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Hans Christian BjørneInnovation Advisor
[email protected] | www.nordicinnovation.net
Update on Nordic Risk Capital Market
EU Finance Day 23/4 - Oslo
• Innovation Policies• Venture Capital• Borderless region • Functional Food• Creative Industries• Commercial Networks• Innovative Tourism• Innovative Building• Micro- and Nano technology• Environmental Technology• Technology Foresight• Food Safety
On-going Programmes
Nordic Innovation Centres´ two main objectives:
1. Stimulate increased Nordic innovation
2. Promote a borderless Nordic region
“a single, inner market”
The Nordic Council of MinistersBusiness, Energy and Regional affairs- Ministers of trade & industry
Nordic Innovation Centre
EK-NE/N + EK-NE/E- Committees of senior officials
Nordic cooperation – Nordic Council of Ministers
NICe’s view on innovation
– Innovations are important in all sectors
– Active participation from the entire innovation system necessary.
• (business sector, market, capital, knowledge communities, and
public sector)
Focus on Nordic Risk Capital
NICes overall objectives:
1. To stimulate the creation of new jobs and industries in the Nordic region
2. To remove barriers and to strengthen the Nordic private equity market.
>> Facilitating cross-border investments >> Attracting foreign capital>> Increasing level of Nordic cooperation>> Increasing level of Nordic experience sharing
Why important?
Because: Private equity financed companies grow faster
Source: SVCA Report ”Private equity backed portfolio companies’ development”
21,0%
7,0%
1,5%
7,3%
2,0%
0,0%0 %
5 %
10 %
15 %
20 %
25 %
Swedish PE portfoliocompanies
Companies on SE Total active Swedishprivate & public
companies
Sales Number of employees
Yearly average growth
Relative Market Sizes (% of GDP) in 2007
VC investment per GDP in 2007 in Europe and selected other countries and regions (by country of portfolio company approach)
1.
031
%
0.79
9 %
0.71
9 %
0.23
4 %
0.21
2 %
0.20
7 %
0.19
3 %
0.18
4 %
0.17
1 %
0.14
5 %
0.12
5 %
0.11
3 %
0.11
1 %
0.11
1 %
0.11
0 %
0.09
7 %
0.08
2 %
0.07
4 %
0.05
0 %
0.04
6 %
0.04
4 %
0.03
4 %
0.02
2 %
0.01
5 %
0.00
2 %
0.0 %
0.1 %
0.2 %
0.3 %
0.4 %
0.5 %
0.6 %
0.7 %
0.8 %
0.9 %
1.0 %
1.1 %
VC p
er G
DP (c
ount
ry of de
stin
atio
n ap
proa
ch), 200
7
Sources: EVCA and PEREP_Analytics, * NVCA/ PwC Moneytree and Bureau of Economic Research** IVC Research Center and CIA, *** NVCA/ PwC Moneytree and Bureau of Economic Research
– Nordic countries relatively well performing (VC per GDP)
• But far behind market leaders
– Foreign investments regulatory improvements in recent years
• Double taxation for direct investments mostly eliminated
in Nordic countries
• Still various legal obstacles to overcome, especially regarding
cross-border investments in funds that invests in companies
– Different fund structures and regulatory frameworks
– cause legal uncertainty >> hamper foreign investments
– Still too fragmented (across borders, sectors, stages)
The Nordic Risk Capital Market – room for improvement
– Dialogue and willingness to cooperate between the countries
– Political backing – well functioning venture market recognized as one of the
cornerstones of the Nordic innovation system
– National differences create opportunities to learn from each other
• Finland has taken many steps to remove legal obstacles and uncertainties
Double taxation for foreign investments in Finnish funds mostly
eliminated
• New fund of funds structure launched by FII which blends private and
public capital (60/40)
Governmental VC fund attracting private investor
The Nordic Risk Capital Market – cooperation
NICe – a true Nordic catalyst
– Public initiatives are vital for the development of well functioning
venture capital markets
– NICe is a true Nordic institution without national agenda or
considerations
– functions as a complement to the national public organizations and a
facilitator for Nordic cooperation.
– NICes initiatives involves private and public market players, Nordic
ministries, legal experts and academia
– Has engaged Nordic Investment Solutions, a Nordic advisory firm within
private equity, as competence partner and coordinator
Developing the food chain of capital
For the development of a well functioning common Nordic venture
capital market it’s vital to focus on all stages of the so called food
chain of capital.
NICe therefore has and will execute initiatives within:
– Seed & Early Stage
– Venture Capital (here defined as expansion)
Downloads available at www.nordicinnovation.net
Background: Performed studies since 2004 - >>
>> NICe has executed a number of inititiaves within the expansion phase of venture capital.
The Nordic Venture Capital Forum
A reference group with leading public and private market playerswas formed for the venture capital initiatives.
