Assessing the Investment Potential of Smes Emerging from Phase 1 and Phase 2 of the SME Instrument

Assessing the Investment Potential of SMEs Emerging from Phase 1 and Phase 2 of the SME Instrument

Independent Investment Expert Group

Final Report

EUROPEAN COMMISSION Directorate-General for Research and Innovation Directorate B — Open Innovation and Open Science Unit B.3 — SMEs, Financial Instruments and State Aids

Contact: Ignacio Puente González Contributors: Marita Kayamanidou Sandro Maccaglia E-mail: [email protected]

European Commission B-1049 Brussels

EUROPEAN COMMISSION

Assessing the Investment Potential of SMEs Emerging from Phase 1 and Phase 2 of the SME Instrument

Independent Investment Expert Group

Final Report

Steering Group Members

Luca Mion (Chair) Arun Harish (Rapporteur) Dimitris Deniozos Katharina Fellnhofer Geraldine Quetin Elena Rico Jose Zurstrassen

Directorate-General for Research and Innovation

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Contents 1. EXECUTIVE SUMMARY ...... 5 2. ASSESSMENT OF THE INVESTMENT POTENTIAL OF SMES ...... 8 2.1. Investment readiness context ...... 8 2.2. Methodological approach ...... 10 2.3. The SMEs participating in Action 9 ...... 14 2.4. The investment readiness analysis of SMEs...... 16 2.4.1. Initial analysis and general characteristics ...... 16 2.4.2. Investment readiness analysis by call topic ...... 19 2.4.2.1. Seas and oceans (Blue growth) ...... 19 2.4.2.2. Biotechnology-based industrial processes (BIOTEC) ...... 22 2.4.2.3. Urban critical infrastructure (DRS) ...... 27 2.4.2.4. High risk ICT innovation (ODI) ...... 31 2.4.2.5. Greener and more integrated transport (IT) ...... 39 2.4.2.6. Nanotech, tech for manufacturing and materials (NMP) ...... 44 2.4.2.7. Diagnostics devices and biomarkers (PHC) ...... 50 2.4.2.8. Eco-innovation and sustainable raw material supply (SC5) ...... 54 2.4.2.9. Sustainable food production and processing (SFS) ...... 63 2.4.2.10. Low carbon energy systems (SIE) ...... 69 2.4.2.11. Space research and development (Space) ...... 74 2.4.3. Investment readiness analysis by other dimensions ...... 76 2.4.4. Historical type of finance ...... 82 2.4.5. Financial strategies and required future external finance ...... 89 2.5. Capacitation plans analysis ...... 93 2.6. Recommendations to boost the investment readiness of SMEs ...... 97 2.7. Limitations of the study ...... 98 3. ANALYSIS OF THE SME INSTRUMENT DESIGN ...... 100 3.1. The SME Instrument scheme ...... 100 3.2. Potential areas of improvement for the SME Instrument ...... 102 3.3. Recommendations to enhance the SME Instrument ...... 104

List of Annexes

Annex 1: Alternative sources of Finance and recommendations to enhance the investment ecosystem Annex 2: Workshops, events and InvestHorizon fast-track approach

List of Tables

Table 1 - Key parameters evaluated by Series A investor...... 9 Table 2 - Topics, sectors, and the innovation cycle classification used in Action 9...... 11 Table 3 - Information asymmetries between investors and SMEs...... 12 Table 4 - Topic distribution of SME Instrument beneficiaries participating in Action 9...... 14 Table 5 - Geographical distribution of SME Instrument beneficiaries participating in Action 9...... 14 Table 6 - Allocation of the projects by topic and IRL for Phase 1 and Phase 2...... 16 Table 7 - IRLs assessed by experts for different topics...... 16 Table 8 - Average IRL Level per Country...... 17 Table 9 - Number of positive answers from SMEs to questions related to financial needs...... 18 Table 10 - IRLs assessed by experts for different innovation cycles...... 76 Table 11 - Assessed IRL dimensions for different innovation cycles...... 77 Table 12 - Assessed IRL dimensions for ready SMEs and other SMEs...... 77 Table 13 - Average IRLs per innovation cycles according to experts and SMEs...... 77 Table 14 - Number of projects for TRL, innovation cycle and investment readiness (Phase 1)...... 78 Table 15 - Number of projects for TRL, innovation cycle and investment readiness (Phase 2)...... 78 Table 16 - Investment readiness level vs year of establishment (Phase 1)...... 80 Table 17 - Investment readiness level vs year of establishment (Phase 2)...... 80 Table 18 - Investment readiness level vs FTEs (Phase 1)...... 80 Table 19 - Investment readiness level vs FTEs (Phase 2)...... 81 Table 20 - Investment readiness level vs Revenues (Phase 1)...... 81 Table 21 - Investment readiness level vs Revenues (Phase 2)...... 81 Table 22 - Average revenues for different IRL and growth rate in revenues and FTEs...... 81 Table 23 - Number of SMEs analysed by historical type of finance (includes Phase 1 and 2)...... 82 Table 24 - SME averages owners' capital by age – values in k€...... 82 Table 25 - SME owners' capital (averages) by age and investment readiness level – values in k€. 83 Table 26 - FF investment by age and per year – values in k€...... 83 Table 27 - SME averages FF finance by age and investment readiness – values in k€...... 84 Table 28 - Averages of BA investment, by age of SME and per year – values in k€...... 84 Table 29 - Averages of BA investment by age and by investment readiness – values in k€...... 85 Table 30 - Averages of VC funding, by age of SME and per year – values in k€...... 85 Table 31 - Averages of VC funding, by age and by Investment readiness - values in k€...... 85 Table 32 - Averages of Bank Debt, by age of SME and per year - values in k€...... 86 Table 33 - Averages of Bank Debt, by age and by Investment readiness - values in k€...... 86 Table 34 - Averages of grants, by age of SME and per year - values in k€...... 87 Table 35 - Averages of grants, by age and by Investment readiness - values in k€...... 87 Table 36 – Average type of finance by age and per year - values in k€...... 88 Table 36 – Type of future funding for companies of Phase 1 by age...... 89 Table 37 - Type of future funding for companies of Phase 2 by age...... 89 Table 38 - Type of future funding for companies of Phase 1 by sector...... 90 Table 39 - Type of future funding for companies of Phase 2 by sector...... 90 Table 40 - Type of future funding for companies of Phase 1 by cycle of innovation...... 90 Table 41 - Type of future funding for companies of Phase 2 by sector by cycle of innovation...... 90 Table 42 - Type of future funding for companies of Phase 1 by investment readiness level...... 90 Table 43 - Type of future funding for companies of Phase 2 by investment readiness level...... 90 Table 44 - Amount of external finance by topic expected and recommended (M€)...... 92 Table 45 - Amount of external finance by IRL expected and recommended (M€)...... 92 Table 46 - Amount of external finance by age expected and recommended (M€)...... 92 Table 47 – SME beneficiaries of Phase 1 intentioned to apply for a Phase 2 proposal...... 101

List of Figures

Figure 1 - Thresholds for the scores in the different investment readiness levels...... 12 Figure 2 - IRLs assessed by experts for Phase 1 and Phase 2...... 15 Figure 3 - IRLs assessed by experts for different innovation cycles...... 76 Figure 4 - Areas of improvement, according to the SME Instrument beneficiaries - Phase 1...... 101 Figure 5 - Areas of improvement, according to the SME Instrument beneficiaries - Phase 2...... 101

Abbreviations used and call topics

Abbreviation Definition IRL Investment Readiness Level SME Small and Medium-sized Enterprises R&D Research and Development ICT Information and Communication Technology EC European Commission EU European Union SIC Short Innovation cycle IIEG Independent Investment Expert Group MIC Medium Innovation cycle LIC Long Innovation cycle ESR Evaluation Summary Report VC Venture Capital BA Business Angel FF Family, friends CP Capacitation Plan

Topic code/sector Definition BG Seas and oceans (Blue growth) BIOTEC Biotechnology-based industrial processes DRS Urban critical infrastructure ODI High risk ICT innovation IT Greener and more integrated transport NMP Nanotech, or other advanced tech for manufacturing and materials PHC Diagnostics devices and biomarkers SC5 Eco-innovation and sustainable raw material supply SFS Sustainable food production and processing SIE Low carbon energy systems Space Space research and development

1. Executive summary

Background, objectives and methodology This report provides the results and conclusions of Action 9 of the Horizon 2020 Work Programme for Innovation in SMEs 2014-2015, aimed at assessing the investment potential of the SMEs emerging from Phase 1 and Phase 2 of the SME Instrument. The report has been prepared by the Steering Group of the Independent Investment Expert Group (IIEG), established by DG RTD B.3 SMEs, Financial Instruments and State Aids of the European Commission. The IIEG consists of a core Steering Group of seven members, and a subgroup of 56 individual experts with high level expertise in specific sectors covering the SME Instrument topic distribution, and chosen for their expertise across multiple sectors and disciplines including early stage venture capital, innovation and technology commercialisation, business angel investment, and other relevant domains.

The two specific purposes of Action 9 were to improve the SME Instrument beneficiaries’ capacity to successfully become investor ready, and to increase the number of investments made into early-stage firms by connecting interested SMEs with suitable source of finance/investors at a sufficiently early stage of the project. Such purposes are reached through the achievement of three different objectives, related to activities conducted within Action 9, described and reported in this document as follows:

1. Boost the investment readiness of the SMEs that are interested in the action and, on an opportunity basis, of the SMEs from other Horizon 2020 activities in order to successfully realise Phase 3 of the SME Instrument. This objective was achieved by an active collaboration between the Steering Group and the expert subgroups. The methodological and operational approach to assess the Investment Readiness Level (IRL) of the SMEs is presented in Section 2, as well as the outcomes of the assessment undertaken with interested SMEs.

2. Understand the investment readiness landscape of the SME Instrument beneficiaries and bring detailed information of the innovation potential and maturity level of funded projects. The findings of this analysis will serve as policy tool to better understand the current framework and make recommendations to enhance the SME Instrument. The assessment of the current SME Instrument beneficiaries’ landscape is presented in Section 3, along with a review of the bulk of SMEs emerging from Phase 1 and 2 and with recommendations and ways to improve the scheme.

3. Explore alternative sources of finance, which cover specific financing needs of entrepreneurs and SMEs. Outcomes of this research, covering European and non-European good practices, schemes and sources of finance for innovative SMEs is presented in Annex 1.

Through Action 9, the independent experts ensured that the assessed SMEs emerging from Phase 1 and 2 acknowledged the key issues required to access private funding and consequently strengthened their financing/financial strategy to establish links with potential investors and negotiate effectively. The action also analysed the investment readiness landscape of the SME Instrument beneficiaries capturing detailed information on the innovation potential and maturity level of funded projects. In addition, independent experts proposed alternative sources of finance, which covered specific financial needs of entrepreneurs and SMEs.

Analysing and understanding the perspectives of the investors (in this Action, the role of investors was taken by the sub-group experts) and entrepreneurs captured asymmetry in investment readiness levels. The overall feedback received from SMEs who benefited from this assessment was very positive, in that, all SMEs reported that the Action helped them appreciate all aspects of becoming investment ready, and it provided them with a structured process to think through the various aspects concerning their leadership teams, markets, product as well as financial strategies. Action 9 involved assessing 147 SME Instrument beneficiaries from 21 countries, covering 11 topics of the SME Instrument and projects from the first three cut-offs of Phase 1 (130 SMEs) and from the first cut-off of Phase 2 (17 SMEs).

