On Monday I was in Helsinki, speaking at a seminar organized by Tekes, Finnish funding agency for tech & innovation. They are launching a new generation of integrated startup financing schemes – which I do not know much about, as my Finnish is below par to fully understand their published materials. But it was a nice half-day event to provide context around their announcements.
The guest speakers included Dr Orna Berry who shared the Israeli innovation financing experiences, Quatar Capital’s Mikko Suonelahti’s talk on venture capital markets. In between them, I was asked to share the story of Skype as a recent startup.
Some of the tonality of Finnish experts, from their Minister’s opening speech to hallway conversations with people in the audience felt quite weird coming from Estonia. Over here we look up to Finland as a role model in R&D and innovation environment, probably not a single discussion around Estonian Development Fund goes without mentioning neighboring Tekes, Sitra and others. However, in Finland, many feel that their progress is not fast enough and they need another boost to get to a next level after the first wave of “nokias”.
Below are my unstructured notes from Dr Berry’s presentation. Leaving aside the enormous impact of military financed R&D which was not discussed this time, I think there are still a few points not just Finland should consider learning from:
- Israel: Innovation policy from R&D to VC funding
- Govmt established Chief Scientist postions 1969 (1 in min of defence, the other civil)
- Budget to support R&D commercialization – $0.5B / year in the 80s
- now smaller, as private sector has picked up
- no preferred sectors, firms, tech; government attempts no winner picking but neutrality
- picking winners is private VC’s art (not science)
- govmt’s main vehicle is Matching Grants Program, criteria:
- tech and commercial feasibility & merit
- the neighboring markets don’t have enough GDP for sustainable exports, so high enough margins for global competitiveness is a must
- potential for expertise generation
- MGP provides conditional loans up to 50% of R&D cost
- ONLY IF the resulting product is succesful, the loan is returned at the rate of 3% of sales / yr
- NB! this gives also input stats for measuring if country’s hightech sales rise (tripled in decade in Israel)
- ISR-US R&D program: $214m grants for 672 projects. direct sales of $4.1B. PLUS indirect gains in created ecosystem.
- Yozma Program – incentives for foreing investors (risk guarantees, financial incentives, privatization)
- 10 VC funds, $200m raised, $100m from government
- government sold its share of the funds in ’97
- Israeli challenge – second class economy:
- 1996-2004, ICT grew 10.5% a year, everything else at 2.3%.
- productivity actually DECLINED: transport,construction, retail, business services
- agressive support in ICT alone will not raise happiness for the whole country
- ireland, singapore incentivise capital investment; Israel r&d investments more
- some foreign investment tax incentives copy the country of origin! if you come from a place where social tax is 20%, you will get the same in Israel, etc.