Global Government Venturing October 2014

October 2014

INSIDEBoulevard of Broken Dreams – five years on

Portugal navigates to stars

Government funding: help or hindrance?

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Contents

Global Government Venturing

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Editor-in-chief: James Mawson

Email: [email protected]

Managing director: Tim Lafferty Tel: +44 (0) 7792 137133 Email: [email protected]

Reporter: Mark Chatterley

Business development: David Jenkins

Administration: Hannah Bayes-Brown

Production editor: Keith Baldock

Website: www.globalgovernmentventuring.com

3 Editorial: Together really can be better

4 News

14 News focus: Concern mounts about European proposals

15 News focus: How venture and the military form an economic symbiosis

16 News focus: Cyber-security whistles for attention

18 News focus: Japan’s arrow nears target

19 Comment: Tech drives the leapfrog in emerging markets’ growthMark Mobius, executive chairman, emerging markets, Franklin Templeton Investments

21 Comment: Boulevard of Broken Dreams – five years onJosh Lerner, professor, Harvard Business School, and director, Private Capital Research Institute

22 Comment: How government funding can help or hinder growthLuca Grilli and Samuele Murtinu, Politecnico di Milano department of management, economics and industrial engineering

24 Comment: Early stage: the venture capitalist’s perspectiveGanapathisubramani Sabarinathan, chairman of NS Raghavan Centre for Entrepreneurial Learning at IIM-Bangalore

Regional reports

25 Portugal

30 Slovakia

31 University corner: Putting tech transfer successes into perspectiveThe Global University Venturing and Combined World Rankings 2014

35 Corporate briefing: Airbus innovation takes flight

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Editorial

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Our motto since we launched the company in 2010 has been the David Hume quote: “Truth springs from argument among good friends.” It has since then certainly been a time for passionate and well-argued discussion in the ecosystem of our three titles, Global Corporate Venturing, Global University Venturing

and Global Government Venturing – the three strands of the triple helix.

There has been and remains discussion about the news, data and analyses of the merits and drawbacks of incubation, technology commercialisation, innovation trends and minority equity investment in third-party entrepreneurial companies through direct deal-making or venture fund commitments. To contribute to the debate, complete our short annual survey.

Josh Lerner, Jacob H Schiff professor of investment banking at Harvard Business School, and head of its entrepreneurial management unit, in his guest comment looking back over the five years since his ground-breaking book, Boulevard of Broken Dreams, was published, says: “Concerns about lagging global growth rates and job creation have not abated, and the perceived importance of entrepre-neurship in stimulating entrepreneurship and growth is as high as ever.

“One dramatic change in the past five years has been that the promotion of venture clusters has moved increasingly beyond major industrialised nations, becoming a global phenomenon. Many emerging nations have made huge investments in development venture capital (VC) and high-potential entrepreneurship. For instance, we have seen extensive initiatives in countries as diverse as Colombia and Saudi Arabia.”

At Global Government Venturing, as well as our sister titles, we are tracking this truly global phenomenon of how high-potential entrepreneurs gain the right sort of backing.

And one truth is now clear. Corporations, governments and universities can, at their best, be vital and supportive parts of the ecosystem. Their contribution is not just to be so-called dumb money to prime the pump or pump up the prices or fill in a round brokered by a venture capi-talist, nor just as an exit option, regulator or customer to a startup. Best means squaring the occasional circle to help those providing the money to the venturing unit, the entrepreneurs and the wider stakeholders in society.

This is not easy, which is why our annual Global Corporate Venturing Symposium attracts corporate venturing units managing more than $20bn in assets on behalf of corporations with aggregate annual revenues of more than $4 trillion so they can share ideas, best practices, war stories and strike up or maintain the relationships that will help them do more and better deals in future. It is what motivates the top 25 universities for innovation, as uniquely ranked by Global University Venturing – see our website and magazine and attend our summit in London on October 21-22.

But while the best corporate, university and government venturers have rightfully taken their place among the venture capitalists and others as responsible and helpful investors and partners to the best entrepreneurs, it has sometimes been a struggle to connect these different elements in a way that makes the life easier for all.

This is why we will launch Global Government Venturing’s directory at our inaugural summit on February 3-4 in Eindhoven, Netherlands, courtesy of our partners at Tilburg University, the Mayor’s office and the Brainport region.

The directory and event, which will bring the best of all parts of the venture ecosystem to one venue, will help all parties better understand and support the regional, national and supranational organisations providing tens of billions of dollars in capital and a host of tax and regulations to ease the lives of those making a difference in the world – the entrepreneurs and their investors.

Together really can be better. It is how friendships form and truth emerges. u

Together really can be better

James Mawson, editor-in-chief

Corporations, governments and universities can, at their best, be vital and supportive parts of the ecosystem


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Ummenhofer to leave EIFMatthias Ummenhofer, head of venture capital (VC) at the European Investment Fund (EIF), the state-backed financial services provider to smaller companies, will leave at the end of the month to set up an asset manager.

EIF operates a fund of funds for venture capital and private equity investments in Europe with µ9bn ($15bn) under management and commitments to more than 350 funds.

Ummenhofer, who joined the EIF in 2001, said: “I will be leaving the EIF as of September 30 to set up an investment firm focusing on European VC. My successor will be Uli Grabenwarter.”

Grabenwarter, who was unavailable for comment, has most recently been the fund’s head of strategic devel-opment equity, and of development impact and social investing, for two years, where he has been building the first pan-European funds of funds for investing in social impact and social venture funds.

Previously, he spent a decade at the EIF as head of equity fund investments.

Juncker nominates commissionersJean-Claude Juncker, incoming president of the European Commission, has named candidates for the 28 port-folios making up the senior ranks of the administration, including seven vice-presidents.

Elzbieta Bienkowska, Poland’s minister for infrastructure and development at home, will be in charge of internal market, industry, entrepreneurship and small and medium-sized enterprises.

The nominee for the trade portfolio is Cecilia Malmstrom of Sweden, replacing Karel De Gucht of Belgium, on the Transatlantic Trade and Innovation Partnership agreement with the US.

Energy Commissioner Günther Oettinger will take over Neelie Kroes’s digital post.There will be six vice-presidents without portfolios but with a remit for oversight, strategy and veto over policy.

A seventh vice-president will act as Juncker’s aide. Finland’s Jyrki Katainen will be a vice-president for the main economic portfolios in the new commission.

Jyrki Katainen, the outgoing European Economic and Monetary Affairs Commissioner, said there were already ideas to recapitalise the European Investment Bank (EIB) as a way of boosting private investment in the eurozone and make countries more competitive.

Juncker has already said he wants to create a growth investment package worth µ300bn ($400bn) before February using structural funds and EIB lending.

Forget cuts to Finnish fundingFinland’s innovation agency will avoid a proposed reduction of µ30m ($38.8m) in its funding, according to director general and chief executive Pekka Soini.

Last year, Tekes, the Finnish funding agency for technology and innovation, provided µ577m in funding to companies and research organisations.

The proposed funding cut to the organisation was called off after Tekes, which was founded in 1983 and is a part of the Finnish Ministry of Employment and Economy, rallied its supporters and those it had funded in the past. In just 24 hours the company was able to point to 70 executives who had supported its work vocally.

Soini said: “Right now, Finland needs income from exports, thus, we have been pleased to note that exports have grown by 20% annually for Tekes’ small and medium-sized client companies.

“Growth companies play a significant role in economic reform. Tekes funding has helped growth companies on to the international market and helped companies receive further funding.”

Irish government invests in Frontline VenturesFrontline Ventures, a UK and Ireland-based invest-ment firm, has raised µ40m ($52m) in the first close for its debut fund.

Investment in Frontline’s fund has come from Enterprise Ireland, Allied Irish Banks and the An Post pension fund, all Ireland government-owned or par-tially-owned companies. The first µ20m of this fund

was raised at the end of 2013, with other investors including Irelandia, the investment vehicle of Declan Ryan, son of Tony Ryan, founder of low-cost airline Ryanair.

To date the fund has made eight investments of up to µ2m each in CurrencyFair, Logentries, Boxever, Qstream, Boxfish, PageFair, Orchestrate and Drop.

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Funding UK health technologyThe UK government has committed half of a £1.2m ($2m) fund for UK health technology startups.

Along with UK not-for-profit housing provider Trafford Housing Trust and US-based pharmaceutical com-pany Janssen Healthcare Innovation, the UK Cabinet Office’s Social Incubator Fund will commit to the Health Innovators Programme, which will support early-stage companies that offer the potential for “tangible and significant” social and healthcare benefits.

The fund is looking to support seven to 10 companies working in the health technology sector targeting men-tal health, dementia, diabetes, healthy ageing and addiction, including alcohol and substance misuse. Support will be both seed funding of at least £40,000 and through mentoring.

The programme is being organised by three organisations – the commercial spin-off unit of University Col-lege London, investment group Numbers4Good and incubator Healthbox.

Winch Capital 3 closes at €300mThe public investment bank of France, BPIFrance, and the European Investment Bank’s European Investment Fund (EIF) have committed to venture capital firm Edmond De Rothschild Investment Partners’ Winch Capital 3 fund.

The fund’s initial target was µ250m ($324m) but reached the hard cap and closed at µ300m. Twenty-three investors in the Winch Capital 2 fund, such as BPIFrance, BNP Cardif Assurance and CNP Assurances, made new commitments to the third fund.

The fund aims to gain a portfolio of approximately 15 profitable companies with sales of between µ30m and µ300m by investing µ7m to µ25m.

Dutch anti-cancer fund opensNetherlands-based Aglaia Biomedical Ventures has raised $65m for its Aglaia Oncology Fund II with investment from the government-backed European Investment Fund and the Dutch Venture Initiative (DVI).

The European Investment Fund is backed by the European Investment Bank, the European Commis-sion and its member states, while the DVI was recently

launched by the Netherlands Ministry of Economic Affairs. This fund, unlike the first oncology fund that was backed only by high-net-worth families, is open to institutional investors.

The Aglaia Oncology Fund II’s investment target is between $80m to $100m and plans to invest in 10 to 15 biotech startups working on developing technolo-gies to prevent and cure cancer.

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Utah struggles with fund costsThe “atypical” financing structure of the US state of Utah’s fund of venture capital (VC) funds’ has negated its investment gains while its impact on the regional economy is unclear, according to an audit report to the state’s legislature.

Founded in 2006 after legislation passed three years earlier, the Utah Fund of Funds (UFOF) aimed to encourage job growth in the state, diversify the economy and help maintain a well-trained workforce while also balancing investment returns.

The fund’s $37.3m cost of servicing $100m in debt financing used to commit money to VC firms has been more than the investment gains from its fund managers so far, although it was “approaching break-even”, the auditor’s report said. If the fund’s assets are worth less than its debt by 2017 then the state will cover the differ-ence through tax credits.

John Schaff, Utah’s auditor general, said: “If the programme’s performance continues to improve, the risk of tax credit redemption will diminish.”

But he said the economic impact was uncertain and the fund’s reported income tax revenue from its activi-ties was “overstated”. He said: “The UFOF lacks a consistent methodology for determining its effect on the Utah venture capital market and the state’s economy as a whole. Because impact is not adequately tracked or documented, the UFOF has reported every new job created in companies that have received investments from UFOF investment managers. We are concerned that the UFOF has been unable to quantify or estimate its

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involvement in total new job creation.”In addition, Schaff also said it was “unclear” whether the fund had helped Utah’s rise in state rankings for VC

activity because of a lack of metrics and because the fund had been inactive for three years from 2008 despite the legislature trying to avoid this during an economic downturn.

However, a change in senior management late last year and new legislation earlier this year are designed to improve governance and reporting.

House Bill 243 disallowed the financing of new investments with debt and reduced the level of tax credits available to the programme, while also modifying and increasing investment performance reporting require-ments to make sure costs affect the publicised rate of return.

For example, the fund’s most recent annual report showed a net internal rate of return that did not account for financing and administrative costs, which Schaff said “was misleading and significantly affected the reported number”.

Salt Lake City news provider Daily Feed reported that Bret Jepsen, who took over as head of the fund in Sep-tember 2013, said he had embraced the majority of reforms recommended by auditors. As the use of debt is now disallowed, a potential second fund of funds would have to raise equity to make its commitments as “UFOF has been unable to build up any redemption reserves”, the audit found.

Illinois launches $500,000 fundThe US state of Illinois is launching a $500,000 fund to invest in university spin-outs. Individual investments will be up to $25,000 so long as the university matches the funding two to one, and the university will need to commit that money first.

Participating universities are Chicago University, Illinois Institute of Technology, University of Illinois at Chi-cago, University of Illinois at Urbana-Champaign, Northwestern University, Northern Illinois University, South-ern Illinois University and Argonne National Laboratory.

The fund, dubbed Regional Proof of Concept Fund and aimed at early-stage tech companies, intends to replicate successes such as Chicago-based incubator 1871 and increase the number of successful startups such as GrubHub and Georama.Editor’s note: A version of this report was first published by sister title Global University Venturing.