The investment readiness analysis The analysis of investment readiness of SMEs covered different readiness dimensions including leadership team capability, product readiness, market readiness and financial strategy. In addition, other aspects were investigated such as information asymmetry between investors and SMEs, specificities relating to each call topic, and other dimensions such as innovation cycles, year of establishment, FTEs, revenues, historical type of finance, required external finance and financial strategies. The investment readiness analysis of SME instrument beneficiaries showed that 28% of SMEs in Phase 1 are “ready” for investment while the majority of SMEs are ‘almost ready’ for investment (62.3%). The remaining 9.2% are not ready for investment. For Phase 2, SMEs are almost equally distributed between ready and almost ready SMEs. None of the SMEs from Phase 2 were assessed as not being investment ready. According to the analysis, the difference between SMEs ready for investment and SMEs less ready seems to be a matter of intensity of the failure to address aspects under the chosen dimensions rather than the type of failure. Key findings in the analysis of investment readiness include a general lack of competencies in the financial/market area within the leadership team, especially in “almost ready” SMEs. Moreover, issues were found in their analysis of competition, imperfect marketing and sales plans, and in several cases the business model was not sufficiently specific. The assessment of Phase 2 projects showed similar deficiencies in market and financial readiness.

Many SMEs showed their historical type of finance based on bank debt, grants or own resources, and they were not fully aware of alternative funding sources at the time of the assessment.

A detailed description of the methodological approach and the analysis of the investment readiness of SMEs is presented in Section 2. The results from the analysis were used to produce the recommendations to boost the investment readiness of SMEs (see Table 2.6) as well as to improve the design of the SME Instrument (see Table 3.3).

Analysis of the SME Instrument design The design of the SME Instrument is intended to promote actions leading to the exploitation and commercialisation of ideas, in three distinctive and not necessarily sequential phases. One of the findings emerging from the analysis is that the majority of the Phase 1 projects evaluated as either “almost ready” or “ready” for investment indicated their intent to apply for Phase 2 instrument. These companies viewed Phase 2 as a means of securing additional non-dilutive finance as they progress towards revenue generation and growth. However, an issue for some applicants is the time lag in the transition from Phase 1 to Phase 2 of the SME Instrument.

Other observations on the SME instrument design include the need for simplifying and clarifying the process of participation, redrafting the application forms and the related guidelines. In 6

addition, analysis on investment readiness suggests that a more demanding selection process be implemented, especially in those areas where several weaknesses have been found (e.g. leadership team).

The analysis of the of SME instrument design is presented in Section 3 and the results were used to produce additional recommendations to improve the design of the SME Instrument, presented in Table 3.3.

Alternative sources of finance

Start-up and early-stage SME financing options have increased over the past few years. New options such as equity crowdfunding, syndicate investing, accelerators, media for equity investments or P2P lending are now able to provide funding to innovative companies, allowing them to establish their product-market fit and grow. This report highlights such indicators of changing landscape for alternate sources of finance:

According to the first pan-European benchmarking of online alternative finance1 – instruments and distribution channels that are emerging outside of the traditional financial system – the European market for alternative finance grew by 144% in 2014 to just under 3 billion €, and could hit 7 billion € in 2015 as companies are increasingly looking to tap fresh sources of capital.

In this context, Europe is nurturing a number of less known but fertile innovation hotspots where good practices of these new alternatives sources of finance can be found.

Annex 1 of this report includes a review of the emerging alternative sources of finance in Europe, as well as EU/regional schemes in favour of innovative SMEs and good practices from International examples. This analysis led to specific recommendations to the EC to enhance the European investment ecosystem, and is presented in Table 1.5

1 The research was carried out by the new Centre for Alternative Finance at University of Cambridge Judge Business School and professional services organisation EY 7

2. Assessment of the Investment Potential of SMEs

2.1. Investment readiness context

The investment readiness analysis methodology developed in this Action took into account existing literature, practices and methodologies including sources in strategic management e.g., the Business Model Canvas2 (Osterwalder, 2004; Osterwalder et al., 2010), existing approaches to the evaluation of the IRL (e.g., Steve Blank’s Investment Readiness Level3), and existing financial instruments in the private and public market (e.g., Finance for Innovators4 and EU Access to Finance5).

The investment readiness analysis methodology for the SME Instrument beneficiaries took into account the asymmetry in the perceptions of entrepreneurs and investors around whether or not the firm was ready to raise equity investment. Attitudes towards equity (aversion towards equity finance) and other parameters were also considered as part of investor’s decision making process. Previous efforts, studies and discussions in this field have been taken into consideration (Schmid, 2001; Hsu, 2007; Subhash, 2009 and Sjögren and Zackrisson, 2005; Southon and West, 2006). In particular, Silver et al. (2010) highlight that closer working relationship between entrepreneurs and investors will increase the readiness level of SMEs.

Previous work on investment readiness by the EC concluded that increasing the demand for investment can be achieved when SMEs are aware and take actions to address investors’ considerations (EC, 2006) on one hand, and investors support entrepreneurs to appreciate the investment decision making process, on the other hand. In principle, SMEs becoming “investment ready” is about business development (Mason and Harrison, 2001) and demonstrating that there is a clear business and revenue model, and the routes to achieving sales are realistic. The concept of “investment readiness” refers to the capability of entrepreneurs to be aware of the specific needs of the investors and to be able to respond through appropriate preparation at technological, organisational, market and financial levels and provision of information and training; and finally a high level of credibility will increase the potential to convince investors to invest in a business. Investment readiness thus combines elements of the firm being technology/product ready, management ready and market ready, combined with the appropriate financial strategy to raise funds and manage cash-flows.

At the start of this Action, the Steering Group discussed and considered both the type and nature of investors that are likely to be interested in the SME Instrument beneficiaries. The Steering Group hypothesised that the most appropriate first round investor for these beneficiaries are likely to be venture capital series A round, in the form of convertible preferred stock. This “Series A” round of investment typically takes place after the founders, friends and family and business angel investors have used their seed money to provide a ‘proof of concept’ demonstrating that their product and business concept is viable, and a potentially profitable one. This Steering Group also considered the key parameters used by a private “Series A” round investor and used these dimensions in developing the investment readiness methodology as well.

2 http://www.businessmodelgeneration.com/canvas/bmc 3 http://steveblank.com/2013/11/25/its-time-to-play-moneyball-the-investment-readiness-level/ 4 http://www.eib.org/products/innovfin/products/index.htm 5 http://www.access2finance.eu 8

Aspects considered by private investors? - Commitment, dedication, risks assumed by founders (invested capital, working hours, etc.) - Ability to attract talent (advisory board, investors, etc.) - Motivation Team - Complementary expertise of the team - Previous experience as entrepreneur - Market sector experience - Resistance to change their role - Capacity to execute the growth plan - Problem/Need of the market, value chain definition and company value proposition - Market size (now and in the future) - Existing and expected competition, competitive advantages and barriers to entry Market - Business Model definition, scalability/Growth traction - Stakeholders agreements, first customers/users - Distribution channels, history of other comparable companies/exit strategy - Innovation of the product or service (IP strategy) - Prototype/proof of concept status/first sales Product - Temporal advantage over the competition with the product - Proper analysis of client needs vs product roadmap - History (major milestones achieved) Other - Previous financing (equity history), balance sheet strength

Table 1 - Key parameters evaluated by Series A investor.

The investment readiness assessment conducted within Action 9 has taken into consideration both the entrepreneur's and investor's perspectives. Analysing and understanding both perspectives through a close working relationship will reduce information asymmetry. Thus, the methodology draws upon generally accepted models, theoretical instruments and practical tools for analysing the investment readiness of the current SME Instrument beneficiaries' landscape.

Innovation cycles In assessing projects, the steering group and the assessors recognised that the companies and projects span different innovation cycles (e.g. short innovation cycles that require few months from concept to commercialisation as opposed to medium and long innovation cycles that require several years from concept to commercialisation). The time to market and financing needs vary substantially between these companies.

2.2. Methodological approach

Chosen approach to assess SMEs’ investment readiness As stated earlier, the main objective of the Action was to boost the investment and market readiness of the SME Instrument beneficiaries based on an analysis of the innovation potential and maturity level of funded projects. The concept of Investment Readiness Level (IRL) is used frequently these days in the financial communities and transcends the Technology Readiness Level, which was introduced by the Commission in the Horizon 2020 principles. An adapted definition of the IRL has been used in this study.

Following paragraphs discuss the definition of IRL used in the analyses, the rationale behind information asymmetry, the methodology for collecting the results and their analysis.

Investment Readiness Level concept The Independent Expert Group designed an investment readiness assessment questionnaire, which was based on value propositions related to the Business Model Canvas (Osterwalder, 2004; Osterwalder et al., 2010). The questionnaire captured SMEs views on four main dimensions:

(a) Product and technology readiness level (e.g., Spath et al., 2012), (b) Market readiness level (e.g., Aasrud et al., 2010), (c) Leadership capability and management readiness level (e.g., Tang and Otto, 2009), and (d) Financial strategy observation (e.g., Patterson, 2009; McAdam and Marlow, 2011).

In addition, the focus of this approach was on growth, history and ambition as indicators of entrepreneurial willingness to approach investors. An assessment of risks was undertaken as well.

The population of the SMEs studied The large diversity of the SMEs benefiting from the EU subsidies has led us to classify them according to commonly accepted criteria, in order to facilitate the extraction of conclusions. A first classification criterion was based on the sector of economic activity of the SME or, alternatively, the technological domain of the project. As a common proxy to the two types of classifications, the “topic” of the project funded by the instrument was selected. These topics are areas of the Horizon 2020 Programme that created the framework for the Calls for Proposals and also links us to the Innovation Cycle that each project belongs to. The European Commission has classified sectors and innovation cycles as shown below and reported in Table 2:

 SMEs active in ICT tend to have a Short Innovation Cycle (SIC).  Biotech/ food, energy (incl. materials and infrastructures), agriculture/chemicals, and marine sciences are seen as sectors including SMEs with Medium Innovation Cycles (MIC), and  Materials including nanomaterials, health, space, security, and transport as the ones with a Long Innovation Cycle (LIC).

It is common for SMEs operating in MIC and LIC to take anywhere between 3 to 7 to 10 years and beyond to commercialise their innovations following demonstration of lab-based prototypes and functionality. However, some inherent limitations are introduced when trying to map all SME Instrument topics to the different innovation cycles, given the variety of subsectors (for instance biotech can be considered borderline between MIC and LIC). 10

Sectors of innovation or Innovation cycle SME Instrument call topics market in Action 9 Short  ICT  High risk ICT innovation (ODI) innovation cycle (SIC)  Biotechnology-based industrial  Food processes (Biotec)  Energy (including  Sustainable food production and Medium materials and processing (SFS) innovation cycle Infrastructures)  Low carbon energy systems (SIE) (MIC)  Agriculture/Chemicals  Eco-innovation and sustainable raw  Marine Sciences material supply (SC5)  Seas and oceans (Blue growth)  Nanotech, or other advanced tech for  Materials/ manufacturing and materials (NMP) nanomaterials  Diagnostics devices and biomarkers  Health (PHC) Long innovation  Space  Space research and development cycles (LIC)  Security (Space)  Transport  Urban critical infrastructure (DRS)  Biotech  Greener and more integrated transport (IT)

Table 2 - Topics, sectors, and the innovation cycle classification used in Action 9.

Choice of sub-group experts (assessors) and face-to-face interviews with SMEs The subgroup experts were chosen by the EC and the IIEG members from an extensive database6 held by the EC, based on their experience in the venture capital industry, private markets and sector knowledge. A detailed mapping exercise was undertaken by the IIEG and the EC to map subgroup experts to SMEs they would assess. Following an introductory note from the EC to the SMEs, the sub-group experts made contact with the SMEs and arranged face-to-face meetings at the SME’s offices. Interviews were conducted by the experts with members of SME’s leadership team (one subgroup expert per SME), in semi-structured formats, using the investment readiness questionnaire to guide the discussion.

