Peer review of Funding for young innovative enterprises ... Peer Review Report NIY.pdf · The third...

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Peer Review Report 1 Peer review of Funding for young innovative enterprises (NIY) – Tekes, Finland Pilot Peer Review Report 16 June 2010

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PPeeeerr rreevviieeww ooff FFuunnddiinngg ffoorryyoouunngg iinnnnoovvaattiivvee eenntteerrpprriisseess((NNIIYY)) –– TTeekkeess,, FFiinnllaanndd

PPiilloott PPeeeerr RReevviieeww RReeppoorrtt

1166 JJuunnee 22001100

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This report was prepared by:

Robbin te Velde, Dialogic

Contact details:

Dialogic Innovation and Interaction

Hooghiemstraplein 33-36, 3514 AX Utrecht - Netherlands

Phone: +31 30 2150580

e-mail: [email protected]

Disclaimer: The views expressed in this report are those of the author and the Peer Review Team. They do not necessarily reflect the opinion or position of the European Commission and in no way commit the involved organisations.

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TABLE OF CONTENTS

TABLE OF CONTENTS ............................................................................................................3

1. Introduction............................................................................................................................4

2. Policy objectives and policy mix ............................................................................................5

3. policy delivery system............................................................................................................6

4. service delivery system .........................................................................................................8

5. identification and description of practices ............................................................................12

6. transferability ISSUES .........................................................................................................14

7. COMMENTS ON THE REVIEW PROCESS........................................................................15

Annex ......................................................................................................................................16

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1. INTRODUCTION

The Pilot Peer Review described in the present report is part of the INNO-Partnering Forum (IPF). The INNO-Partnering Forum (IPF) is an INNO-Net. It was established as a project under the auspices of the European Commission (DG Enterprise and Industry) for the period 2009 – 2012. The aim of IPF is to identify, develop and exploit synergies between public innovation agencies in Europe and propose new approaches to innovation support for SMEs. The project will in particular explore and test new ways of service delivery, aiming to accelerate the take-up of the most advanced innovation mechanisms with proven efficiency and impact. IPF is carried out by a consortium consisting of the following six partners: Vinnova (SE, co-ordinator), Tekes (FI), Technology Strategy Board (UK), Enterprise Ireland (EI), NL Agency (NL) and FFG (AT). Work Package 2 of IPF consists of three pilot peer reviews. A pilot peer review is a full fledged peer review, at its learning stage. This implies that some of its procedures might be adjusted on the basis of experience. Also the relationship of the peer review to other activities under IPF will be under development during these pilot PRs. For the pilot peer reviews the cases (programmes) are provided by the partner organisations and the members of the review teams come exclusively from the partners. The third pilot peer review was on the Funding for Young Innovative Enterprises (NIY) in Finland. The review visit took place on the 10th and 11th of May 2010 in Helsinki, Finland, at the premises of Tekes. The visiting peers belonged to four European innovation agencies:

– Eelco Denekamp - NL Agency (chairman) – Gerard Fenner - Enterprise Ireland – David Golding - Technology Strategy Board, UK – Kjell-Håkan Narfelt – VINNOVA, Sweden – Jenni Nordborg – VINNOVA, Sweden

The Review Team also included: – Robbin te Velde - Dialogic, Netherlands, as external consultant.

The discussion and conversation partners were:

– Minna Andersson – Tekes, Finland – Matti Hiltunen – Tekes, Finland – Kristiina Laurila – Tekes, Finland – Patrick Louko – Footbalance Oy, Finland – Heiki Meittinen – Innofinance Oy, Finland – Heikki Uusi-Honko – Tekes, Finland

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2. POLICY OBJECTIVES AND POLICY MIX

