Tidlige fase finansiering - hva er det private markedets oppgaver og hvor bør det offentlige spille en rolle ? Erfaringer ...
Agenda <ul><li>Northzone Ventures </li></ul><ul><li>The Nordic Venture Market </li></ul><ul><li>What should be the role of...
Northzone Ventures <ul><li>Established in 1996, 3 funds to date </li></ul><ul><li>Capital injected into 30 early stage com...
Northzone’s  investment strategy Specialize on high-growth wireless, broadband, software and services opportunities in an ...
Agenda <ul><li>Northzone Ventures </li></ul><ul><li>The Nordic Venture Market </li></ul><ul><li>What should be the role of...
A choppy ride
European Funds Raised and Investments €  m Source: EVCA <ul><li>Reduction from 2000 to 2001 was modest compared to the US ...
Investment Trends in Europe by Stage Source: EVCA <ul><li>The trend from Q102 indicate that we might be back to 96 /97   a...
Private Equity investments as % of GDP 2001 => Sweden stands apart from the other Nordics Source: EVCA
The Nordic Venture Capital Scene <ul><li>NORWAY </li></ul><ul><li>The Internet Hype didn’t last for very long </li></ul><u...
Agenda <ul><li>Northzone Ventures </li></ul><ul><li>The Nordic Venture Market </li></ul><ul><li>What should be the role of...
Chief Priority: To focus on the business climate, stability, and infra-structure  <ul><ul><li>The public sector has histor...
However, don’t leave the market all by itself, because there is an equity Gap <ul><li>Business Angels have been playing a ...
..and us Nordics are also struggling with an Attitude Gap   <ul><li>With the exception of Finland, where are remarkable ch...
1. Improve the risk-reward ratios <ul><li>W idespread direct government ownership in early stage undertakings is not in th...
2. Plant Seeds and Build Green Houses <ul><li>Invest heavily in Research & Education </li></ul><ul><li>Educate the future ...
3. Water the Seeds and Build irrigation networks – tap into private networks <ul><li>Enable R&D projects with a commercial...
4. Encourage irrigation of dry soils through incentive schemes <ul><li>Tax breaks and investment incentives for individual...
5. Apply your fertilisers with caution, focus and clear goals <ul><li>Direct government Investments </li></ul><ul><li>A mi...
6. ..and if possible distribute  fertilizers through private vehicles  <ul><li>Fund in Funds </li></ul><ul><li>-  The Euro...
Summary <ul><li>Basically, governments should focus on the general business climate, stability, and infrastructure  </li><...
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Partner Tellef Thorleifsson, Northzone Venture, Norge (ppt ...

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  • Partner Tellef Thorleifsson, Northzone Venture, Norge (ppt ...

    1. 1. Tidlige fase finansiering - hva er det private markedets oppgaver og hvor bør det offentlige spille en rolle ? Erfaringer fra Northzone Ventures. Tellef Thorleifsson, Partner Nordic Industrial Fund Conference 15-16 October 2002
    2. 2. Agenda <ul><li>Northzone Ventures </li></ul><ul><li>The Nordic Venture Market </li></ul><ul><li>What should be the role of the Government ? </li></ul>
    3. 3. Northzone Ventures <ul><li>Established in 1996, 3 funds to date </li></ul><ul><li>Capital injected into 30 early stage companies </li></ul><ul><li>Total funding of EURO 100 mill. provided by large Nordic and International professional investors </li></ul><ul><li>A team of 10 professionals with extensive entrepreneurial experience </li></ul><ul><li>Main focus on the Nordic market with offices in Oslo, Stockholm and Copenhagen </li></ul><ul><li>Specialisation on ICT </li></ul><ul><li>Proven track-record and high ROI </li></ul><ul><li>Strong international network </li></ul>
    4. 4. Northzone’s investment strategy Specialize on high-growth wireless, broadband, software and services opportunities in an increasingly networked society Focus on the Nordic region to ensure volume of high quality deals and draw on regional competence base Concentrate on the ”early stages” to leverage the team’s ability to add value and thereby maximize returns Focus on scalable business models with an international scope and high value potential Emphasize pro-active search for value creation opportunities arising from market shifts/transformations