The questionnaire aimed to capture both SME’s perspectives as well as the experts’, in order to capture any information asymmetry between the two groups, i.e. the investor’s views versus the SME’s views on how ready the SME was, for investment. The interviews also captured the nature of financing appropriate for the SMEs and the amount required. Following the assessment, the experts analysed the results and prepared a customised investment readiness analysis report (referred to as capacitation plan in this report), which outlined how ready the SMEs were from an investor’s perspective and how they could address any issues identified. The analysis and capacitation plan were discussed with the SMEs before finalising. Where appropriate, a list of relevant pitching events for the SMEs and contacts to investors were also provided on a case-by- case basis. The analysis from the questionnaires and capacitation plans utilised paired samples test statistics, independent samples tests, ANOVA tests, exploratory factor analyses, correlations

6 http://ec.europa.eu/research/participants/portal/desktop/en/experts/index.html

analyses and component analyses. The results are interpreted and discussed in the following sections.

Information asymmetry between investors and SMEs and investment readiness levels Based on prior research findings, the information asymmetry between SMEs (the demand side)and investors/financial providers (the supply side) represents a critical obstacle when SMEs are seeking finance (Schmid, 2001; Hsu, 2007; Subhash, 2009). In addition, the principal-agency theory plays a key role emphasising that different individuals with different perspectives value information differently (Jensen and Meckling, 1979). Analysis of a previous study (Silver et al., 2010) indicates that close working relationships between investors and entrepreneurs are crucial for the SME's growth potential.

As a consequence, the asymmetric information and knowledge gaps of between the supply (investors) and demand (SMEs seeking investment) side provides a fundamental basis of this action and analysis. In Action 9, the role of the investor was taken by the assessing expert, who brought the investor's perspective during the assessment phase. A traffic light investment readiness labelling system for investment “ready”, “almost ready” and “not ready” has been used to group companies following assessment by the experts. Overall, the assessment defines the IRL of the beneficiary, based on the thresholds and weighting of the four readiness dimensions: (a) leadership team capability (b) product readiness (c) market readiness and (d) financial strategy. Each dimension consisted of 5 to 8 questions with a possible score from 1 to 5. Overall, with the maximum of 130 points in total, a threshold below 60% (below 78 points) defines a SME Instrument beneficiary as ‘not-ready’ for investments. Reaching equal or more than 85% (over 100.5 points) the SME was classified as ‘ready’ for investment. This threshold is in line with the rounded average thresholds from Phase 1 (Threshold 13/15 = ~ 87%) and Phase 2 (Threshold 12/15 = 80%). SMEs’ projects with scores from 60% up to 85% were considered as “almost ready” for investment.

Thresholds/Investment Readiness Lights IRL ≥ 85% Investment ready 60% ≤ IRL < 85% Almost Ready IRL< 60% Not ready

Figure 1 - Thresholds for the scores in the different investment readiness levels.

Phase 1 Phase 2 IRL IRL by IRL by IRL by expert Asymmetry IRL by expert Asymmetry SMEs SMEs Ready 94,2% 89,9% 4,3% 94,3% 90,8% 3,5% Almost ready 85,3% 73,8% 11,4% 87,1% 78,6% 8,5% Not ready 75,9% 52,1% 23,8% - - -

Table 3 - Information asymmetries between investors and SMEs.

Table 3 highlights that more ready the beneficiaries are, the smaller is the gap between the IRL assessed by the expert and the beneficiary. Whilst the gap between the IRL assessed by the expert and the SME was on average approximately 4% for investment ready Phase 1 beneficiaries and approximately 3% for investment ready Phase 2 beneficiaries, this gap reaches approximately 12% when assessing almost ready Phase 1 beneficiaries and approximately 10% when assessing almost ready Phase 2 beneficiaries. The asymmetry increases to 24% between not ready SMEs of Phase 1 and their assessors. In other words, the information asymmetry gap

more than doubled from one level to the next readiness level. In addition, the information asymmetry appears to reduce from Phase 1 to Phase 2.

Post-assessment analysis, capacitation plans and feedback to SMEs After the face-to-face assessment, the experts analysed the results and prepared a tailor-made capacitation plan for the SME based on the IRL evaluation. To ensure consistency, a template was provided to the experts by the IIEG. Overall, this investor readiness capacitation plan summarises the whole assessment in a clear format for the SME. Strengths, weaknesses, opportunities and threats are outlined, and clear recommendations regarding actions and next steps were prepared for each SME to boost their readiness levels. In particular, tailor-made execution plans were proposed to the companies and the main key performance indicators were discussed on an individual level (if applicable).

The assessing sub group experts also discussed the capacitation plan with the SMEs. This customised report stresses on the required activities to climb the IRL for each assessed SME to maximize chances of their success when seeking finance. Outcomes and conclusions presented were clear and measurable (e.g. proposed type of financing classified by type, size, etc.). The reports were all developed in English.

2.3. The SMEs participating in Action 9 The 147 SME Instrument beneficiaries that participated in Action 9 (130 SMEs from Phase 1 and 17 SMEs from Phase 2) are distributed across the call topics, cut-off dates and countries as reported in Table 4 and 5. Phase 1 Phase 1 Phase 1 Phase 1 Phase 2 Call topic/Sector Total cut-off 17 cut-off 2 cut-off 3 Total cut-off 1 BG - Seas and oceans (Blue growth) 0 2 2 4 0 4 BIOTEC - Biotechnology-based industrial 3 2 0 5 1 6 processes DRS - Urban critical infrastructure 3 0 2 5 0 5 ODI - High risk ICT innovation 14 15 2 31 3 34 IT - Greener and more integrated 13 4 0 17 3 20 transport NMP - Nanotech, or other advanced 9 7 0 16 2 18 tech for manufacturing and materials PHC - Diagnostics devices and 8 3 2 13 3 16 biomarkers SC5 - Eco-innovation and sustainable 7 4 1 12 1 13 raw material supply SFS - Sustainable food production and 3 1 0 4 1 5 processing SIE - Low carbon energy systems 12 7 0 19 3 22 Space - Space research and 2 1 1 4 0 4 development Total 74 46 10 130 17 147

Table 4 - Topic distribution of SME Instrument beneficiaries participating in Action 9.

Country Phase 1 Phase 2 Total Spain 28 2 30 Italy 19 0 19 United Kingdom 17 1 18 France 7 3 10 Ireland 7 2 9 Germany 8 1 9 Finland 7 2 9 The Netherlands 5 2 7 Sweden 5 1 6 Denmark 5 0 5 Austria 4 0 4 Slovenia 3 0 3 Portugal 3 0 3 Estonia 2 1 3 Turkey 2 0 2 Norway 2 0 2 Lithuania 2 0 2 Israel 1 1 2 Hungary 1 1 2 Serbia 1 0 1 Iceland 1 0 1 Total 130 17 147

Table 5 - Geographical distribution of SME Instrument beneficiaries participating in Action 9.

7 Cut-off dates were respectively 18/06/2014, 24/09/2014, 17/12/2014 (Phase 1) and 9/10/2014 (Phase 2). 14

Not investment ready Phase 1 (130 SMEs) Almost investment ready Investment ready

9.2% 62.3% 28.5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Phase 2 (17 SMEs)

52,9 % 47.1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Figure 2 - IRLs assessed by experts for Phase 1 and Phase 2.

2.4. The investment readiness analysis of SMEs

2.4.1. Initial analysis and general characteristics

Table 6 shows the results from the assessment of the 147 SMEs (130 Phase 1 and 17 Phase 2) by call topic of application (related to industry/sector) and level of investment readiness.

Phase 1 Phase 2 Call Almost Not Total Almost Not Total Topic/Sector Ready Ready ready ready Phase 1 ready ready Phase 2 BG 2 1 1 4 - - - - BIOTEC 2 2 1 5 1 - - 1 DRS 1 3 1 5 - - - - ODI 13 16 2 31 1 2 - 3 IT 5 9 3 17 - 3 - 3 NMP 6 9 1 16 1 1 - 2 PHC 2 11 - 13 3 - - 3 SC5 2 9 1 12 1 - - 1 SFS - 3 1 4 - 1 - 1 SIE 4 15 - 19 1 2 - 3 Space - 3 1 4 - - - - Total 37 81 12 130 8 9 - 17

Table 6 - Allocation of the projects by topic and IRL for Phase 1 and Phase 2. Figure 2 summarises the IRL assessed by the experts for SMEs in Phase 1 (left) and SMEs in Phase 2 (right). The majority of SMEs in Phase 1 are almost ready (62.3%) while companies in Phase 2 are almost equally distributed between ready and almost ready SMEs. None of the SMEs in Phase 2 were assessed as not being investment ready. Table 7 summarises the IRL assessed by the experts and by SMEs, with related information asymmetry.

Table 8 presents the average IRL by country. It has to be noted that whilst Israel, Austria and Serbia are shown on top of the list, only 1 SME was assessed in Serbia and Israel. Austria, France and Finland show high average IRLs, which might be connected to adequate regional support and advice. Regarding Phase 2 (although with a few SMEs assessed), Finland and Germany are relatively leaders. Phase 1 Phase 2 Call Average Average IRL Average IRL by Average IRL Topic/Sector Asymmetry IRL by Asymmetry by SME expert by expert SME BG 85% 80% 4% - - - BIOTEC 77% 70% 8% 91% 91% 0% DRS 93% 74% 19% - - - ODI 87% 78% 9% 86% 79% 6% IT 81% 71% 10% - - - NMP 89% 74% 15% 47% 44% 4% PHC 92% 84% 9% - - - SC5 86% 76% 10% 97% 93% 3% SFS 93% 80% 14% 91% 83% 8% SIE 86% 77% 10% 94% 86% 8% Space 88% 69% 19% - - - Average 87% 76% 11% 84% 79% 5%

Table 7 - IRLs assessed by experts for different topics.

Phase 1 Phase 2 Average Country Number of Average IRL Average IRL Number Average IRL IRL by SMEs by SME by expert of SMEs by SME expert Israel 1 100% 98% 1 90% 77% Serbia 1 95% 89% - - - Austria 4 94% 89% - - - Iceland 1 98% 88% - - - France 7 89% 86% 3 94% 90% Finland 7 89% 84% 2 96% 92% Denmark 5 88% 83% - - - Lithuania 2 82% 80% - - - Ireland 7 84% 79% 2 93% 84% The 5 90% 78% 2 78% 73% Netherlands Slovenia 3 88% 76% - - - Turkey 2 90% 76% - - - Sweden 5 84% 75% 1 83% 78% Spain 27 88% 75% 1 93% 84% Germany 8 91% 75% 1 95% 87% United 17 86% 74% 1 94% 91% Kingdom Hungary 2 89% 74% 1 93% 92% Italy 19 82% 70% - - - Norway 2 77% 65% - - - Estonia 2 76% 63% 2 90% 82% Portugal 3 82% 62% - - -

Table 8 - Average IRL Level per Country.

The assessed SMEs present several characteristics based on the findings of the experts as reported in the capacitation plans. Such characteristics are more pronounced as the IRL of the project was decreasing. They extend from shortcomings within leadership teams to lack of customer engagement or revenue model validation.

Leadership/management readiness: A key factor common to “almost ready” SMEs was around the lack of specific critical competencies and robust advisory boards and experts to complement the leadership team skills. Senior members of the leadership team appear more adept at dealing with technological challenges rather than financial or marketing related aspects. The issue of adapting and changing roles as the firms grow was diversely perceived by the managers; in very small firms, the roles were overlapping whilst the much needed critical expertise was subcontracted. In general terms, the differentiation between ready and less ready SMEs seems to be a matter of intensity of the failure than the type of failure.

Product/technology readiness: SMEs have largely utilised Phase 1 projects for desk based studies/feasibility studies and it appears that only some have utilised it to further increase their technology/product readiness levels, with specific examples linked with short innovation cycles (e.g. ICT). For many SMEs, the Phase 1 seems to be a good preparation for the Phase 2 application. Where appropriate, subcontractors have been used for scale-up and further development of their technology/product readiness. Often, costing was imperfect and scaling up funding was limited. Moreover, not ready SMEs have been suffering from limited access to development and scale up facilities to take the prototype through to a pre-industrial production stage.

