Investing in Global
Entrepreneurship and Innovation
Focus on Results
José Epifânio da Franca
Chairman and CEO
Agenda
 Where we stand in the world of R&D
and Innovation
 The reality behind the numbers… and
lessons for change
 Building the structural foundation of
the investment pyramid
 It is (a lot) more than capital
2
Agenda
 Where we stand in the world of R&D
and Innovation
 The reality behind the numbers… and
lessons for change
 Building the structural foundation of
the investment pyramid
 It is (a lot) more than capital
3
 Conditions
 Institutional
Ecosystem
 IT Infrastructure and
use
 Resources
 Human capital
 Funding
 Investment
Processes
Source: Barómetro COTEC, January 2012
We stand in the bottom half among 52 countries…
 Processes
 Networking and
entrepreneurship
 Application of
innovation
 Incorporation of
technology
 Results
 Impact of innovation
 Impact on economy
Results
Conditions
Resources
Low
Average
High
Very High
Low
Average
High
4
In all 4 dimensions, the Gap is high against Leading Countries
Portugal vs Leading Countries (sample)
Portugal
Switzerland
Denmark
Finland
Sweden
United Kingdom
Conditions
Resources
Processes
Results
Source:
Barómetro COTEC, January 2012
5
The Gap narrows down against EU countries of similar size,
with the exception of the Results dimension
Portugal vs EU 27 Countries (sample)
Portugal
Austria
Belgium
Finland
Holland
Ireland
Conditions
Resources
Processes
Results
Source:
Barómetro COTEC, January 2012
6
Portugal performs better than Eastern European countries, still
with the exception the Results dimension
Portugal vs Eastern European Countries (sample)
Portugal
Slovakia
Slovenia
Hungary
Poland
Czech Republic
Conditions
Resources
Processes
Results
Source:
Barómetro COTEC, January 2012
7
Portugal also has better global performance than Southern European
countries, although the Results dimension still pulls it down
Portugal vs Southern European Countries
Portugal
Spain
Greece
Italy
Conditions
Resources
Processes
Results
Source:
Barómetro COTEC, January 2012
8
possuindo as condições necessárias com vista à promoção de IDI, continua a não consubstanciar as mesmas em outputs visíveis,
da forma mais eficaz e eficiente.
Greater efforts and focus are needed to achieve meaningful
economic impact factors
Análise
Posicionamento
de Portugal - Pilares
Improving
thede
pillars
of entrepreneurship
and innovation
Legenda
7,00
2011
2010
5,25
4,96
4,86
4,52
4,79
4,42
4,07
3,50
4,16
4,00
4,12
3,35
3,11
2,87
3,70
2,30
3,15
2,93
2,44
1,75
0,00
4,12
3,71
2,18
Envolvente
Institutional
Institucional
ecosystem
TIC (Infra-estrutura
IT
e Utilização)
infrastructure
and use
Conditions
Capital
Humano
Human
Financiamento
Funding
Capital
Resources
Investimento
Investment
Networkingand
e
Aplicação de
Networking
Application
Empreendedorismo
Conhecimento
Entrepreneurship of innovation
Processes
Incorporação de
Incorporation
of
Tecnologia
Technology
Impactosofda
Impact
Inovação
innovation
Impactos
Impact
on
Económicos
economy
Results
Source:
Barómetro
Inovação
- Innovation
Barómetro
COTEC, January
2012 Digest
7
9
Agenda
 Where we stand in the world of R&D
and Innovation
 The reality behind the numbers… and
lessons for change
 Building the structural foundation of
the investment pyramid
 It is (a lot) more than capital
10
The reality behind the numbers
 Significant investments in science and technology throughout the past 20
years have significantly increased scientific visibility in the world.
However:
 Still the lowest number of patents per 1,000 habitants in Europe;
 Commercial exploitation of university patents is largely inexistent;
 Tech companies are mostly trapped in a small internal market;
 Just a handful of small or medium sized companies are referenced as worldclass in any high tech segment;
 Few or no multinationals with established R&D centers;
 Little or no international VC investment in Portuguese high tech companies;
 Highly qualified human capital is not absorbed by the economy.
11
A view of why
 Scattered investments among many different domains have prevented the buildup of critical mass.
 Entrepreneurship has been hampered by cultural aversion to failure.
 University system still captured by the “preparing for a job” view of education.
Fast change to an entrepreneurial view of education is a national imperative.
 No real efforts to transform academic know-how into entrepreneurial capital.
 Lack of international references, both in VC and tech entrepreneurship.
 Little effort to attract international venture capital to invest in Portuguese
projects.
 Lack of competitive focus in international markets – focus in domestic
markets.
 Public investment in High Tech companies mostly not done through equity –
weak alignment of interests with the success of projects.
 Public VC investment has not been followed by qualitative support to companies
and entrepreneurs.
12
Is it possible to change? – lessons from experience
 Global success is possible – there is not such thing as a “country curse”.
 International references and positioning in international markets are crucial
elements for global competitiveness.
 Quality projects can attract international investments.
 Global networking is a must.
 Our talent can be as good as any talent in the world.
 Access to foreign talent is fundamental to complement local know-how and
achieve critical mass.
 Execution and sense of urgency are more important than good ideas.
 Alignment of incentives among investors and entrepreneurs is fundamental to
induce success.
13
Agenda
 Where we stand in the world of R&D
and Innovation
 The reality behind the numbers… and
lessons for change
 Building the structural foundation of
the investment pyramid
 It is (a lot) more than capital
14
Two public entities have a comprehensive set of tools to participate in
the financing of the economy