Maryland funding the white hatsThe Maryland Technology Development Corpo-ration, an organisation supporting entrepreneurs and business startups in the US state, has created a $1m state-sponsored fund to support cyber-security companies.

The Cybersecurity Investment Fund (CIF) will invest up to $100,000 in companies developing and com-mercialising security technologies – called white hats. The fund will provide both seed and early-stage funding.

Rhode Island faces VC information requestUS state Rhode Island’s race for governor is leading to greater clarity on how the state invests in a venture capital (VC) fund.

Rhode Island committed $5m to VC firm Point Judith Capital in 2006, and its co-founder, Gina Raimondo, is trying to be nominated as the Democrat Party’s candidate for governor. Her rival for nomination, Angel Taveras, has made a freedom-of-information request to see the investment agreement made between the VC firm and Rhode Island.

News provider Providence Journal said Traveras as mayor of the state’s Providence city had already publi-cised details of its $1m investment in Point Judith Capital but now wanted more information from Rhode Island’s investment.

Innova Memphis reaches first closeInnova Memphis, formed by the US state of Tennessee’s non-profit Memphis Bioworks Foundation, has made the first closing of its third venture capital partnership at $20m. Innova said it had invested more than $13m in 32 startups, attracting $39m of outside capital and supporting more than 150 direct jobs.


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Kansas county considers capitalising companiesThe US state of Kansas’s county of Douglas is planning to provide venture capital as one way to help entrepreneurs.

Lawrence, a city in the county, and the Lawrence-Douglas County Economic Development Corporation have created a plan to help startup companies with an entrepreneurship scholarship, grants, loans and venture capi-tal. It could also help the state tap into Kansas University’s small business development centre.

Hangzhou plans US incubatorThe Hangzhou region of China is setting up an incubator in California to attract startups to Asia. The Hang-zhou-US Silicon Valley incubator is expected to offer venture funding as well as connecting entrepreneurs with Hangzhou-based businesses.

News provider the Lawyer said law firm Dacheng advised the government of Hangzhou and its fund man-agement partner Zhejiang Cybernaut Investment Management Company on the creation of the Hangzhou-US Silicon Valley incubator.

Dacheng reportedly drew up the internal control scheme, planned funds and funds of funds, structured busi-ness models and drafted legal documents in preparation for an official launch of the incubator.

Canada fund Avrio hits halfway pointCanada-based venture capital company Avrio Capital has announced the first close at C$65m ($59m) of its latest late-stage venture fund with a commitment from government of Canada-owned Export Development Canada and Farm Credit Canada.

Avrio Ventures Limited Partnership III will focus on the food and agriculture sectors and is targeting a final close of C$125m.

BDC aids Canada Media Fund portfolioBDC Capital, a subsidiary of state-backed Business Development Bank of Canada (BDC), will invest C$150,000 ($160,000) in Canada Media Fund (CMF) portfolio companies.

BDC Capital, which has more than C$1bn under

management, will provide its money as a convert-ible note for games and software startups whose projects received – or will receive – funding through the CMF’s Experimental Stream either in 2013-14 or 2014-15.

Jamaica eyes regulatory changesJamaica’s venture capital legal and regulatory changes should be implemented during the next fiscal year.

Peter Phillips, Jamaica’s finance and planning minister, said the Development Bank of Jamaica (DBJ), through the Jamaica Venture Capital Programme (JVCP), had identified some regulatory changes needed to set up a venture capital and private equity industry on the Caribbean island.

Speaking at the official opening of the second annual Venture Capital Conference at the Jamaica Conference Centre in September, Phillips said: “What is required is much more than simple capital and efforts are being made to identify the nature of the changes, which would be required to the legal and regulatory framework.”

Last year, the DBJ signed an agreement with the Inter-American Development Bank (IDB) to develop a ven-ture capital ecosystem through the JVCP, and aims to get two venture capital funds started by 2016. The IDB is putting up $150,000 to match the DBJ’s $128,000 to establish the ecosystem.

Phillips said a call for proposals had already been issued, and “in the course of next year, we will have estab-lished functioning venture capital funds, which will provide a way for those with good ideas and good business plans, but without access to capital to start their businesses”.

Fund managers will be required to invest at least 2% in their own venture funds, while DBJ planning to invest about 25%.

One group, GraceKennedy, has set up a subsidiary, GK Capital Management, to raise a VC fund in Jamaica. Don Wehby, group CEO of GraceKennedy, said: “We are excited about the role that venture capital investment opportunities will play in Jamaica and plan to participate actively in this space through GK Capital, [led by CEO Steven Whittingham].”

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Japan’s reshuffle affects marketsShinzo Abe, Japan’s prime minister, has appointed Yasuhisa Shiozaki as health minister leading to expectations the ¥126.6 trillion ($1.3 trillion) Government Pension Investment Fund (GPIF) will invest more in equities that will knock on to the venture industry.

Shiozaki is considered a pro-market reform voice within the ruling Liberal Democratic Party and the GPIF is expected to increase its holdings of Japanese shares to 20% and reduce domestic bonds to 40%, according to a Bloomberg News survey in May. The GPIF would need to buy ¥3.5 trillion of domestic stocks to reach the 20%, according to calculations by Bloomberg based on its figures for holdings at the end of June.

Shigeo Kagami, general manager at the office of innovation and entrepreneurship in the division of university corporate relations of Tokyo University, in a speech at the institution’s conference, Intellectual Property and Venture Capital: The Secrets to Building Innovation Ecosystems, following the news of Shiozaki’s appointment said he “really expected” the new minister to put an emphasis on the GPIF holding more risk money because the supply of such capital was “smaller than it should be”. Already, six of the eight members of the GPIF’s invest-ment committee had been changed.

One impact of the GPIF holding more domestic stocks could be the government using its voting rights to encourage corporations to acquire more startups, he added. Traditionally, successful entrepreneurial private businesses have floated on the stock markets rather than sold out to trade peers. Established corporations have been seen as reluctant to buy startups but activist shareholders could encourage change, which could boost the chances of university venturing-backed portfolio exits, Kagami said.

The GPIF’s increased holdings of equities could also encourage more venture-backed companies to float if there is an institutional investor taking the lead, according to Jack Motoyama, head of the office of innovation and business at Tohoku University.

Both Tohoku and Tokyo universities are part of Japan’s $1.2bn university venturing programme to create proof-of-concept funding for student and faculty ideas and funds to invest in their startups.

The ministries of education and finance have already approved plans by the other two universities, Osaka and Kyoto, to use their allocations under this scheme, which divides the pot into $1bn for venture capital and $200m for proof of concept.

Tokyo receives 43.7% of the money, Kyoto 27.2%, Osaka 16.6% and Tohoku 12.5%.

Korea’s rising starSouth Korea’s Small and Medium Business Administration (SMBA) has agreed to set up a $150m venture capi-tal fund managed by DFJ and Walden International.

The Korea Fund will have to invest at least 51% of the money within the country, where Walden has previ-ously backed Com2us, SundayToz and MNtech. The Korea Fund will be promoted alongside the Korean Yozma Fund, which plans to invest $1bn in Korean startups over the next three years. SMBA said it expected foreign investment in domestic startups to reach $700m this year.

South Korea has hosted the inaugural event of a government-led investment consultation group through its sovereign wealth fund.

The Co-investment Roundtable of Sovereign and Pension Funds (Crosapf) group invited sovereign wealth funds, pension fund firms and global public funds to its first conference this year, hosted by Korea Investment Corporation and sponsored by Export-Import Bank of Korea (Kexim), which supports exports.

Attendees included the United Arab Emirates’ (UAE) Abu Dhabi Investment Authority, the European Bank for Reconstruction and Development and Asian Development Bank, the Qatar Investment Authority, Singapore’s GIC and Temasek, Sweden’s AP1 and AP4 buffer funds, Australia’s Future Fund, Azerbaijan’s Sofaz, China Investment Corporation, France’s CDC, Japan’s Global Pension Investment Fund and Malaysia’s Khazanah.

Separately, Investment Corporation of Dubai (ICD), another of the UAE’s sovereign wealth funds, signed a memorandum of understanding with Kexim so they can together explore investment opportunities across Asia, the Middle East and Africa in healthcare, infrastructure and energy.

Lee Duk-Hoon, chairman and president of Kexim, said: “This partnership provides a fantastic platform to promote and develop new investment opportunities in potentially new markets for mutual benefit, alongside a partner of global standing, with complementary competencies and a congruent investment philosophy.”

ICD’s portfolio includes equity stakes in some of Dubai’s largest corporate entities, including Emirates NBD, Emaar Properties, Dubai Islamic Bank, Emirates Airline, Emirates National Oil Company and Dubai Duty Free.

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Yozma’s South Korean FundYozma Group, an Israeli government-created venture capital firm, has opened an office in Seoul, South Korea, and is to open its first campus to help develop startups in the country.

Yozma – Hebrew for initiative – plans to operate a fund worth 1 trillion won ($954m) through the campus over the next three years. The venture capital for this fund is to come from the US, the UK and Singapore.

Yozma also plans to open campuses in other parts of Asia but Yigal Erlich, founder and managing partner of Yozma Group and former chief scientist of Israel from 1984 to 1992, said: “I think Korea already has reached a more advanced technological level than its fellow Asian countries like Taiwan and China. Foreign investors like us think that the main reason that the Korean startup market has stayed weak is not the technology. It is a problem of globalisation.

“[Foreign investors] certainly recognise the power of Korea, which nurtured global companies like Samsung and LG. We think that the Yozma will be able to grow Korean startups into the second and third Samsung.”

Originating from a government programme in 1993 aimed at prompting venture investments in Israel, Yozma over a three-year period established 10 sub-funds, each capitalised with more than $20m before its second and third funds were raised in 1998 and 2002 respectively, with a total across all three of $220m. In parallel they started making direct investments in 50 startup companies.

Over the past decade Yozma has worked with several academic institutions in Israel, such as Hadassit (the Hebrew University’s Hadassah Medical Centre commercialisation company) and Technion Research and Development Company, a subsidiary of the Technion Institute of Technology, to source deals, including Para-gon Communications and Predix.

Nik Amlizan Mohamed promoted to CIONik Amlizan Mohamed has been promoted to chief investment officer of Kumpulan Wang Persaraan (Diper-badankan), Malaysia’s second-biggest retirement fund.

Mohamed began work at Kumpulan in 2007 as head of equity and went on to become senior director of equity in February this year.

In her new role she will be responsible for creating the all investment strategies for the firm. She will remain a board member of Prima Ekuiti (UK), a unit of the company, and maintain her investment committee positions with Valuecap, IVCap Management and Metropolitan Uxbridge.

Vietnam eyes VC regulationsVietnam plans to launch a pilot domestic venture capital fund this year backed by businesses, organi-sations and individuals rather than the state budget.

Nguyen Thanh Long, vice-chairman of the State Securities Commission, said the Ministry of Sci-ence and Technology was working on this VC plan, according to an interview with Thoi Bao Ngan Hang (Banking Times) newspaper.

Long also said hundreds of state-owned enter-prises would be privatised, but only a proportion of this capital would be raised through the banking sec-tor and the stock market and some would also require venture capital.

Long said the law still lacked specific regulations on definition, policy orientation or preferential condi-tions for venture fund operation.

India plans $1bn telecoms fundThe Indian Department of Telecommunications is considering a $1bn government-sponsored fund to promote local technologies.

India’s National Manufacturing Competitiveness Council and the Prime Minister’s Office (PMO) of Narendra Modi proposed the fund, which would buy majority stakes in local startups to prevent foreign takeovers.

According to communication between the PMO and the telecoms department, seen by news provider Eco-nomic Times of India, the fund would “infuse equity in startups promoted by technocrats and scientists of Indian origin on condition that product development and manufacturing happens in India”.

The Modi-led government’s Digital India project plans to deliver citizen services electronically and replace imported electronics with locally manufactured ones.

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Odisha fund to be created in IndiaThe Indian state of Odisha government’s Micro, Small and Medium Enterprises (MSME) Department and the asset management company GVFL Advisory Services have agreed to create a venture capital fund.

The six-year Odisha MSME Fund will raise R1bn ($16.5m) and provide marketing and infrastructure support to companies in the region.

The state government plans to invest R500m in the fund with the remaining funding coming from traditional investors and the national government.

An asset management company, provisionally named Odisha Alternate Asset Management Company, will be set up to manage the funds. It is expected that typical investments will be in the range of R50m to R100m.

Punjab promotes agriculture schemeThe Indian state of Punjab has boosted the promotion of its venture capital assistance scheme for agriculture after just 12 out of 1,000 businesses took up the scheme in the initial round.

India’s Small Farmers Agribusiness Consortium (SFAC) gives interest-free loans to small farmers worth 26% of the investment cost.

Maharashtra leads the country with 220 industrial units using the SFAC, while Uttar Pradesh has 124 units, more than 10 times Punjab’s total.

The SFAC met Punjab agriculture department officials, bank officials and farmers on last month.

