Innovation centres, Technology Transfer centres and Technology incubators as

promoters of innovative entrepreneurship

EU Strategy for the Baltic Sea RegionIncentive for Innovative Entrepreneurship

Dr.Phys.Māris Ēlerts, Deputy Director of LIAA MBA. Evija PudāneM.Soc.Sc.Viesturs Zeps

Riga, 21.09.2011

Importance of H-tech sector

• America’s robust economic expansion is being led by high-technology

sector, which is currently generating one third of real economic growth. US

leadership in the high-tech sector highlights the gap between US fast-growing

and dynamic economy and the slow-growth economies of Europe and Japan …

These income gaps show no sign of narrowing any time soon.

• Not only is the volume of funds raised for venture capital investment in the US

some five times the European total, but a far higher proportion of equity

investment is directed in the US towards high technology sectors.”

Gill D., Martin C., Minshall T., Rigby M. Funding Technology. Lessons from America. 2000

Innovation = Economic Innovation = Economic GrowthGrowth

“If you want real growth, you

have to have new technologies”

Source: Business Week

Dr. Eli Opper – Chief ScientistDr. Eli Opper – Chief Scientist, , Ministry of Industry, Trade and Ministry of Industry, Trade and Labor Labor

Export from IsraelExport from Israel(forecast)(forecast)

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exports ($millions) Citrus

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?

Dr. Eli Opper – Chief ScientistDr. Eli Opper – Chief Scientist, , Ministry of Industry, Trade and Ministry of Industry, Trade and Labor Labor

Weizmann institute – research;Yeda – a world leader in Technology

Transfer• Weizmann institute:• 2400 people; 250 research groups; 1000 MSc, PhD students

and postdocs; 850 scientific support staff• Budget: about $170 Million/year

• Yeda’s mission:1. To allow society to benefit from discoveries made at

Weizmann.

2. To create an additional source of income to the institute so that more independent research can be conducted.

• Tens of products from Weizmann on the market.

• Total annual royalty-generating sales in 2004: $6,000,000,000.

• Over 40 new companies where established around Yeda’s technologies (some already public), 18 in the last 5 years.

Dr. Isaac Shariv, CEO Yeda

TECHNOLOGY TRANSFER – A LINK BETWEEN RESEARCH AND INDUSTRY

R&D Technology Transfer Market

UniversityResearch Organization

Development of IP

Licensing

Creation of new company

MARKET

Research Results

Marketable IP

Contract research

• Technology Transfer is a contact sport… it is about building relationships

• Technology Transfer programs are expensive– It takes 10 to 15 years for an office to generate enough revenue to off-set

their expenses– One “winner” may make enough money to pay for an office…but most

technologies do not generate significant income

• Technology Transfer programs do more than commercialize technology– Build relationships with the business community– Build relationships with the financial (Venture Capital) community– Improve community awareness of institutional research activity – Provides institutional participation in economic development– Educate Faculty and Students about intellectual property, market research and

commercializing innovative technology

• Technology Transfer is a long-term process– From the time a patent is filed until revenue is coming to the institution can

be 10+ years

What Technology Transfer is about?

Source: Stuart Gordon

The Legal Framework for Technology Transfer

• Motivating legislation on protection of intellectual property rights (IPR). Legal structure similar to Bayh – Dole act. Are the laws in Latvia Supportive of University Technology Transfer?

– Institutional ownership of the IP and management on behalf of Inventor

– Royalty sharing with Inventors is crucial.

– Effective Patent and Copyright protection

• Easy starting and closing an enterprise

• Legislation favorable to risk investors (e.g. – individual income tax benefits)

• University has effective policy for IP management

– Incentive to Inventor/Author

– Effective management of Conflicts of interest

• Established policy for corporate sponsored research and consultation

– Fair and appropriate access to University research and resources

– Guidelines and policies for faculty consultants

Government support programs

– Incubators

– Direct tech transfer support programs

• Developed VC community, Entrepreneurs

University and Industry:Two diverse cultures

University cultureUniversity culture

Research to educate, break ground, provide

service (economic development)

Pace is slower

Mission = basic and applied research

Technology transfer activities are companion

to applied research mission

Industry cultureIndustry culture Mission toward research / R&D / commercialization Quick-paced Solve problems - develop new products - profit Maintain control of science to explore full potential of discovery (initially) Direct and indirect economic impact

Lessons from Israeli Tech Transfer system• Weizmann Institute is aimed at basic science

excellence (not applied science).• Industrial funding (<15% of research budget) are

restricted, in order to preserve integrity and academic freedom.