Venture Capital


Portugal
Ventures



PME
Investimentos


Fostering technology-based entrepreneurship
Private Equity


Seed, Early-stage and Scale-up investments
Consolidation and restructuring of traditional sectors of the economy,
to grow and export
Capital operator focusing on relevant economic sectors and, in
particular, tourism
With about 1.5 billion euros of assets under management, it has
contributed to about 12 billion euros injected in the economy
In partnership with the national banking system, PME Investimentos
finances credit line facilities
As a Limited Partner, its main goal is to develop the private
Venture Capital and Private Equity industry, stimulate the
emergence of new players and attract international investment
It can participate with assymetric sharing of profitability with
private investors
15
15
Founded in June 2012, Portugal Ventures is the result of the merger of 3
of the most representative VC and PE firms in Portugal
InovCapital
AICEP
Capital
Global
Turismo
Capital
 AICEP Capital Global (founded in 1988)
 Inov Capital (founded in 1989)
 Turismo Capital (founded in 1991)
 26 funds
 +100 portfolio companies
 (circa) EUR 600 M of assets under
management
www.portugalventures.pt
16
A reform made to foster private venture capital and develop
entrepreneurship open to the world

Clarify strategic objectives and concentrate resources for public
investment.

Rationalize and significantly reduce the operational cost structure.

Act as a catalyst of private Venture Capital and Private Equity’s activity,
fostering co-investments from Portuguese and International players.

Develop Portuguese entrepreneurship and promote the generation of
economic value from scientific and technological knowledge.

Create a new business landscape with high export potential and
global competitiveness, well-positioned in international value chains.

