Access to venture capital Innovative incubators Venture capital What is possible? What is needed? MEAmidt 2010.10.07 Lars Stigel
Different companies, Different needs, Different possibilities
Health Equipment Denmark Aps, created by Kristian Rye Veedfald and Mads Hemdorff Petersen in co-operation with East Jutland Innovation Two entrepreneurs with a sharp eye for a need, a good idea and tons of dedication
He saw a problem and created a solution • AC Sun - Solar driven air condition: • 90% CO2 reduction • No chemicals Inventor Gunnar Minds, M.Sc. Eng
Biotech – long term and capital requiring investment – app. 250 MDKK since 2000
Innovative incubators (Innovationsmiljøer) • The six incubators are mainly operating on a regional basis with close links to one or more research organisations in their region • Co-located with science parks and local new-business parks • Important to us: Body contact to entrepreneurs important
Is this within our remit? 0-2 weeks Pilot project Continuation Phase 1 investment Phase 2 and 3 investment The process • Potentials and challenges: • Market • IPR • Patent • Network • Ambitions • Business plan • Etc. • Max. DKK 80.000 • 1-4 months Develop product - demonstrate technology and market, secure protection (IPR or other). Incorporation Project with goals and milestones. Identify capital needs and identify new investors DKK 1,7 MDKK ++++ 1-3 years • Commercialization or further development • Further development of company • Or licence agreement with 3rd parties • Further investment …. • … and further investment Initial validation Feasibility study
Investement phases and investors Risk Capital need Go public – stock exchange Institutional investors Venture capital funds Universities’ POC fund Vækstfonden Business Angels ØI Pre-seed Seed Start up Initial growth Growth Diversification
Innovative Incubators: Objectives • New research-based, high tech, innovative companies with high growth potential • Risk taking investment in the very early phase where private investors don’t invest • Motivate innovative entrepreneurs • Capital and competence in the start-up phase CLEVER MONEY! • Technology transfer • Market orientation from day one
Venture Capital • Purpose: To create profit to the investors behind the venture capital company • Professional investment in companies with high growth (global) potential • Focus on exit and profit from day one • From 5 m DKK and up • Active role as investor
Venture Capital - problems • Venture funds have difficulties in creating profits to their investors (not only a problem in Denmark) • Private investors – including pension funds – will not invest • Only a few VCs have survived • Only a few can make new investments • Venture funds have to take less risk when investing – leaving a gap in the value chain – The Death Valley
Venture Capital - problems ”Valley of Death” Capital Business ideas from research etc Succesfull companies Pre-seed and seed Venture
Venture Capital - solutions • Venture investments are wealth creating investments: Tax, knowledge, employment, attraction of foreign capital • – more than profit creating • Reason for governmental (co-) funding in pre-seed and seed investment.
Venture Capital - limitations • Copenhagen based VCs • Including Vækstfonden • Difficult to attract investments in Jutland • VCs not always value creating • No funding for companies with small investment need (sometimes easyer to get 25 m DK than 2,5 m DK)
What is needed? • Regional based VC • On top of Innovative Incubators • Governmental, regional and private co-funding • Preference status for private investors • Also focus on “small investments” • Public sector as first customer for new companies with new products • Creation of stronger Business Angel network and culture • Creation stronger entrepreurial spin out culture in existing companies
Venture guys – clever guys? What happened when Janus Friis presented Skype to Danish venture capitalist?