Planning session 2 the creation of seed capital funds for italy 4th ifise meeting
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Planning Session 2 The creation of Seed Capital Funds for Italy 4th IFISE Meeting. Milan, 1 st March 2002. The issues. Legal framework: EC laws for R&D and public financial support Government R&D policies: general R&D framework coming from the will of central government

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Planning Session 2 The creation of Seed Capital Funds for Italy 4th IFISE Meeting

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Planning session 2 the creation of seed capital funds for italy 4th ifise meeting

Planning Session 2The creation of Seed Capital Funds for Italy4th IFISE Meeting

Milan, 1st March 2002


The issues

The issues

  • Legal framework: EC laws for R&D and public financial support

  • Government R&D policies: general R&D framework coming from the will of central government

  • Management Company establishment: new managers for new seed funds

  • Fundraising: use private raised funds reducing risk with public support (Fund of Funds model)

  • Entrepreneurship creation and Technology Transfer: the role of public incubation system and University

  • Exit way: what kind of link between Seed Capital Funds and VC Funds?


Planning session 2 the creation of seed capital funds for italy 4th ifise meeting

Seed Capital: The model

LEGAL FRAMEWORK

R&D policies

for

Technologies

SEED

CAPITAL

FUNDS

FUNDING

FoF

Public support

(PPP)

EXIT

•VC funds (+PE)

Private Managers

Entrepreneurship levels


Legal framework

Legal Framework

  • It is vital to convince the government that the development of the Seed High Tech Sector “is good” for the economy: demonstrate the social/economic impact on the national/regional economy

  • The first public money/incentives should activate seed capital funds

  • If they succeed a virtuous cycle of “success stories” and good impact on the economy is activated, then the government will be willing to keep on running the programme (more money/more incentives)

  • When the market is stable, then the private investors could come in fully and the government should withdraw


New managers and new funds

New managers and new funds

  • In Italy, the early stage activity seems to be mostly oriented towards the start up industry. Only few investments are made in seed projects.

  • The relationship with the VC world seems not to exist, and a link is now not active because of different approach to the firm: companies coming from seed projects are not seen as ready to be backed by VC’s

  • The creation of new management companies committed to seed capital activity is very highly recommendable to fill this lack of operators

  • The importance of the role of Banca d’Italia act for the reduction of capital requirements of Management Companies (promoted by Universities and research centres) investing in new high tech firms

  • The role of regional policies to cover the MC start up costs


The fundraising

The fundraising

  • Funds raised for the VC activity is enough, but it is not invested in seed projects

  • The way to redirect part of these funds towards seed activity is to adopt the Fund of funds model, in order to create a critical mass of funds to put into smaller funds able to commit towards small seed projects:

  • 1. Use the “one dollar to one dollar” basis to attract private money with public money (PPP)  risk reduction

  • 2. Activate effective collaboration with European Investments Fund to catch a 30-40% sum for the FoF

  • 3. Catch public money to fund part of the project (but not let the public institutions run the funds)

  • Public and Private money managed by private professional new MC


The demand side entrepreneurship creation

The Demand side: entrepreneurship creation

  • We can observe that, nevertheless the Italian R&D total expenditure p.a. on GDP is about one half of the EU average (i.e. 1,04% vs. 1,92%), what we really need is to transform the excellence research result into business

  • The role of local entrepreneurship promotion activities played by the numerous incubation systems and public agencies (such as Sviluppo Italia)

  • The role of University incubators and technology transfer offices: we need a more formal coordination of these actors

  • Increase the entrepreneurship consciousness of researchers/scientists and promote incentives to set up companies


Final issues

Final issues…

  • Create a sound solid connection between Seed capital funds and VC funds

  • It is important to back the seed project in order to make it acceptable by the future VC who will take the equity stake

  • The first Euro million is a public-private matter

  • Activate a network with Universities, Public incubation system and government authorities to declare a formal framework programme with declared goals

  • Control mechanism for incubation activity: more money to incubators which gained “high reputation”


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