Financing the Knowledge Society Seed and Venture Capital

Financing the Knowledge Society Seed and Venture Capital Financing, the roles of the public and the private sector Claes de Neergaard CEO Industrifonden

THEMES 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 transfers 2007 -2013 benefit from the Swedish experience?

What do we get out of R&D investments? Financial Times Nov 8, 2005

R&D expenditures in relation to GDP 2003 Business sector Universities & colleges Government organisations Israel Sweden Finland Japan Korea United States Germany Denmark (2001) Belgium France Canada Netherlands (2001) United Kingdom Norway Ireland (2001) New Zealand Per cent of GDP Source: OECD 2005

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 R&D Technology transfer Collaboration industry – research organizations Basic Applied Licensing Creation of a new company Market

Good ideas can end up in “ The Valley of Death ” Knowledge ©Jan Edling Market

THEMES 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 transfers 2007 -2013 benefit from the Swedish experience?

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 six industry 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

Financing in different stages Basic R&D Applied R&D Preseed Start-up Expans ion Private sector Public sector Pre-commercial financing Commercial financing

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 Seed EUR 148 m Expansion EUR 7, 900 m Start-up EUR 2, 200 million Total investments EUR 12, 000 million

Criteria for an effective innovation system Idea Increases flow of high quality business ideas Provides rigorous screening Involves business angels Brings in market perspective early Based on centres of excellence Market

Three focus areas Seven regional companies Luleå Umeå Seed capital Academia – Business co-op. Infrastructure Incubators Uppsala Stockholm West South East

Independent trust set up by the Swedish government in 1979 Total equity: SEK 3. 2 billion Invested capital: SEK 1. 6 billion Direct investments in about 100 companies Co-owner in 11 regional VC-companies and Innovationsbron Invests in high-tech companies in ICT, Life Science and Industrial and Energy Ventures

Regional venture capital companies

Venture capital investments Percent of GDP EVCA 2005

THEMES 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 transfers 2007 -2013 benefit from the Swedish experience?

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

THEMES 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 transfers 2007 -2013 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 Fund and national sources • Do not go too far in defining “European interest”. Good research benefits all EU-countries