrentsystem.
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 15
Proposals
Therearefourmajortopicstoaddress:1. Getthelawsright(especiallybankruptcylawsandadmincosts).
2. Ensureaccesstocutting‐edgetechnology(reduceIPfriction).
3. Createtax‐incentivesandremovebarriers.
4. Trainpotentialentrepreneurs
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 16
Majorcommonerrors
• FieldofDreams:“Builditandtheywillcome”• Timing:Mostcommonmistakeistohaveprogramswhicharetoolongortooshort.
• Sizing:Understandthesizeoftheproblemandthenumberofcompanies(tomuchmoneywillbeasbadasnotenough).
• Badimplementation:Civilservantsarenotventurecapitalists.
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 17
Bestpractice:Fundoffundstructure
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 18
Boulevard of Broke Dreams, J. Lerner©
Bridgingthegap…
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 19
Without breakingthebridge!
Thankyou!
Contactdetails:[email protected]+41229061020
February19,2014 IGNITINGGROWTH:THEEMERGINGLANDSCAPEFORINNOVATIONFINANCING 20