Nepal investment fundThe Dutch, Finnish and Austrian government-backed Dolma Impact Fund, has launched its Nepal invest-ment fund targeting R2bn to R4bn ($20m to $40m). Dolma is backed by the Development Finance Insti-

tutions FMO (Netherlands), Finnfund (Finland) and Austrian Development Bank-OeEB (Austria) and pri-vate investors to invest in the renewable, healthcare, education, agriculture and financial sectors.

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Angola looks to alternatives for growthJosé Filomeno Dos Santos, the chairman of Fundo Soberano de Angola, Angola’s sovereign wealth fund, said he planned to invest a third of its assets in alternative investments in sub-Saharan Africa.

He told news provider Forbes the fund received the last part of its $5bn endowment in June from the coun-try’s Strategic Financial Oil Reserve Account for Infrastructure and would allocate a third to liquid securities – a figure that can never drop below 20% – and the other third into what he called “opportunistic investments internationally – distressed assets that the fund could take advantage of, spin around and refocus”.

Investments are intended to both generate returns and prompt growth in the economy of Angola and sub-Saharan Africa.

Kenya plans sovereign fundKenya is setting up its National Sovereign Wealth Fund to invest revenues from the country’s natural resources. The Sovereign Wealth Fund Bill 2014 will provide guidelines on how money will be withdrawn from the fund for socio-economic projects.

Separately, on the other side of the continent, the International Monetary Fund is encouraging Republic of the Congo to work with Bank of Central African States on a SWF to manage its reserves.

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Kuwait SMEs clarifiedA Kuwaiti government official has clarified what the terms small and medium mean when applied to enterprises applying to the fund established by the Kuwaiti parliament in March 2013 to boost such SMEs.

Whereas in other countries the terms can refer to revenue or even contribution to the country’s gross domes-tic product, in Kuwait small and medium-sized enterprises (SMEs) are defined by a company’s capital and its number of staff.

Speaking to the Kuwait News Agency, Mohammad Al-Zuhair, executive chairman and secretary general of the National Fund for Small and Medium Enterprises Development, said: “A small enterprise, according to the fund’s categorisation, should not have more than four Kuwaiti workers with a capital that does not exceed D250,000 ($873,000).”

He went on to say that a medium enterprise should have five to 50 workers and a capital of between D250,000 and KD500,000.

In March 2013, the Kuwaiti Parliament approved the law to establish the SME fund to help private sector companies run by Kuwaiti citizens.

Al-Zuhair said: “Such enterprises will be promoted as soon as they reach a certain point of development with the help of concerned bodies here and in host countries.

“The fund has the authority to take up a calculated risk percentage so as to encourage SMEs and allow them more space to manoeuvre. The fund will not only provide finance for entrepreneurs, but will also cater for them by holding necessary training courses in order to help them develop their capabilities.”

Incubating entrepreneurship in QatarThe Qatar Business Incubation Centre, a joint project between the Qatar Development Bank and the Social Development Centre, has been launched to boost entrepreneurship in the country.

The incubator is the largest in the Middle East and north Africa and is expected to incubate 15 projects that have come through its Lean Startup programme.

The 15 projects taking part in the incubator will be provided with office space and financing of incubation services for two years. The incubator will also offer four spaces to scale projects that will have access to the services of the incubator and potential funding opportunities.

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Russia develops tiesRussia’s Sakha (Yakutia) Republic Investment Development Agency and Chinese state investment fund Yuntszin have agreed to set up a bank and fund to back investment projects, while separately Russia is reportedly eyeing options for its main sovereign wealth fund following US sanctions.

Beijing-based Yuntszin is a significant player in the Chinese investment market. The company works with major Chinese state financial bodies, international banks and investment companies.

Chinese investors have recently shown an increased interest in Russian businesses. According to Russian online newspaper Gazeta.ru, Business Russia, a Russian non-government organisation, gathered 57 Russian entrepreneurs trying to attract $7.2bn in investments from China.

Separately, the Russian Direct Investment Fund, a state bank-backed private equity fund with more than $10bn in foreign capital that invests in Russian businesses may be moved to Russia’s central bank to keep it from being touched by sanctions, news wire Bloomberg reported. An fund spokesman said no decision had been made, and discussions about this change were started two years ago.

The sanctions-related bill in the US Senate could stop US companies from doing business with the fund, which has been backed by countries such as China, France, Japan and the United Arab Emirates (UAE). The UAE has provided most of the money in recent years, including last year’s $5bn committed by the Abu Dhabi department of finance and $1bn from the emirate’s Mubadala Development Company.

Russia’s two internally-funded sovereign wealth funds, the National Welfare Fund and the Reserve Fund, swelled by R353.3bn ($9.4bn) last month to reach combined reserves of R6.54 trillion.

KuWAiT

qATAR

RussiA


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Rusnano and RusHydro plan fundRusnano, a Russian state-backed investment organisation, and the country’s largest national hydroelectric power company, RusHydro, plan to set up a $200m venture fund on an equal basis.

Rusnano president Anatoly Chubais said the prospective venture fund was expected to focus on projects in the field of electricity generation, according to news agency MA-agency.ru.

Separately, Rusnano has invited Chinese partners to create a joint fund of undisclosed size for investment in nano-technology.

Chubais said both countries would contribute equally to the fund as Beijing had already invested “gigantic” sums in that sphere.

NZ plans high-growth fundNew Zealand’s Labour government plans to put NZ$100m per year into clean-tech companies as part of the creation of a sovereign wealth fund called NZ Inc to invest in strategic assets, funded by dividends from priva-tised assets and royalty payments from oil and gas developments.

Half of the money will be managed by the New Zealand Superannuation Fund to invest in high-growth New Zealand assets, to keep the ownership in New Zealand.nEW zEAlAnd

Deal activity last month

Name Region Sector Stage Amount Aggregate InvestorsAldea Pharmaceuticals

US Health B $24m $35.4m RusnanoMedInvest, WuXi PharmaTech Corporate Ventures, Canaan Partners, Correlation Ventures

Tyneport Coatings

UK Industrial – $282,000 – Finance for Business North East’s growth fund

IE-CHP UK Clean-tech – $1.3m $8.3m SSE Ventures, Intelligent Energy, Scottish Investment Bank

KKBox Taiwan Media – – – GICATK Shopping Solutions

Germany Consumer M&A – – Rebelle

IndoorAtlas Finland Services – $10m $14.5m Tekes, BaiduMyDoc Singapore Health Seed – – Spring Seeds Capital, August Capital PartnersClearside Biomedical

US Health B $16m $27.9m RusnanoMedInvest, Santen Pharmaceutical, Hatteras Venture Partners, Mountain Group Capital, Georgia Research Alliance Venture Fund

I3 Membrane Germany Industrial – – – High-Tech Gründerfonds, Innovationsstarter Fonds of Hamburg

IAmCompany South Korea

Services – $1.5m $1.553m Undisclosed

Appcelerator US IT D $22m $90m EDBI, Rembrandt Venture Partners, Union Grove Venture Partners, Relay Ventures, Mayfield Fund, Storm Ventures, Translink Capital, Sierra Ventures

Enevo Finland Utilities – $8m $10.94m Finnish Industry Investment, Earlybird Venture Capital, Lifeline Ventures, Draper Associates, Risto Siilasmaa

Brandnew Germany IT Seed $1.9m – Berlin’s Program for the Promotion of Research, Innovation and Technology (Pro Fit), PubliGroupe, Belin Ventures, Lukas Kircher

PatSnap Singapore Services A $3.6m $8.53m Vertex Venture, Accel-X Appointedd UK Services Seed $266,000 – Scottish Investment Bank, Apollo Informal

Investment, Equity GapNutrinsic US Industrial – $12.7m – US Rural Infrastructure Opportunity Fund, Capitol

Peak Asset Management, Artiman Ventures FanDuel US Consumer D $70m $85m Scottish Enterprise, Shamrock Capital Advisors,

NBC Sports Ventures, Bullpen Capital, Pentech Ventures, Kohlberg Kravis Roberts

Whill US Transport A $11m $13.15m Innovation Network Corporation of Japan, NTT Docomo Ventures, 500 Startups, Jochu Technology, Scott McNealy


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GlassPoint Solar

US Clean-tech C $53m $86m Omani sovereign wealth fund State General Reserve Fund, Royal Dutch Shell, Chrysalix Energy Venture Capital, Nth Power, Rockport Capital Partners

MindMixer US IT C $17m $23.2m Govtech Fund, Dundee Venture Capital Devyani International

India Consumer – $66m – Temasek

Quantum Genomics

France Health – $337,000 – BPIfrance

Tikona Digital Networks

India IT – $25m – International Finance Corporation

Hootsuite Canada IT C $35m $224.9m Fidelity InvestmentsWebinar.ru Russia IT A $7.3m – Intel Capital, European Bank for Reconstruction

and Development, Flint Capital, VTB CapitalCelluFuel Canada Clean-tech – $5m – Innovacorp, Boralex, Tatro GroupDetsky Mir Russia Consumer Stake

purchase– – Sistema, Russia-China Investment Fund

Elastic Path Canada IT – $4.5m $20.6m Business Development Bank of CanadaEuclises Pharmaceuticals

US Health A $1.3m – Missouri Technology Corporation, St Louis County Port Authority’s Helix Fund, Cultivation Capital, BioGenerator Accelerator Labs, ABC Laboratories, St Louis Arch Angels

Poxel France Health B $13m $43m BPIfrance, Kreos Capital, Edmond de Rothschild Investment Partners

Airway Therapeutics

US Health A $4.6m $5.1m CincyTech, Cincinnati Children’s Hospital Medical Center, private investors, the Queen City Angels

Arzneimittelwerk Warngau (AMW)

Germany Health – $7m – UnternehmerTUM Fund, BayBG Bayerische, IBG Beteiligungsgesellschaft, SHS Gesellschaft für Beteiligungsmanagement, Bayern Kapital, KfW, Wilfried

Advantex Network Solutions

UK IT – $150,000 – Finance for Business North East Angel Fund

GreenDust India IT – $5m $45m Vertex Venture, Lightbox PartnersTink Sweden Financial

servicesA $4m – Sunstone Capital, Sven Hagströmer

MGB Biopharma UK Health – $6.4m $10.94m Scottish Investment Bank (SIB), Innovate UK, Archangels, Tweed Renaissance Investors Capital (TRI Cap), Barwell

FeedHenry Ireland IT Exit $81.5m $90.5m Red Hat, Enterprise Ireland, Intel Capital, VMware, Kernel Capital Partners, ACT Venture Capital

Visible Technologies

US IT Exit – $80m Vocus, Cision, In-Q-Tel, Ignition Partners, Investor Growth Capital, WPP

ESentire Canada IT C $12.7m $19.7m Northleaf Venture Catalyst Fund, Georgian Partners, Edison Partners, VentureLink, Cisco Investments

Palantir Technologies

US IT – $165m $1bn Reed Elsevier, In-Q-Tel

Jimubox China Services B $37.2m – Xiaomi, Shunwei Capital, Vertex Venture Holdings, Matrix Partners China, Ventech China

Blinq Networks Canada Services B $15.1m $32.5m BDC Venture Capital, Win FundQuobyte Germany IT A $1.2m – High-Tech Gruenderfonds (HTGF), Target

PartnersBitstars Germany IT – – – High-Tech Gruenderfonds (HTGF)MinCell Germany Industrial Exit – – High-Tech Gruenderfonds (HTGF)CommerceTools Germany IT Exit – – High-Tech Gruenderfonds (HTGF), Rewe GroupVirgin Mobile Central and Eastern Europe

UK Services – $51m – International Finance Corporation (IFC), European Bank for Reconstruction and Development (EBRD), Delta Partners Emerging Markets TMT Growth Fund II, CEE Mobile Capital

Cosmopolit Home

France Services – $2.5m – BPIfrance, Rhône-Alpes Création, Expansinvenst, Otonnale

GrabCad US IT Exit – – Stratasys, Estonian Development Fund (EDF)Sentrix Israel IT – $6m – Israeli government’s Chief Scientist programme,

Cedar Fund, Magma Venture Partners

Name Region Sector Stage Amount Aggregate Investors


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The European corporate venturing industry is mobilising in an effort to stop legislation hitting corporate venture investment in the continent. Various members of the corporate venturing industry have contacted Global Corporate Venturing, sister paper to Global Government Venturing, to say they are concerned

about proposed changes to European competition law. The European Commission was in a period of public consultation until this month on a white paper proposing that the commission be notified of acquisitions of stakes in related companies of over 20% or of above 5% under certain conditions.

Market participants have said they are preparing submissions to warn about the low threshold in the proposals, which are likely to need scrutiny from corporate venturing units as it targets stakes of a size those units typically seek to buy.

Dörte Höppner, chief executive of trade body the European Private Equity and Venture Capital Association (EVCA), said: “This issue is indeed of concern to our corporate venture members. The EVCA is preparing a submission to the European Commission and will ensure that the potential impact is clearly understood by policymakers.”

UK trade body the British Private Equity and Venture Capital Association has also said it is monitoring the potential impact of the white paper.