    5. 5. Agenda <ul><li>Northzone Ventures </li></ul><ul><li>The Nordic Venture Market </li></ul><ul><li>What should be the role of the government ? </li></ul>
    6. 6. A choppy ride
    7. 7. European Funds Raised and Investments € m Source: EVCA <ul><li>Reduction from 2000 to 2001 was modest compared to the US </li></ul><ul><li>Figures from Q102 indicate a major reduction in 2002 </li></ul>
    8. 8. Investment Trends in Europe by Stage Source: EVCA <ul><li>The trend from Q102 indicate that we might be back to 96 /97 activity levels </li></ul><ul><li>Largest reduction in Seed and Start-up </li></ul>
    9. 9. Private Equity investments as % of GDP 2001 => Sweden stands apart from the other Nordics Source: EVCA
    10. 10. The Nordic Venture Capital Scene <ul><li>NORWAY </li></ul><ul><li>The Internet Hype didn’t last for very long </li></ul><ul><li>Healthy economy, but large dependence on oil </li></ul><ul><li>VC Capital is still available, but the main VC’s are funding few new cases, </li></ul><ul><li>The Grey Market is gone </li></ul><ul><li>Many VC’s have changed focus from IT&Telco to energy and life sciences </li></ul><ul><li>SWEDEN </li></ul><ul><li>Europe’s Silicon Valley during the Internet hype </li></ul><ul><li>The Internet consultants & all the new VC players are gone </li></ul><ul><li>Ericsson’s demise is having severe repercussions </li></ul><ul><li>VC funding is still available, early stage cases are struggling hard to get funding </li></ul><ul><li>DENMARK </li></ul><ul><li>Healthy economy </li></ul><ul><li>Never really a part of the Internet and the wireless boom </li></ul><ul><li>Institutions dominate the VC space </li></ul><ul><li>Strong technology competence, but still relatively few entrepreneurs (& VC’s) </li></ul><ul><li>FINLAND </li></ul><ul><li>The Nokia effect has tampered off </li></ul><ul><li>The rush of international “wireless” VC funding is no longer available </li></ul><ul><li>Back to basics </li></ul><ul><li>The major VC’s are well funded </li></ul>
    11. 11. Agenda <ul><li>Northzone Ventures </li></ul><ul><li>The Nordic Venture Market </li></ul><ul><li>What should be the role of the government ? </li></ul>
    12. 12. Chief Priority: To focus on the business climate, stability, and infra-structure <ul><ul><li>The public sector has historically been a poor player when targeting investments and sectors </li></ul></ul><ul><ul><li>Early stage financing - the responsibility of the private sector </li></ul></ul><ul><ul><li>The market will over time bring about the most efficient allocation of capital </li></ul></ul><ul><ul><li>“ Friends, Family & Fools “, Private investors, angels, venture funds and growth funds should be responsible the financing and growth of new companies. </li></ul></ul><ul><li>THE MAIN ROLE OF THE GOVERNMENT: TO PROVIDE A STABLE CLIMATE AND GARDEN ASSISTANCE </li></ul><ul><ul><li>Make it as simple as possible to start a new company (i.e. reduce the number of reports imposed on a small limited company.) </li></ul></ul><ul><ul><li>Provide practical assistance to Start ups – reduce red tape </li></ul></ul><ul><ul><li>Reduce tax on employment options </li></ul></ul><ul><ul><li>Emphasize the basics - There is too much focus on agencies, aid, packages and schemes </li></ul></ul>
    13. 13. However, don’t leave the market all by itself, because there is an equity Gap <ul><li>Business Angels have been playing a limited role in the Nordic countries. </li></ul><ul><li>In the US wealthy individuals last year invested about USD 20 bill. while the venture funds invested about USD 10 bill.   </li></ul><ul><li>In the Nordic countries such private funding is much less important </li></ul><ul><li>Grey Markets have been buoyant during Hype times, but provide fragile funding for early stage tech companies, and fraud cases have been prevalent. </li></ul><ul><li>Right now the Grey Market is more or less non-existent.   </li></ul><ul><li>The availability of early stage financing from VC’s such as Northzone is very limited. </li></ul><ul><li>The incubators are gone </li></ul><ul><li>The magnitude of the Equity Gap will depend on the market & where we are in the cycle. </li></ul><ul><li>The equity gap will be widened in the period we </li></ul><ul><li>are now entering into   </li></ul>“ Mind the Gap”
