DIT SMEs Forum holding V INSME Annual Meeting Financing SMEs’ Innovation at times of global financial crisis Salvatore Zec...
<ul><li>SMEs, especially innovatives ones, are hit harder by the current global financial crisis than other firms. </li></...
<ul><li>Our focus: </li></ul><ul><li>Scale of the financial problem for R&D and innovation </li></ul><ul><li>Main stumblin...
Source, OECD-Eurostat Entrepreneurship Indicators Program, “Measuring Entrepreneurship: a digest of indicators”, 2008
Source, OECD-Eurostat Entrepreneurship Indicators Program, “Measuring Entrepreneurship: a digest of indicators”, 2008
Source :  OECD, Main Science and Technology Indicators, October 2008. Main Science and Technology Indicators
 
<ul><li>SMEs generally invest less than larger firms in R&D and innovation. </li></ul><ul><li>R&D and Innovation expenditu...
Cyclicality of innovation Business funded R&D, patents (applications to the European Patent Office),  trademarks (filed at...
Innovation expenditure growth in the Italian Enterprises Source: “La ricerca e sviluppo in Italia”, ISTAT, 2008
SMEs investing in  in-house  innovation (% of SMEs)
<ul><li>Sources  of financing difficulties: </li></ul><ul><li>Cash-flow problem and profit squeeze </li></ul><ul><li>Credi...
<ul><li>Other consequences: </li></ul><ul><li>Breakdown of supply chains </li></ul><ul><li>Kowledge network disruption </l...
Leverage of the Italian manufacturing enterprises Source: “Rapporto sulle tendenze nel sistema produttivo italiano”, Bank ...
Short term debt on total financial debt in the Italian enterprises Source: “Rapporto sulle tendenze nel sistema produttivo...
Banks with tighter lending conditions Source : EcoWin, in “Denmark National Bank”, Monetary Review, 4 th  Quarter 2008.
Global venture capital investment 2000-2008 in USD Source: VentureXpert, 2009
Recent investment trends in the US   Source: PricewaterhouseCoopers and National Venture Capital Association
Experienced or expected impacts of the crisis on SME and entrepreneurship financing Source :  Country Reponses to the 14 J...
Source: Country Reponses to the OECD WPSMEE on the Impact of the Global Crisis on SMEs and Entrepreneurship Financing, Tur...
<ul><li>Government approach </li></ul><ul><li>Supply-side measures: </li></ul><ul><li>- loan guarantee and direct lending ...
Private Equity & Venture Capital Markets   Source: Country Reponses to the OECD WPSMEE on the Impact of the Global Crisis ...
<ul><li>Other measures to be considered : </li></ul><ul><li>Dissemination platforms </li></ul><ul><li>Networking </li></ul...
<ul><li>R & D and innovation depend on an entire system of institutions, infrastructures and critical players. </li></ul><...
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Zecchini Financing Sme Innovation Sz Slides 15 4 09

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Zecchini Financing Sme Innovation Sz Slides 15 4 09

  1. 1. DIT SMEs Forum holding V INSME Annual Meeting Financing SMEs’ Innovation at times of global financial crisis Salvatore Zecchini April 21, 2009 Jumeirah Emirates Towers, Dubai, United Arab Emirates
  2. 2. <ul><li>SMEs, especially innovatives ones, are hit harder by the current global financial crisis than other firms. </li></ul><ul><li>More vulnerable, because they involve higher risk and weaker financial structures. </li></ul><ul><li>Still they deserve special attention, because they are essential for long-term economic growth. </li></ul>
  3. 3. <ul><li>Our focus: </li></ul><ul><li>Scale of the financial problem for R&D and innovation </li></ul><ul><li>Main stumbling blocks </li></ul><ul><li>Solutions adopted in OECD countries </li></ul>
  4. 4. Source, OECD-Eurostat Entrepreneurship Indicators Program, “Measuring Entrepreneurship: a digest of indicators”, 2008
  5. 5. Source, OECD-Eurostat Entrepreneurship Indicators Program, “Measuring Entrepreneurship: a digest of indicators”, 2008
  6. 6. Source : OECD, Main Science and Technology Indicators, October 2008. Main Science and Technology Indicators
  7. 8. <ul><li>SMEs generally invest less than larger firms in R&D and innovation. </li></ul><ul><li>R&D and Innovation expenditure is very sensitive to firms’ financial constraints and to business cycle. </li></ul>
  8. 9. Cyclicality of innovation Business funded R&D, patents (applications to the European Patent Office), trademarks (filed at the US Patent and Trademark Office) and GDP (Annual growth rate for the total of OECD countries; divided by standard deviation) Source: OECD, Patent database.