• Scientists focus on science, not on commercialization.

• Scientists are rewarded for success (40%).• Tech transfer team which knows the campus and

the market: Weizmann graduates with industrial background.

More significant discoveries and inventions. better patents. Very high income from commercialization. More money for basic research.

© IMG GmbH, T. Schwing, 2005ESTER-Workshop 23.09.2005 / Folie 11

IMG Innovations-Management GmbH

The Open Science ModelThe Open Science Model

• University (PRO) does not retain any IP rights (no patent applications)

• No need for active IP management• Little incentive to invest in applications of

inventions• Often no direct impact on regional economy• Still the most widespread model in Europe• Innovation rests on Industry• Most inventions from PROs are not turned into

innovations• Responsibility of Inventor for IP

© IMG GmbH, T. Schwing, 2005ESTER-Workshop 23.09.2005 / Folie 12

IMG Innovations-Management GmbH

The interaction modelThe interaction model

• Builds on the Licence Model and IP management• Proof of principle is made in partnership with industry • Demonstration funded in part by public money

(example EC framework programs)• Fosters innovation as interactive process• Compatible with PROs missions:

– Contributes to Science– PRO can capitalize on foreground– Fair share of returns

• Contributes to regional economy• Starts to works in Europe, but could work much

better

300 inventions rejected

50 inventions not licensed

34 licenses produce license issue fees

100 patent applications filed

50 inventions licensed

16 licenses produce income

15 licenses produce < $1M

1 license produces > $1M

Terrence Feuerborn, Former Executive DirectorUniversity of California System, Office of Tech Transfer

© IMG GmbH, T. Schwing, 2005ESTER-Workshop 23.09.2005 / Folie 14

IMG Innovations-Management GmbH

The Spin-out ModelThe Spin-out Model

• Also Build on the licence model and IP management• Background technology is used as platform to develop

new business concepts• Proof of principle by the researchers themselves• Development funded by seed capital and funding

(difficult)• Only alternative when no industry partner in sight• Contributes to regional development with labour• Contributes to European and national economy• Slow process: more than 10 years for mature companies• Works in Europe, but not spontaneously (shareholder?)• Often more support and help from PROs necessary

© IMG GmbH, T. Schwing, 2005ESTER-Workshop 23.09.2005 / Folie 15

IMG Innovations-Management GmbH

Conclusions for PROsConclusions for PROs

1. PROs should seriously consider taking a pro-active role in innovation by managing IPR from research.

2. Main objective is maximize benefits for society.3. Returns for PROs are attracting students,

retaining good scientists, funding research. Not an alternative source of funding.

4. Straight licensing is not sufficient. More interaction with industry and creation of spin-outs are necessary

5. Staffing and training professional KTOs is the key.

TT System Challenges in Latvia

• Need to develop understanding of TT/commercialization issues among researchers

• Potential entrepreneurs with good ideas don’t want to leave research

• One way to cope is finding project leaders with good business skills

• Lack of experience for TT managers (in LiOs)

• Companies don’t know what PROs are doing (asymmetric information)

• Problematic communication between idea holders and investors (different perspectives – one needs to understand what the other party thinks)

European Knowledge Transfer Society (EUKTS)• What is EUKTS

– a proposal for a new organization ensuring quality in knowledge and technology transfer profession

– main objectives is to define professional curriculum and certification and accredit courses and certify individuals

– includes existing organizations and networks supported by Member States

– not a training provider

– not a professional association

– a not for-profit organization

• FUNCTIONS– Accreditation/reaccreditation of courses

– Certification/recertification for professionals(3 levels of certification)

– Coordination with main associations working on data collection

• PARTNERS– Governmental institutions, Agencies; Universities; Private firms; Network of

knowledge transfer offices; IPR professionals; European Patent Organization Academy; LIAA

– Italy, Austria, Czech Republic, UK, Netherlands, France, Belgium, Germany, Latvia

Yozma Venture Capital (1)

Mission: Mission: To create the venture capital market in Israel

Method: Method: To entice the private sector and foreign investors to set up new VC funds

To participate in the inv. Committee in the new VC funds To secure an obligation of the new VC funds to invest in start-up companies in Israel

Accomplished through: Accomplished through: Establishment of a $100M investment company

Use of proceeds: Use of proceeds: Establishment of 10 drop down funds together with strategic partners.

