Transcript Sitra PreSeed-palvelujen esittely

Public Private Partnership
in PreSeed Funding
October 27th, 2006
Risto Kalske
SITRA, Finnish National Fund
for Research and Development
Contents
− Observations about General CIP principles of public financing
− A practical example of Public Private Partnership
in PreSeed Funding in Finland
− Towards Pan-European Market Place in Start-Up Financing
2
Community guidelines on state aid to promote risk
capital investments in small and medium-sized
enterprises
− Scope: Risk capital and companies with perceived high-growth potential at
their early growth stages
− Demand from companies with high-growth potential that do not have sufficient
access to capital markets
− Supply of risk capital comes from investors ready to take high risk in
exchange of potentially above-average returns from the equity invested
− Aided risk capital funds – low overall profitability
− Ensure that profit-driven and professional investment decisions are
strengthened in order to further encourage private investors to co-invest with
the State
3
Community guidelines…
− Supply side: The investor needs to make a careful analysis not merely
of any collateral being offered (as a lender does) but the entire
business strategy to estimate the possibilities of making a profit on
the investment and the risks associated with it.
− Demand side: The enterprise must understand the benefits and risks
associated with external equity investment to pursue the venture and to
prepare sound business plans to secure the necessary resources and
mentoring
4
Community guidelines…
− State aid for risk capital must result in a net increase in the
availability of risk capital to SMEs, in particular by leveraging
investments by private investors
− State aid will be inefficient if it goes beyond what is needed to induce
more risk capital provision. To ensure that aid is limited to the
minimum, it is crucial that there is significant private participation
and that the investments are profit-driven and are managed on a
commercial basis
− The presence of publicly supported measures may discourage other
potential investors from providing capital
5
Community guidelines
− The Commission considers that the main source of market failure
relevant to the early stage risk capital markets relates to imperfect or
asymmetric information. Potential investors face difficulties in
gathering reliable information on the business prospects of a new
company.
6
Lack of
capital
Corrective
Measures:
• State Aid
Non-functioning
private capital
market
Market Failure in
Risk Capital Markets
• State Funds
7
Non-functioning
private capital
market
Lack of
capital
Market Failure in
Risk Capital Markets
Lack of
information
8
Better
functioning
private capital
market
Lack of
capital
Market Failure in
Risk Capital Markets
Public Capital:
Lack of
information
Goal-oriented
Funding
9
Public
Private
Venture
Capital
Better
functioning
private capital
market
Lack of
capital
Market Failure in
Risk Capital Markets
Public Capital:
Lack of
information
Goal-oriented
Funding
10
INTRO Market Place
A Finnish Five Years’ Experience
in Public Private Partnership
in Funding Early Stage Growth Companies
It’s not all about money
LIKSA
Business Concept
DIILI
Human Resources
Start-up
Company
INTRO
Capital
12
SITRA and business angel network
− In-depth public / private partnership with business angels
since 2001:
–
–
–
–
A deal-flow development program
INTRO-market place as a trade point
Offers syndicate partnership
”sales competence as sweat equity” scheme
− Coordinates the investment process
− A national network of 450 business angels
− Initial funding for pre-seed technology companies
13
PreSeed: integrated investment readiness scheme for
start-ups
LIKSA
INTRO
• Focus on acquiring
market information
• 20 … 70 k€ and
up to 24 months
• Resulting in a high
quality business plan
• Sitra and TEKES
financing in cooperation
• Marketplace for early
stage investments
• Private persons
(business angels) as
investors
• Aiming at syndication
DIILI
• Sales competence as
sweat equity
• Resource: experienced
business professionals
• Objective: to speed up
the investment process
14
Stepping stone to venture capital
Microsoft
IP Ventures
technology
DIILI
sweat equity
resources
VERIFICATION
INTRO
Deal flow
Deal
flow
200
LIKSA funding
business
plans
•
•
•
•
Internet access
Venture forums
Investment negotiations
Syndicates
Business
angels
SITRA
PreSeed
VC-funds
40
20
15
INTRO – a true value-adding market place
−
−
−
−
−
−
−
Funding the business plans
Addressing sales forces on sweat equity basis
Screening enterprises – screening business angels – screening sales forces
Conducting investment process
Legal support – shareholders’ agreements
Stepping stone to VC markets
Public/private syndicates
16
Proven results
LIKSA
• 600 LIKSA applicants
instructed
• Funding to 160
start-ups
• Accelerates the
commercialisation of the
company
• Improves the target
company’s possibility for
receiving first investment
INTRO
• Private investors
organised as an
industry
• A growing community
of 350 private
investors (business
angels)
• 35% investment ratio
• Added impact from
private and public
venture capital
investments
DIILI
• A renewing group of 100
knowledge capital
investors (1700
knowledge years)
• 25 investments carried
out
• Expedites investment
negotiations has opened
up
• A new path to
entrepreneurship
17
Sitra’s objectives for co-partnering
− Need to create a strong Business Angel domain
− Establish a well functioning pre-Venture Capital market immune to VC
fluctuations
− Reduce the discontinuity in exit routes
− Address BA domain as part of the VC chain
− Improve Sitra’s success rate through BA / Sitra syndicates
18
PreSeed – integrating value for the start-ups
− Initial results are promising:
–
–
–
–
–
First 50 investments in 4 years
70% funded by BA/VC coalitions alone
25 sweat equity investments in the first 24 months
8 VC funds participated in the syndicates
Significantly accelerated investment process
19
National and local network – at the same time
INTRO
Nationwide network of
business angels and
investee companies in one
database
20
Future potential: cross-border network
EASY-project
European-wide Cross-border
network of business angels and
investee companies, 2007-2008,
11 Member Countries,
5,2 M€ Budget
21
Thank you!
Contact: [email protected]