    14. 14. ..and us Nordics are also struggling with an Attitude Gap   <ul><li>With the exception of Finland, where are remarkable changes have taken place during the last 10 years, the other Nordic countries are still facing a large competence and attitude gap between the R&D circles/the government officials and the commercial forces/venture funds. </li></ul><ul><li>Most administrative R&D staff have to be more commercially minded </li></ul><ul><li>The Public Sector’s understanding of international business is not strong enough </li></ul><ul><li>Likewise, the Business Community’s understanding of political priorities, its constraints and how the political system works is far too weak. </li></ul>Then what shall the governments do ?
    15. 15. 1. Improve the risk-reward ratios <ul><li>W idespread direct government ownership in early stage undertakings is not in the long term interest of any economy </li></ul><ul><li>The government can easily find itself being a very big fish in a very small pond </li></ul><ul><li>(Rosenberg.) “Rather than try to get into the business of technology itself by forming companies or investment funds or by picking industries through trade protection or tax incentives, Government helps most when it creates mechanisms for improving the risk-reward ration for private entrepreneurs. The two main routes are </li></ul><ul><ul><li>encouraging private venture capital by passive co-investing programs and the likes, and </li></ul></ul><ul><ul><li> by reducing the risk of undertaking R&D.” </li></ul></ul><ul><li>  </li></ul>
    16. 16. 2. Plant Seeds and Build Green Houses <ul><li>Invest heavily in Research & Education </li></ul><ul><li>Educate the future work force – give them hard skills, drive and motivation </li></ul><ul><li>Continue investments in Basic Research, but </li></ul><ul><li>Increase the allocation to Applied Research within areas with potential commercial applications at the expense of spreading it out widely on a wide range of “soft areas”. </li></ul><ul><li>R&D should be seen as an investment for future tax income and employment, not just as an academic luxury !! </li></ul><ul><li>Educate commercial skills – not just accountants and economist, but also the techies (such as eg. Gründerskolen) </li></ul><ul><li>Create environments which may foster contacts between businesses and R&D, and international links </li></ul><ul><ul><li>- Research Parks </li></ul></ul><ul><ul><li>- Scholarships </li></ul></ul><ul><ul><li>- International cooperation and joint ventures </li></ul></ul>
    17. 17. 3. Water the Seeds and Build irrigation networks – tap into private networks <ul><li>Enable R&D projects with a commercially viable basis to continue longer than today. (Large public resources are spent on R&D, but far too little is allocated for developing projects to level where they are becoming palatable for the investors.) </li></ul><ul><li>- Alone – based on milestones, regular scrutiny and evaluation by independent committees. </li></ul><ul><li>- Jointly – with private sources. Public funding only to be released when private sources are willing to commit accordingly. With the public funding giving some kind of a kicker/leverage on the private funding. (and or Reducing the downside.) </li></ul><ul><li>- The Yozma Venture Capital project in Israel </li></ul><ul><ul><ul><ul><ul><li>-    Enterprise Irland </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>-   Forny-programmet (Norway) </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>-   The proposed EFFECT project (Norway) </li></ul></ul></ul></ul></ul><ul><li>NB. Create direct financial incentives to Researchers related to patents and license income on patents filed. (The Stanford model) Such income should not only be allocated to departments or faculties, but also to individuals. </li></ul>