Market readiness: Whilst almost all investment ready projects have addressed this in one way or the other, the “almost ready” companies and projects have scored low on this. They suffer mainly from deficient competition analyses, insufficient engagement with potential customers and imperfect marketing and sales plans. The relations with the downstream side of the value chain are taken into care but can be in many cases further improved. In several cases, the business model was not sufficiently specific in describing the customer relations, and the distribution channels are vaguely described. In almost half of the cases, the “go to market” strategy and the analysis of the competitors do present deficiencies that the entrepreneurs intend to address in Phase 2, if selected. “Not ready” SMEs appear not to be fully able to analyse costs and risks for a mass production of their innovative service or technology, their knowledge about distribution channels was limited and they do not have established a well-defined inter-departmental strategic plan and management for marketing.

Financial strategy: A key drawback of companies not assessed as “investment ready” was around the lack of sufficient detail around revenue modelling, which in many cases was based on unrealistic assumptions. Insufficient knowledge around cash flow management was highlighted as a significant weakness in many assessments. Many SMEs are not fully aware of alternative funding sources. The firms needed better knowhow on revenue modelling, cash flow, analytical costing methods, and other financial support services that can be delivered by specialist consultants and other private services.

Table 9 shows that all of the SMEs that are ready for investments identified a need for funding, and most of them (all Phase 2 SMEs) have identified the time, amount, and form of funds to be raised. Many have already invested their own money in the company, been in contact with investors and have established targets for the future growth rate. These observations are very similar for almost ready projects (the main differences are that only 77% of Phase 1 almost ready SMEs connected with investors and 67% of Phase 2 almost ready projects estimated a future growth rate target). Phase 1 Phase 2 Further questions related to the next level on Almos Almost Not the investment readiness ladder (number of Ready Ready t ready ready available SMEs into brackets) (37) (8) ready (81) (12) (9) Have you already identified a need for funding? 37 79 11 8 9 Have you already identified a time for funding? 36 76 7 8 7 Have you thought about how much funding is needed 36 77 12 8 9 to develop your innovation or to go-to-market? Do you know which form of investment you might 35 72 8 8 7 need? Have you invested any of your own money into the 35 77 11 8 8 business? Have you been already in contact with investors? 33 62 6 8 7 Have you been already in contact with your home 29 51 7 3 7 bank? Have you already established targets for the future 36 71 6 8 6 growth rate? Are you willing to spend more time than now to 33 67 10 4 6 develop your innovation or to go-to-market? Have you been supported by innovation and business development coaching in parallel throughout the 31 54 9 5 5 phase? Have you already thought about an exit strategy? 28 53 6 8 7

Table 9 - Number of positive answers from SMEs to questions related to financial needs. 18

A few of the ‘not ready’ SMEs identified their expected timeline for funding (58%). However, they could not clearly identify the type of investment (67%) and had not made contact with investors (50%) or banks (58%) As shown in the table, 78% of Phase 1 and 38% of Phase 2 investment ready projects already got in contact with their home banks. The almost ready projects also had established contact with their banks (63% for Phase 1 and 78% for Phase 2).

Most of Phase 1 companies were willing to spend more time to develop innovation or to go-to- market strategies (83 to 89% of them) compared with Phase 2 firms (50% of investment ready and 67% of almost ready).. Investment ready and not ready SMEs from Phase 1 are those who have mostly benefited from innovation and business development coaching. Phase 2 SMEs and Investment ready SMEs from Phase 1 are those that have clearly thought through their exit strategy (76% to 100%).

2.4.2. Investment readiness analysis by call topic

2.4.2.1. Seas and oceans (Blue growth)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 2 0 Almost ready 1 0 Not ready 1 0

Seas and oceans (Blue growth) - Phase 1

Number IRL Focus Quoted sentences (from the abstract) of SMEs The specific objective for the feasibility study is to obtain a solid analysis of the potential market for the ‘Remote Controllable Spreading Devices’, in order to design an Market analysis (2) adequate market penetration strategy and IPR and regulatory ultimately to direct new investments. issues (1) Ready 2 Business plan (1) Phase 1 feasibility study aims at further Upscale potential (1) analysing IPR and regulatory status of the

different strains, releasing a detailed business plan based on market feedback and pursue the scale up of the best selected strain.

For the 1st stage project, the objectives are to study the: Business plan 1.1. Refinement of the nutritional and Market biochemistry analysis of the selected seaweed Almost Technical analysis 1.2. Requirements for upscale the innovative 1 ready Partnerships biorefinary process for a higher production 2.1. Refinement of the Market analysis at EU and global level 2.2. Business Plan, including defining in detail the prices, commercialization strategy, 19

possible partnership The Phase I project is used to verify the technological and economic viability of the Technological and proposed device and to prepare a sound plan Not ready 1 economic viability for implementation of the innovation project, to be able to launch the product to the market in ca two years.

Investment ready SMEs

Of the 2 SMEs implementing the ready projects, one has been created 2006 in Iceland, in the field of Remote Controllable Trawl doors for fishing, and the other has been created in 2007 in France, and develops a microalgae-based innovative natural marine ingredient with scientifically demonstrated benefits on weight management and metabolism issues. In 2014, the companies respectively counted 3 and 9 Full Time Employees, and a revenue of 994 k€ and 189 k€. Since 2013, the revenue of the first company has stayed at around 1 M€ with an increasing gross margin (from 92.5 k€ in 2012 to 207 k€ in 2014 with a negative EBITDA of -49.6 k€). The EBITDA of the French company remains negative (and decreasing) since 2012 (-559 k€ in 2014).

Funding has been secured mainly from grants in 2012-2013 (respectively 93% and 56%), but in 2014 the only source of finance came from owners' capital with 23.6 k€ (was 55.3 k€ in 2013). The French company raised 1.74 M€ funds in 2013 from VC and Business Angels (already had a bank debt of 800 k€ before 2012), and contracted bank debt and grants of 490 k€ in 2014.

The estimated external financing required for the next 5 years by the Iceland SME is 1.5 M€ and 5 M€ for the French SME. The French company benefits from several patents (3 National, 3 European and 25 international), and the Iceland company counts few patents (1 National, 1 European and 1 international).

The first company has good financial advisors and is already engaged in financial negotiations with financial investors and industrial partners (private and public lending and grants). The company also plans a Phase 2 application for a scaled prototype.

Both companies are mainly using the corresponding Phase 1 project for enhancing their market capabilities. The French one also includes IPR and regulatory issues.

The first company is currently testing the product and the expert analysed the TRL to be between 3 and 4. For the second company, the French one, TRL is between 6 and 7. For the latest one, the Expert has given a higher evaluation of the leadership team capabilities than the SME itself, the leadership team of the first one is small but highly experienced in the relevant industry. The main shortcomings relate to in-house IT and growth finance competence, and also in having a proactive (not just reactive) legal team.

Almost ready SMEs

The SME implementing the almost ready project has been created in 2012 (Portugal). In 2014, they employed 2 people, with a revenue of 450 € with negative EBITDA of -47.8 k€.

In 2014, the company gathered less than 95,000 Euros through owners' capital, Bank Debt and Grants (73%). The second one only shows 1 patent. 20

Their future needs are estimated at respectively 5 (most of all in Tax rebate) and 2 million Euros. Both companies plan on preparing a Phase 2 proposal for the SME Instrument.

The SME is using the corresponding Phase 1 project mainly for enhancing their market capabilities, Business plan, scale-up potential and possibility of partnerships, and includes some technical analysis.

The SME's TRL is 6 (but the expert claims a lower TRL of 4). Skills are strongly missing in the leadership team, somehow balanced with the advisory board experience so far, but an industry expert needs to be hired.

The expert recommends the initiation of pre-clinical trials before starting the scale up of the process, to hire as soon as possible an expert on the industry to prepare and implement the pre- clinical and clinical trials, to adapt their financial statements and to intensify equity approach for scaling up.

Not ready SMEs

The not ready project plans to develop a new type of spectrometer for measuring the volume scattering function (VSF) in aquatic environments – initially in seas and oceans, but later also in other bodies of water. The company has been created in 1991 in Estonia but keeps a low level of revenues (479.6 k€ in 2014, 380 k€ planned in 2015) with 8 full time employees, which gives a very low level of revenue per employee (average 55 k€ per employee per year between 2012 and 2014). The company declares no external fund raising, but plans to apply for a Phase 2 funding.

Private financing Grants/total value including FF, BA, Bank Debt Number Year of IRL VC of SMEs establishment 2012- < 2012- < 2012- < 2012 2014 2012 2014 2012 2014 800 Ready 2 2006 and 2007 - 340 k€ 150 k€ 1,84 M€ 320 k€ k€ Almost 1 2012 - 69 k€ - - - 50.76 k€ ready Not ready 1 1991 ------

The comparison of the financial inputs justifies the readiness levels of the two projects, confirmed with the private and bank funding figures.

2.4.2.2. Biotechnology-based industrial processes (BIOTEC)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 2 1 Almost ready 2 0 Not ready 1 0

Biotechnology-based industrial processes (BIOTEC) – Phase 1

Numb IRL er of Focus QUOTED sentences from the abstract SMEs “organizing a professionally conducted study, using Product/Technol proper consultation and market research databases, is ogy (1 SME) of the utmost importance. Read 2 y Market related “better study the feasibility of the here proposed issues (1 SME) innovation project and design in the more accurate

way the breakthrough innovation activities

“we plan to develop and test business models for two key European markets (Scandinavia and UK). The results from this study will allow us to develop viable Almo business models, supply chains and product

st Business model requirements” 2 ready (1 SME) “feasibility assessment of the business concept will be conducted to better determine its technical, economic and legal viability, as well as plan its most appropriate operational and scheduling strategy.”

Market related Not 1 “analyse market and business strategies in the sector” issues (1 SME) ready

Amongst the 5 SMEs assessed, 2 SMEs are investment ready, 2 SMEs almost ready and 1 not ready for investment.

Investment ready SMEs

Out of the 2 SMEs assessed as investment ready, one was founded in 2006 and the other in 2012. Whilst one SME is pre-revenue, the other is expected over a million Euros in 2015, with a positive EBITDA. Number of employees was 13 and 23 in the 2 SMEs, and they had both established management and technical advisory boards. Both SMEs did not have any granted patents, but they had several patent applications, National, EU and International. Their financial needs were 3 M€ and 5 M€ respectively.

Leadership teams for both SMEs had well rounded capability including technology, finance and general management. At least one member of the leadership team has had prior entrepreneurial 22

experience. Both SMEs have members with strong sector experience and domain knowledge. They have both further augmented these with advisory boards, both technical and management and the leadership team is well prepared to adopt their roles based on needs, as the company grows. Overall, the expert assessors were very convinced regarding the leadership team capabilities of both.

In terms of product readiness, one SME has fully developed its product, including demonstrating early sales in the market; the other was yet to validate the product in operational environment, but had appropriate plans to achieve it. In terms of market readiness, one SME was fully on track with establishing market segments, and even generating sales from certain segments. However, the other SME, although having full market knowledge hadn’t generated any sales, but has sufficient confidence regarding their competitive advantage and ability to generate sales. Whilst one SME had a business model to sell one off cultures and assays, the other had a model for both device and a consumable. However, in both cases, cost bases were under control as they were incurred mostly R&D stages. The cost of manufacture was significantly lower than selling price, and hence allowed sufficient margins. And finally, both SMEs seem to have estimated their financial needs and are pursuing venture capital funding routes.