Simon Holmes, a partner at law firm King & Wood Mallesons SJ Berwin, is one of a number of lawyers who have raised concerns about the white paper. Holmes said: “If implemented, these proposals could have significant effects on corporate venturing in Europe, with investors having to confirm, prior to the purchase of a minority shareholding of over 5%, whether the transaction triggers a notification obligation. This could add significantly more cost and delay to certain transactions.”

Paul Morris, formerly a senior member of Dow Chemical’s corporate venturing unit, and now an adviser to UK Trade & Investment, the government agency charged with promoting British business abroad, said: “This EU proposal to improve merger control rules risks having the apparently unintended consequences of inhibiting corporate venturing investments.”

However, despite the concerns, the European Commission is confident its reforms will be highly targeted. Antoine Colombani, a commission spokesman, said: “The review system would be strictly limited to certain categories of minority shareholdings, namely transactions of EU dimension that give a certain degree of influence in a competitor or a vertically-related company– that which prima facie may be problematic from a competition point of view. This would cover an estimated 20 to 30 cases per year and would leave benign transactions com-pletely unaffected.”

Europe is a region of significant corporate venturing activity. So far this year corporate venturing units have invested in 187 European companies, which have raised venture rounds worth a total of $3bn, according to Global Corporate Venturing analysis. Activity has already overtaken 2013’s full-year activity, in which 165 European companies were backed by corporate venturing units in rounds worth $2.7bn.

The sector invests in many of the biggest deals in the continent. According to Dow Jones Venture Source, the overall venture sector in Europe invested in 1,534 deals worth nearly µ6bn ($7.7bn) during 2013.

Eight companies backed by corporate venturing units have also achieved exits or initial public offerings worth a total of $2.4bn so far this year. There were 14 exits and initial public offerings worth $1bn in 2013. There are 334 corporate venturing units across Europe, as well as many international groups operating in the region.

Morris, of UKTI, said: “The UK government is actively seeking to support corporate venture investing in the UK. A number of roundtable sessions are taking place where corporate venturers can share their opinions with senior government officials on how to further enhance corporate venturing investment activity.” u

Editor’s note: A version of this story was first published by sister title Global Corporate Venturing.

Concern mounts about European proposals

Toby Lewis, editor, Global Corporate Venturing

“The EC is confident its reforms will be highly targeted”


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Europe, Japan and others might envy how the US procures technology, but they “may lack the military might to mimic it”, according to an article in the Washington Post earlier this month. However, they are trying to copy what they can, it seems.

A few weeks after that article, Japan’s Ministry of Defence said it would set up a ¥2bn ($19m) fund to develop military technology from research projects at universities and other civilian institutions for the first time. The ministry reportedly plans to budget ¥2bn for the year beginning April 2015, increasing to ¥6bn over three years. The fund will be modelled on the US’s Defense Advanced Research Projects Agency (Darpa).

Similarly, press reports had earlier indicated the UK’s Government Communications Headquarters (GCHQ) wanted to set up a fund similar to the US intelligence community’s In-Q-Tel technology investment affiliate. GCHQ and In-Q-Tel took part in an innovation event hosted by Security Inno-vation Network (Sinet) last month in London, UK (see news focus). Global Government Venturing and its sister titles were media partners to the event.

However, the scale of US defence procurement and the systematic way it taps into third-party innovations for use by the military and intelligence communities is of a different order of magnitude. The US was responsible for more than a third of the world’s $1.75 trillion defence spending last year, according to Sweden-based non-profit Stockholm International Peace Research Insti-tute. Add intelligence spending and the US tops $1 trillion by itself, the Washington Post said. Military spending by Europe and Japan is three to 12 times lower than the US, while even China accounts for less than a third the level of US investment, but is also looking at innovation rather than simply maintaining its 2.3 million-strong army, according to Reuters.

In addition, the climate is substantially different in what used to be called the military-indus-trial-academic cluster involving the US and most other countries. While the 1960s demon-strations on campuses helped encouraged US universities such as Stanford to separate from the defence-funded research institutes, such as what is now SRI, last year’s revelations from military contractor Edward Snowden exposed the connections between corporations and the US National Security Agency’s surveillance programme.

There have been protests against government surveillance in Europe, and a group of Japanese university researchers have opposed its defence ministry’s fund for civil-military co-operation, cit-ing and aversion to academia’s contribution to Japan’s militarisation during the Second World War. In May, Tokyo University turned down a request from the ministry to help find the cause of stress-related defects in the next-generation C-2 transport aircraft.

But reasons for linking military and industrial-academic research are increasing. The experience of In-Q-Tel for the US has been revelatory in showing how venture investing and then tailoring products for government use can improve quality at lower cost.

And while the US size and scale remains unique, different models can exist. “It is almost impossible to find a technology company in Israel” without ex-service personnel from Israel’s signals intelligence unit, according to Homeland Security News Wire in 2012. The unit develops its own technology while these personnel are con-scripted to the military, but many then use the ideas to develop a host of startups, such as CheckPoint, FST21 or Elbit Systems, the newswire added. These startups in turn boost the country’s venture ecosystem and economy.

As in war, therefore, while a larger size is often helpful to win a victory, it is not always the only option. u

Procurement will be a topic at the inaugural Global Government Venturing conference in Eindhoven, Nether-lands, on February 3-4 – for more details email [email protected]

How venture and the military form an economic symbiosis


Reasons for linking military and industrial-academic research are increasing


mailto:jmawson%40mawsonia.com?subject=

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Whistle-blower or traitor? This is hardly a standard question at most post-conference drinks events but then few of the delegates are as equipped to answer as the attendees of the Global Cybersecurity Innovation Summit organised by Sinet (Security Innovation Network).

Sinet’s inaugural international conference held in the British Museum in London, UK, covered many of the ways in which people, companies and governments can protect themselves from the downsides of exponential IT changes. It also looked at how these same issues can create opportunities by offering this cyber-security through collaboration by all three groups and the startups that bring innovative ideas.

As Gerald Brady, head of UK relationship banking at financial services provider Silicon Valley Bank, said, cyber-security was increasing revenues by 8% a year, compared with 4% for the IT sector generally, and would be an $80bn market next year.

Vince Cable, the UK’s secretary of state for business innovation and skills, said the UK had committed £860m ($1.2bn) to cyber-security over five years but wanted the country to earn £2bn from exports of cyber-security technology and services by 2016 after recording 22% growth last year. Robert Rodri-guez, chairman and founder of Sinet, said there had been 60 acquisitions of cyber-security startups in the first half of the year and returns for venture capitalists from their investments in the space had been good.

This growth is driven by threats increasing even faster. Suleyman Anil, head of cyber-defence in the emerging security challenges division of Nato, said it had seen a seven-fold increase in cyber-attacks over the past two to three years due to three broad reasons.

There had been an increase in the number of attackers, both non-state actors finding cyber-crime both lucrative and low-risk, and state actors conducting offensive operations. Off-stage, technology company Norse produced an arresting graphic showing the location and target of these cyber-attacks based on its five million sensors recording internet protocol addresses.

Anil said the second reason for attacks increasing came from the growing number of access opportunities. He said: “There will be 25 billion devices connected to the internet by 2015 – 500 per house.”

The third reason was the opportunity for cyber-attacks to develop asymmetric forms of politi-cal or economic warfare. He said it was asymmetric as attackers could be relatively few and attacks low-cost to conduct, but could inflict damage equivalent to a physical attack.

Heli Tiirmaa-Klaar, cyber-security policy adviser at the European External Action Service, the foreign office of the European Commission, said such cyber-attacks were now part of “hybrid” warfare, alongside kinetic, or physical, combat.

She said as a minister in Estonia she had to put in place cyber-security measures following Russia’s denial of service operations against the country in 2007. These had been followed by operations against Georgia and then Ukraine. The cyber-campaign to shape public opinion was part of the war-fare, she added.

That the attacks and information campaigns can affect any or all parts of society is bringing together these constituencies (see box overleaf). Bob Dudley, CEO of oil major BP, said it worked with government as a result. He said: “Cyber unites. Government does not control the key assets [to respond] as it would in a physical or terrorist attack.”

He said the energy sector had been a prominent target, as it made up 10% of global GDP and underpinned the other 90%. He added that while uncertainty was a fact of life, the response could be certain, and he held out the hope that cyber-security processes could be simplified under a framework of the right governance, developing capabilities to respond, changing behaviour to reduce vulnerabilities among BP’s 80,000 staff and preparedness under different scenarios.

He said BP carried out “ethical phishing” to identify people likely to be fooled by malicious emails or calls, and had improved the way people could report such attempts to cause damage. In addition, BP now compartmen-talised information so joint venture partners, such as China’s state oil company, or contractors could gain only limited access.

In turn, the UK and other countries have been pushing national cyber-security initiatives. Ian Caplan, the

Cyber-security whistles for attentionJames Mawson, editor-in-chief

The energy sector has been a prominent target, as it makes up 10% of global GDP and underpins the other 90%


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UK Home Office’s acting deputy direc-tor responsible for delivering the pursue strand of the government’s Serious and Organised Crime Strategy – the other strands are prevent, protect and prepare – said the authorities were embedding technology into the way they tackled any crime – pursuing criminals by gathering evidence, preventing others joining them in their activities, protecting people and institutions, and helping them prepare to mitigate the effects of cyber-attacks.

However, tackling cyber-security fully – what Caplan called the Home Office’s most important issue – required com-bining the cyber-world with legislative changes, such as making transparent the beneficial owners of companies, as well as partnering other countries in deal-ing with what is a global issue.

Sir Iain Lobban, director of the UK’s Government Communica-tions Headquarters (GCHQ), said partnership with the US Federal Bureau of Investi-gation (FBI) had helped in securing prosecu-tions against organised hacker groups.

The speed of technol-ogy change makes security a challenge. Michael Trevett, senior information risk owner at the UK govern-ment’s Cabinet Office, in a networking lunch on risk management, posed a series of ques-tions about how organi-sations could cope with the speed of change. If technology improves so rapidly, identifying what is important and protecting it, rather than trying to protect everything, might be helpful, he said. Additionally, understanding the nature of threats was important.

However, Trevett said society faced a potential “cliff” connected to the development of a self-learning and evolving artificial intelligence (AI), leading to a “ghost in the machine”. The fear is that this evolution could lead to an event dubbed “the singularity”, in which an AI exceeds human intellectual capacity and control. This was a challenge those in research were also tackling, he noted.

Other government officials were more critical of the lack of regulatory attention being paid to the risks of so much innovation so rapidly. One said on the sidelines of the event: “Technology is moving too fast and policy-making is at the lowest common denominator. AI is not thought of as an issue.”

Given that the standard innovator’s guiding principle historically has been “ask for forgiveness rather than per-mission”, it could be that people will regret governments feeling they are unable to get ahead of the technology curve to regulate more.

But the penalty for misjudging the regulators could be steep. Sir Iain Lobban, outgoing director of GCHQ, said the UK would have been harder on Edward Snowden, the cyber-security contractor who revealed US surveil-lance measures last year, had he been a Briton revealing the UK’s cyber-security measures. u

The Severn valley’s cyber-security clusterThere are a few global regions where cyber-security experts cluster. These include Washington DC, the west coast around San Francisco, Israel, Beijing in China and the Severn valley in the western UK between Malvern and Newport.

This last region is perhaps the most nascent and was cited as an example at the Sinet Global Cybersecurity Innovation Sum-mit’s panel on cluster models.

Emma Philpott, managing director of services company Key IQ and founder of the Malvern Cyber-Security Cluster, said she had moved to Malvern three years earlier from Singapore and had been struck that everyone she seemed to meet worked in cyber-security but did not know one another. As a result, she set up an informal networking meeting once a month and more than 50 companies in the area now attend.

Andy Williams, head of Cyber-Connect UK, said the role of government had been indirectly important as the UK’s Qinetiq defence research laboratory and GCHQ were in the area, and after the privatisation of Qinetiq a number of people left to set up their own business.

Into this mix, Philpott arrived and brought her experience of how the Singaporean government had tried to develop its clusters.

With Williams, she has been developing a national network, often around universities, such as Lancaster and Liverpool John Moores, with specialist departments. Stephen Robinson, founder of Xyone Cyber-Security and leading the north-west cluster around Lancaster, said academia had been very impor-tant to its cluster through winning research grants. Robinson said bringing together a cluster helped firms collaborate to win contracts and develop people’s skills.

While these contracts could come from the private sector, the role of government procurement was important, people said, and still needed work. One bemoaned the lengthy paperwork involved in the government taking on a contractor.

But given the sensitivity of the work, most said some security requirements were necessary. And Sir Iain Lobban said that over the past three decades he had developed five proposi-tions to help build the relationships between private and public sectors.•Tellthetruth–thattheproductsdowhatvendorsclaim.•Nomoresellandforget.• Itisafrontratherthanback-officesystem–individualsareat

risk.• It isnotagovernmentor individual that leads– it isabout

collaboration.•Hands-off–nopoaching,butworktogetherondeveloping

the skills for the next five to 10 years.