There are about 20,000 firms founded annually in Finland. Only 100-150 of these firms are genuine growth firms. Small in number, yet of great importance to the overall development of the national economy. Similar to other Nordic countries Finland has no particular lack of start-ups but does have a lack of growth firms. Thus the bottleneck is in the expansion phase. The objective of Tekes’ funding for young innovative enterprises, NIY funding, is to generate new innovative high growth enterprises. The purpose is to boost the growth and internationalization of the most promising small businesses and it is targeted to overall development of business operations in the enterprise. Beneficiaries of NIY are small young innovative enterprises. NIY was introduced to deal with the difficulties small enterprises have in raising appropriate private funding for innovative ventures due to the high risks that investors perceive. With regard to the policy mix, it there are few links between NIY and other policy instruments. Tekes, though having links to other government early stage investments schemes like Finnvera/Veraventure equity financing, seems to function rather independently. The budget for NIY comes directly from the state budget. A new interface is with Vigo, the accelerator scheme from the Ministry of Employment and Economy, which is modelled after the well-known Isreali schemes. NIY’s director is in the steering committee of Vigo. All in all there seems to be a pretty symbiotic relationship between Vigo and NIY (see §3).

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3. POLICY DELIVERY SYSTEM

With regard to the international context, the EC rules on state aid are obviously very relevant to the NIY program. At the national level, NIY mainly relates to other programs within Tekes, to Vigo (a programme of the ministry of employment and economy ) and to Finnvera (a specialised VC financing company owned by the State of Finland). EC regulation NIY–funding is based on the Community framework for state aid for research and development and innovation. Funding may be in a form of a grant, loan or risk capital, in maximum one million euro per enterprise. In practise, 99% of the funding is in grants. The substantial block grants could be regarded as a rather strong state intervention. It is only after the recent easening of the EU regulation this kind of state aid is permitted. Finland has actively lobbyed for the change of the regulation. Since 2008, after the introduction of the General Block Exemption Regulation (GBER), notification of an NIY-like scheme would not have been necessary. However preparation for NIY already started in 2007 and Finland still decided to follow the regular notification route. NIY was approved in December 2007 and, after revisions, finally accepted in mid 2008. EC regulation is very strict on financial accumulation. Recipients from state aid (such as NIY) are excluded from any other kind of public financial support for a period of three years. This includes de minimis funding, funds for regional development, subsidies for environmental subsidies etceteras. Important exceptions are R&D&I aid (such as regular Tekes’ grants) and public risk capital aid (such as Finnvera’s seed fund Vera). EC definitions of young innovative enterprises apply to NIY. Firms should exist for less than 6 years at the time when the aid of the first phase is granted, and their R&D expenses should represent at least 15 % of the company’s total operating expenditures. It is not always easy for firms (esp. service firms which often are not even aware that they are doing R&D at all) to show that they meet the criterion. Finnish government The Finnish ministerial rules on financial accumulation are even stricter than the EU rules, which only ask for a statement from an external auditor. The Finnish regulation requires that actual procedures are in put in place. In practise the rule is very difficult to enforce. Firms sometimes are not even aware themselves that they are receiving state aid. A second requirement is that recipients of grants should always finance 25% themselves. This is not a EU obligation – EU regulation permits a 100% grant – but a general principle of the Finnish Ministry to guarantee commitment from the recipient. Another overall national rule which effects the service delivery of NIY is that firms which receive 50% or more public funding automatically become a “public procurement unit”. This means that they have to publicly tender all their purchases exceeding 30.000 euro. Tekes There is a strong connection between Tekes’ regular R&D&I funding and NIY. Most of the firms which participate in NIY are already Tekes’ customers. R&D&I funding actually regularly exceeds NIY financing in volume. The other way around, NIY sometimes refers potential applicants to regular R&D&I grants (one stop shop). Although Tekes has a lot of experience with R&D&I grant schemes, the strong focus on business development and venture capital in NIY is a new element for the agency. This has compelled Tekes to bring in more