Almost ready SMEs

The ”almost ready” SMEs in this case was established in 2001 and 2014 respectively and are pre- revenue mainly relying on owners' capital and angel investment. In fact, one SME has been successful in securing 1m from angel investors and is expecting a further 1.2 M€ in 2015. They have bought 2 granted patents in 2014, one US and one Japanese patent. They appear to have both a management and technical advisory board and have estimated that they need 2.5 M€ financing over the next 5 years. The other SME has managed to secure debt financing (some 183 k€) and grants (344 k€).

On one of the SMEs, the leadership team has been evaluated as very strong by the expert and two of the leadership have prior entrepreneurial experience and sector knowledge and experience. The leadership also recognises that they need to adopt their roles as the company grows and they believe what they have is sufficient for their current stage. Given the nature of their product, they are yet to run full clinical validation studies and early animal tests have been done. As a result of this, their general product readiness level has been scored low. However, the company does recognise the time it takes to further develop the product and has analysed associated costs and are reasonably well engaged with their customers and suppliers during the product development phase. They also have access to scale-up facilities and have estimated costs for mass production. They appear to have a robust IP plan, with many patent applications filed, and they have bought 2 patents in 2014.

In terms of market readiness, the SME appears to have undertaken extensive market analysis, including state of the art and competitor analysis, and have targeted “niche” market segments that are not necessarily targeted by larger companies. They have also made significant progress with potential distributors who have shown interest in their product following clinical validation. They have scored relatively low on their routes to market, as they are unable at this stage to signup formal contracts with customers and distributors, which is a valid score at this stage of their product development. Until the full clinical validation on humans is complete, they cannot finalise the “claims” for their product.

As the company is still in pre-revenue stage and awaiting clinical validation results, they have made some reasonable forecasts for their revenues. However, it is still not decided whether or not they go the distributor route or via OEMs. These are strategic decisions still to be made and 23

they are currently exploring these options. On the cost side, they have ensured they understand full details of cost structures both during development and mass production scale. As there is still a need for clinical validation, they are likely to pursue routes that would help them secure non- dilutive grants.

The other SME, although having a strong leadership team, lacks a formal and strong advisory Board and senior level sales and marketing experience from the sector. The leadership team appears more experienced in technical matters than in business management. The product has been developed from very early stages into an offering that is almost ready to go to market. The company has a clear view and good strategy for doing so. The main issue and challenge appears to be that of market readiness. They have made a number of assumptions, which are not yet fully tested out in the market. And as a result, although they have a revenue model, it remains highly untested. The assessing expert notes that once the company has moved further closer to testing their product in the market, they will be in a better position to raise their next round of financing of 2-3 M€.

Not ready SMEs

From data available, the “not-ready” SME was established in 2004, revenue generating (265 k€ in 2014 and expected 500 k€ in 2015) and in fact profitable since 2014. The SME has 9 employees and have a management advisory board, but no technical advisory board. The SME has 1 patent application pending, but no granted patents. It appears that they have been relying mostly on grants and own income generated to cover their operating costs to date. They have raised 100k of early stage venture capital and are looking to raise 1.2 M€ over the next 5 years.

The SME has a good leadership team, but doesn’t involve anyone with prior entrepreneurial experience. They admit not having a true advisory board that includes domain and sector expertise. They are only comprised of people with some managerial experience and help with cash flow management and general management advice. They are prepared to adopt their roles to suit future needs, however.

Their product readiness levels have been questioned by the reviewing expert, and the expert doesn’t believe they exactly know how much time it will take to fully validate their product at a pre-commercial readiness level. They also admit that they haven’t been fully engaged with their customer base during the product development phase, and this seriously poses a significant risk that the product may not be what the customers need (or in its current version). Their resource planning and costs analysis have also been scored low, as they do not appear to have estimated costs associated with mass production. The expert also notes that their IP strategy is very weak and has many short comings.

The SME’s market readiness has been questioned by the expert, in that, they haven’t studied carefully their target market segments and lacks strategies for market penetration. They completely lack a marketing plan and haven’t engaged with the routes to market. As a result, the SME is not in a position to demonstrate real “value” to a potential customer.

Finally, in terms of financial strategy, the expert assessor notes that they haven’t established a convincing revenue model and even their cost structures look weak as they haven’t calculated all related costs. Their cash flow analysis appears to contain methodological errors and they haven’t estimated how much cash they are likely to need in the next 5 years.

Private financing Grants /total value including FF, BA, Number Year of IRL VC of SMEs establishment < 2012- < 2012 2012-2014 2012 2014 2.7 Ready 2 2006 and 2012 1.27 M€ 1.67 M€ 3.4 M€ M€ Almost ready 2 2001 and 2014 - 293 k€8 - - 165 Not ready 1 2004 234 k€ 163 k€ 128 k€ k€

Biotechnology-based industrial processes (BIOTEC) – Phase 2

Numb IRL er of Focus QUOTED sentences from the abstract SMEs Read Scale-up and final “will bring product from small pilot scale to 1 y product validation industrial production and commercial applications”

1 SME was assessed as “investment ready” under Phase 2 of BIOTEC.

Private financing Grants /total value Number of Year of including FF, BA, VC IRL SMEs establishment 2012- 2012- < 2012 < 2012 2014 2014

Ready 1 2008 480 k€ 502 k€ - 4.79 M€

1 SME was assessed under this topic as “investment ready”. This SME was established in 2009 and was expecting revenues of 400 k€ in 2015. The company has 3 SME owners, and 15 employees. They have 8 international patent applications pending and 2 granted patents. They also have other trademarks and know-how associated. They also have raised venture capital of 4.79 M€ between 2012 and 2015, and a cumulative 354 k€ prior to 2012, and also have a good record of securing some grants amounting to ~1 M€. They are now looking to raise about 3 M€ in their next round of VC.

From the capacitation plan, it is noted that the SME has a balanced management team and a Board of directors, with one of the co-founders being a serial entrepreneur. They also have an elaborate technical advisory board, comprising of leaders from the field. They have sought help from external consultants including groups that can help prepare papers for private investment raising.

8 (data from 1 SME only)

The SME has industry ready products, and have already selling to early users. They have outsourced logistics to external providers. They also have partnerships with EU facilities for large scale production, when required. They also have a very robust understanding of their cost structures and a very robust IP strategy.

In terms of market readiness, the SME has clearly identified its value proposition and have a well- defined sales process and customer database. They are looking at direct sales in Scandinavia where they are based, and via distributors over rest of EU and other select global countries. They also appear to have established good processes for supply chain management and forming value-chain partnerships. They have also mapped out different layers of competition, both direct and indirect. One of their main challenges is the long sales cycles, given the industry they sell into being very conservative (traditional paper and pulp). Deal times can be very long and having operational cash-flow is crucial, and therefore they are looking at strategic investors rather than pure financial investors. In terms of revenue model, the SME has begun validating these in the market and getting some early feedback. As the company is experienced in raising both private and public monies, they seem fairly confident of the process and they are aware of managing the critical cash flow issues in the short term. Overall, they appear to have a robust financial strategy.

2.4.2.3. Urban critical infrastructure (DRS)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 1 0 Almost ready 3 0 Not ready 1 0

Urban critical infrastructure (DRS) - Phase 1

Number IRL Focus Quoted sentences (from the abstract) of SMEs " A precise and well-defined product road map has been developed as part of the feasibility study in phase 1 of the SME Instruments scheme. Product costs and risks have been analysed and the necessary Product road map resources and processes for a mass installation. definition until Ready 1 mass production For the feasibility study that has been the outcome of

phase 1 of the SME Instruments program, a market Market analysis analysis has been performed together with a potential customer survey and a mystery shopping campaign. "

"... proposes to use the project in order to fully validate its business case, canvas and plan using a ‘hands-on’ approach including a small-scale Market validation demonstration and interaction with all known Demonstration stakeholders"

Almost 39 "The expected outcome of both phases will be a ready Technical complete IVA platform transforming our TRL level 6 demonstration solution into a near market ready security product

(with associated services), making high throughput

detection and tracking of people in crowds for the first time a practical reality "

“has the following ambitions in consecutive Phase 1 and Phase 2 SME Instrument projects: To provide the Technical first commercial security scanning system that will improvements allow true real-time scanning of multiple moving Not and adaptations persons and their bags which novelty has been 1 ready verified... To adapt this system to client’s needs by Commercial varying diode panel size and image resolution at a deployment price below current commercial SoA solutions that can run up to €250,000 per stationary unit; ...To offer the clients constant improvement and upgrade of

9 No information available for one of the 3 projects

customized image recognition software; To generate sales in excess of €160Mn in first 5 years post-launch, utilizing a network of distributors and licencees;... To bring ROI for Europe to at least 10,800% given the estimated investment of €1.5Mn in Phase 2 project.

Investment ready SMEs

The SME implementing the investment ready DRS project has been created in 1999 in Spain, in the field of infrastructures to prevent and manage cyber-attacks. The average revenue of the company between 2012 and 2015 has been 5.6 M€ (around 70% of increase each year) with an EBITDA between 24 and 32% of the revenue each year, and accounts for 134 FTE in 2014 (increase of 67-76% each year).

Regarding the historical type of finance, the SME has secured a good level of owners' capital (4 M€ until 2014, increased by 67 to 87% per year since 2012) and has used bank debt (almost 11 M€ until 2014), 2.6 M€ grants until 2014 and 2.5 million of other financial facilities. The estimated external financing required for the next 5 years is 6 M€. They declared no registered patent.

They do benefit from an advisory board. The only weakness evaluated by the expert was regarding the entrepreneurship experience but as the company has been created in 1999, we can consider that the founders have gone through entrepreneurship experience since then. Nevertheless, the revenue seems to stay quite week after 15 years with 46 k€ per employee per year.

Regarding the Leadership team assessment, the management team is very experienced, well balanced and complementary, but the expert recommends to set up a detailed sales & marketing plan (with good with experienced team) for European expansion.

It is not specified if the company plans to apply for Phase 2 of the SME Instrument. Phase 1 permitted to realise a feasibility study including a well-defined product road map until a mass installation and also a market analysis.

Regarding the product readiness, the company is well prepared for scale up, and has a precise and well-defined product road map. The TRL is not specified but it is said that the product evolved from a pre-commercial release up to a production release.

From both the market and the financial perspective, the expert assessed the SME as very well positioned and only recommended to establish a network of distribution partners and to find to new sources of financing for its global expansion.

Almost ready SMEs

The 3 projects concern: - a set of intelligent robots embedded inside a fleet of unmanned aerial vehicles (UAVs), scanning the environment with different detection technologies - a broadband Professional Mobile Radio (PMR) system running over standard cellular networks (starting to be demanded by International Governments for usage by Emergency Services and Professionals) - an Intelligent Video Analytics (IVA) technology to create a high performance system for threat detection to protect urban soft targets and critical infrastructure. 28

Among the 3 SMEs implementing almost ready projects two are Spanish, one is from UK, and they have been created in 2009, 2003 and 2014. The newest one has no revenues declared yet. For the older ones, one has seen its revenue decreased from 2012 to 2014 while the other has been increasing (the older one has an average revenue of 318 k€ and the younger one 877 k€ in 2012-2014). As to the employment, they employ respectively 15, 10 and 4 full time employees in 2014. The 2 Spanish and older ones can count on an advisory board (both management and technical boards).

Regarding their leadership team, they are all solid, complementary, and experienced at working together. The experts' advice to integrate more senior advisors, strengthen the team in finance, communication and legal issues, and to strengthen strategic partnerships for one of the 3 SMEs.

With respect to product readiness relevant access to resources for scale up appear to be acquired in the short term (internally or outsourced), even though additional expertise is needed (finance, marketing, technical, etc.) and a plan is recommended with key resources and time frames to ensure realistic scale up, for reaching the next TRL levels and convince potential partners. In two cases experts recommend to accelerate contacts with stakeholders (either customers or suppliers, etc.). Two 2 SMEs have already proven their ability to incorporate customers' feedbacks into their product development activities, the third one needs to complete validation from the market. The SMEs' TRL is between 6 and 7. The older Spanish and the UK companies declare owning some IP protection.

