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Innovation Finance Value Chain Current State of Play in Turkey

Innovation Finance Value Chain Current State of Play in Turkey. A. Mete Çakmakcı Türkiye Teknoloji Geliştirme Vakfı ARTEV Conference İstanbul 10 December 2011. Investing in R&D. Cheaper cost of capital and abundant public funding has been trigerring more private R&D investments.

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Innovation Finance Value Chain Current State of Play in Turkey

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  1. Innovation Finance Value ChainCurrent State of Play in Turkey A. Mete Çakmakcı Türkiye Teknoloji Geliştirme Vakfı ARTEV Conference İstanbul10 December 2011

  2. Investing in R&D Cheaper cost of capital and abundant public funding has been trigerring more private R&D investments 1416 Million TL in Public R&D Investments X 5 in private R&D spending 2002 x 3,5 increase in TUBİTAK grants to private companies 2009 2010 286 Million TL in Public R&D Investments Source : State Planning Organization, 2010

  3. Impact • Share of high-tech in manufacturingexports from 1992 to 2008 only increased from 1,2 % to 1,7 %. Poland’s increased from 3,7 % to 5,2 %; Brazil’s increased from 5,4 % to 12 %. (Latest BRIICS ave is %30!) Source : OECD STI Scoreboard, 2008 Source : TUSİAD, (2008) “Türkiye Sanayiine Sektörel Bakış” • Turkey’s exports increased from 14,7 Billion USD in 1992 to 127 Billion USD in 2008. (2008 imports were 202 Billion USD )

  4. Global Benchmarking There is an urgency to establish IP as an innovation «currency» Source : www.worldbank.org/kam

  5. Innovation Cycle Innovationcyclefree of any market failuresshould be self-sustainable Comfort Zone For Public Intervention Knowledge VISION INVESTMENT Opportunity Competitiveness Capital APPLICATION Value MARKET Value

  6. The Problem *Exit = IPO or M&A Source : “Angels, Venture Capitalists and Entrepreneurs”, W.F. Miller, METU 23 January 2008. Commercialization of technology takes many years and requires many financing sources

  7. CommercializationPipeline Knowledge ExploitationPipeline 45 M TL PrivateInvestment R2B Accelerators (TTO’lar ve TTA funds) 5 M TL PrivateInvestment 30 M TL CONDITIONAL LOANS 15 M TL TAX DEDUCTION 750 K TL * 20 prototypes = 15 M TL CONDITIONAL LOANS Pre-Incubation AppliedResearchSupports (~450 M TL) 100 K TL * 100 concept = 10 M TL GRANTS Concept Start-up Growth Product Proven Business Plan 3 – 5 years 2 – 3years 0,5 – 1 year 1,5 – 2 years

  8. Economics of VC Flight of capital away from the VC requires us to review how we design and deliver programs Risc Excessive Investment Negative «economics» 5-9 7-10 3-7 3-5 1-3 1-3 Investment Period (Years) Bridge Very High Growth Later Stage Second Stage High First Stage Venture Capital Start-up Medium Investment Return Seed Low Idea/Concept R&D First Sale Market First Product Patent Prototype New Markets

  9. The Human Factor Serial Enterpreneur Consultant Investment Banker Currentopportunityrequiresmore “hands on” investments People withpeopleskillsand a visionforthebusinessareneeded as VCs

  10. Eco-Systems Buy-Out Need to Develop A Public Role Well Defined Public Role Expansion Growth Early Adde-Value Complementary Knowledge Services and Networks Knowledge Infrastructure & Programs Seed Pre-Seed Local Context «Eco-System» Eco-systemsarebuiltuponsocialcapital (awarenessandtrust) Translatingfinancemodelsrequires a strongunderstanding of the eco-systemmodes

  11. Global Networks Source : 2007 Index of Silicon Valley Today VC and IP Exploitation is operatingacross global networks