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Japan’s arrow nears target

For Japan, Prime Minister Shinzō Abe’s so-called three arrows strategy is certainly trying its best to jolt a country into inflation and growth. And while on the surface the latest move, to appoint Yasuhisa Shiozaki as health minister, would appear relatively minor, it carries the potential to join together various other

government actions to connect an ecosystem of state institutions and private enterprise.

The health ministry runs the ¥126.6 trillion ($1.3 trillion) Government Pension Investment Fund (GPIF), which has historically invested mainly in bonds rather than equities – about 11%.

This might change as Shiozaki is regarded as a pro-market reformer. One consequence of a shift towards a 20% equities allocation by GPIF could be to provide a fillip to share prices on the Tokyo Stock Exchange, whose stocks have an aggregate market capitalisation of about $4.5 trillion.

While helpful, the ramifications could be more significant if GPIF takes an even more nuanced position.

As a potentially large shareholder in most companies, GPIF would have the voting rights to encourage com-panies to consider their own strategies of how they find and fund innovation or offer above-

inflation pay rises to employees. It could inspire further uses of corporate venturing to incubate or invest in startups and take

advantage of the Industrial Competi-tive Advantage Law, which came into force in January with unprecedented speed and makes 80% of corporate venture investment through funds tax

deductible.

Positive shareholder support might result in large corporations using

mergers and acquisitions to buy entrepreneurial businesses, provid-

ing an alternative exit route for venture-backed businesses beyond flotations.

And providing a lead role in buying initial public offerings could increase both the number and size

of flotations, which had fallen last year but has already started to bounce back this year.

This creates the circularity of investment and return of capital to fuel optimism that the country can indeed become even wealthier – a nod to Abenomics’ referencing the previous Meiji era’s concept of Fukoku kyõhei – enrich the country, strengthen the military.

There has already been significant investment in the sup-ply of Japanese entrepreneurs and the early funding they need to prove concepts and create nascent businesses.

Through a $1.2bn university venturing programme, four academic institutions – Tokyo, Tohoku, Kyoto and Osaka – are developing their proof-of-concept and venture capital funds, while the Ministry of Economy, Trade and Invest-ment has set up its Jump Start Nippon Project to build a venture ecosystem through a network of mentors and sup-porters, and the $20bn Innovation Network Corporation of Japan has already been backing more startups through its venture programme.

Adding in the next-generation companies that have them-selves previously been venture-backed, including Rakuten,

Gree, Dena, Softbank and CyberAgent, and are showing both fast growth and an ambition to use venturing and merg-

ers and acquisitions tools to maintain their successes, and the arrow could indeed be about to hit its target. u



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Tech drives the leapfrog in emerging markets’ growth

The potential for emerging and frontier markets to realise accel-erated economic growth as a

result of technology transfer comes up regularly in our research.

We have been increasingly excited about the capacity for new technol-ogy, particularly related to data over the internet, to completely bypass swathes of older technology and busi-ness activity. We think this could lead to even more dramatic economic pro-gress. In effect, the emerging markets are leapfrogging over the old technol-ogy and taking advantage of the new-est technology.

One example is the phenomenon of Kenya’s mobile money transfer sys-tem, large in scale and with growing potential. A mobile network opera-tor launched the service to meet the needs of the large number of Ken-yans without bank accounts to have a secure means of remitting funds to their families using the advertising slo-gan “send money home”.

Unexpectedly, the service grew like wildfire among the population, and as of March 2012, transactions sent through the M-Pesa (Swahili for money), represented about 25% of Kenya’s gross domestic product (GDP), according to the World Bank.

Mark Mobius, executive chairman, emerging markets, Franklin Templeton Investments


October 2014 I 20


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As a result of that success, the system has spread rapidly to many other countries in Africa, Asia and even Europe where geography or the secu-rity situation renders money transfers over long distances problematic.

In the meantime, in Kenya, and elsewhere, the easy-to-use service has produced an explosion of additional activities in commerce, savings and loans. Such transactions involved well over half the country’s population as of March 2012, the World Bank reported.

Similar operations are also becoming estab-lished separately in other countries. Banks are getting involved since they now realise that the need for an expensive system of physical branches is not as critical.

Reaching new consumers in new ways

We see the same process in action within India’s retail space. The country, having largely prevented the crea-tion of supermarket and multiple store chains through nationalist legislation and bureaucratic inertia, appears well on the way to avoiding the need for costly store construction in the first place. Internet retailers have been making rapid strides in India’s retail markets.

When we meet the managements of such companies, we are struck by a regular anecdotal theme – that sales models set up to meet an assumed dominance of tech-savvy urban customers have, in fact, experienced dra-matic levels of demand from rural areas. Just as technology and the internet allowed India’s prime minister Narendra Modi to campaign in many places at once during the recent general elections, through his use of live hologram projections of his speeches, India’s retailers can suddenly reach a customer base of millions with only limited levels of capital investment.

This factor highlights the potential for relatively simple infrastructure projects to have a tremendous pay-off in India. With a hypermarket available through his or her smartphone, a rural dweller in India requires only reli-able electricity, internet connectivity and adequate roads to transport supplies.

Our visits to some Indian cosmetics companies have demonstrated a similar process on a more intimate scale. Having operated largely through direct sales from teams of saleswomen going from door to door, a process requiring a slow build-up of sales forces and quite gradual geographic expansion, the businesses are now able to use the internet to enter entire new geographies at limited cost.

Interestingly, the basic human connection between the potential customer and a trusted interlocutor remains, but instead of standing on the doorstep, the saleswoman can be present electronically, through a blog posting, online live chat or even a Facebook page.

An important aspect of all these reports is the way sellers can open up completely new customer bases. In these circumstances, the ease and cost of customer acquisition are likely to be far lower than that seen decades ago when similar businesses were set up physically in developed markets. With technology, the implications for growth rates are profound.

Investment and infrastructure remain vital for many important activities in emerging markets. Basic levels of power provision and transport links remain necessary to allow these economies to function effectively, while spending on education is needed to give populations the necessary skills to engage with a global marketplace. Many industrial activities will continue to require heavy initial capital investment. However, across a wide range of consumer activities in particular, technology and the internet are linking potential customers to markets at a rate that would have seemed impossible even a decade ago – to the potential benefit of both the populations of emerging markets and the businesses set up to serve them. u


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Boulevard of Broken Dreams – five years on

Since my book Boulevard of Broken Dreams was published in 2009, the issues it discussed have become more relevant. Concerns about lagging global growth rates and job creation have not abated, and the perceived importance of entrepreneurship in stimulating entrepreneurship and growth is as high as ever.

Both developed and developing nations have undertaken a variety of experiments along these lines. The expe-riences have served to underscore some of the lessons in this book.

One dramatic change in the past five years has been that the promotion of venture clusters has moved increas-ingly beyond major industrialised nations, becoming a global phenomenon. Many emerging nations have made huge investments in development venture capital (VC) and high-potential entrepreneurship. For instance, we have seen extensive initiatives in countries as diverse as Colombia and Saudi Arabia.

With the broadening of geographic scope has come the emergence of a variety of creative initiatives pursuing familiar goals in new ways. A terrific example is Start-Up Chile, a programme the Latin American government began in 2010. It tempts for-eign entrepreneurs with a stipend of $40,000 a year, a one-year residency visa, and a dedicated team of seven people to provide guidance in navigating the country’s business culture.

This effort was part of a pledge by President Sebastián Piñera to add 100,000 new businesses to the Chilean economy by 2014, which, he argued, would require the nation to look outside its borders “to regain its entrepreneurial and innovative culture”. While many of the businesses lured to Start-Up Chile will move on to Silicon Valley or elsewhere after the programme, the hope is that they will have lasting spillovers for local entrepreneurs and the venture culture more generally.

At the same time, it is important to acknowledge that, like earlier efforts, the recent wave of governmental attempts to encourage innovation and VC around the globe has a mixed record. While some have been notable successes, such as Brazil’s Inovar, Israel’s Yozma, and Singapore’s numerous initiatives, others have largely wasted billions of taxpayer dollars. Nor are these disasters limited to efforts in emerging markets. Developed countries have also poorly designed and mismanaged funds intended to encourage innovation and create a VC ecosystem.

A well-publicised example in the US was the Department of Energy’s clean-energy initiative. It was created in 2005, but remained unfunded until 2009, when it received financing as part of the American Recovery and Reinvestment Act. The programme was to provide loan guarantees and direct grants to risky but potentially rewarding energy projects that might otherwise be too risky to attract private investment. More than $34bn was spent in less than four years, which was almost $2bn more than the total private VC investment in the field.

The enormous scale of public investment appears to have crowded out and replaced most private spending in this area, as VCs waited on the sideline to see where the public funds would fall. Moreover, the investment decisions of government administrators have led to a handful of embarrassing bankruptcies, such as Solyndra and A123 Systems. This experience illustrates the problems with “crowding out” discussed at considerable length in the book.

Funding innovation effectively is difficult. It often requires encouraging behaviour that has not been widely adopted in the past – innovation and entrepreneurship are high-risk pursuits. Moreover, most innovation pro-grammes cannot be established and then left alone. They require regular review and revision, to ensure they are achieving their anticipated goals. Such reviews must address programmes that are not succeeding but they are also essential for successful efforts. A programme that has achieved its goal of, for instance, encouraging private investment in a certain sector must change its target, lest it “crowd out” the very private investment it has attracted. Sometimes the approach must be refined. Sometimes the goals or measurements turn out to be sub-optimal. In the complicated world of politics, however, it is often risky to embark on these reviews.

In many of the new programmes, we can see both very positive and more challenging aspects. The importance of effective programme design, with careful attention to the incentives involved, cannot be understated. Thus, the issues raised in the volume when first published in 2009 remain timely and relevant today. It is my hope that policymakers and observers will continue to find this discussion helpful. u

The book is available from press.princeton.edu/titles/8984.html

Josh Lerner, professor, Harvard Business School, and director, Private Capital Research Institute

The enormous scale of public investment appears to have crowded out and replaced most private spending


http://press.princeton.edu/titles/8984.html

October 2014 I 22


cOMMEnT

The gap in public and private research and development (R&D) spending is reputed by policymakers to be one of the main factors responsible for the slower growth rate that European economies have been experiencing compared with international competitors.

Although the relationship between R&D and economic growth is far from finding full support in the scientific literature and cannot be considered to be automatic, the need to increase R&D spending has been at the centre of the European Council’s policies since the Lisbon 2000 strategy. In this respect, one important cause that is individuated by the European Commission for explaining the R&D gap is the low presence of high-tech rapid-growth entrepreneurial firms on the old continent. In the words of the commission’s Europe 2020 agenda, “R&D spending in Europe is below 2% [of GDP] compared with 2.6% in the US. Our smaller share of high-tech firms explains half of our gap with the US.”

One widely shared belief is that the creation of a florid pan-European venture capital (VC) market is a funda-mental prerequisite to bridging the above-mentioned gap and increasing EU performances in terms of innova-tion, job creation and economic growth.

However, the development of VC markets in the EU member states has been dramatically different from the development that is experienced in the US. The overall value of the VC investments over the GDP is nearly three times higher in the US than in Europe. The recent financial crisis has further weakened the EU VC fundraising ability in subsequent years.

The need for an efficient EU VC market to spur economic growth is well understood at the policy level and has resulted in a series of initiatives – the most important one is the Risk Capital Action Plan in 1998 – at various playing-field levels, for example measures that aim at increasing stock market openness and labour market flexibility or tax incentives, which targeted both the supply of and the demand for VC.

According to market operators, even though some structural problems remain, such as thin and fragmented exit markets and limited fundraising ability due to different national regulatory regimes, these attempts con-tributed to strengthening the EU VC markets, especially after the dot.com bubble, according to the European Private Equity and Venture Capital Association in 2010. Such policy initiatives also led to a specific peculiarity of the EU context – the relative importance compared with other geographical contexts – primarily the US – of governmental VC (GVCs) funds.

GVCs are not indirect government support programmes to stimulate the supply of VC funds managed by independent VC firms, and they are not public subsidies that are directed toward the assistance of high-tech entrepreneurial firms. Instead, GVCs are defined as funds managed by a company that is entirely possessed by governmental bodies.

Public initiatives that fall into the definition of a GVC are quite typical in many European contexts, for exam-

Luca Grilli and Samuele Murtinu, Politecnico di Milano department of management, economics and industrial engineering

How government funding can help or hinder growth


October 2014 I 23


cOMMEnT

ple Belgium, Finland, France, Germany, Italy, Spain and UK, and they share the same mission of nurturing, through public equity-like investments, the development and growth of interesting business projects.

Using the Vico dataset – a novel firm-level longitudinal dataset sponsored by the EU – we assess the impact of GVCs in comparison (and in conjunction) with independent VC firms on the growth of European high-tech entrepreneurial firms.

Our results show that the main statistically robust and economically relevant positive effect is exerted by independent VC investors on firm sales growth – 38% in the short term, 60% in the long term. Conversely, the impact of GVC alone appears to be negligible. We also find a positive and statisti-cally significant impact of syndicated investments by both types of investors on firm sales growth, but only when led by independent VC investors – 60% in the short term, 141% in the long term.