15 Direct investments

© Yozma Proprietary

Yozma Drop-Down Funds (2)

© Yozma Proprietary

FUND CAPITAL MANAGED ($MM)

Original size Today

•Eurofund 20 90

•Gemini 25 350

•Inventech 20 40

•JPV 20 580

•Medica 20 70

•Nitzanim-Concord 20 280

•Polaris 20 645

•Star 20 400

•VERTEX 20 250

•Walden 25 175

210 2,880

0

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Thousand Dollars

Government Vs. Private InvestmentsGovernment Vs. Private Investments in Incubator Graduate Projects in Incubator Graduate Projects

Private

Government

Lessons from Israeli Tech Transfer system

•Venture capital funds and “angels” are the most important sources for investment funds

•The major difficulties:–Fund raising–Establishment of business contacts: strategic partners and

marketing–Protection & management of IPR

•The most meaningful government assistance:–Promoting the establishment of VC funds through the

Yozma program•Industrial background and experience enforce the creation of successful

enterprises•Investment s in R&D promote an “R&D culture” that becomes a breeding

ground for entrepreneurs and entrepreneurial ideas•The incubators program provides a “ balancing” measure to

concentrating in few market trendy industrial sectors•The involvement of “angels” and other individuals in funding the surge of

establishing start-ups needs to be evaluated

Jauni produkti/ tehnoloģijas esošiem uzņēmumiem

Knowledge Transfer Platform

Sources of knowledge (PROs and others)

Technologies with

commercial potential

Technologies with

commercial potential

Technologies with

commercial potential

Technology search/ Scouting/ pre-feasibility

Reactor Business Developers

Jauni produkti/ tehnoloģijas esošiem uzņēmumiemJauni produkti/ tehnoloģijas

esošiem uzņēmumiemNew technologies in existing companies

New Ventures

Technology Transfer

Preseed

INCUBATION

Role of TTO

• Marketing of Latvian technologies

• Expert role

• Support to PROs

• Support to LiOs (coordinated activities)

GLOBAL TECHNOLOGY MARKETInternational companies

Technology brokers

EXECUTIVE MARKETING ROLE:Contact network development/ international marketing

Technology licensingCollaborative research deals/ contracts based on IP portfolioLatvia-based JVs (inward investment)

LiOPRO1

LiOPRO2

LiOPRO3

LiOPRO4

TTO(Mandated under agreement

with PRO partners)

EXPERT ROLE:Repository of best practices and model contracts

Partnership-building within NIS and other innovation schemesSupport to LiOs in educational tasks and building interface with local companies

Coordinated functions of LiOs:Joint database of research interests and competences

Training of researchers in IP/patent mattersIntellectual property development

Selected IP portfolio under TTO management

MAIN SERVICES for PRO partners:

Auditing of research resultsPatenting advice Intellectual Property Support project control and management

Latvian companies

Independent functions of LiOs/PROsLocal marketing and information dissemination activitiesService & consultancy contracts for Latvian industries

Technology Transfer LiOs• Technology Transfer Liaison Offices

– 8 TT Liaison offices integrated in Latvian PROs– Database on research capacities; – Collaboration projects between PROs and Companies

2009 2010 2011 (IIQ)

Contracts (for research, licencing etc)

11 51 5

International Patent applications

5 5 1

National Patent applications

44 36 5

Other IP applications 48 4 1

Commercialization offers 51 67 5

Income (k.LVL) 13.54 29.86 10,89

The international technology development and commercialization project “Commercialization reactor”

in collaboration with Virtual CEO

Project aim is to connect researchers with serial entrepreneurs who will lead the invention or technology to the market place and who will attract investors and the support needed to create and operate a successful high tech start-up in Latvia and the European Union.