  12. Innovator’s Guide to Eco-Systems Hard-working but oftenunderappreciated Preciousandfragile but intimidating Invisible but feedingandbinding Opportunistic but functional Vulnerable but goodcitizens of theglobe Accomodating, fosteringandlivelihood

  13. Capital Formation VENTURE CAPITAL FUND ENTERPRENEUR Successful Exits INSTITUTIONAL INVESTOR FieldExpertise Capital SerialEnterpreneurship Motivation ANGELINVESTOR VentureCapitalandAngelInvestmentsare “niche” sourcesof capital

  14. Alligningwiththe Value Chain Fiscal Incentives (Tax deductions, incentives) Guarantees Investments (FoF, CoInvestment) Guarantees Environment (Fiscal, Legal etc.) Program Leveraging Fiscal Incentives Project Finance Procurement Source :ArnaudCaudoux, OSEO

  15. VC Program OTHERINVESTORS PROGRAM OWNER InvestmentIncentives CapacityBuilding/Promotion Supports THE ‘’FUND’’ A public VC programdepending on the maturity of the eco-system should require a more integrated approach to development CapacityBuilding/Promotion Supports FON FastTrack FocusedSupports Co-Loan Facility OTHER PUBLIC PROGRAMS TARGET SME PROFILE SMEs

  16. Fund of Funds KOSGEB 50 M € X 1 Riscand Portfolio Diversification iVCi 160 M € X 3,2 v Market Validation s t Riscand Portfolio Management SMEs 800 M € X 16 MoreQuality Finance

  17. Karolinska Model : LocalInterface IdeaFlow Idea Flow Proje Değerlendirme ve Paketlemne Seedand Start-up Earlystageandgrowth ExternalCapital Karolinska Development AB Venture Capital Exit Finance Karolinska Institutet Innovations AB Alliance / Strategic Sale/ IPO Karolinska Institutet and other universities Firms Industry/ CapitalMarkets Actar AB Expert Networks Source : www.karolinskainnovations.ki.se Business Development IntellectualProperty Rights Scientific Karolinska Institutet Science Park AB

  18. IP Impact Share in MostCited EPO Patents Source :OECD STI 2011

  19. IP Fund Company Company LICENSING COMMERCIALIZATION IP Fund Investors IP Pool IP Pool IP Pool Research Institute Research Institute University University TTO TTO Company Company Source : Innovation Network Cooperation of Japan (INCJ)

  20. Who is TTGV? TTGV is a public-privatepartnershipunderthe legal structure of Foundation EstablishedbyLaw TTGV wasestablished in 1991 tomanagethefirstpublic program tosupportprivatesector R&D andinnovation

  21. Where is TTGV? POLICYMIX POLICY DELIVERY Source : Kjell-Hakan Narfelt, VINNOVA PROGRAM DELIVERY TTGV PROGRAMTOOLS MIX MARKETACTORS • In line with policy objectives • Identify program requirements • Design and develop programs • Deliver programs POLICYOBJECTIVES

  22. TTGV Hakkında What TTGV does? Technology Development Finance Program Manager Co-finance Provider İş Girişim A.Ş. Shareholder TTGV iVCi “Istanbul Venture Capital Initiative” TURKVEN TPEF-1 Investor Sponsor Teknoloji Yatırım A.Ş. Owner Support Provider Facilitator Environment Projects Finance SupplyandDemand Side CapacityandAwarnessRaisingActivities

  23. ConcludingRemarks - I • Smart Money : Management (Who?) • Quality of Finance : Delivery (How?) • Hearts and money on the same track : Design (Why?) • Complementary Public Programs : Alignment (What?) • Positive Perceptions ( Understanding and Managing Investor Psyche) : Promotion (When?)

  24. ConcludingRemarks - II • Quality investor base • Capable management teams • Deal flow (strong supply at the seller side) • Exits More public money into the system wıthout these ‘enablers’ More broken dreams and less political support

  25. Türkiye Teknoloji Geliştirme Vakfı Cyberpark, Cyberplaza B-Blok Kat:6 Bilkent 06800 Ankara info@ttgv.org.tr

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