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knowledge on this particular topic. Firms which apply for further NIY funding are judged by a panel which consists of internal and external experts (see §4). This is the first time Tekes makes use of external reviewers. The internal experts are Tekes staff members who already had technical or business expertise in the specific industry sector. To extend their business expertise, they have been partly retrained by means of several training sessions in Finland and a one week VC training in Silicon Valley. Vigo program The Vigo programme is managed by the Ministry of Employment and the Economy (TEM) and coordinated by Tekes. Finnvera participates in the programme via its subsidiary the venture capital company Seed Fund Vera by investing in enterprises being accelerated.1 The aim of the program is somewhat similar to NIY, namely to boost the Finnish venture capital market and attract international accelerator players and venture capitalists into Finland. However Vigo specifically targets fast-growing startups whereas NIY is geared towards young growth firms. Thus Vigo firms are in an earlier stage than NIY firms. Vigo also uses other another service delivery mode. Rather than giving financial grants (as NIY does) it provides support in kind, that is, it uses seasoned professionals to coach start-ups into rapid growth and increased investment readiness.2 In practise, the activities of Vigo and NIY are closely intertwined. All firms under the program are completely dependent on NIY financing.3 The other way around, Vigo is de facto screening candidates for NIY, promoting the NIY scheme, and also brings in the necessary management skills (which is often a precondition for NIY funding).4

Finnvera Prior to the introduction of NIY, Finnvera already dealt with VC capital and soft loans to innovative growth firms. However, in order not to burden the balance sheets of NIY companies with too much loans or (profit expecting) VC capital, the scheme was designed into a grant programme. Given Tekes’ know-how on grant schemes – it allocated about €600 million in R&D&I schemes annually – it became the logical nexus for NIY.5

The strict terms on financial accumulation do sometimes complicate the collaboration between NIY and Finnvera. Seed funding is exempted from the regulation, but for its other financial instruments Finnvera has to wait three years until it can finance the same firm again, at least if the interest rates used are below market level.

1 http://www.vigo.fi/www/en/index.php 2 As an accelerator scheme, Vigo is rather unique in the sense that the seed capital (in this case coming from Finnvera) goes directly to the startup firm rather than to the accelerator vehicle (in this case: Vigo). The firm then uses this money to hire external management experts from Vigo. 3 However note that the Vigo program has just been started. So far (May 2010, RtV) 14 firms are participating in the Vigo scheme. 4 Given the support from experienced managers Vigo firms that apply for NIY funding can skip the VC panel session (see Service delivery) 5 In 2009, Tekes allocated €579 million of which about 40% (€246 million) were grants for enterprises, another 40% (€236 million) grants for public research, and the remaining 20% loans to enterprises.

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4. SERVICE DELIVERY SYSTEM

Overview of the NIY scheme The NIY scheme has three phases: a pre-phase, a first phase and a second phase. These phases will be further elaborated below. The pre-phase is technically not part of the overall funding scheme. During this stage potential recipients prepare a new or improve an existing business plan. Firms enter the first €250K phase after a review by a panel of internal and external (VC) experts. During the first phase they set growth targets for the second stage. Only if the targets are met, firms can enter the second €750K stage.

Tekes is not actively pushing the scheme, although some marketing is being done by Vigo (see before). The agency feels that the initiative should rather come from the entrepreneurs themselves. So far there is also little need for marketing and promotion. Awareness of the program is already relatively high and a sufficient number of firms is applying for the scheme. Many firms already know Tekes and regularly contact the agency. Thus there is a lot of internal referral. Furthermore, given the small size of the economy everyone in the VC community knows each other. With its extensive pool of 50 external experts, NIY has a lot of ties with this community. The portolio of NIY firms does reflect a markedly different structure than the existing Finnish industry sector, with for instance a strong representation of software and digital media firms and a weak representation of traditional sectors such as forest/pulp and paper.6 These are indeed the fastest growing sectors in Finland. However, on top of that, NIY is also explicitly including specific sectors into the selection (esp. business service firms).

6 But note that there are often still strong links between the emerging and mature sectors, either/or they originate from the traditional sectors (clean tech from pulp and paper/chemistry) or they supply to traditional sectors (software, clean tech for pulp and paper industry etc.)