Focus on the creation of economic impact factors with a sustainable
and long lasting foundation.
17
Repositioning – greater focus and critical mass
High
Investment Focus
Future
Increased investment efficacy and
impact efficiency
Now
High dispersion and low involvement
– loss of efficacy
Low
Low
Average Investment Ticket
High
18
Opening up the national ecosystem to the World
“Inbound”
Capital & Talent
“Outbound”
Internationalization
Adopting international best practices is a must!
19
Stages of investment follow enterprise maturity
Seed Innovation
Capital
 Investment in the Seed / Proof of
Concept phases of companies with
innovative tech-based projects with high
growth potential
Venture Capital
 Investment in Global tech-based
companies from early stages of
development to scale-up
1
2
Technology-based start-ups must be global, innovation
must be benchmarked internationally!
20
Overcoming the paradox of the numbers:
What creates value does not export and what exports does
not create value…
21
Stages of investment follow enterprise maturity
Seed Innovation
Capital
 Investment in the Seed / Proof of
Concept phases of companies with
innovative tech-based projects with high
growth potential
Venture Capital
 Investment in Global tech-based
companies from early stages of
development to scale-up
1
2
Technology-based start-ups must be global, innovation
must be benchmarked internationally!
3
Private Equity
 Consolidation, Internationalization and
Turn-around of traditional industries in
tradable sectors
22
A healthy investment pyramid requires a strong foundation built with
ingredients to attract private capital, both national and international
Number of projects
Scale-up
Early-stage
Seed
In 5 years: 850 M€
Public:
325 M€
Capital
• 10 projects per year
• = 50 projects in 5
years
• € 10 M€ per project
• = € 100 M€ per years
= € 500 M€ in 5 years
(20% public)
• 20 projects per
year
• = 100 projects in 5
years
• € 2.5 M€ per project
= € 50 M€ per year
= € 250 M in 5 years
(50% public)
• 100 projects per year
= 500 projects in 5
years
• 0.2 M€ per project
• = 20 M€ per year
= 100 M€ in 5 years
(100% public)
National private: 375 M€
International private: 150 M€
23
The Ignition Program has been designed to address structural
weaknesses at the basis of the pyramid
 To promote and facilitate the access to venture capital investment of projects with
global growth potential in the Seed / Proof of Concept phases of development;
 To grow the deal flow, both local and international, and streamline the time-toinvestment process;
 To open the ecosystem to the world by creating the conditions to achieve global
competitiveness of tech-based companies and attracting both international talent
and capital;
 To stimulate the creation of new, global technology-based companies and foster
technology entrepreneurship;
 To promote the economic value of science and technology as a way to achieve
structural transformation and competitiveness of the Portuguese economy;
 To retain and attract talent.
24
24
The Ignition Program is designed around 4 sub-programs
Ignition Program
Ignition Partners
Network
Call for
Entrepreneurship
Acceleration &
Innovation
Hubs in the World
Ignition Capital
Network
Stimulate deal
flow and achieve
critical mass
Streamline
process for capital
supply
Catalyst for
outbound
globalization
Attract private
capital
participation
25
6 months after its inception, the Ignition Partners Network already has
28 members… and it is still growing
26
Call for Entrepreneurship
Key Aspects:

Total investment target of 20 M€ / year;

4 Calls per year;

Fast processing: 3 months from submissions to execution of investment
contracts;

Evaluation by an international panel;

Investment per project between 100 k€ and 750 k€;

Portugal Ventures retains a minority stake; high pre-money intagible value;

Participation in follow-on funding rounds, depending on the development of
the projects;

International networking and mentoring;

Facilitating access to strategic partners and international investors.
27
27
Initial response is encouraging
 Deal flow between 01Jan2012 and 30Jun2012

Submitted projects: 56

Projects not investment ready: 55

Invested projects: 1
 Deal flow of the 1st Call for Entrepreneurship

Registrations: about 400

Submitted projects: 143

After pre-screening: 99

20 evaluation panels with 53 experts, 25 from abroad

Evaluation has been completed

Final investment decisions shortly
28
Programa de Ignição 16jul2012
28
The 1st Call for Entrepreneurship required a significant effort for
evaluation
SETORES DE ATIVIDADE
ICET & WEB
PAINÉIS DE AVALIAÇÃO
# PROJETOS
1. Tecnologias de Informação (2)
8
2. Comunicações e Eletrónica (2)
10
3. Web / e-commerce (7)
34
4. Social web (1)
8
5. Apps / Mobile / Gaming (2)
10
6. Biotecnologia / Pharma (3)
15
7. Medical Devices (1)
5
8. Energia (2)
9
LIFE SCIENCES
ENDOGENOUS RESOURCES
99
29
The evaluation involved 53 experts, 25 from abroad
SETORES DE ATIVIDADE
# PERITOS
ICET & WEB
28
LIFE SCIENCES
11
ENDOGENOUS RESOURCES
4
OUTROS
10
ORIGEM
# PERITOS
NACIONAIS
28
NÃO NACIONAIS
17
EXPAT
8
53
53
30
CA 06dec2012
30
Agenda
 Where we stand in the world of R&D
and Innovation
 The reality behind the numbers… and
lessons for change
 Building the structural foundation of
the investment pyramid
 It is (a lot) more than capital
31
A successful cluster of innovation and entrepreneurship requires a lot
more than just capital supply
Comunidade de
Capital de Risco
Experiente e Global
Estudantes
Universitários,
Pós-graduados e
Doutorandos
Instituições
Académicas de
vanguarda mundial
Corporate
Spin-offs
Empreendedores
Experientes/”Serial”
Disponibilidade
de Capital
Humano
Veteranos de
Empresas Globais
Sucesso e
Globalização
Empresarial
Cultura de Inovação e
Empreendedorismo
Infraestruturas
Tecnológicas
Corporate
R&D
Incubadoras
Tecnológicas
Apoio do Governo
32
THANK YOU!