State backed Seed Capital, Pre-Seed pilots and Seal of Excellence Norwegian implementation

Public – Private cooperation for increasing early stage company funding Strictly commercial, and privately owned and managed funds Governmental capital 50 % – 70 % (national or regional mandate) Subordinated loans with 25% loss fund Equity capital with 15 % asymmetrical price Funds total capital is between €13 – 65 mill In total 18 funds with €550 million under management First 6 funds ( ) (5 terminated) gave very poor capital returns 4 national funds ( ) show promising signs with good exits 4 regional funds ( ) include both challenges and excellent exits 2 national funds ( ) have only made a few investments 2 national funds ( ) mandates awarded ultimo 2015 Over 300 investments made Seed capital funds

National Seed Capital Funds New national 50/50 seed capital scheme. Total budget allocation to seed capital through the scheme is up to a maximum of NOK 1.5 billion in investment capital, through up to six national seed funds. Revised National Budget 2012, NOK 500 million in investment capital for the two first funds was allocated. Additional NOK 300 million in investment capital revised in the State Budget 2015 New founds have to be located in City of Bergen and in North-Norway. 15 % governmental support element through ownership transfer and result in 42,5 % state ownership in the funds. State will take part in the funds pari-passu with other investors.

National Seed Capital Funds To support and help Norwegian-based innovative young enterprises with a high-growth and international potential in the seed and start-up phases to grow by providing competence and capital. The definitions of seed and start-up in the RCG will apply. The target enterprises must have a potential for profitability. Enterprises must be Norwegian based. Up to 10 % can be based outside Norway – decision taken by the investors

Private capital Must be at least 50 % of the total capital in each fund. Investors will be invited to participate in the scheme through an open tender. No restrictions regarding foreign investors’ participation provided that they are profit- seeking.

State Aid 15 % of the State’s involvement is intended to be a support element. Investment 50 % of the fund – 42,5 % ownership* Approval under the Guidelines on State Aid to Promote Risk Capital Investments in Small and Medium-Sized Enterprises (RCG) EFTA Surveillance Authority (ESA) Dec. NO: 104/12/COL

Investments and follow-on investments Max € 2,5 mill in any 12-month period Initial investment below € 2,5 mill Made in a company younger than five years Max 10 % of each fund’s capital under management

Sectoral focus Specialize according to their manager’s and investors’ competence. The Ministry or Innovation Norway can not point out sectors for the funds.

Framework agreement Life-time Minimum 10 years, maximum 15. Short time is investor-friendly Second-hand sales IN must approve new investors

Framework agreement Fund structure PLC (AS) Board selection In line with general state ownership principles – focus on competence Innovation Norway – appoint two board members Fund raising/closing 2nd closing within 12 months. First closing at MNOK 300 Draw down of state capital always after private capital to ensure no more than 50 % state participation

Pre-seed Pilots Directed towards Tech Transfer Offices and Business Angel Networks

Purpose Make companies investor ready, improve access to finance and competence Further develop the innovation ecosystem Further develop business angel networks

Target group Innovative SMEs with ambition to grow SMEs should be in commercialization and growth phases Younger than 3 years (2015) and 5 years (2016)

Problem/solution Solution/business model Prepare scaling/growth 123 Phase-1: IN grants for establishing a company and feasibility study Phase 2: IN grant for commercialization Pre-seed capital

Implementation The capital is transferred as loans (partially reimbursable «grants») from IN as loans. No interest. No instalments. TTO/incubator/manager invests the money in companies as equity The capital invested needs to be matched with private capital, pari passu The Principal amount of the loan is repaid with exits IN allocate repaid loans back into the Pilot

Criteria Small enterprises, under 5 years 1-3 million NOK pre-seed capital max for a singel company Funding needs to be matched with private capital Payments are done matching the investors The interest of the founders of the companies shall be safeguarded

Seal of Excellence Norwegian implementation

Norwegian implementation of Seal of Excellence – key points Seal of Excellence for the SME-instrument (SMEI) has been operational from January The first companies have been funded. Funding ensured from the Ministry of Education and Research and through existing Innovation Norway instruments Goal: to make the Norwegian and European support system more seamless as well as preparing more companies for phase 2 as well as increase commercialization Phase 1: companies get the same level of support as in the SMEI (EUR 50, % funding), both in regards to funding and Key Account Manager services. SoE is given as de minemis aid for the time being. Application procedure: simplified, BUT with an assessment of the companies financial standing and other applications (if applicable). The documents requested are: Seal of excellence letter SMEI application Evaluation Phase 2: under development. State aid is challenging. A possible way forward: Contingent loans/partially reimbursable grants + Existing IN grant schemes

SME Instrument Horizon 2020 PHASE 1 PHASE 2 National ‘Seal of Excellence’ National grants (+ IN funding) EUR grant + KAM National grants (+ IN funding) EUR grant + KAM Contingent loans/partially reimbursable grants + Existing IN grant instruments Contingent loans/partially reimbursable grants + Existing IN grant instruments Commercialization SMEs Under development