Venture Capital funding of public spin-offs

© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske 1

Venture Capital funding of public spin-offs

OECD workshop on high-technology

spin-offs from public sector research

Paris, December 8th, 1999

Risto Kalske

Director, Technology Transfer

[email protected]

SITRA, Finnish National Fund

for Research and Development


Sitra’s structure: principals and functions

Finnish ParliamentFinnish Parliament

Supervisory BoardSupervisory Board

Board of

Directors

Board of

Directors

Management Management

Research Training Innovative operations

Financing of technology companies International funds

Regional funds Commercialisation of technologies


Sitra’s Operational Sectors

Corporate finance

Seed finance and commersialisation of technologies

Investments in venture capital funds

Research and innovative operations

Training


Seed and start-up Growth stage Strategic investments

SitraVenture Capital

60 (148 Mmk) 42 (227 Mmk)

Privatised part of Sitra

Bio Fund Management Oy Eqvitec Partners Oy Sitra Fenno Management Oy

Sitra Bioventures Ky Eqvitec Tech Fund I Ky Fenno Program

(Sitra 30%, man. 70 %), 0,5 Mmk(Sitra 31%, managers 69%), 0,3 Mmk

Investments in fundsDirect investments

74 Mmk74,5 Mmk

16 (40 Mmk)

102 (375 Mmk)

25 (145 Mmk)

48 (201 Mmk)

5 (150 Mmk)

Regional funds

(Sitra 40%, managers 60%), 0,8 Mmk

155 pcs (726 Mmk, 155 pcs (726 Mmk,

ECU 121 million)ECU 121 million)

155 pcs (726 Mmk, 155 pcs (726 Mmk,

ECU 121 million)ECU 121 million)

Tech.transfer7 (16 Mmk)

Inv. in technology transfer

Sitra's Venture Capital ActivitiesSitra's Venture Capital Activities


Clear tendency from public to private investments as the VC business matures

0 %10 %20 %30 %40 %50 %60 %70 %80 %90 %

100 %

1993 1994 1995 1996 1997 1998

Public

Private

Source: FVCA


Motives for VC investment; public investments shift to the early stages

0 % 20 % 40 % 60 % 80 % 100 %

Seed

Start-up

Other early stage

Expansion

Bridge financing

MBO

MBI

Turnaround

Private

Public

Source: FVCA


Domestic venture capital companies

Sitra focuses on seed & start-up financing Sitra focuses on seed & start-up financing

SitraSitra2nd round

(Sitra) (3rd round)

International financing

Tekes


24 %

25 %32 %

5 %

1 %

13 %Growth firm finance

Seed finance

Venture capitalfunds

Research

Training

Innovativeoperations

Breakdown of Sitra's funding in 1998


Business maturity within Sitra’s portfolio companies in 1998

Start-up

Early growth

Rapid growth

Exit / Transition Seed

TOTALTOTAL102 companies102 companiesEUR 63 millionEUR 63 million


24 companies

EUR 17.8 million

24 companies

EUR 17.8 million

27 %27 %

13 %13 %13 %13 %10 %10 %

27 %27 %

23 %23 %23 %23 %

23 companies EUR 14.2 million

23 companies EUR 14.2 million

36 companies, EUR 6.9 million36 companies, EUR 6.9 million5 companies, EUR 7.8 million5 companies, EUR 7.8 million

14 companies

EUR 16.1 million

14 companies

EUR 16.1 million


Industrial distribution

within Sitra’s portfolio companies in 1998


Biotechnology (11 co.)

Chemical industry (7 co.)

Transportations (3 co.)

Medical companies (22 companies)

Other electronics (17 co.)

Other manufacturing (2 co.)

Control and monitoring (7 co.)

Industrial production (13 co.)

Information technology (9 co.)

Communication (5 co.)

5.2 m

4.7 m

1.4 m

2.7 m

18.8 m

7.5 m

1.3 m

1.7 m.

10.4 m

6.0 m

3.2 m

Consumer goods (5 co.)

Travelling (1 co.) 159 000


Management network of the regional funds

Tekno Advisors Oy, Oulu (100%)

Sentio Invest Oy, Tampere (100%)

Aboa Venture Management Oy Turku 25,2%

Savon Invest Management Oy Kuopio (100 %)

Indekon Management Oy Lappeenranta (100%)


Network of regional funds

Teknoventure Oy, Oulu

Pikespo Invest Oy Ltd, Tampere

Spinno-seed Oy, Espoo

Indekon Oy, Lappeenranta

Midinvest Oy, Jyväskylä

Karinvest Oy, Joensuu

Savon Teknia Oy, Kuopio

Innoventure Oy, Helsinki


Network for technology transfer

Oulutech OyOulu

Tamlink OyTampere

Oy Aboatech AbTurku

Helsinki UniversityLicensing Ltd. Oy

Helsinki

Finntech FinnishTechnology Ltd Oy

Espoo


Public sector activities for R&D in Finland

P A R L I A M E N T

G O V E R N M E N T

Other ministries and theirinstitutes

Funds like: SITRA Kera Oy

Ministry ofTrade andIndustry

Ministry ofEducation

Academy ofFinland

UniversitiesTechnicalResearch

Centreof Finland

Science and

TechnologyPolicy

Council

NationalTechnology

AgencyTekes


Universities and technology transfer

• Universities and Sitra co-own 6 technology transfer companies in 4 university towns

• The technology transfer companies

• identify ideas with commercial potential

• evaluate technologies

• serve researchers in commercialising their idea (on a royalty sharing basis)


Future Development

• Harmonized practices to commercialise university IPRs

• Advanced Technology Transfer Network to

• offer professional licencing services

• enhance the birth of spin-off companies

• offer international Technology Brokearage services

• link the financing institutions to the spin-offs

• advice on suitable options to utilize the IPRs


Three approaches to the commercial utilisation of innovations

InnovationInnovation

Growth company

Acquisition vehicle

Sale/License of IPRs

• true entrepreneurship

• technology brokerage

• exit means


VC criteria - special concerns with spin-off firms

• Early stage• Professional management • Level of commitment • Business plan • Novelty value • Identified customer need • Ownership of the IPRs • Growth potential• Total financial plan • Terms of partnership• Exit plan

Spin-offs


Licensing is also a viable option for the commercialisation of IPRs

• Scientist and entrepreneurship - a rare combination

• The promotion of spin-off activities attracts top-notch researchers

• Financial benefits tend to supersede scientific calling

• Brain drain affects the quality of university research

• Professionally organised licensing may offer a balanced win-win solution in many cases

Thank you!

[email protected]

Venture Capital funding of public spin-offs

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