From the market perspective, the 3 SMEs implement B2B products. two have a very good knowhow of stakeholders’ needs, good business strategy, good relationships with customers and distribution partners. Experts recommend, nevertheless, reaching more stakeholders, gathering further insights on competitors and a clear overview of new entrants, and to get a more detailed demand/pricing model and testing, a detailed marketing approach and a Total Cost of Ownership (TCO) study. For the third project relationships with customer segments and international USP to be further developed even though a comprehensive risk analysis matrix has been already elaborated.

The SMEs have been using the corresponding Phase 1 project mainly for doing market and technical validations and demonstrations (no information regarding the use of Phase 1 for one of the SMEs).

On the financial side, the older ones have secured owners' capital (between 107 k€ and 393 k€). The youngest one has invested personally 65 k€ since its creation in 2014 and counts 3 owners, 4.5 M€ raised through angels and declares a need for 10 M€ within the next 5 years. Apart from owners' capital the 2 other SMEs, declare a low level of bank debt until 2014 (70 k€ and 36 k€ total for each one), a good level of grants (800 k€ and 398.5 k€ each), and the older one declares other financial facilities (5.4 M€ total between until 2014). Their future needs are estimated by themselves at respectively 5 and 2 M€. All 3 companies plan on preparing a Phase 2 proposal for the SME Instrument. Experts did recommend strengthening of financial skills in the team, to map all potential and accurate private investors as well as institutional investors, EIF intermediaries and strategic partners. For one of the SMEs the founders stated they do not want to open their capital and prefer to rely on local and EC funding.

Not ready SMEs

The not ready project plans to offer real-time scanning of multiple moving persons and their bags. The company has been created in 1992 in Norway, and has an experienced and complementary management team. There is no information about revenues and profit. The company counts 12 FTE in 2014, declares one international patent, and plans to raise 5 M€. The company didn't provide enough information to evaluate the market potential. The team has a strong experience and technical skills but a senior commercial talent is suggested by the expert. Despite the good team, there are too many uncertainties and unknowns for being ready for investment so far but the expert suggests after a clear market identification, to raise seed capital between 0.5 and 1.0 M€ (in non-dilutive financing such as grants and some limited equity financing) instead of the 5 M€ expected by the company. The company plans also to apply for a Phase 2 funding. So far, the price seems to be too high, costs have to be studied in depth, little effort was made to explore production at large scale, still limited interactions on the new product with the market, where alternative markets should also be reconsidered.

Private financing Grants /total including FF, BA, Bank Debt Number Year of value IRL VC of SMEs establishment 2012- < 2012- 2012- < 2012 < 2012 2014 2012 2014 2014 2.07 Ready 1 1999 1. 6 M€ 1.02 M€ - - 8.74 M€ M€ Almost 2009, 2003 179.7 3 1.02 M€ - 273 k€ 4.830 € 102.12 k€ ready and 2014 k€ Not ready 1 1992 ------

The ready project is part of a large company, and hence hasn’t secured private funding (FF, BA and VC funds) and they mainly rely on bank debt. Also for the almost ready most private financing comes from the company created in 2009, the SME created in 2003 gathered mainly other financial facilities. The younger one plans on massive investment from Business Angels (4.23 M€ planned for 2015).

2.4.2.4. High risk ICT innovation (ODI)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 13 1 Almost ready 16 2 Not ready 2 0

High risk ICT innovation (ODI) - Phase 1

Number IRL Focus QUOTED sentences from the abstract of SMEs “during the project will be elaborated: Apart from market related Market Analysis Business Plan, Marketing issues, addressed by all SMEs, Plan, Legal and Organisational Plan and further specific activities have Technological Plan" concerned:

Ready 13 “Identify targeted customers in defining Product/Technology (9 SMEs) the solution to meet market needs” Regulations (2 SMEs)

IPR/legal (2 SMEs) “ secure the regulatory / industry

endorsement as part of the launch &

commercial efforts” “the project will help us to create a feasibility plan for going international.” Product/Technology plus market related issues (13 “Specific objectives include field tests with SMEs) test partners, to collect feedback, fine- tuning of the solution” Almost 16 Other two projects have also ready focused more on financial “the feasibility study will review expansion issues (1 SME) and opportunities by studying European regulations (1 SME) markets, identifying potential partners, reviewing regulatory and legal environments, checking prototype product fit and localization requirements,” "the goal of our project is to open and lead Product/Technology plus this market by reducing costs." Not market related issues (2 2 ready SMEs) “identifying key actions points for the internationalization and fine-tuning to make it a global success”

Investment ready SMEs

Investment ready ICT SMEs participating in Action 9 were established on average in Q2 2008 (before other SMEs from the same sector with different investment readiness level), and they show a higher number of owners (4.2 versus 2 owners for the different readiness levels). No investment ready ICT SME was established after 2013. The number of owners does not change significantly across the recent years for ready ICT SMEs. Within the observed period 2012-2015 all the investment ready SMEs have positive EBITDA and are growing in terms of revenues

(average 59% per year) and FTEs (14% per year on average, with an average value of 8,2 FTEs in 2015). In 2014, average revenues for ready SMEs founded in 2011 or before were 1.26 M€, while no revenues were recorded for more recent SMEs.

Regarding the historical type of finance, ready SME instrument beneficiaries in the ICT sector have been relying more on owners' capital and grants until 2012. After 2012 ready ICT SMEs engaged more with private finance (especially SMEs established after 2010), preferring Business Angels as investors and showing an increasing use of VCs in the recent years. Moreover, only one firm will seek debt finance provided by a bank in the near future. Ready firms demonstrate a more intensive activity in the last 4 years with private finance with respect to the almost ready SMEs:

Today, despite all SMEs affirmed to be in contact with investors at the time of the assessment, and 10 out of 13 of granted investment-ready SMEs have been supported by some kind of private investors, SMEs forecast to rely mainly on grants or own resources and they do not expect to raise BA/VC funds in the near future with two exceptions (2 SMEs established in 2010 and 2013). In some cases, experts recommended to support the expansion of ICT ready SMEs by complementing grants with private funds. Therefore, as remarked by experts, ready SMEs need strong guidance to find investors and establish clear strategies for the international competition, given that in the past they did not have such approach.

With regard to the amount and type of funding adequate for the SMEs, table below indicates the views of experts as reported in the CPs. Experts indicated 500 k€ for one SME, from 2 M€ to 3 M€ to 9 SMEs and 5 M€ or more for 3 SMEs. The indicated sort of funding is VC/BA for 4 SMEs, a mix of VC investor/grant financing for 4 SMEs, and debt finance (in view of an IPO) for 2 SMEs. Moreover, Phase 2 or other grants were suggested as the appropriate source of finance to 3 SMEs. With regard to the exit strategy, experts identified IPO for 4 SMEs and trade sale for 4 SMEs. For other SMEs the exit strategy was not described.

Amount of funding IRL appropriate for the SME Sort of funding Exit strategy (according to expert)  VC/BA (4 SMEs)  IPO (4 SMEs)  500 k€ (1 SME)  Mix of VC investor/grant  Company selling (4  from 2 M€ to 3 M€ (9 Ready financing (4 SMEs) SMEs) SMEs) SMEs  Debt finance (in view of an  Undefined (1 SME)  5 M€ or more (3 IPO) for 2 SMEs  No strategy (4 SMEs)  Phase 2 (3 SMEs) SMEs)

In addition to the above analysis related to the historical type of finance of ICT SMEs, when assessing the leadership team of this group of SMEs, the CFO role and experienced sales team with international networks are usually missing. This is particularly acknowledged by SMEs in the mobile app/web services. However, 10 ready ICT SMEs have an advisory board, and all ready SMEs have at least one team member with previous entrepreneurial experience.

The manufacturing facilities and capacities are in place and there is a marginal need for additional access to scale-up facilities, confirmed by the fact that ready ICT SMEs made significant progresses in terms of TRL during the project. Only two ready SMEs reached TRL 9 during phase 1, in most other cases the final TRL is 7 or below. This confirms that Phase 1

beneficiaries could access directly Phase 3 after Phase 1, without necessarily step into a Phase 2 project. Moreover, this aspect further confirms that the three SME instrument phases should not be intended as consequent phases, and Phase 3 can run in parallel both to Phase 1 and to Phase 2. While projects do not present major difficulties in technology development, as remarket by experts, formal risks identification and clear IP strategies are usually missing even in ready SMEs. In terms of international activity, 7 ready SMEs have significant percentages of international sales and 4 of them have 99% of their sales performed in the international market. Among those 4 SMEs with almost exclusive international activity, 3 SMEs were established in 2012 or after. With regard to IP management, all ready ICT SMEs have a good understanding of the IP process and know how to properly protect their IP. However, 4 SMEs still have not identified the appropriate schedule to perform patent applications or resources to implement their IP strategies.

From the market perspective, the majority of ICT ready SMEs participating in this action implement B2B products (11 SMEs), and only two SMEs implement products including end users in their customer segments. For those SMEs, experts recommended to focus more on competitive analysis and to engage more with strategic partnerships and, in addition, experts have noticed difficulties to develop solid new business models for software services. More generally, innovative business models based on data exploitation are usually missing. In these terms, experts report general conservative strategies and the granted projects do not show evident disruptive approaches. At the same time, since the ICT sector is fast changing and the global ICT market is highly competitive, SMEs in the ICT field need more different and alternative opportunities to access finance. For instance, ICT SMEs often rely on lower quantities of finance expected to return in a shorter time than MIC/LIC firms, which rely on more traditional form of finance, to be returned in a longer time.

Almost ready SMEs

The average year of establishment for almost ready SMEs in ICT is Q4 2010, with 2 owners. 3 almost ready SMEs were founded in 2014 and 4 in 2013. It is observed that among the ICT SMEs participating to Action 9 and established in/after 2011, 67% is almost ready, 22% is ready and 11% is not ready. During the last four years SMEs, almost ready SMEs have increased the revenues of 56% (on average), with the exception of 3 SMEs that increased revenues (~200% or more). Within the observed period, almost ready ICT SMEs have positive EBITDA and present on average 9,1 FTEs and they are growing on average of ~1,4 FTE per year, with the exception of two SMEs growing of 100% or more in the last two years. In 2014, average revenue for almost ready SMEs was ~750 k€, confirmed as trend in 2015: revenues for almost ready SMEs appear on average about half of ready SME’s.

The leadership teams appear well experienced in the specific sector, presenting overall very good ICT skills. While skills in the technological fields are generally in place, and most of SMEs (13) include serial entrepreneurs in their team, what is generally missing are senior profiles in finance and marketing. 8 SMEs have a formal or informal advisory board and to those SMEs with informal advisory board, experts recommended to hire the key functions such as CFO and marketing specialists, structuring more tight cooperation with the advisory board for other aspects such as technical aspects or regulations. As reflected by the type of activities conducted by almost ready SMEs during phase 1, most of SMEs have access to legal advisors and, indeed, IP strategies are well established with all SMEs, with only 3 exceptions where the IP management process is still under development.

From the product development perspective, it is observed that only 2 SMEs reached TRL 9 where in most cases the final TRL is 7 or below. This is also due to different level of readiness of the different components of the product/service, which need further development and assessment, 33

often demanded to a forthcoming participation to the Phase 2 of the SME instrument. Access to scale up facilities is generally not an issue and contacts – even at an early stage - with customers & suppliers are performed by all SMEs. Among almost ready SMEs, 8 implement B2B products, 2 implement B2B2C and four are both B2B and B2C. However, as remarked by experts, more than half almost ready SMEs need to improve the analysis of costs and risks associated to the technical development of their product. This aspect is strongly linked to other recommendations related to the market dimension, where experts have recorded weak go-to-market strategies for 9 SMEs and limited competitor analysis for 6 SMEs. However, firms present good implementation of feedbacks and development of relationships.

