1. Early Stage Finance and Knowledge Intensive Companies Intellectual Capital a key driver for accessing finance Andrea Di Anselmo - META Group 6 th WIPO Forum on Intellectual Property and SMEs Cardiff, September 10-11 2008

2. OKnowledge Intensive Companies OWhat investors are looking for? OIntellectual capital: key driver for accessing finance OCase Studies

3. Knowledge Intensive Companies Knowledge Intensive Companies (KICs). They are small in numbers but cover a critical role Ostrongly affecting employment Oplaying an increasingly active part in Global Markets and Value Chains: initiators

4. Knowledge Intensive companies OQuality and quantity employment: 2% of new companies produces 50% of new employment in Europe and 70% in USA ODynamism of the economy: Nokia alone has changed Finland physiognomy and perception OCreative destruction: today AT&T only exist as a brand O75% of Fortune 500 did not exist 25% ago

5. KICs 3 Key issues

6. 1 st “issue” their value (assets) is mainly represented by Intangibles O The research(ers) capabilities – human capital O the technology (Knowledge) embedded and O the possession of “IP products”

7. 2 nd “issue” Knowledge intensive companies need (a lot of) money! 3 Fs (Fools/Founders, Family, Friends) are not enough!

8. 3 rd “issue” Research (knowledge) + Finance = Innovation ? What are the ways and means to enhance cooperation between research and finance in order to efficiently support innovation? V/S What are the ways and means to enhance cooperation between entrepreneurs, research(ers) and finance …..?

9. KNOWLEDGE INTENSIVE IDEAS EARLY STAGE RISK FINANCE Global Value Chains Global Markets Investor Readiness IC Management New KICs (CONSTANT FLOW OF INDEPENDENT IDEAS CONCEPTS, PRODUCTS) Seed Capital

10. … Finance is not enough oImportance of investment readiness interventions oMentoring and training oAcceleration oInternationalisation – cross border oThe added value of business angel investment

11. And, moreover, investors are looking for…

12. OBalanced & committed Management Team OHigh growth potentials OSustainable Business Model OSuitable strategies: with deliverable goals … a clear way out strategy ….presence of a strong strategy for intellectual capital - IC Ready – Investor ready

13. Business Idea Recognition Knowledge Intensive Company! Markets foresight, trend research Identification of market trends Trainings for entrepreneurs and enterprises Skills and abilities needed for successful businesses Business shaping Mentoring – expert support in feasibility study, business plan, etc, preparation Facilities Location / space, equipment and services for getting started and keep going and growing Access to finance Identifying the most appropriate financing for enterprises (Business Angel Network, proposals etc) Entrepreneurial culture Initiatives, creativity, entrepreneurial spirit stimulation How to become an entrepreneur Business Platform Partnership development, Technology transfer, entering into markets A long, challenging and exciting walk, IC being the first step Intellectual Capital Readiness understand, value and protect intangibles

14. Intellectual capital is “knowledge” that can be exploited for money-making or for creating value. combinations of human capital, instructional capital and individual capital employed in productive enterprise are usually what is meant by the term, when it is used to actually refer to a capital asset whose yield is intellectual rights. Due to their industry focus, the term "intellectual capital" is employed mostly in information technology, innovation research, technology transfer and other fields concerned primarily with technology, standards, and venture capital. (Source: Wikipedia) Intellectual capital V/S Intellectual property

15. Intellectual Capital = Explicit + Tacit KNOWLEDGE Explicit  USEFUL IDEA – Patent  ORIGINAL EXPRESSION - Copyright  DISTINCTIVE IDENTITY (Physical – Shape, Non Physical - Logo) Tacit  PEOPLE!

16. What, we, investors look for OMonitoring of competitive products/technologies/patents OCorrectly employing the legal tools in protecting products/technologies OEnsuring key resources (including people) are valorised and protected IC Readiness of intangibles in KICs

17. OKICs require attention in the initial stages to assure an adequate development and protection of their product/knowledge OThe commercial viability of an IP product resides in its actual implementation on the market place requiring: Othe entrepreneurial team must know how to manage the intangible asset by employing the legal tools protecting the innovativeness of the idea in order to ensure the exclusive right to its commercially exploitation OIP protection will augment early stage investors’ interests in a particular KIC by providing further, strong, guarantees on future returns on investments

18. Investment Readiness Easy a Pro Inno Europe Inno Action Provides a dynamic framework for cross-border investing, enabling seed investors and investment ready internationally focused businesses to come together www.earlystageinvestors.org

19. The role of intellectual capital key driver for accessing finance Case Studies

20. Case A) OBiotech spin-off from the University of Ferrara OResearch and development of drugs for pain: treatment of pathologies as neuropathic pain OMedical (biotech) research requires long development times (10- 15 years) with high costs (€ 10-15 million) OIP protection is thus one of the most decisive factors for the success of a spin-off

21. Case A) OThe University of Ferrara has given : 5 patents and as many active principles; 3 full time researchers; 4 researchers on a contract; 3 high levels scientific advisors OFunding: the company has received €3.2 million OFinancial resources needed for the different development phases: 1. Phase 1 (toxicity verification) €6 million 2. Phase 2 (efficacy verification) €12 million 3. Phase 3 (clinical experimentation) €20 million

22. OThe team is composed by researchers who are necessary for going on with the research and they are always stimulated to start a new project….. OManagerial skills are lacking …. Case A)

23. OThe IPR was secured by international patents, only critical element was evaluation …….. BUT OWhere is the needed “know how” to go in to the market? (managerial or technical skills?) OHow long does it take to gather this knowledge on the market? OHow to solve this issue?... Lock in …. Confidentially agreement Case A)

24. Then…when managing OIP protection involves constant monitoring on the state of the art of alternative products and surveys on the IPRs of other pharmaceutical companies Case A)

25. The start up company has developed a new Web service (on line password manager) on the basis of new solutions, covered by a US patent and by copyrights, for solving a clear market needs. The team is composed by a married couple: –He has the technical know how –She has the vision and the market approach –They are both involved in the project and company creation from the beginning –They shared all the efforts and results …. Case B)

26. OWhat will happen if they divorce? OWho is the “real” knowledge owner? Intellectual property is there …. But people for developing the service are necessary Case B)

27. Case C) OERP Systems for SMEs OERP built exclusively for SMEs (not a down size of larger products) OIt is Software after all! OProtection through lock in...

28. An industrial spin off is developing IT collaboration platform for companies In the IT sector the patentability is still a big issue …. … How to solve this issue Case studies Case C)

29. Terms & Definitions (Community Guidelines -2006/C 194/02) Risk capital means equity and quasi-equity financing to companies during their early-growth stages (seed, start-up and expansion phases), including informal investment by business angels, venture capital and alternative stock markets specialised in SMEs including high-growth companies (hereafter referred to as investment vehicles); Venture capital means investment in unquoted companies by investment funds (venture capital funds) that, acting as principals, manage individual, institutional or in-house money and includes early-stage and expansion financing, but not replacement finance and buy-outs;

30. Terms & Definitions Early-stage capital means seed and start-up capital; Seed capital’ means financing provided to study, assess and develop an initial concept, preceding the start-up phase; Start-up capital’ means financing provided to companies, which have not sold their product or service commercially and are not yet generating a profit, for product development and initial marketing; Expansion capital’ means financing provided for the growth and expansion of a company, which may or may not break even or trade profitably, for the purposes of increasing production capacity, market or product development or the provision of additional working capital;

31. Thank you for the attention a.dianselmo@meta-group.com www.meta-group.com