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Stages in the scheme Although 99% of NIY funding is in grants the service delivery emulates VC financing to a certain extent. Financing is also done in increasingly bigger tranches (‘investment rounds’). Firms do not necessarily have to enter the program via the pre-phase – it is optional. In fact the majority of firms enters the program during the first phase. There is actually an informal yet important phase even before the pre-phase. In Finland, firms are used to contact Tekes prior to submitting any application. Tekes is widely known among Finnish firms (about 50% is aware of the existence and role of Tekes). The informal pre-meetings are typical to Tekes, thus not unique to the NIY scheme. During these pre-meetings, NIY might suggest to opt for another scheme (for instance, a regular Tekes R&D&I grant if there is no proof of concept yet) or drop the application altogether. Thus effectively there has already been a screening of candidates prior to the pre-phase. Between the pre-phase and first phase there is usually a gap of 1-2 years. Participating firms not always understand this, but this time is needed to get ready for the crucial first phase. The move from the pre-phase to the first phase is the most difficult transition. It is also here that the external review (by the VC panel) and internal review (Tekes industry experts) is staged. The VC review is missing at the transition from the first to the second phase. This is a much more gradual transition. Once firms have entered the NIY program they do not have to reapply for each separate phase. They thus work gradually towards the big €750K grant. It is this long term integrated process which sets NIY apart from other financial schemes (including Finnvera funding). Pre-phase Pre-phase financing is intended for the planning of the business activities. The result of the funding should be a high-level new business plan or a significant improvement to an existing plan. The pre-phase can last in maximum 6 months. The funding covers 75 % of the eligible costs, the maximum aid being €50K.7 Tekes makes funding decisions almost on a continuous base, that is, weekly in an internal meeting. Beneficiaries from NIY are new innovative enterprises.8 However, NIY is not really geared towards entirely new, that is, genuine start-ups. There should already be some kind of proof of concept, not just a business concept or an idea. The firm should also have sufficient and adapted resources to carry out the necessary research, development and innovation activities.9 In a similar vein, NIY candidate firms should be R&D intensive, but not dedicated to research. Their main goal should be to grow fast, not to do rocket science R&D.10

Once firms have entered the first phase they do not have to reapply for the second phase. That is, if they meet the targets that have been set they are on track for the ‘first prize’ of a one million € grant in phase 2.11 This makes NIY an attractive alternative to other financial schemes such as Finnvera’s Vera. However due to the strict regulation on financial accumulation the particular setup of NIY has an important drawback. Even if firms are thrown out of the program halfway (that is, do not make it to stage 2) they will have to wait another three years before they can re-apply for state aid.

7 Because the pre-phase is financed under the de minimis rule it is judicially not a part of NIY. 8 Firms that want to participate in NIY should have existed for less than 6 years at the time when the aid of the first phase is granted. They are innovative enterprises, on the basis that their R&D expenses represent at least 15 % of the company’s total operating. The 6 years rule is directly taken from EU regulation. The additional Finnish rule is that after turning 8 years the company is excluded from the scheme. NIY therefore uses a cut-off of 5,5 years because of the 1-2 year gap between the pre-phase and the first phase. 9 Also the firm should already have its own finance in order and should already have at least some staff fully committed to the company. However no hard figures (in terms of minimal turnover or minimal fte) are being used. 10 For this reason, NIY has adjusted the supporting activities and reduced the amount of R&D work to maximum 25% of the total accepted costs. 11 Actually €750K because of the 25% co-financing principle.