    18. 18. 4. Encourage irrigation of dry soils through incentive schemes <ul><li>Tax breaks and investment incentives for individuals may be cheaper for the government and a lot faster to implement than direct government investment schemes. </li></ul><ul><li>- In the UK private investors investing in start ups, are tax exempted on capital gains if the stock is held for more than 3 years </li></ul><ul><li>- £ 150 000 can be invested for each year with a 20 % tax break </li></ul><ul><li>=> 77 % of the British investors utilizing the scheme, claim that it has encouraged investments that would not otherwise have been done. </li></ul><ul><li>However, the experience from similar types of tax incentives in Germany have been more mixed </li></ul><ul><li>I n Norway the most tax advantageous area for allocation of private investments is real estate. Lavish office spending will not bring about future growth !! </li></ul>
    19. 19. 5. Apply your fertilisers with caution, focus and clear goals <ul><li>Direct government Investments </li></ul><ul><li>A mixed blessing </li></ul><ul><li>In Norway SND has been imposed rigid regional strings. Very few companies now promoted by the members of NVK have received funding from SND. </li></ul><ul><li>In the US the Government has played a very active role in the technology sector through the SBIC and SBIR, but most of this funding has been indirect. </li></ul><ul><li>Direct government investments should in principle focus on the early stages </li></ul><ul><li>The later stages should be left to the market </li></ul><ul><li>The government is in a position to act counter-cyclically </li></ul><ul><li>Draw a clear line between regional development aid and profit maximization. (Establish separate funds, arms length from the politicians, when profit maxi-misation is the goal) </li></ul><ul><li>Most government agencies have been imposed impossible, or at times conflicting goals, i.e. to both gain high returns and to attain regional growth or other “softer” goals. </li></ul>
    20. 20. 6. ..and if possible distribute fertilizers through private vehicles <ul><li>Fund in Funds </li></ul><ul><li>- The European Investment Fund is a large fund in fund investor in the EU </li></ul><ul><li>- Argentum (NOR)/Vækstfonden (DK) are also applying the Fund in Fund Model </li></ul><ul><li>- Similar types of fund in fund vehicles should also be built up in seed financing set ups </li></ul><ul><li>Loans/Other types of Incentives to venture funds </li></ul><ul><li>US venture funds can access long term loans from SBA. 57 % of the number of venture firms funded in the US last year, was done by VC-firms receiving loan financing from SBA (SBIC/SBIR) </li></ul><ul><li>In Norway Startfondet has tested out a similar type of model, but ideally this type of schemes should be made available to all players satisfying the requirements so established. </li></ul><ul><li>Avoid subsidising a few players – make it open and available to the entire professional market </li></ul>
    21. 21. Summary <ul><li>Basically, governments should focus on the general business climate, stability, and infrastructure </li></ul><ul><li>However, don’t leave the market all by itself, because there is an </li></ul><ul><ul><li>Equity Gap </li></ul></ul><ul><ul><li>An Attitude Gap, and </li></ul></ul><ul><ul><li>Very choppy times.. </li></ul></ul><ul><li>Hence, as regards early stage funding governments have to: </li></ul><ul><li>1. Improve the risk-reward ratios </li></ul><ul><li>2. Plant Seeds and Build Green Houses </li></ul><ul><li>3. Water the Seeds and Build irrigation networks – preferably by tapping into private networks </li></ul><ul><li>4. Encourage irrigation of dry soils through incentive schemes </li></ul><ul><li>5. Only apply fertilisers with great caution, focus and clear goals </li></ul><ul><li>6. ..and if possible distribute fertilizers through private vehicles </li></ul>

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