In terms of international sales, less activity was recorded with respect to the ready SMEs. Only 6 SMEs have significant activity and two of them have 99% of their sales performed in international markets.

The historical type of finance (before 2012) of almost ready SMEs in ICT shows strong dependency from owner’s capital with a little activity with private finance (1 SME with family and friends, no SME with business angels, 2 with VCs). After 2012 the firms have increased the use of grants and bank debt, with little activity with VCs and business angels (in the time frame 2013- 2014, no activity is recorded neither with BA nor with VCs). All SMEs affirmed to be in contact with investors at the time of the assessment (except for one SME, which however participated to the third Phase 1 cut-off), and 11 out of 16 of granted almost investment-ready SMEs have been supported by some kind of private investors in the past.

With regard to the amount and type of funding adequate for the SMEs, table below summarizes experts’ report.

Amount of funding IRL appropriate for the SME Sort of funding Exit strategy (according to expert)  Equity raise and  IPO (5 SMEs)  500 k€ (1 SME) VC/BA (6 SMEs)  Company selling (6  From 1 M€ to 2 M€  Mix of VC SMEs) (7 SMEs) Almost investor/grant  Strategic investor (1  From 2,5 M€ to 3 M€ ready SMEs financing (4 SMEs) SME) (5 SMEs)  Grants, bank loans (1  Undefined (2 SME)  4 M€ or more (3 SME)  No strategy (2 SMEs) SMEs)  Phase 2 (4 SMEs)

SMEs forecast to rely mainly on grants or own resources and a few SMEs expect to raise BA (2 SMEs) or VCs (1 SME) funds in the near future. Within almost ready SMEs, only 3 firms presented clear revenue models and some lack of appropriate cash flow management was recorded as a need for SMEs as well as business models to be better defined. A common recommendation by experts was in the need for more strong financial plans, underlining the need for guidance to find investors also for almost ready SMEs.

Not ready SMEs

The 2 non-ready SMEs in ICT sector were established on average in 2014, with 2 owners. Being relatively very young firms, those SMEs do not present significant behaviour in terms of revenues and FTEs, either in tracking experienced private investors or in international sales. Moreover, both SMEs have been seeking debt finance provided by a bank in the recent years. The 2 SME were assessed as not investment ready for different reasons.

One SME is a very young start-up in the mobile-gaming industry with a ground-breaking business model. The firm is a spin-off of a successful SME in the traditional field of internet services and had not finalised the development of its platform at the time of the assessment and did not have tested it in a pilot environment. Moreover, some additional skill was needed in the firm in order to support the international expansion plan, (financial, marketing and business development managers) with specific international experience in the field. Moreover, the national/international relationships need expansion and service providers were yet to be chosen. The SME has access to legal skills, although no IP strategy was elaborated. From the financial point of view, the firm has a revenue model that needs to be validated in real environment and, what is more, the firm has to carefully evaluate if the “mother” SME can provide enough cash flow to ease the firm until has reached a higher TRL and investors become be more interested. For this SME the expert identified 1,5 M€ of funding need through VC as appropriate source of funding.

The other non-ready SME is recently established and the team is too junior, characterised by important skills missing in the team. Expert tracked very relevant functions on areas such as business development and finance. There are not enough senior profiles in the team and the experience in the specific sector is mainly concentrated on the CEO. The company does not seem to have considered its future needs and how adapt the team to make the company more successful and achieve its goals. Regarding the advisers, the company does not seem to have considered the need to join as a relevant trade association which would be very helpful to identify potential regulation of concern for the sector. Although the prototype was already demonstrated in actual operational environment, a specific IPR Strategy was not elaborated and no legal barriers were detected. The firm has not a good marketing plan and need a better segmentation of the market. From the financial perspective, the cash flows are currently managed by the CEO who also acts as CFO. The knowledge about different sources of private funding and related opportunities is very limited and indeed, although the company has defined its financial needs, does not know how to cover them. For this SME the expert identified 1 M€ of funding need through an angel network or an accelerator programme.

Granted Numb Private financing including FF, BA, VC Year of SMEs/value IRL er of establishment 2012- SMEs < 2012 < 2012 2012-2014 2014 3 SMEs raised 98k€ 2 SMEs raised 2008 (1 SME in 3 SMEs 9 SMEs / on average via FF. 25/820 k€ from FF; 1999, 5 SMEs (744 385 k€ One of them also 5 SMEs raised av. Ready 13 between 2002 k€, 2.2 per year raised 91k€ from BA, 1 M€ from BA and and 2009, 7 M€, on the other raised 214 2 SMEs raised av. SMEs ≥ 2010) 144 k€) average from BA and 100 k€ 435 k€ from VC from VC.

2010 (1 SME in 11 SMEs 4 SMEs raised av. 2 SMEs One SME raised Almos 2000, 6 SMEs / 135 k€ 206 k€ from FF; (31 k€, 14k€ (FF) and 2 t 16 between 2006 per year 1 SME raised 50 k€ 50.4 SMEs raised 100 k€ ready and 2011, 9 on from BA and 1 k€) and 2 M€ from VC. SMEs ≥ 2012) average SME 300 k€ from VC Not 2 2013 and 2015 - - - - ready

Bank Debt IRL < 2012 2012-2014 Ready 100 k€ (1 SME) 5 SMEs with 161,5 k€ on average per year Almost ready 300 k€ (1SME) 3 SMEs with 102,6 k€ on average per year Not ready - -

High risk ICT innovation (ODI) - Phase 2

Number IRL Focus QUOTED sentences from the abstract of SMEs "The objective is to double the advertising Market related inventory and video revenue...” Ready 1 issues “The project involves commercializing technology for specific adaptation to the requirements …” “The project will also establish a solid go-to- market activities mix that will encompass B2B engagements… followed subsequently by Market related penetrating B2C marketplace” issues plus Almost 2 Product/Technology ready “will develop set of complex software (2 SMEs) algorithms ... and internet protocol based

communications system, and a data base management system“

Investment ready SMEs

Only one SME from the ICT topic was assessed as investment ready. The firm has revenues around 600 k€ and has been growing of ~16% in the last years with 20% of international sales percentage, with 13 owners and 16 FTEs, growing of 100% in the last two years. No bank debt is recorded for the SMEs.

With respect to leadership team capabilities the SME comprises three major shareholders (~83%) and several minor shareholders (~17%) with at least two serial entrepreneurs with more than 10 years entrepreneurial as well as adequate sector experience. The company provides almost all different profiles and a CFO is needed as reported by the expert. As a consequence, strategic

partnerships could complement the ownership team. However, strong contacts to external high- profile experts form an advisory board.

With respect to product readiness (B2B2C) the integrated and actual prototype at TRL 6 has been proven in an operational environment. However, not all essential technical requirements for successful market entry appear to be implemented. The owners appear to have full access to all relevant human resources for commercial exploitation and consequently secured relevant access to key resources for scale up. Nevertheless, the leadership team aims at hiring two additional R&D managers. Consequently, a plan with key resources required to scale up is recommended to be outlined to explain potential – strategic and financial – partners how to reach expected growth rates with respect to time frames. Overall, the owners have demonstrated an exemplary engagement mechanism with the customer base. The SME has a robust process to incorporate feedback into their prototype development activities. Nevertheless, it is recommended by the expert to clearly define the steps with time frames for reaching the next TRL levels including costs as well as sales and ROI/ROE that will emphasise a realistic plan to scale up and convince potential partners.

With respect to market readiness several relationships with customer segments have been built but need to be further developed – clients could turn into strategic partners as well. Consequently, a comprehensive risk analysis matrix including adequate risk-minimizing- strategies is recommended to be elaborated for further negotiations with potential investors and strategic.

With respect to the financial strategy the company has been benefiting from grants since 2012 and in 2013 had activity with private finance (Business Angel). The firm is continuously revalidating its revenue model and adapting calculated realistic revenue streams. Beside the funding strategy and strong contacts to already convinced venture capitalist, it is also recommended by the expert to get in touch with the outlined EIF's financial intermediaries and strategic partners in parallel. The SME has already raised successfully venture capital funds and the entrepreneurs appear to be very experienced with pitching investors. The preparation of relevant documents for additional potential investors is suggested by the expert for the acquisition processes. The adequate finance recommended to the SME is 6 M€.

Almost ready SMEs

Two SMEs from the ICT topic were assessed as almost investment ready. Both SMEs were established in 2013 with on average 3 owners, having today around 15 FTEs. One of the SMEs has 99% of international sales with a sound IP management and IP strategy understanding and proficiency. No bank debt is recorded for those SMEs.

In terms of leadership team, SMEs have a leadership team with relevant experience and background in the field and as well as entrepreneurial experience at International level, and both firms are well covered in respect of access to legal skills. However, the formation of an advisory board along with the recruitment of CFO, product manager, and a business development/sales manager are recommended to both SMEs.

In terms of product readiness (one SME implements a B2B product, the other has a mixed approach), both projects were running since about 6 months and at the time of the assessment it was not possible to clearly assess to what extent the TRLs have progressed. Both SMEs have good awareness of the time frame and control of the time schedule. Where applicable, manufacturing costs are known and both leadership teams are well aware of all resources needed for commercial scale up. 37

From the market readiness point of view, experts underlined the need for refining go-to-market strategy and to strengthen the competitor analysis, as well as to better embed market feedback from the customers and to pay special attention to sales strategies especially in relation with the absence of sales specialists for key markets.

In terms of financial strategy, although both SMEs are relatively young (2013) they confirmed to be in touch with investors and one SME has already identified Business Angels as the appropriate form of private finance to use to growth. One company has a clear financial strategy and according to the expert public funding sources are being secured. The amount of finance recommended by the expert is 2 M€ and the financial resources recommended by the expert to support the growth are both equity injection by the shareholders (since the capital needed for supporting the growth is expected to come from the first customers) as well as public funding as an alternative.

For the other SME, expert recommended to further elaborate their financial planning and identified venture funding (indicated appropriate amount is 5 M€) by one or few leading VC's as main financial resource (along with VC’s support to contribute to SME's commercialization plan.

For both SMEs the CFO is missing and in one case this was recorded as an issue, recommending recruiting and experienced financial manager.

Year of Private financing including FF, Number Granted SMEs/value IRL establishm BA, VC of SMEs ent < 2012 2012-2014 < 2012 2012-2014 Average 390 k€ Ready 1 2010 - - 560 k€ from BA per year 0 Almost Both in 2 - - - (1 SME 946 k€ from BA ready 2013 expected in 2015) Not 0 - - - - - ready

2.4.2.5. Greener and more integrated transport (IT)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 5 0 Almost ready 9 3 Not ready 3 0

Greener and more integrated transport (IT) - Phase 1

Number IRL Focus Quoted sentences (from the abstract) of SMEs This project produces a feasibility study and a business plan based on results from test use in real operational environments and negotiations with channel partners. Market analysis (5) Develop a detailed business plan, strengthen the in combination to relationship with potential customers and partners Ready 5 technology (3), and define the technology. Submit a Phase 2 financial (2), application. organisational (1) …We will conduct a variety of analyses to confirm the viability of our game and justify further external investment, specifically Phase 2 funding from this programme. The objective of this phase 1 is to complete a feasibility study to find out the workability and profitability of the business venture. If the result of the feasibility study is positive, we will write the Business Plan and we will apply to phase 2. Market analysis (8) Define the investment and the effort that the in combination to company should undertake to penetrate efficiently the Almost financial (6), European market, validate the ability of the solution 9 ready organisational (2), to bring economical return to the company into a technical (1). Unclear defined period in order to evaluate sustainability of 1 the business plan, quantify the impact…. we plan to elaborate a detailed feasibility study (Phase 1) that will possibly recommend to opt for Phase 2 funding later on, necessary for extended R&D and for a rapid worldwide dissemination of our solution. (technical) solution is at a mature stage of development and therefore the feasibility assessment Market analysis (2) will focus on the development of the industrial chain Not Financial (1) 3 to set-up and validate the scale-up production… ready Technical (probably We envisaged (the project) as a durable and reliable 1) solution to avoid the formation of fouling (bio- fouling) in ships

Investment ready SMEs

Three of SMEs implementing the five ready projects have been created from 2002 to 2009 and two from 2011 to 2013. The revenue varies from 16.3 k€ to 6 M€, the staff from 3 to 23 people in 2014. Both revenue and staff show an upwards trend in the last three years, in some cases quite significant. The highest rate of revenue growth is marked by a project with a tiny grant (a crowdsourced logistics service allowing, for example, someone shopping in a hypermarket to also deliver groceries to his neighbours, a spin out of a telecom multinational). No project has received until 2014 any private funding (FF+VC+BA). Grants exceed €1 million in only one case; this project is the one requiring 200 M€ of investment in the medium run. Three of the projects envisage further funding from the Phase 2 of the SME Instrument and the two other see the European Investment Fund (EIF) as a potential funding source. VCs and BAs are envisaged for money seeking in three of the projects. The amounts required vary between 1 M€ and 2 M€, except for one case where the necessary investment is envisaged at 200 M€. In one more case the expert proposes the development of sales before addressing VC support.