  9. 10. Innovation expenditure growth in the Italian Enterprises Source: “La ricerca e sviluppo in Italia”, ISTAT, 2008
  10. 11. SMEs investing in in-house innovation (% of SMEs)
  11. 12. <ul><li>Sources of financing difficulties: </li></ul><ul><li>Cash-flow problem and profit squeeze </li></ul><ul><li>Credit rationing </li></ul><ul><li>Reduction in fundraising for equity capital, seed and VC investment, private equity </li></ul>
  12. 13. <ul><li>Other consequences: </li></ul><ul><li>Breakdown of supply chains </li></ul><ul><li>Kowledge network disruption </li></ul><ul><li>Redirection of R&D resources </li></ul><ul><li>Risk of more destruction than creation. </li></ul>
  13. 14. Leverage of the Italian manufacturing enterprises Source: “Rapporto sulle tendenze nel sistema produttivo italiano”, Bank of Italy, November 2008
  14. 15. Short term debt on total financial debt in the Italian enterprises Source: “Rapporto sulle tendenze nel sistema produttivo italiano”, Bank of Italy, November 2008 < 250 251 - 500 501 - 1000 > 1000 1983 42,2 65,5 56,8 61,7 28,2 1984 47,5 66,3 63,5 59,5 34,5 1985 47,7 67,0 62,7 62,9 31,9 1986 48,6 66,5 63,3 61,2 32,3 1987 49,1 67,2 62,2 62,2 32,0 1988 52,3 68,7 64,1 61,6 34,9 1989 54,5 69,6 66,9 62,0 37,1 1990 55,9 70,5 66,8 66,6 36,7 1991 50,7 68,7 66,7 63,7 30,7 1992 52,0 68,8 66,8 64,3 33,0 1993 58,5 71,6 67,4 67,7 44,0 1994 56,2 72,0 64,1 65,9 38,0 1995 56,6 73,1 59,7 66,2 39,3 1996 63,8 70,7 56,6 55,1 60,7 1997 66,6 69,5 65,7 65,7 64,3 1998 65,0 69,7 64,3 60,0 60,4 1999 64,1 66,6 63,0 63,4 61,2 2000 66,3 67,8 65,2 62,9 65,3 2001 64,9 67,5 65,5 63,1 62,0 2002 65,3 68,1 66,5 65,5 61,8 2003 61,9 67,1 62,2 59,3 57,2 2004 55,1 62,7 63,6 55,5 46,2 2005 54,0 60,9 60,1 54,9 46,5 2006 56,8 67,2 56,9 52,4 48,2 year Total Enterprise size by employers
  15. 16. Banks with tighter lending conditions Source : EcoWin, in “Denmark National Bank”, Monetary Review, 4 th Quarter 2008.