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First phase Financing of the first phase is intended for the enterprises which have successfully implemented the pre-phase or otherwise possess a business plan of equal quality.12 The purpose of the first phase is to accelerate and intensify the start-up and development of the business and innovation activities of the company (“conditions of growth”). The funding covers 75 % of the eligible costs the maximum aid being €250K.13 There is no partial funding: candidates either receive the full 75% or nothing. The condition for reaching a new phase is that the company has attained the goals set for the previous phase. Typically the goals attained are related to turnover, new international customers, resources or getting private capital investments. The selection of the candidates for the first phase is being done by an internal and an external expert team. The external expert panel is organized on a monthly basis. The internal team from Tekes normally consists of 3-4 members who represent both technical and business expertise. The external team is drawn from a group of about 50 private VCs, angel investors and industry experts. The external panel evaluates the enterprise and gives advisory recommendations to Tekes. There is a more or less elaborate voting process by the panel members but at the end of the day the scores seem not to be all that important. Ultimately, Tekes (that is, the director for funding) decides and can and actually occasionally does overrule the external experts. With regard to the selection of the firms for the first phase an important thing to note is that the firms do not have to fight for the same (chunk of) budget: NIY funding is not allocated on a competitive basis. Funding has high criteria, but any firm which meets the criteria of the program is eligible for funding. This is because there are no budgettary constraints (yet) – remember that NIY forms only 4-5% of the overall budget of Tekes. If there are constraints they might be of a practicl nature, but the main constrain is a lack of potential growth companies. Second phase In order to reach the second phase the enterprise must have achieved the goals of the first phase “in an impeccable manner”. The purpose of the funding is to accelerate and intensify the development of the business and the internationalisation of the company (“rapid growth”). The funding covers 75 % of the eligible costs, the maximum aid being €750K, again plus 25% in areas eligible for regional aid. Firms come forward with their own targets. NIY then adjusts them to another strategic direction which usually involves more internationalisation and/or growth. Additionality does not seem to be an issue. That is, it does not seem to matter for NIY whether firms would have done the investments anyway, thus also without NIY funding. The general point of view is that the program should not “punish” firms who have sufficient financial resources (i.e. are already profitable or otherwise have equity) and/or have shown readiness to take risks. The obvious solution – if desired - is to set ambitious targets which the firm would otherwise not have set by itself. Firms should be clearly committed to the targets they have also set themselves. However, there is no penalty for a firm which does not meet the targets. All eligible costs will be covered by NIY and the firm does not have to pay back to grant. Of course it will not be allowed to enter the next phase.

12 The latter thus refers to ‘side-entrants’ and to Vigo firms. 13 Plus 25% in areas eligible for regional aid.

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Thus the most crucial point when the targets are looked at is between phases. This is also the reason why the financing in phase two has later on been split into two tranches. In this way, the targets that were being set at the beginning of phase two can still be evaluated during the phase (and thus not only after the phase, when the NIY has effectively ended).14

One of the key objectives of NIY is to put the firms in such a position that they can attract sizeable sums of external private financing after phase two. One of the most important contributions of NIY is that counterbalances the uneven power balance between young innovative enterprises and private VC’s during the growth phase. Due to the high risks involved during this early stage, private VC’s often set insane conditions for financing. NIY grants give firms more time to grow and to look for external financing.15 Eventually (after phase two) there is a more healthy valuation and firms have better negotiation position vis-à-vis private VC’s. Stated differently, the “exit strategy” of NIY is to deliver the firm in a sound condition at the doorsteps of a growth capital VC. This does not mean that public (NIY) and private (VC) financing are mutually exclusive during phase one and two. Private VC’s use public money as a leverage for their own capital. Public money also functions as an ‘insurance’ – with public backing, firms do not so easily collapse at the frst serious set back. In a similar vein, NIY hopes that the awarding of the NIY grant will have a ‘halo’ effect on the firm and makes it easier for it to attract capital from private sources. The obvious issue is who exerts control over the firm during the growth phase. Since NIY does not have to recoup its investments (that is, the grants it provides), it can set friendlier conditions and can focus more on the long run growth potential of the firm.

14 NIY can now for instance compel firms to really get external (private VC) financing (usually one of the targets that is being used). 15 The particular role of NIY – providing capital under lenient conditions during the early growth stages – is usually provided for by family capital (e.g., in the US). However the lack of family capital is one of the weak points of the Finnish financing system.

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5. IDENTIFICATION AND DESCRIPTION OF PRACTICES

Good practices � The NIY scheme has a solid budget. From the perspective of an individual firm, there are substantial

amounts of money involved against a relatively low administrative burden. The grant scheme allows ‘lightweight’ contracts, also compared to the due-diligence driven shareholder agreement process of private VC’s.

� The use of an integrated multistaged process gives NIY a longer term view. During a period of several years, firms work steadily towards the first prize: the one million euro grant in phase two. The firms do not need to reapply between stage 1 and stage 2. Once accepted by the program they can continue working on their growth plans. NIY counterbalances the fragmentation that is a common characteristic of the financial landscape.