Our results remain stable after controlling for endogeneity, survivorship bias, reverse causal-ity, anticipation effects, legal and institutional differences across countries and over time, and are stable with respect to potential non-linear effects of age and size of entrepreneurial firms. Overall, our analysis casts doubt on the ability of governments to support and lead high-tech entrepreneurial firms to a higher growth performance through a direct and active involve-ment in VC markets and a go-it-alone strategy in the choice and management of investments.

The straightforward policy implication that can be drawn from our analysis is that if the Euro-pean VC industry ever needed governmental aid – and our analysis is not intended to solve this question – public intervention would preferably create a favourable environment for pri-vate VC initiatives through indirect forms of support, such as eliminating unfavourable tax treatment to EU cross-border VC activities, rather than adopting a hands-on approach.

On the other hand, if one wants to conserve the rationale for a direct public intervention to sustain the growth of high-tech entrepreneurial firms, these findings call for a deep reconsid-eration of the way that European GVCs are managed.

In this respect, our analysis suggests that the inefficacy of GVCs in fostering the sales growth of European high-tech entrepreneurial firms is not only related to the scarce availability of financial resources but also might be due to a lack of value-added skills. A solution might be to replicate the design of the Australian Innovation Investment Funds, a specific type of public-private co-investment model that resembles the US and Israeli programmes, which were proven to be effective in enhanc-ing the investments in the startup and early-stage high-tech entrepreneurial firms and, more generally, in fostering the development of the local VC industry. These funds were cut in this year’s budget by the Australian government. u

This article is drawn from Government, venture capital and the growth of European high-tech entre-preneurial firms, by Luca Grilli and Samuele Murtinu, in Research Policy 43(9): 1523–43. Available at SSRN: ssrn.com/abstract=2066867

Our analysis casts doubt on the ability of governments to support and lead high-tech firms to a higher growth performance


http://ssrn.com/abstract%3D2066867

October 2014 I 24


cOMMEnT

Early stage: the venture capitalist’s perspective

With the announcement in India’s budget of a R100bn ($1.62bn) fund for start-ups, the possibilities of and prospects for early-stage financing appear to have received a further boost. Three observa-tions are relevant in this regard. First, this is not the first time that state and central governments have

attempted such initiatives. Second, for decades now, governments elsewhere in the world have attempted similar interventions to kick-start or boost entrepreneurship. Third, it is perhaps useful to step back and see what can be learnt from those experiences before working out the details of the government’s programme.

It would be useful to understand what it is about venture capital that has made it so effective in financing early-stage enterprises.

Higher risks

Financing startups is known to be a more challenging task than providing capital to established enter-prises. An obvious aspect about early-stage enterprises is that they are more likely than an established enterprise to fail. Economists describe this higher likelihood of failure as higher uncertainty or risk.

There are two other challenges that investors who have funded early-stage enterprises would readily appreciate.

The first of these is that start-ups are more challenging to evaluate. Central to the evaluation process is finding out as much as possible about the venture and the people behind it. Entre-preneurs know more about their business than investors can ever find out or know. Economists refer to this gap as information asymmetry.

The second problem is the difference in motivation between the entrepreneur and the inves-tor. The investor is interested in achieving a return on investment in a time-bound fashion. Entrepreneurs set up ventures for multiple other reasons. Pursuing a passion, owning and managing a venture and realising personal wealth are the more commonly known among these reasons.

A third set of issues arises from doing business with other people’s money. It is referred to as the problem of moral hazard, a term borrowed from the insurance industry. The insured party tends to be less careful about avoiding accidents when he knows that a property is protected from damage by insurance. In the same way entrepreneurs can be less diligent when their business is substantially funded by an investor.

A related problem is that of the entrepreneur taking decisions that will serve his purpose even though it may not be the right thing to do in terms of generating a financial return. For exam-ple, an entrepreneur who is an inventor could pursue an invention indefinitely even in the face of compelling evidence that it does not make economic sense, simply because he is passionate about it

These problems exist in the case of larger and more established enterprises too. But they tend to be more pronounced in the case of start-ups. Again, it is not as if every entrepreneurial venture is fraught with this problem.

Evaluation process

Venture capitalists address these problems through intensive effort in evaluating an enterprise. They could spend between two and six months evaluating a proposal. This is on top of the specialist knowledge of indus-tries or technologies that venture capital investment managers bring to the business.

After they write the funding cheque they also engage with the enterprise to continue to learn about the ven-ture. Through this engagement they seek to ensure the entrepreneur does not behave opportunistically, to his benefit.

Academics and practitioners believe venture capitalists produce many successful businesses out of entrepre-neurial ventures because of this ability to tackle the challenges in financing startups. It is further believed that the structure and incentives of the venture capital fund motivate them to be successful. u

Ganapathisubramani Sabarinathan, chairman of NS Raghavan Centre for Entrepreneurial Learning at IIM-Bangalore


October 2014 I 25


REgiOnAl REPORT: PORTugAl

It has seemed quite a while since Portugal gave “new worlds to the world” from its 15th century explorations under Henry the Navigator, pictured, and John II, inset. However, while there are few physical lands left to discover on Earth, Portugal is looking back to help discover the “right combination of risk, curiosity, ambi-

tion and knowledge, to design and execute such a remarkable endeavour”, as identified in the book Pioneers of Globalisation, by Jorge Nascimento Rodrigues and Tessaleno Campos Devezas.

Facing a bankrupt kingdom in the late-1400s, John II placed emphasis on the advice of the Council of Scholars – selected on meritocratic rather than aristocratic principles – and exploration for gold in Guinea and mercantilist trade.

Strategy

After the most recent credit crunch from 2007, Portugal, which had “long struggled with low growth, productivity, and com-petitiveness”, according to a US government report on the country, took a µ78bn ($99bn) bailout from suprana-tional organisations in May 2011.

In return, the supranationals asked Portugal to imple-ment austerity measures and structural reforms, which has included a shake-up of its government venturing programmes and efforts to boost entre-preneurialism to help tackle its low growth and productivity issues.

As a result, in 2012, Portugal Ventures was formed out of the merger of three venture capi-tal (VC) and private equity firms whose share-holders include both private and public enti-ties and collectively managed about µ600m in 25 funds (see profile).

Before 2012’s shake-up, the European Commission’s innovation policy pro-gress report said Portugal had “relatively good performance” in finance but the “weakest link” was VC. The report added: “This result is not at all surprising, since it is the consequence of two main factors – the credit-based nature of the Portuguese financial market and the shal-lowness of the domestic market, raising barriers to the develop-ment of a sound VC industry, in spite of the measures taken by successive governments.”

The US government last year noted that Portugal had 44 banking insti-tutions, with the four largest groups accounting for more than 70% of the sector’s total assets, while the country’s largest bank, Caixa Geral de Depositos (CGD), was state-owned.

The credit crisis from 2008 and subsequent bailout of the economy made growth and equity-led investment important issues for longer-term recovery.

In 2008, the European Investment Fund, funded by member states of the EU together with private financial institutions, public bodies and select foundations, launched the Portugal Venture Capital Initiative (PVCi), a

Portugal navigates towards growthJames Mawson, editor-in-chief


October 2014 I 26



µ111m fund of private equity and venture capital funds focused on deals primarily to accelerate growth of Portugal’s small and medium-sized enter-prise (SME) sector. PVCi investors include the Portuguese gov-ernment, CGD, the philanthropic Gul-benkian Foundation, set up in Portugal by Armenian oil devel-oper Calouste Gul-benkian, and private banks.

This joining of public and private sector from Portugal and international organisations over nearly a decade has been an evolution, with the latest iteration led by Portugal Ventures though its Ignition Partners Net-work (IPN) active in the US states of Massachusetts and California.

IPN has been built on the MIT Portugal programme involving Massachusetts Institute of Technol-ogy in the Boston region and the Iberian country. It was launched in October 2006 as a strategic investment in science, technology and higher education, supported by the government of Portugal through the Foundation for Science and Technology.

In addition, the two parties, along with University Institute of Lisbon (IUL) and CGD’s venture capital unit Caixa Capital, helped form the IUL MIT Portugal Caixa Capital Venture Competi-tion as part of a five-year effort to attract university spin-outs and new ventures with inter-national product potential. Four finalists are eligible for µ1m in awards provided by Caixa Capital, and in its first four editions the venture competition received nearly 400 applicants from 14 countries, with winners securing an additional µ15m.

One example (see table) of the latest generation of explorers navigating the business world is online translation startup Unbabel, which in July raised $1.5m in seed funding from investors including Caixa Capital.

Unbabel graduated from US-based accelerator Y Combinator and also attracted US and other investors, including internet companies Digital Garage and Google, publishing com-pany IDG Partners, Matrix Partners, Caffeinated Capital, ZPark Ventures, Faber Ventures, Shilling Capital Partners, FundersClub and WeFunder.

Pedro Rocha Vieira, co-founder, president and CEO of Beta-I, a startup accelerator, said such deals as Unbabel attracting international investors, as well as other Portuguese entrepreneurs joining highly-regarded accelerators in other countries, such as Y Combinator or Seedcamp in the UK, were significant for an ecosystem that had previously lacked an international network.

Linking state-backed investors and VC firms, such as Portugal Ventures and Finova, with business angels, entrepreneurs, universities and corporations required changes to the model. There have been less-onerous requirements on geographies and more flexibility on a deal-by-deal basis for funds, Vieira said. He said Caixa Capital under Stephan Morais, executive director and chairman of the European Venture Fund Investors Network, an initiative of public investors across the continent, and José Epifânio da Franca, chairman and CEO of Portugal Ventures, had been among those who had brought a greater sense of action to the venture ecosystem in Portugal.

“There has been a revolution in VC activity. The government had responded to the economic crisis and the European Commission provided structural funds and while some of it led to amateur investments there is a clear vision from people like Morais and da Franca. It would be better if the government concentrated on tax, funds of funds then direct investments rather than the other way round, but there has been a lot of actions and we need more.”

Pedro Vilarinho, director of the Technology Commercialization Accelerator at Cotec, Portugal’s Business Asso-ciation for Innovation with 330 members established in April 2003, said it was conducting a study on national policies to support research and its commercialisation and startups.

Over the past decade, Cotec has been supporting the finding of technology-driven, high-growth products and startups and has backed 18 each from Porto Business School and Lisbon’s equivalent from proof of concept to three startups.

Portugal’s entrepreneurial rising starsAnubis NetworksFiberSensingBiosurfitKinematixAbyssalAptoideAuditMarkStreamBolicoPerceive3DGleam WorldGrissimaTuizziCard MobiliNmusicVision Box

Advanced Cyclone SystemsFeedzaiDomaticaMygonFashnPolis.comAround KnowledgeMuzleyCaixa Magica SoftwareTekeverCard4BSystemsIntelligent Sensing AnywhereloklokStoryoOceanscan

Operadores de Transportes da Regiao de Lisboa

Centro de Novas Tecnologias da Informacao

Keep SolutionsWit SoftwareVoiceinteractiTecnologias de

Processamento da FalaPlux, Engenharia de

Biosensores

Source: Pedro Rocha Vieira, co-founder, president and CEO of Beta-i

“There has been a revolution in VC activity”


October 2014 I 27



Vilarinho said what would be most helpful would be if the government launched a similar initiative to the UK’s seed and early investment scheme, which offers investors a 50% tax rebate under certain conditions.

Government initiatives

Finicia, started in 2005, is aimed at improving companies’ access to equity and credit through the setting up of public-private partnerships. Finicia provides venture capital to high-innovation-content projects, emergent small businesses and regionally-relevant company initiatives. By 2008, more than 400 new companies were created with the support of the programme, but after the crisis and the consequent credit crunch there has been significantly lower activity.

Additional measures were launched in December 2011to promote entrepreneurship through the National Strategic Programme on Entrepreneurship and Innovation to replace earlier versions, such as Nest.

The lead agency for Portuguese economic development policy is the Portuguese Agency for Foreign Investment and Commerce (Aicep), which helps exporters and encourages foreign direct investment. It serves as the point of contact for investors with projects over µ25m and offers Aicep Capital Global for technology transfer, incubator programmes and venture capital support.

The Institute of Support to Small and Medium-sized Enterprises and Innovation, a public agency within the Ministry of Economy, has a programme of mutual guarantees so that smaller companies do not have to use their assets or those of their shareholders to collateralise debt, and has also supported the creation of venture capital funds and firms.

Tax

ABPA, the Portuguese Association of Business Angels, has a one-for-two co-investment agree-ment through Portuguese government programme Compete that uses EU funds. This means Compete invests µ2 for every µ1 an angel invests, and investors gain an asymmetric return, benefiting most from successes.

In November 2012, Portugal received EU permission to reduce its standard corporate tax rate to 10% for new investments made in Portugal, rather than 25%.

The Autonomous Regions of Madeira and the Azores also offer investment incentives from within a differing tax regime.