Technology and researcher

+Entrepreneurs

New enterprise

New investment opportunity

Process

Results of Commercialization Reactors

 November 2009

May2010

November 2010

June 2011

Technology presentations (CIS, Georgia, Armenia)

9 10 13 9

Technology presentations (Latvia)

0 1 2 3

Attendees from CIS, Georgia, Armenia (researchers and experts)

25 25 23 20

Entrepreneurs from Latvia 90 170 150 150

Matchmaking (individual meetings)

46 60 50 30

Signed MoU 3 6 9 6

Established new enterprises 2 2 planned 3* n/a

*1 technology from Riga Technical University

Commercialization of technologies from local research institutes and universities

• It is the time to evaluate operations of Technology Transfer Centers at Universities

Process

• To identify technologies with commercial potential

• Training for scientists about technology transfer – training – September 22-23, – 19 technologies were submitted for a commercialisation

proposal, – 4 of them were selected for small market research to be

prepared before training

• Matchmaking event – technology owners and entrepreneurs

– estimated date - October 21

• Training for entrepreneurs – how to manage high tech company

– estimated dates - October 26-27

• Matchmaking event – entrepreneurs and investors – estimated date - November 02

New forms of Business Incubation

In late 1990s has been driven to multiply the number of succesful, fast-growth, high technology businesses in US

a) Its led by serial entrepreneur; b) it has its own seed fund drawn from founder’s own, VCF or

corporate partner’s capital; c) it may have specific sector focus

Gill D., Martin C., Minshall T., Rigby M. Funding Technology. Lessons from America. 2000

Conventional incubators offer “heat, light and dial tone”, but “Smart” Venture Investment claim to offer more, developing ideas and incubating them in-house as well as providing late seed capital and A, B and C round investment.

Incubation today is seen as a way in which capital can be efficiently applied to support new technology businesses

One-to-one technical advice and support

Concept Evaluation

Competitor Analysis Feasibility Studies Product Compliance & Certification

Prototyping

Technology Options

Manufacturing Technology

Product Design

Materials Advice

Product Development Process/ Development Path Options

SOLUTIONS

Incubation Period -Business Planning & Modeling -Marketing Intelligence & IP Strategies -Global Business Development & Executive Mentoring -Infrastructure & Administration

Technology Founder

Mentoring Chairperson

Execution CEO

Screening ProcessScreening Process

Team, Team & Team - Technology – Feasibility,

Richness, IP - Market – Size, Growth,

Penetration Can we help? Budget, Expertise - Can we identify Exit strategies?

Entrepreneurship in education and pre-incubation concept

Source: Zeps, V., Avotiņš,V., ( 2010). Critical Conditions to Establish Efficient Incubation Cycle in Latvia. Proceedings of the XXI ISPIM Conference. Bilbao, Spain, 2010 (ISBN 978-952-214-926-8 (2010))

Key elements of BI system

Source: Zeps, V., Avotiņš,V., ( 2010). Critical Conditions to Establish Efficient Incubation Cycle in Latvia. Proceedings of the XXI ISPIM Conference. Bilbao, Spain, 2010 (ISBN 978-952-214-926-8 (2010))

Latvia – selected initiatives in Latvia – selected initiatives in pre-incubation stagepre-incubation stage

Promotion and Awareness◦Student Companies(Junior Acheiveivement Latvia)◦Business Men in 5 days (Training + Consultations)◦ Idea Cup (Training + Consultations + Awards)◦ALTUM (Training + Consultations + Credits/ Grants)

Business laboratories◦Business lab of SSE Riga

Mentoring◦SSE Riga MC◦SO “Līdere”

Investment Rediness◦CONNECT◦SEED Forum◦Pre-seed facility

Israeli TI performance• TI operation grant max 300 kUSD / two Years• 23 incubators, budget 20 MUSD in 2004• Graduates rate versus entrants no. 84%• Long-term survival rate 34%• Fails ~50%, from them during incubation 19%• Further investments receive 50% graduates in avg 0.9-1.0 MUSD• 50% graduates reach 0.1 MUSD sales, 27% - 0.1-0.5 and 23% -

0.5-5.0 MUSD respectively• 0.41 MUSD per graduate in 14 years, 20% pays back seed loans• Extremely important in VC industry creation (40% of all high

tech start-ups created by TI) and to cover seed investment gap• Privatised 12

Naiot, Israel at a glance

• An Incubator working under Israel’s OCS TIP (operational grant 1.8MUSD per 6 years; 35% of total TI budget)