� Everything centres around the business goals that are set by the firm and then adjusted by NIY. Allmost all costs which efficiently contribute to the achievement of the business goals are eligible. This makes the scheme very flexible which is a clear advantage under the given dynamic circumstances.

� The program is run with an very small number of administrative staff members. This is due to the fact that it uses the contribution of other Tekes staff and external people (internal industry experts, external VC panel members, Vigo staff) in a rather smart way. It has, for instance, effectively outsourced parts of the screening and management support of potential NIY candidates to Vigo.

� The small size of the administration, in combination with the administrative independence, makes NIY very effective and decisive. Decisions on the crucial admission of firms into phase one are made by NIY director for funding based on a presentation of the Tekes expert team, and do not require lengthy procedures. Funding decisions are made internally on a weekly base. Panel meetings prior to the first phase are arranged on a monhtly base. As a result, firms can continuously apply for NIY grants.

� In a similar vein, NIY staff know all firms personally. They effectively act as account managers to “their” firms. Because NIY also manages some traditional Tekes R&D grants, the program can act as a one stop shop for small firms. It can for instance add grants to regular NIY grants, or suggest firms during informal pre-meetings to apply first for regular Tekes R&D grants and only (years) later for NIY grants. Thus the service orientation from the program seems to be particularly high. Furthermore, the (informal) pre-selection that takes place during the pre-meetings greatly improves the average quality of the firms that eventually enther the pre-phase or first phase.

� The use of the external panel of VC experts is beneficial to both Tekes and the candidates. It gives NIY direct access to the VC community and is an effective way to attract good candidate recipients. Candidates are exposed to the VC community and get the informed opinion of seasoned VC’s on the opportunities of the company for further funding.

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Practices for possible further study � So far NIY has been extremely successful with its investments – at least 8 out of 100 firms have indeed

experienced very strong growth – but it remains to be seen whether this is a sustainable situation. First, shifts in staff might directly effect the success of the program. Secondly, also in VC investments from a statistical point of view the rule of big numbers applies. This means that really big hits (Nokia or Google category) need really big portfolios. However the current setup of NIY – with the small number of staff – does not allow for dealing with a large portfolio of firms. The challenges for scaling up – both inside and outside Tekes - certainly deserve further study

� In a similar vein, the monitoring of firms by NIY is currently not sufficiently understood. Private VC’s are usually directly involved in the management of the firm. They therefore continously monitor (and adjust) the operations of a firm. Tekes does not directly participate in firms. Moreover, the limited human resources do not permit NIY to closely follow the development of the firm. Currently this is largely provided for by the personal contact between NIY staff and the firms. Again, this governance model does not seem to scale very well.

Points for possible improvement � The interaction with the VC panel can be further further improved. More time and resources could be

made available for the preparation of the dragons’ den. Currently panel members might feel that they have too little background information to take well-informed decisions. That is, the ‘lite’ version of the business and project plan they receive right now seems to be too light.They need more solid market research and due diligence analysis. The core element missing in the information is marketing information (the ‘battle map’ of the competitors, suppliers and customers). The presentation during the panel session usually focuses on the product/service itself but this is not the most important element. One suggestion is that Tekes’ internal experts should help the firm to prepare for the VC dragons’ den (thus doing comprehensive market research). Right now there is little or no formal feedback between the internal and external experts, also not after the panel session.

� Applicants in turn feel that they are ill-prepared for the presentation. Thus it seems that the current (half-day) preparation by PwC is not sufficient. Furthermore, given the very limited time available for the presentations, feedback from the panel to the applicant company is fairly limited. It is likely that applicants would appreciate feedback even if negative to assist them in later pitching for funding. Given the limited time available and the fact that the scores of the panel seems to be of relatively little importance, the time on the scoring exercise could be spent instead on feedback to the presenters and/or longer internal discussion between the panel members. The (qualitative) results of the discussion seem to be at least as valuable for the decision upon the application as the (quantitative) results of the voting exercise.

� The management of the portfolio of firms in the NIY scheme is probably an area for improvement. In an overall investment portfolio, high risk/high growth investments are usually counterbalanced by lower risk/steady growth investments. A similar weighting could be used at the level of individual firms, where high risks could be offset by higher targets. However it should be noted that that one of the strongest points of NIY is that it does not use the same bold economic criteria as private VC’s.