Representatives from the private market:
HealthCap (S) - Anki Forsberg, Partner and Chief Administrative Officer
CapMan (FI) - Petri Niemi, Senior Partner and Head of Technology
BaltCap (EST) - Peeter Saks, Managing Partner
Northzone Ventures (N) - Tellef Thorleifsson, General Partner
Representatives from public market players:
Sjätte AP-fonden (S) - Cecilia Gross Friberger, Portfolio Manager Venture Capital
Vaekstfonden (DK) - Christian Motzfeldt, CEO
Tredje AP-fonden (S) - Claes de Neergaard, CEO, Industrifonden, Chairman
New Business Venture Fund (IS) - Jon Steindor Valdimarsson, CEO,
Nordic best practice studies, 2006 & 2007:– Lacked structures to compete successfully with foreign funds.
– Limited Partnership seen as the only appropriate vehicle for
venture capital funds by international investors.
– Lack of favorable tax treatment and trust
– Investors expected full tax transparency
– All the Nordic countries (except Denmark) had disfavourable
legal and/or tax related issues
• creating obstacles for international investors.
– VAT on management services to the fund – non-recoverable
Obstacles to Nordic Venture Capital Funds
Mannheimer Swartling
Borenius & Kemppinen
Wikborg, Rein & Co.
Plesner
Deloitte
Nordic Investment Solutions
Nordic Council of Ministers > appointed Task Force to follow up on the recommendations of the NICe reports.
2008 study:
THE NORDIC RISK CAPITAL MARKETA Review to Support Nordic Venture Capital Policy
by Professor Markku Maula TKK Helsinki University
A Review to Support Nordic Venture Capital Policy
1. Must work toward fully integrated market.
– Cross-border, -sector, -stage
2. Need higher levels of investments in early growth stages.
Problem:
Institutional investors not investing in start-ups due to high risk and long-term yield expectations
>> creating an equity gap
Recommendations for further development
3. Work toward Mutual Recognition of fund structures by removing remaining legal barriers and uncertainty, and eliminate the need for permanent establishments.
>> Attract foreign investments and facilitate cross-border investments
4. Complimentary measures
>> Nordic Venture Fund Program, Business Angels matching, etc.
Problem:
Variations in national fund structures and regulatory environments cause uncertainty
>> obstacle for cross-border fund of fund investments
Recommendations for further development
Feb 09: Nordic Council of Ministers: Committee of Senior Officials EK N/NE
– Asked Nordic Innovation Centre (NICe) and Finnish Ministry of
Employment and Economy to gather public VC investors to
discussion.
– NICe to update status in each country
Recent developments
• Venture Capital:– Follow-ups now being planed:– Legal issues regarding the establishment of funds– Mandates for national investors – still an obstacle?– Funding for private venture capital firms – a potential Nordic
program?– Nordic Public Investor Summit, Copenhagen (September?)
Going forward – NICe’s current and planed initiatives
NICe will continue to focus on Venture Capital and on Seed & Early Stage
• Seed & Early stage:– Nordic Seed Capital Initiative 2009 now in execution– Formation of the Nordic Seed Capital Forum– Writing of “Challenges and Initiatives for the Nordic Seed Stage”– Nordic Seed Capital Summit, Stockholm, June 4
• Could a Nordic inititive be created to facilitate increased Nordic cooperation, increased visiblity for the seed stage and and a joint Nordic voice towards political decsion makers?
Can we establish a Nordic seed community that can interact efficiently with entrepreneurs, international players and the venture capital community?
Nordic Seed Capital InitiativeBuilding blocks: Nordic Seed Capital Forum – a reference group for the initiative and for the Nordic seed segment towards decision makers with key organizations from each country as participants Challenges and Initiatives for the Nordic seed stage - a description of joint challenges and suggested solutions and initiatives
Nordic Seed Capital Summit in Stockholm, June 4
Nordic Public Investor Summit in the planningOwner of the initiative Coordinator
Nordic Seed Capital Forum
– June 4th, Stockholm
– First gathering of Nordic public and private seed stage investors
– Facilitate discussions among investors and among investors and
policy makers
– Nordic seed stage report: “Challenges and Initiatives for the Nordic
Seed Stage”
www.nordicinnovation.net/seed
Nordic Seed Capital Summit
Nordic legal project report (TBC)– Description of national regulatory
changes since last report– Description of planned regulatory
actions– Update on legal and taxation
obstacles for foreign investments in nordic risk capital funds
– Nordic and national recommendations
– Description of mandates of national public funds
– Changes in mandates from 2004– Description of obstacles caused by
mandates of public funds
In the planning
– Well functioning risk capital market essential for innovation and job
creation
– More integrated market (sector, border, stage) needed to foster high-
growth Nordic companies
– Removal of legal barriers and increased Nordic cooperation will
stimulate cross-border investments and attract foreign competent
capital
– NICe’s focus is on the food chain of capital with initiatives within:
– Seed & Early Stage
– Venture Capital
>> NICe is a true Nordic facilitator developing Nordic markets
In Summary
Thank you for your attention!
Questions may be sent to:
Hans Christian Bjørne
www.nordicinnovation.net