Legal

Venture capital is regulated by law and subject to oversight by the Portuguese Securities Exchange Com-mission (CMVM).

In addition to defined venture capital companies, there are also collective investment vehicles defined as ven-ture capital funds and business globalisation and restructuring funds.

CMVM’s latest annual report, in 2010, said 30 venture capital companies managed 51 venture capital funds with an average of µ31.7m under management, with partial capital subscribed by Finova, a fund of funds originated by the European Commission. u

Profile: Portugal VenturesFounded in 2012, Portugal Ventures was a result of the merger of three venture capital and private equity firms whose shareholders included both private and public entities and collectively had managed 25 funds. The three being merged were InovCapital, founded in 1989, Aicep Capital Global, founded in 1988, and Turismo Capital, founded in 1991.

Over the past two years, Portugal Ventures has rationalised some funds – it manages 20 with a total capital of about µ600m – which in turn have invested in 180 companies from a number of different industries and at various stages of development.

The aim underpinning this diversity is “to improve the competitiveness of the Portuguese economy by investing in cutting-edge industries and technologies, as well as in companies geared toward global markets”, accord-ing to Portugal Ventures.

José Epifânio da Franca, chairman and CEO of Portugal Ventures, in a February 2014 speech said its aims

Profile: Portugal Ventures


October 2014 I 28



were to “clarify strategic objectives and concentrate resources for public investment”. He said this would be achieved by:•Rationalisingandsignificantlyreducingtheoperationalcoststructure.•ActingasacatalystofprivateVCactivity,fosteringco-investmentsfromPortugueseandinternationalgroups.•DevelopingPortugueseentrepreneurshipandpromotingthegenerationofeconomicvaluefromscientific

and technological knowledge.•Creatinganewbusinesslandscapewithhighexportpotentialandglobalcompetitiveness,wellpositioned

in international value chains.•Focusingonthecreationofeconomicimpactfactorswithasustainableandlong-lastingfoundation.

The type of fund available include those for seed stage, startups, expansion and internationalisation, and across sectors, such as tourism, and regional. Tourism is the most important national economic sector in Portugal with 13% of exports. Portugal Ventures has backed 25 companies with µ136m in aggregate revenues across tech-nology, services and infrastructure.

In VC, Portugal Ventures has backed 50 life sciences, technology and resources companies with µ80m in aggregate revenues and µ50m of exports.

Da Franca said: “Tech-based entrepreneurship is a decisive imperative for Portugal as well as for Europe. The EU has recognised the strategic relevance of technology-based entrepreneurship to promote global competi-tiveness, and is expected to allocate adequate resources in its Horizon 2020 programme, especially with the availability of new risk capital instruments.”

He added that Portugal Ventures was a “small” player in the private equity market with 54 investments, and noted there was “fairly limited liquidity available” and “the challenge is to successfully divest from its ageing portfolio with the purpose of generating fresh cash for rotating investments and provide cash returns for the funds participants”.

Ultimately, da France said he wanted Portugal’s “investment pyramid” in five years to be µ850m of seed, early-stage and scale-up funding available from three sources. The public would provide µ325m, with local private investors investing µ375m and international private investors the remaining µ150m.

As well as recycling later-stage money, Portugal Ventures is concentrating on the earlier stage. It has cre-ated an innovative Ignition – or seed – programme to help the so-called base of the pyramid by boosting the

Lisbon


October 2014 I 29



network, asking entrepreneurs to pitch for money and attract private capital, and then connecting them with accelerators and innovation hubs around the world.

The last stage could be most transformative if it helps open global markets and investors to entrepreneurs otherwise limited by a relatively small domestic market. Portugal Ventures opened in US city Boston earlier this year in partnership with LB Ventures, a venture formation and acceleration entity, following on from a similar initiative in Silicon Valley, California.

Luis Barros, founder of LB Ventures, said: “Portugal Ventures uniquely leverages the triple helix model at its core” of government, university and industry connections. As well as direct government – Portugal and the EU – backing Barros said: “It is likely that the portfolio companies will further benefit from Horizon 2020 and Portugal 2020 grants in the EU, and in the US the plan will be consummating collaborations with principal investigators and institutes. There will be potential from non-dilutive financing… both within the US Small Business Innova-tion Research and then government agencies’ general programmes.”

On the links with corporations, there is the Plus Inovação Plus Indústria initiative to connect with corporate venturing and research and development, such as in life sciences around the Boston area.

On the university linkage, Barros said Portugal Ventures’ IPN was designed to attract dealflow from 45 member universities, tech transfer offices, institutes and accelerators.

Already, 43% of its deals have come from this network and 250 (43%) of the 576 submissions for funding – up to the seventh call for entrepreneurs – have come from IPN, he added.

Da Franca said VC funding backed by EU funds played “a decisive role in the financing of the IPN and the emergence of a new generation of tech-based startups fully equipped to compete and hopefully win in global markets”.

He said by February about µ25m of funding – half EU, half national – was committed to five, sector-specific funds to address the seed and early-stage investment phase.

However, he warned EU-backed funds posed some execution challenges:•Smallfunds–aboutµ5m–reduceefficiencyandincreasemanagementcosts.• Fragmentationandtimelimitsofcapitalsupplyreducesthedepthofinvestmentandlimitsthecapabilityto

support follow-on investment needs throughout the maturity cycle of successful ventures.•Geographiclimitationsdonotalwaysmatchtherealityofthenationaltalentmap.• Frameworkofinvestment,onaprojectbasis,isnotfullyalignedwiththebroaderneedsofventuresfunding.•Theconceptofinternationalisationlimitstheabilitytoexpandbeyondborders,forexampletoaddressthe

critical need to capture strategic human capital resources.

Da Franca warned: “Building a knowledge-based economy cannot be accomplished overnight. It is a national endeavour that must be pursued with resilience and determination. It requires persistence to execute poli-cies and programmes that need many years to bear fruit. It needs openness to the world, to find in the world everything the endeavour needs and that might not exist at home. It needs the capability to focus resources to achieve critical mass and to ensure champions have all they need to succeed. It needs inspirational leadership to transform cultural mindsets, and to encourage all those who do not get it right first time to try over and over again.”

He said the public sector’s role should be to avoid crowding-out private participation, but rather to encourage its active and successful participation in what must be a “national enterprise”. u

“Building a knowledge-based economy cannot be accomplished overnight”


October 2014 I 30


REgiOnAl REPORT: slOvAKiA

The Slovak Republic was created when Czechoslovakia was formally dissolved on 1 January 1993, but in terms of venture capital (VC) it appears to have been a case of time standing still from its Communist days.

There is little up-to-date information available from the local trade body, Slovca, which was unavailable for comment, but the European Private Equity and Venture Capital Association (EVCA) said it was the most under-developed market in the Visegrad region of central Europe – the Czech Republic, Hungary, Poland and Slova-kia. Two private sector VC funds have been set up with limited activity, while EVCA in 2008 said the country’s tax and legal environment was poor in supporting private investments.

Vladimir Gadus, while preparing his master thesis, Government Venture Funds, at Tilburg University noted Slovakia had zero VC in 2008, although this had climbed up to µ2m ($2.4m) by 2010, according to EVCA.

However, the picture looks better from its own statistics. Gadus’s research found the country’s National Agency for Development of Small and Medium Enterprises (Nadsme) had reported there were 23 deals worth µ8m in 2008, 26 worth µ13.9m in 2009 and 20 worth µ11.9m in 2010, nearly 20 years after the first government-sponsored VC fund was started in 1991.

Just after the fall of the Berlin Wall in Germany that marked the collapse of the Soviet Union, of which Czecho-slovakia was a vassal state, the US government sponsored the Czech and Slovak American Enterprise Fund.

The US government has used VC as a way of encouraging capitalist economies and Congress enacted the Support for East European Democracy Act, which set up funds as public-private partnerships using taxpayer money. From 1996, the Czech part of the enterprise fund name was dropped. It has invested µ34m in 25 Slovak companies since inception.

Nadsme set up the µ40m Seed Capital Company – now called Fund of Funds – in 1994 to manage the Start-up Capital Fund and commit to two others – Early-stage and Early-stage Development – and later the Slovak Business Angels Network.

But although the Nadsme figures look more positive, in general, government support has failed to kickstart a VC industry. The European Commission supported the creation of the Integ fund in 2005 but it failed to make any investments, so µ400,000 was returned to both the commission and the Slovak Ministry of Finance. u

Venture investment struggles to get started


Bratislava


October 2014 I 31


univERsiTY cORnER

According to the World List of Universities and Other Institutions of Higher Education, there are more than 16,000 institutions worldwide. When research was conducted prior to the launch of Global University Venturing, there was a need to identify the universities that we needed to tap into first for news and data.

We decided the best way to get an overview on the top players in the university world was to combine three of the major rankings – Times Higher Education, Quacquarelli Symonds, and the Academic Ranking of World Universities. We took the information from this combined ranking as one of the main sets of data for the maga-zine, and from that list Global University Venturing has grown.

That was in 2012. This year, we decided to do the same, but to open up the ranking information to our read-ers, and the top 100 universities in the world by combined ranking can be found with this report. However, it quickly became apparent when checking the methodology of each ranking that the lists are generally blind to a university’s ability to innovate and its efforts in terms of technology transfer.

For the Quacquarelli Symonds rankings, 40% of a university’s overall score comes from academic reputation. Academics are asked where the best research in their field is being conducted, and the ranking is weighted hugely towards a subjective standpoint. It is further broken down by employer reputation (10%), student-to-faculty ratio (20%), international faculty ratio (5%), and international student ratio (5%). Only 20%, citations per faculty, considers the research output of an institution, which fails to recognise the ability of a university to turn an idea into reality.

Putting tech transfer successes into perspectiveThe global university venturing and combined World Rankings 2014

Gregg Bayes-Brown, editor, Global University Venturing


October 2014 I 32


univERsiTY cORnER

For whatever reason, many TTOs shy away from sharing their stories and statistics

Academic Ranking of World Universities ranks higher in this regard, with 40% of the overall ranking weighted towards research output. And yet that 40% still looks at only the publishing of academic papers, not the even-tual impact. Quality of education and faculty takes up a further 50%, with the main indicators being citations, Nobel prizes and Fields medals. The final 10% focuses on per capita academic performance.

Only Times Higher Education allocates for the impact for innovation and technology transfer, at 2.5% of an overall score. Teaching, citations, research volume, income and reputation all take a 30% chunk each, while the remaining 7.5% examines international outlook.

In an attempt to begin to rectify this, Global University Venturing has taken a look at some of the top universities according to our combined ranking, and assessed their technology transfer efforts by the metrics of revenues generated, inventions disclosed, patents issued, spin-outs created and licensing deals done.

However, the rankings are far from conclusive. Many issues begin to arise when assessing technology transfer. For a start, many tech transfer offices (TTOs) remain hard to contact or make it difficult to acquire statistics. Only a handful provide useful data online or produce an annual report, something that seems counterintuitive for units that, by the nature of their mission briefs, will have to go beyond their own campuses and interact with the outside world.

There are many reasons why this might be so. Perhaps the TTO lacks the financial capacity or inclina-tion to consider its wider marketing strategy. Inter-university competitiveness could hamper how a TTO reports its facts, with a lack of enthusiasm for being shown up by peers. Regional approaches also affect how open a TTO is, with the US, UK or Australian approach to extending reach mark-edly different to some of their European or Asian counterparts.

There is also a sense that some TTOs may be reluctant to share statistics. Indeed, if 84% of US universities are operating their tech transfer programmes in the red, then such hesitance may well be understandable. Another consideration is the expertise of staff in building the bridge between academia and industry, and smaller TTOs lack the human resources to conduct their activities effectively, lending support to the idea that critical mass, be it through a larger research budget or inter-university co-operation on the tech transfer level, is key to overall success.

For whatever reason, many TTOs shy away from sharing their stories and statistics. To coun-teract this behaviour, a debate needs to be held on how innovation stemming from univer-sities is ranked. Is it, as the major rankings suggest, purely a factor of how much prestige papers can pull in? And can the success of technology transfer be distilled into a handful of statistics such as revenues and patents filed, or does that merely tip the balance in favour of bigger universities while creating a culture obsessed with creating an office with the biggest stack of patents and deals?

With that in mind, it should be considered that this year’s inaugural rankings are preliminary – a preview of what is to come should that debate not be held.

An alternative would be to look at the wider innovation offering from a university, rather than the metrics being simply a check-list of easily tallied output. In some parts of the world, spin-outs are dwindling while student startups soar, underlining the need to factor in startup rate, incubator support and survival rates for both startups and spin-outs. Another point to consider is a university’s research budget, how much research it produces and at what quality, and how much of that goes on to have a direct impact through knowledge or technology transfer. From a financial viewpoint, what does a univer-sity’s activities have on the local economy, and how much does a country’s university system add to its whole economic output? What funding is available by way of grants, seed funds and university venture funds, and what does the angel and venture capital support for a university look like in comparison with others?

