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@sitra.fi
SITRA, Finnish National Fund
for Research and Development
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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Sitra’s structure: principals and functions

Finnish Parliament


Supervisory Board
Research
Training
Innovative
operations


Financing of
technology
companies
International
funds


Regional funds
Commercialisation
of technologies
Board of
Directors
Management
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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Sitra’s Operational Sectors
Corporate finance
Seed finance and commersialisation
of technologies
Investments in venture capital funds
Research and innovative operations
Training
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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Sitra's Venture Capital Activities
Sitra
Venture Capital
102 (375 Mmk)
Direct investments
Seed and start-up
60 (148 Mmk)
5 (150 Mmk)
Bio Fund Management Oy
(Sitra 31%, managers 69%), 0,3 Mmk
Sitra Bioventures Ky
74,5 Mmk
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
48 (201 Mmk)
Inv. in technology transfer
Growth stage
42 (227 Mmk)
Tech.transfer
7 (16 Mmk)
155 pcs (726 Mmk,
ECU 121 million)
Investments in funds
Strategic investments
25 (145 Mmk)
Regional funds
16 (40 Mmk)
Privatised part of Sitra
Eqvitec Partners Oy
(Sitra 30%, man. 70 %), 0,5 Mmk
Eqvitec Tech Fund I Ky
Sitra Fenno Management Oy
(Sitra 40%, managers 60%), 0,8 Mmk
Fenno Program
74 Mmk
4
Clear tendency from public to private
investments as the VC business matures
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0%
1993
Public
Private
1994
1995
1996
1997
1998
Source: FVCA
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
5
Motives for VC investment;
public investments shift to the early stages
Turnaround
MBI
MBO
Bridge financing
Private
Expansion
Public
Other early stage
Start-up
Seed
0%
20 %
40 %
60 %
80 %
100 %
Source: FVCA
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
6
Sitra focuses on seed & start-up financing
International financing
Domestic venture
capital companies
Tekes Sitra
(Sitra)
(3rd
Sitra 2nd
round round)
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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Breakdown of Sitra's funding in 1998
13 %
1%
24 %
Growth firm finance
Seed finance
5%
Venture capital
funds
Research
Training
32 %
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
25 %
Innovative
operations
8
Business maturity
within Sitra’s portfolio companies in 1998
Seed
Exit / Transition
5 companies, EUR 7.8 million
13 %
36 companies, EUR 6.9 million
10 %
Rapid growth
14 companies
EUR 16.1 million
27 %
27 %
Start-up
24 companies
23 %
TOTAL
102 companies
EUR 63 million
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
EUR 17.8 million
Early growth
23 companies
EUR 14.2 million
9
Industrial distribution
within Sitra’s 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
4.7 m
Information technology (9 co.)
Chemical industry (7 co.)
3.2 m
Communication (5 co.)
Consumer goods (5 co.)
2.7 m
Transportations (3 co.)
Control and monitoring (7 co.)
Travelling (1 co.)
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
1.7 m.
1.4 m
TOTAL
102 companies
EUR 63 million
1.3 m
159 000
10
Management network of the regional funds
Tekno Advisors Oy,
Oulu (100%)
Sentio Invest Oy,
Tampere (100%)
Savon Invest Management Oy
Kuopio (100 %)
Indekon Management Oy
Lappeenranta (100%)
Aboa Venture
Management Oy
Turku 25,2%
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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Network of regional funds
Teknoventure Oy,
Oulu
Pikespo Invest Oy Ltd,
Tampere
Savon Teknia Oy,
Kuopio
Karinvest Oy,
Joensuu
Midinvest Oy,
Jyväskylä
Spinno-seed Oy,
Espoo
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
Indekon Oy,
Lappeenranta
Innoventure Oy,
Helsinki
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Network for technology transfer
Oulutech Oy
Oulu
Tamlink Oy
Tampere
Oy Aboatech Ab
Turku
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
Helsinki University
Licensing Ltd. Oy
Helsinki
Finntech Finnish
Technology Ltd Oy
Espoo
13
Public sector activities for R&D in Finland
Science
and
Technology
Policy
Council
PARLIAMENT
GOVERNMENT
Ministry of
Education
Ministry of
Trade and
Industry
Academy of
Finland
National
Technology
Agency
Tekes
Universities
Technical
Research
Centre
of Finland
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
Other ministries
and their
institutes
Funds like:
 SITRA
 Kera Oy
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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)
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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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
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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Three approaches to the
commercial utilisation of innovations
Growth company
• true entrepreneurship
Acquisition vehicle
Innovation
• exit means
Sale/License of IPRs
• technology brokerage
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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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
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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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
© Sitra 1999 OECD.ppt / 8.12.1999 / Risto Kalske
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Thank you!
risto.kalske@sitra.fi