Venture Capital funding of public spin-offs

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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 risto.kalske_at_sitra.fi SITRA, Finnish
National Fund for Research and Development
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Sitras structure principals and functions

• Research
• Training
• Innovative
• operations

• Financing of
• technology
• companies
• International
• funds

• Regional funds
• Commercialisation of technologies

Finnish Parliament
Supervisory Board
Board of Directors
Management
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Sitras Operational Sectors

• Corporate finance
• Seed finance and commersialisation of
  technologies
• Investments in venture capital funds
• Research and innovative operations
• Training

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Sitra's Venture Capital Activities
155 pcs (726 Mmk, ECU 121 million)
SitraVenture Capital
48 (201 Mmk)
102 (375 Mmk)
Investments in funds
Direct investments
Inv. in technology transfer

• Tech.transfer
• 7 (16 Mmk)

Seed and start-up
Growth stage
Strategic investments
Regional funds
60 (148 Mmk)
42 (227 Mmk)
16 (40 Mmk)
25 (145 Mmk)

5 (150 Mmk)
Privatised part of Sitra

Bio Fund Management Oy
Eqvitec Partners Oy
Sitra Fenno Management Oy
(Sitra 30, man. 70 ), 0,5 Mmk
(Sitra 31, managers 69), 0,3 Mmk
(Sitra 40, managers 60), 0,8 Mmk

Sitra Bioventures Ky
Eqvitec Tech Fund I Ky
Fenno Program
74,5 Mmk
74 Mmk
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Clear tendency from public to private investments
as the VC business matures
Source FVCA
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Motives for VC investment public investments
shift to the early stages
Source FVCA
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Sitra focuses on seed start-up financing

International financing
Domestic venture capital companies
Tekes
(Sitra) (3rd round)
Sitra 2nd round
Sitra
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Breakdown of Sitra's funding in 1998
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Business maturity within Sitras portfolio
companies in 1998
36 companies, EUR 6.9 million
5 companies, EUR 7.8 million
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10
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14 companies EUR 16.1 million
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24 companies EUR 17.8 million
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• TOTAL
• 102 companies
• EUR 63 million

23 companies EUR 14.2 million
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Industrial distribution within Sitras portfolio
companies in 1998
18.8 m
Medical companies (22 companies)
Industrial production (13 co.)
10.4 m
Other electronics (17 co.)
7.5 m

• Biotechnology (11 co.)

6.0 m
Other manufacturing (2 co.)
5.2 m
Information technology (9 co.)
4.7 m
3.2 m
Chemical industry (7 co.)
Communication (5 co.)
2.7 m
TOTAL 102 companies EUR 63 million
Consumer goods (5 co.)
1.7 m.
Transportations (3 co.)
1.4 m
Control and monitoring (7 co.)
1.3 m
Travelling (1 co.)
159 000
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Management network of the regional funds

• Tekno Advisors Oy, Oulu (100)

Savon Invest Management Oy Kuopio (100 ) Indekon
Management Oy Lappeenranta (100)
Sentio Invest Oy, Tampere (100)
Aboa Venture Management Oy Turku 25,2
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Network of regional funds

• Teknoventure Oy, Oulu

Savon Teknia Oy, Kuopio
Karinvest Oy, Joensuu
Pikespo Invest Oy Ltd, Tampere
Midinvest Oy, Jyväskylä
Indekon Oy, Lappeenranta
Spinno-seed Oy, Espoo
Innoventure Oy, Helsinki
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Network for technology transfer
Oulutech Oy Oulu
Helsinki UniversityLicensing Ltd. Oy Helsinki
Tamlink Oy Tampere
Oy Aboatech Ab Turku
Finntech FinnishTechnology Ltd Oy Espoo
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Public sector activities for RD in Finland
P A R L I A M E N T
G O V E R N M E N T

Science andTechnologyPolicyCouncil
Other ministries and theirinstitutes
Ministry ofTrade andIndustry
Ministry ofEducation
NationalTechnologyAgencyTekes

• Funds like
• SITRA
• Kera Oy

Academy ofFinland
TechnicalResearch Centreof Finland
Universities
12/95-06
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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)

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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

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Three approaches to the commercial utilisation
of innovations
Growth company
true entrepreneurship
Innovation
Acquisition vehicle
exit means
Sale/License of IPRs
technology brokerage
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VC criteria - special concerns with spin-off
firms
Spin-offs

• 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

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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

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Thank you! risto.kalske_at_sitra.fi