  16. 17. Global venture capital investment 2000-2008 in USD Source: VentureXpert, 2009
  17. 18. Recent investment trends in the US Source: PricewaterhouseCoopers and National Venture Capital Association
  18. 19. Experienced or expected impacts of the crisis on SME and entrepreneurship financing Source : Country Reponses to the 14 January OECD WPSMEE Questionnaire on the Impact of the Global Crisis on SMEs and Entrepreneurship Financing and Credit reform Economic 2008/09. Source : Country Reponses to the 14 January OECD WPSMEE Questionnaire on the Impact of the Global Crisis on SMEs and Entrepreneurship Financing and Credit reform Economic 2008/09. Experienced or expected impacts of the crisis on SME and entrepreneurship financing
  19. 20. Source: Country Reponses to the OECD WPSMEE on the Impact of the Global Crisis on SMEs and Entrepreneurship Financing, Turin, 26-27 March 2009 Policy responses
  20. 21. <ul><li>Government approach </li></ul><ul><li>Supply-side measures: </li></ul><ul><li>- loan guarantee and direct lending </li></ul><ul><li>-tax incentives </li></ul><ul><li>-public-private partnership in equity investment </li></ul><ul><li>-investment subsidies </li></ul><ul><li>-promotion of leasing and factoring </li></ul><ul><li>Demand-side measures: </li></ul><ul><li>-macroeconomic demand support </li></ul><ul><li>-public procurement </li></ul><ul><li>-innovation-oriented restructuring </li></ul><ul><li>-new funding for research </li></ul><ul><li>Regulations and Standard setting </li></ul>
  21. 22. Private Equity & Venture Capital Markets Source: Country Reponses to the OECD WPSMEE on the Impact of the Global Crisis on SMEs and Entrepreneurship Financing, Turin, 26-27 March 2009 The first public venture capital company (PDTK) will start to operate in 2009 with a budget of 35 million EUR. PDTK will complement private investments in “start-up&quot; and innovative companies with the high-growth potential. Slovenia CORFO Venture Capital for Innovative SMEs will contribute to investment funds that back the creation or expansion of SMEs with innovative projects and high growth potential. Chile Capital for Enterprise Fund will provide £75 million of equity, made up of £50m of Government funds and an additional £25 million from Barclays, HSBC, Lloyds TSB and RBS to provide equity and quasi equity of between £250,000 to £2 million for companies with a turnover of up to euro 50 million who have viable business models and growth potential in need of long term capital. UK Capital for Development Schemes seek to increase the supply of venture capital (Seed Capital Program and Fund of Productive and Infrastructural Development Projects FOPRODE). Mexico A) The New Hungary Venture Capital Programme has been designed to improve the financial status of Hungarian SMEs by providing early-stage equity financing. The Hungarian capital market is relatively underdeveloped in this field; larger transactions are dominant – only a few market players are involved in financing SMEs in their seed and start-up stages. Under the Program, Venture Finance Hungary Plc. – as the fund manager of a Fund of Funds (FoF) – relays resources to venture capital funds. A total of HUF 35 billion is being allocated to the Program, 85% of which is going to be financed by the European Union. The partners of Venture Finance Hungary Plc. will be venture capital fund management firms, who are tasked with raising a fixed proportion of additional private funding to the resources committed by Venture Finance Hungary Plc. The abovementioned partners will be selected by open tender. The amount of the investment may have a transaction size of an annual EUR 1.5 million. Potential target enterprises: SMEs in the early (seed or start-up) or growth stage, which were founded no more than five years prior to the investment decision and have a net annual turnover not exceeding HUF 1.5 billion in any business year. B) A Japanese-Hungarian Venture Capital Fund (SBI Europe Fund) has also been announced in December 2008 with effect from first quarter 2009. This is the first private equity fund established by a public bank and a private investor in the Central and Eastern European region, focusing on the SME sector. The Fund plans investments in the range between €1 million and €20 millions, of around €5 to €7 Million on average in exchange for majority if possible, but in exceptional cases, minority equity interest will be considered. ELAN SBI will be the Fund Manager for the SBI Europe Fund and will target investments in promising companies with high growth potential, with no sector preference. Ideal investment targets will be companies with established management teams, existing revenues and fast growing profits. The Fund will seek to realize exits within 3 to 4 years. The committed amount is EUR 100 million (60 % by the SBIH Group and 40% MFB) Hungary The government will set up a risk capital fund that will act as a minority investor in Venture Capital or MBO –funds or directly in companies on equal terms with private investors. Finland 1 bn € to support small and medium sized companies:- Participation-Fund for SMEs: 40 million € pa for 2009 and 2010; Austria Country
  22. 23. <ul><li>Other measures to be considered : </li></ul><ul><li>Dissemination platforms </li></ul><ul><li>Networking </li></ul><ul><li>Code of standards </li></ul><ul><li>Exit markets for VC </li></ul><ul><li>Innovative clusters </li></ul><ul><li>Innovative infrastructures </li></ul><ul><li>Financial tutoring </li></ul><ul><li>Infrastructure for dialogue and consultation </li></ul><ul><li>Monitoring of financial constraints </li></ul><ul><li>Subsidizing highly skilled workers </li></ul><ul><li>Addressing social consequences of t.p. </li></ul>
  23. 24. <ul><li>R & D and innovation depend on an entire system of institutions, infrastructures and critical players. </li></ul><ul><li>No Government package of measures can alone substitute for a coherent effort by all the parties in such a system. </li></ul><ul><li>What’s at stake in innovation is the return to high and sustainable economic growth and to better our society and living standards. </li></ul>
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