• Acts as a VC willing to take higher development risk

• Fully owned by the OHTG, acquired in 1997

• Makes 4 to 6 $500K investments annually, 8-10 NTBC in incubator

• Graduated companies raised >$140M

• Best Incubator Award five years in a row

• Hands-on management

• Investing in Medical Devices (70%), software (20%) and miscellaneous (10%)

• Seed finance: 200 kUSD from Private HT matched with 300 kUSD public loan

Incubator Network

Tenants Virtual Pipelined (waiting list)

Left New products developed

Jobs

338 56 46 53 136 1 255

Innovation Centres and Business Incubators 2007-2008

5 Innovation Centres and 6 Business Incubators established in all regions of Latvia

Funding: 2007: 2.316 MEUR 2008: 2.334 MEUROutcome 2007: 67 new

innovative companies established, 136 new working places created, approx. 355 k EUR on tax payments

Outcome 2008: 111 new innovative companies established, 319 new working places created, approx. 1.29 MEUR on tax payments

Funding programme 2010 – 2014: 22 MLVL, 10 operators, business incubators established in 21 town of Latvia

Total Outcome 2007-2008: 178 new innovative companies established, 455 new working places created, approx. 1.645 MEUR on tax payments

37

Venture capital instruments 2007 - 2013

SeedFunds

Ave. deal size €50K €1m €3m

VCFunds

Pre-SeedFunds

Business Angel Co-investment Funds

5 Pre-Seed projects (MolPort, Naco Technologies, BuzzPodium, E-Tag, Blue Bridge Technologies)

3 Investments (Primekss, EUROLCD, Oobelisk)

Seed Fund and Co-Investment Fund (provided by EIF within JEREMIE)

Funding for the initiative: 12.00 MEURSeed-Fund for early stage business development up to 200.00 kEURCo-Investment Fund, investments above 200.00 kEUR coinvested with private investors.

Technology Incubators(support system for research related start-

ups)

• Funding – EIF pre-seed and seed funds

•Services ?

“Green” industry Technology incubatorProgram still in design phase

• In cooperation with Innovation Norway and SIVA

• Available funding: 8,0 MEUR

• Intended Structure:– Operation costs for TI– Pre-Seed for SMEs, 5.0 kEUR, intensity 90%– Seed for SMEs, 200.0 kEUR, intensity 70%

• Timing:– April 2012, programme proposal accepted by the donor

representatives;– May 2012, procurement documentation completed and

procurement commenced;

B.B. The designed draft Growth4Future Scheme

Tested in Israel, with WB experts, EU experts, local expert panels

1. Technology incubator grant

2. Pre-seed grant – Think for month

3. Seed soft loan (I and II)

Management companies or Operators of TI’s – private companies providing space & infrastructure, management and S&M advice, basic business services and private investment structuring in exchange for equity position in the tenant company

Target groups:– Potential entrepreneurs from

industry– Potential entrepreneurs from

academia– Repatriating scientists and

R&D personnel– Regional inventors

CONEQ is a patented technology that corrects and improves the response of all manner of loudspeaker systems ranging from studio monitors to concert arrays. In 2008 Real Sound Lab won “Par Excellence” Award from Pro Audio review at New York Audio Engineering Society Show

SUCCESS STORY – MOTIVATION PROGRAM, INTRAPRENEURIAL TECH TRANSFER, VENTURE CAPITAL FUND, BUSINESS INCUBATOR => HITACHI HOME ELECTRONICS BUYS LICENCE FROM LATVIAN COMPANY

Innovative Product of Latvia

Hollywood, CA - Renown for meticulous sound quality on world class projects including Lord of The Rings, Golden Compass, Pan’s Labyrinth and numerous other “A- list” feature presentations, Mi Casa Studios recently purchased a full surround-sound CONEQ correction system for “Studio C.” “CONEQ makes this room sound better than ever before. It tightens up the bass and adds a new level of clarity to the midrange, improving both the clarity and realism of instruments and voices. CONEQ has made a dramatic difference.”

Few Samples...

Hygene – compression of natural gas for carsSolar Energy – silicon solar panels

Thank you!

Pērses iela 2, Rīga, LV-1442Tālrunis: +371 67039410Fakss: +371 67039401E-pasts: maris.elerts@liaa.gov.lv www.liaa.gov.lv