� Although the integration of NIY with the regular R&D&I schemes is a strong point from NIY, it might be that the ‘one stop solution’ could be further enhanced by fully utilising ofther existing instruments and schemes within Tekes (soft-landing schemes, Tekes’ foreign offices, domestic and international partnerships etceteras). This could bring in more value to the companies in the NIY scheme.

� As far as the opportunity has not already been explored, Tekes might consider introducing new complementary policy instruments. For instance, the agency itself might function as a catalyst for getting and/or improving business relations for the applicant firms (e.g., by using Tekes’ own procurement).

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6. TRANSFERABILITY ISSUES

� The reach Tekes has among Finnish firms (about 50% of all firms knows Tekes) is rather unique. Furthermore, firms are already used to contact Tekes for any issue concerning R&D&I funding (e.g., the ‘pre-meetings’). The ‘low barriers to entry’ from Tekes in general and from NIY in particular are another strong point of the service delivery. This greatly facilitates the communication back and forth to the firm population. The frequent informal ‘pre-meetings’ also enable the pre-selection of candidates. This pre-selection might be one of the reasons of the high success rate of the NIY firms (that is, the firms that enter the scheme are not just average firms).

� In a similar vein, due the small size of the economy all individuals involved know each other (e.g. the VC community is rather small). Thus new practices and schemes or interesting cases (e.g., of highly potential startups and/or growth firms) quickly spread.

� The lack of family capital is not unique to Finland but probably does not apply to all countries that are currently involved in the review process. In the UK for instance absence of family capital might be less problematic, hence there is less need for a scheme like NIY.

� The high degree of concentration in the decision making - one person makes the decision by presentation in a meeting where relevant Tekes staff participates - seems to be rather special, though common within Tekes. The NIY director of funding makes the decision on the allocation of the NIY grants. Moreover NIY staff has also additional (regular R&D) funds at their proposal. This approach might be a general trait of the Finnish policy making system, but it does not apply to most other countries.

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7. COMMENTS ON THE REVIEW PROCESS

� It is important to have sufficient time available for the peer review. In this particular case, there was little time left to discuss for instance issues concerning transferability.

� The first presentation(s) should be on the scheme itself. This makes presenations on the context later on better understandable.

� With regard to understanding the policy objectives and policy mix, it would have been useful to have some representatives from the Ministries involved, especially to see how they evaluate the effectiveness of the programme in practice.

� The self-assessment questionnaire was useful both prior and after the review (supporting the editing process of the review report).

Some practical considerations: � It would be useful to receive the presentations made at the review in soft copy afterwards. � The dinner would have been more productive in the middle of the review, rather than at the beginning.

However the planning could probably not have been different, given the split two day schedule which in turn made the traveling scheme to and from Finland considerably friendlier.

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ANNEX

Agenda

Pilot Peer Review of the NIY Funding Instrument

10-11 May 2010

Tekes, Helsinki Monday 10th May 18:30 Arrival of Review Team and internal preparatory discussion 20:00 Joint informal dinner

Tuesday 11th May 08:30 Welcome & Introduction of participants, Kristiina Laurila 08:45 Opening remarks; position of NIY in Tekes funding scheme and the European context, Matti Hiltunen (replaces Jari Romanainen) 9:15 Background of NIY, notification and national legislative issues, Matti Hiltunen 09:45 Immediate Questions & Answers, discussion [short break] 10:00 Introduction to NIY, Minna Andersson and Kristiina Laurila (Launching of a new instrument, pyramid-model, application process including external VC-panel, state-of-the art (volume, quality, results, satisfaction, …)) 12:00-13:00 Lunch at Tekes 13:00 -Finnish VC point of view to NIY, Heikki Miettinen (Investment Director, Innofinance Oy) -Growth company view to NIY, Patrik Louko (Footbalance Oy) -Questions & Answers, discussion 14:30 Coffee

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14:50 VIGO Accelerator Programme and NIY, Liisa Rosi 15:15 Review Team internal meeting 15:45 Closing discussion