Then purely on a tech transfer level, current metrics should still have a place, but other activities need to be considered. How does a TTO’s academic-industry relations look in comparison with others and, in turn, what support and training does it offer its academics on where their papers may go once published, and how do the academics rate a TTO’s performance? Does a TTO market itself effectively internally and externally? Does it co-operate with other universities to achieve its mission of converting taxpayer-funded research into the wider market? What are the failure rates of inventions and patent applications, and what steps does a TTO take to feed that information back into a university’s research ecosystem and help shape future research outlook?

When these questions, and others like them, begin to be answered, a ranking goes beyond simply asking who has the biggest numbers. It creates a pretext for a discussion of what is important to university innovation that both academics and industry can feed into. It shares a set of common values and best practice for tech transfer to strive towards, and allows those with smaller yet more effective operations to shine alongside their larger contemporaries. Crucially, it helps formulate a vision of how to stimulate innovation that all universities can work towards. u


October 2014 I 33


univERsiTY cORnER

Global University Venturing rankings 2014Rank University TTO World

rankDisclosures Patents Licences Revenues

($m)Startups

1 Massachusetts Institute of Technology

Tech licensing office 2 698 288 59 79.6 16

2 Pennsylvania University

Penn Centre for Innovation

14 391 77 122 86.9 26

3 Cornell University Centre for Technology Enterprise and Commercialisations

16 395 73 135 131.2 14

4 Columbia University Columbia Technology Ventures

10 371 90 89 146 16

5 University of California Los Angeles

Office of intellectual property and industry research alliances

20 359 95 91 23.4 17

6 Johns Hopkins University

Tech transfer 17 441 77 133 17.9 8

7 Stanford University Office of tech licensing 3 502 Patents outsourced

103 87 9

8 Washington University Centre for Commercialisation

26 462 60 51 41 9

9 University of California San Diego

Office of intellectual property and industry research alliances

35 351 62 49 22 15

10 Oxford University Isis Innovation 5 313 100 98 18.77 411 Northwestern

UniversityInnovation and new ventures office

23 212 66 130 11

12 Cambridge University Cambridge Enterprise 4 124 204 109 27.09 413 California Institute of

TechnologyTech transfer office 6 268 144 58 Undisclosed 11

14 Michigan University Tech transfer office 19 421 108 14.4 915 Harvard University Tech development office 1 414 74 34 15.2 916 New York University Industrial liaison office 29 172 56 40 214.2 817 Imperial College

LondonImperial Innovations 12 386 43 32 Unknown 11

18 Edinburgh University Edinburgh Research and Innovation

27 199 62 51 8.16 4

19 University of Illinois at Urbana Champaign

Tech management office 30 191 72 46 4.91 6

20 Chicago University UChicagoTech 8 163 24 50 20.5 521 Toronto University Research and innovation 18 166 10 36 3 1222 University of California

BerkeleyOffice of intellectual property and industry research alliances

11 164 48 41 5.1 6

23 University College London

UCL Enterprise 15 139 41 51 15.2 1

24 British Columbia University

University-industry liaison office

34 152 66 31 5.4 5

25 Princeton University Tech licensing office 7 Undisclosed 29 33 9 Undisclosed

Notes on Global University Venturing rankings

The rankings were calculated by:•Takingfromthecombinedrankingthetop25universitiesforwhichwecouldobtainstatistics.•Rankingeachinstitutionbyindividualmetricsfrom1to25.Foranyinstitutionthatcouldnotprovidea

statistic in a certain category – for example, Stanford outsources its patenting activities while Imperial Innovations does not provide revenues made specifically from technology transfer activity with its financial data – universities were ranked or jointly ranked in last place for that category.

•Anaverageofscoresineachcategorywascalculatedandusedtoawardarankingposition.

The 25 universities that made the final table were not necessarily in the top 25 of the combined world rank-ings. The reason for this is that some of the universities in the top 25 – for example, Karolinska, Yale and Tokyo – neither provide statistics online nor responded to our requests for information.


October 2014 I 34


univERsiTY cORnER

University rankingsTHE ARWU QS Overall

Harvard University 2 1 2 1Massachusetts Institute of Technology

5 3 1 2

Stanford University 4 2 7 3Cambridge University 7 5 3 4Oxford University 2 9 6 5California Institute of Technology

1 7 10 6

Princeton University 6 6 10 7Chicago University 9 9 9 8Yale University 11 11 8 9Columbia University 13 8 14 10University of California, Berkeley

8 4 25 11

Imperial College London 10 22 5 11ETH Zürich – Swiss Federal Institute of Technology Zürich

14 19 12 13

Pennsylvania University 16 16 13 13University College London 21 20 4 13Cornell University 19 13 15 16Johns Hopkins University 15 17 16 17Toronto University 20 24 17 18Michigan University 18 22 22 19University of California, Los Angeles

12 12 40 20

Duke University 17 31 23 21Tokyo University 23 21 32 22Northwestern University 22 28 29 23Wisconsin-Madison University

30 24 37 24

Karolinska Institute 36 45 10 24Washington University 25 15 59 26Edinburgh University 39 45 17 27Melbourne University 34 44 31 28New York University 40 27 44 29University of Illinois at Urbana Champaign

29 28 56 30

Kyoto University 52 26 35 30King’s College London 38 59 19 32British Columbia University 31 37 49 33University of California, San Diego

40 14 63 34

McGill University 35 67 21 35Manchester University 58 38 33 36University of Texas at Austin

27 39 71 37

University of North Carolina at Chapel Hill

47 36 54 38

Carnegie Mellon University 24 62 57 39Australian National University

48 74 27 40

National University of Singapore

26 101 24 41

École Polytechnique Fédérale de Lausanne

37 96 19 42

Washington University in St Louis

42 32 86 43

Heidelberg University 68 49 50 44Munich University 55 49 65 45Bristol University 79 63 30 46Brown University 52 74 47 47Minnesota University 46 30 102 48Seoul National University 44 101 35 49Queensland University 63 85 43 50Peking University 45 101 46 51University of California Davis

52 55 85 52

THE ARWU QS OverallBoston University 50 70 79 53Tsinghua University 50 101 48 54London School of Economics

32 101 68 55

University of California Santa Barbara

33 41 130 56

Sydney University 72 101 38 57Utrecht University 74 57 81 58Pennsylvania State University

49 58 107 59

Leiden University 67 77 74 60Hong Kong University 43 151 26 61Purdue University 62 60 99 62Georgia Institute of Technology

28 99 99 63

University of California Santa Cruz

138 93 64

University of Texas Southwestern Medical Centre at Dallas

188 45 65

KU Leuven 61 96 77 66Copenhagen University 150 39 45 67Ohio State University 59 64 113 68Amsterdam University 83 100 58 69Helsinki University 100 73 69 70Pierre et Marie Curie University

96 35 112 71

Southern California University

70 51 125 72

Pittsburgh University 78 65 106 73Uppsala University 111 60 79 74Zurich University 121 56 78 75Monash University 91 101 69 76Geneva University 124 66 71 77Maryland University 108 43 116 78New South Wales University

114 101 52 79

Nanyang Technological University

76 151 41 80

Glasgow University 117 101 51 81Basel University 74 90 110 82Ghent University 85 70 122 83Groningen University 98 82 97 84Osaka University 144 78 55 85Rice University 65 82 136 86Sheffield University 112 101 71 87University of California Irvine

93 47 149 88

Ecole Normale Supérieure 65 67 158 89Colorado Boulder University

97 34 160 90

Lund University 123 101 67 91Hong Kong University of Science and Technology

57 201 34 92

Göttingen University 63 101 128 93Free University of Berlin 86 * 109 94Chinese University of Hong Kong

109 151 39 95

Aarhus University 138 74 91 96Alberta University 109 101 96 97Erasmus University Rotterdam

73 151 92 98

Birmingham University 153 101 62 99Korea Advanced Institute of Science and Technology

56 201 60 100

* Because of an unresolved dispute over Nobel laureates before the Second World War – both Humboldt and Free University claim to be Berlin University’s rightful successor – they no longer appear in the ARWU rankings


October 2014 I 35


cORPORATE BRiEfing

Tom Whitehouse, chairman of London Environmental Investment Forum and founder of Carbon International

Airbus innovation takes flight

What technology do you spin out? Around what technology should you form a subsidiary? What technol-ogy do you need to bring in? Large companies that recognise that innovation is fundamental to long-term survival constantly ask themselves these questions. They also want to know whether corporate

venturing is their ultimate answer, only part of the solution or just a distraction.

Airbus Group, the European aviation giant, is a good case in point. These questions and issues are being grap-pled with by Otto Gies, head of innovation nursery and start ups within the Airbus Group’s CTO organisation. I met Otto at the water venturing session I chaired at Global Corporate Venturing’s May symposium. Water and Airbus – how do they mix?

Airbus has established Speetect, a spin-off company for bacteria detection in liquids and water. It was born of Airbus’s need for a new mobile technology rapidly and automatically to identify bacteria in water used for sanitary purposes on planes. The Speetect solution will save considerable penalty costs incurred when infected water prevents the commissioning of Airbus planes. But Speetect will achieve its full potential outside aviation in industrial waste water markets. So Airbus is seeking co-investors for its spin-out’s development.

“Although Airbus Group is a customer of Speetect’s products and services, its captive market in Airbus would not be sufficient to turn it into a prosperous business,” says Gies. “By spinning off this business the team is able to implement a dedicated business model to address a wide range of market segments, such as water providers, cooling towers, semi-conductors, pulp and paper, cooling lubricants, cosmetics, food and beverages, hospitals and others.”

There is a vast untapped wealth of underutilised intellectual property in large corporations like Airbus. It needs to be set free in such spin-off strategies. If it is not strategic to the parent, it may nevertheless find a good home elsewhere and make the parent proud – and money. But far too often, it simply languishes or is licensed, which, in my experience at least, does not always work for either the licensor or licensee.

But one Airbus start up that will not be spun out is Apworks, which provides advanced manu-facturing and engineering services such as metallic 3D printing and friction welding. Apworks is core to Airbus and will sit within its research centre. “But it was necessary to establish it as a start up within the overall group, as the research centre itself is not structured for external business and commercialisation,” explains Gies. “Airbus is the right company to help Apworks reach its full potential, so it will remain within the group.”

An Airbus innovation that will neither be spun out nor set up as a new company within the group is HAPS/Zephyr, a high-altitude pseudo-satellite based on solar-powered glider aircraft technol-ogy. It provides services in earth observation, telecommunications, positioning and meteorology with extremely long unmanned flights in the stratosphere over the specific area of interest.

“As all targeted commercial and governmental markets are already serviced by Airbus Defence and Space core business, HAPS/Zephyr will benefit from the group’s marketing and sales contacts and initia-tives,” says Gies. “We set up a separate department in a separate building to keep the entrepreneurial culture and spirit. But we did not set up a separate company.”

What are Airbus’s intentions in corporate venturing? “Today we invest on a case-by-case basis in external ventures,” explains Gies. “To engage fully in corporate venturing we need to complete our ongoing discus-sion – definition of respective search fields, willingness to incorporate disruptive or potentially cannibalising innovations, the set-up of an efficient structure.” u

Disclosure: I am advising Speetect.

There is a vast untapped wealth of underutilised intellectual property in large corporations


Innovation through collaboration

For info visit www.guvsummit.com

Keynote speakers:

The news from New York Shelley Harrison, NYU and Coller Institute

The rise of a new asset class James Mawson, editor-in-chief,Global University Venturing & Mawsonia

Living in the red - Why 84% of US TTOs are failing to break even Walter Valdivia, Brookings Institute

Insights into the world’s top university incubators Ali Amin, CEO, UBI Index

Working with universitiesGeorge Buckley, former CEO, 3M

Discussion panels taking place:

What makes a great university incubator?UBI Index will discuss insights from their annual rankings with dissemination from the world’s leading university incubators.

Constructing the spin-outA panel of leading technology transfer professionals will discuss how to build the perfect team to lead academic spin-outs.

Building the Atlantic bridgeLeaders in fostering links across the Atlantic share their experiences.

Melding academia and industryGlobal Corporate Venturing editor Toby Lewis leads a discussion on combining academia with corporates.

Investment in the futureManagers from university-linked funds discuss experiences of investing in university innovation.

Fostering entrepreneurship and innovation on campusTech transfer professionals, business school academics, and incubator managers share advice on encouraging students and faculty to step forward on innovation.

Agenda also includes:Unpanels

Face to face debates on equity stakesand collaboration versus competition

University showcases

Innovation showcases

GUV Awards 2014

Deal of the year

Fundraising of the year

Technology transfer unit of the year

Lifetime achievement award

Personality of the year

The Global University Venturing awards return this year, to be awarded at the Gala dinner.

The GUV Summit will tackle the theme of “Innovation through Collaboration”, and discuss how universities foster innovation across campus, with peer institutions, investors, governments, and corporations.

The Crystal, London on the 21st & 22nd of October 2014

Others

Universities and Start ups

£595

£995

Tickets now on sale

Register online at http://bit.ly/1om7nL6

Global Government Venturing October 2014

Documents

Transcript of Global Government Venturing October 2014