The leadership team seems of high level in all cases but in one project is missing a sales officer, in another a CFO and in a third a better allocation of tasks is required. The experts propose to fill these gaps in staffing and in one case to organise the external experts into a formal advisory board.

TRLs for these projects are at 6 or higher: In two of the cases, the components of the final product or the individual sub-products are of different TRLs. One expert requires the clarification of the TRLs of the products, another notes that TRL enhancement is a target of the Phase 2 and a third one points that during the Phase 1 increased the TRL. Timeframe awareness and customer contacts are positively assessed by the experts. In one case the expert notes the need for a comprehensive cost analysis and in another the expert raises potential legal and ethical problems with piracy.

Market readiness reveals more serious problems: need for Customer Relationship Management (CRM) in one case and for market surveys in new markets in another, relatively poor knowledge of distribution channels in two more. The go-to-market strategy requires improvements in two projects and the competitors’ analysis in one. The experts recommend better integration of the clients to the strategy of the company through closing deals and introducing relevant indicators, avoiding sales channels conflicts, benchmarking the value networks of similar service providers, intensification of competitors’ surveillance and analysis, strengthening barriers to entry for competitors, improvement of the CRM and go-to-market strategy, elaboration of a risk analysis matrix to address the financiers’ questions, further customer and market segmentation.

The clarity of the revenue model is recognised in most cases: in one case the expert requires its adjustment to the various types of client. On the opposite, revenue streams require clarification or refinement in all 5 cases. Similarly, cash flow raises questions in the majority of the projects, as well as the knowledge of financing opportunities, which tend to focus on public funds. The experts recommend the consolidation of the financial plan and the diversification of funding sources in one case, building strong brand value in a second, elaboration of a detailed plan for scaling up in a third. It seems very important to validate the revenue model at European level. In two cases the experts are proposing the preparation of high quality Phase 2 proposals.

Almost ready SMEs

There are 9 SMEs implementing almost ready projects. Two of these SMEs have been created before 2000 (intermodal system for fast loading the new Ultra Large Container Vessels, operating drones on behalf of civil customers), five between 2001 and 2008 and one in 2012. The 2014 revenue varied from 30 k€ (mass transport operators) to 4.2 M€ (16g aircraft seats). As expected, the older companies show the highest revenues, but the youngest SME has the largest employment exceeding in 2014 well beyond the SME size limits (demographic and travel information) and the fastest growth of revenue during the 2012-14 period. This is the case that has received a substantial grant in the same period. Four more firms have received grants, while only one VC funding. In six projects is clearly envisaged the funding from the Phase 2 of the SME Instrument, four of them look for additional public funds and in one case the expert recommends no further public funding because “they are profitable and can self-fund”. In four cases is recommended the use of VCs-BAs, in connection to Phase 2 funding. The amounts needed for funding in the immediate future do not exceed the 3 M€ by case (an average of 1.3 M€ per project).

The TRLs of the almost ready projects score between 6 and 9, except in one case for part of the product. The leadership teams are satisfactory in most cases; in one of them the expert notes the need for marketing and financial skills and for understanding international dynamics, while in another the expert suggests that the team needs to be completed. Formal advisory boards are not in place in three cases. In one case the expert notes that the company’s management does not wish scaling up.

Adequacy of the knowledge of the distribution channels needs to be reinforced in three cases and marketing plans in four. More in depth competition analysis is required in two projects. The experts recommend the improvement of marketing and communication plans, the selective development of partnerships with actors of the value chain, focusing on negative shareholders that could damage the entrepreneurial effort, finding ways to transform competitors into partners, improving the business model and the marketing and commercial strategy.

The revenue model presents flaws (need for validation, diversification) in two cases, cost is sufficiently assessed in all cases but one, cash flow is sufficiently assessed in two cases. The majority of the firms suffer from deficient knowledge of the investment financing opportunities. The experts recommend the validation of the business model at European level, the prioritisation of the relevant market segment, the search of seed capital by the VCs and BAs, the preparation of a strategic plan containing among other key resources, risk analysis matrix and risk minimising strategies.

Not ready SMEs

The topic includes also three not ready projects. In revenue and staff terms they don’t differ significantly from the almost ready ones. One of them has been funded by VC and the other has received a relatively small grant. Owners’ contribution appears to be insignificant in two of the projects. All three envisage addressing the Phase 2 of the SME Instrument, while in two cases VC- BA support is envisaged. The necessary amounts do not exceed 1 M€.

In the not ready cases the experts focus on the reliability of the leadership team, the functionality of the technical systems, the acquisition of the necessary IP, the networking with the partners and the development of an awareness building strategy, the elaboration of in depth competition analysis and of a strategic financial plan.

Private financing Granted SMEs/value Total financial input Numb Year of including FF, BA, (M€) (M€) IRL er of establishme VC (M€) SMEs nt 2012- 2012- 2012- < 2012 < 2012 < 2012 ≥ 2012 2014 2014 2014 1.4 (2 firms, 60 (91% 1.4 (4 2002, 2008, 0.696 one from from firms, one Ready 5 2009, 2011, (one - - grant, one bank debt takes 2013 firm) from owner of one 78%) funds) firm) 1985, 1988, 0.833 (3 3.2 (5 firms 5.5 (8 2000, 2001, 1.7 (5 0.125 0.06 Almost firms, 50% from firms, 9 2003 (2), firms, 2 (one (one ready one got owners’ 41% one 2007, 2008, got 74%) firm) firm) 84%) funds) firm) 2012 1.7 (3 0.039 firms, one Not 2004, 2007, 0.364 (2 0.01 (one 3 - - (one 75%, 68% ready 2010 firms) firm) firm) owners’ funds)

It is rather surprising, under the present conditions, that investment ready projects advance without external private finance (FF+VC+BA), while the other two categories show also very limited activity in this type of funding. On the other side, the ready projects receive a considerable help from grants in both periods examined. Given the deficiencies of the projects identified by the capacitation plans, it is not surprising that the private investors are not participating to the funding efforts.

Greener and more integrated transport (IT) - Phase 2

Number IRL Focus Quoted sentences (from the abstract) of SMEs Our goals for phase 2 are to further develop and refine product in order to have a market ready product. Our main focus, on a technical level, will be the Technical (3) implementation of the two SoA visual systems… Almost 3 Market …support product to adjust, test and demonstrate the ready analysis (1) benefits of technology to the Automotive market… the project will also look to understand fully the business strategy to ensure that the product’s commercial potential is maximised

Almost ready SMEs

The three almost ready projects of this topic target diverse areas of the transportation sector: one aims to create an innovative platform and track protection system in the rail transportation to increase security, the second targets “advanced car driver assisted system applications” and the third is developing a rubber recycling technology based on a cost-effective devulcanisation process which uses supercritical CO2 instead of chemical solvents. 42

The three companies have been established 1995, 2003 and 2010. One employees 53 staff, the other 17 and the third one reports none. The 2014 revenue varies from 8.9 M€ for the larger to 40 k€ and 115 k€ for the other two. For the two larger firms approximately 50% of the turnover comes from exports. Only one (the car driver security system) shows substantial financial movement with private financing (FFF+VC+BA), grants and other financial facilities. Another one is supported mainly by bank debt. The needs for external financing are estimated by the firms from 1 M€ to 9 M€.

The quality of the leadership teams is assessed differently in each case: in the first is fully satisfactory, in the second is satisfactory and in the third it needs enhancement with missing expert staff. One of them has an external advisory board. TRLs vary around 6 in all cases: one is 6-7, a second is 6, and the third one is 7 but an application is 5-6. Clear increase of the TRL is marked in the third case. Contacts with customers and suppliers are lagging in one case while access to scaling up in two and analysis of costs and risks in all three. Among the three companies, one seems to have a clear IP management and strategy.

Knowledge of customers’ segments and distribution channels needs to be further developed during the implementation of the Phase 2 project, so the go-to-market strategy remains to be fixed and refined. Competitors are limited in number and therefore their monitoring is rather easy, but the struggle for market domination, particularly in two of the cases, is fierce. As to the revenue model and revenue streams, in one case seems well developed, in the two other, the corresponding CPs are not clear enough on the issue.

The financial needs are explored by the experts, who estimate them at 2 M€ to 3 M€ in one case, €9m in a second but they are very unclear in the third project, where the expert notes “the production costs of (the product) are so high that the benefit generated will never cover the amount of money required for to cover production capital requirement of the net year…”. The same expert suggests better exploitation of the IP for raising income. Moreover, the experts propose the reinforcement of discussions with potential investors, exploring more (national) funding sources, intensifying negotiations with the supply chain partners, more effective marketing, promotion and diffusion actions, organising for scaling up, and in one case hiring logistics manager and development engineer.

Private financing Granted Year of including FF, BA, VC Total financial input (M€) Number SMEs/value (M€) IRL establish (M€) of SMEs ment 2012- < 2012 2012-2014 < 2012 < 2012 2012-2014 ≥ 2012 2014 Ready ------1995, 0.233 1.8 (99% Almost 1.3 (1 4.1 (1 8 (84% to 1 3 2003, - (97% to 1 to 1 ready SME) SME) SME) 2010 SME) SME) Not ------ready

2.4.2.6. Nanotech, tech for manufacturing and materials (NMP)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 6 1 Almost ready 9 1 Not ready 1 0

Nanotech, tech for manufacturing and materials (NMP) - Phase 1

Number IRL Focus Quoted sentences from abstract of SMEs “will move from a semi-manual production towards a mass production process” “consolidate its position in the laser engraving/texturing services while extending its 2 SMEs: Improve the business “ production process “deliver consistent, scalable manufacturing of cell- to achieve a new based models used by multiple industry sectors to market evaluate materials ranging from new drugs to 1 SME: improve the healthcare products and functional foods” prototypes “feasibility study is needed to conduct a more detailed Ready 6 3 SMEs: Elaborate market study” Market study / “we can mass produce the modules which would Business Plan speed up the service and reduce the price” 1 SME: develop and “it is necessary to show customers customized designs commercialise a new as well as to get feedback from the market on sales product and price models, implementation strategies and

product features” “A business plan will set out the technical developments needed and costs to demonstrate the commercial viability” “to confirm the commercial application” “to investigate the feasibility of developing different 1 SMEs: confirm the size machines with different specifications, examine commercial the commercial and technical risks of the process, application develop strategies to meet different standard 6 SMEs: improve the requirements and develop strategies to commercialise prototypes + define our unique product” commercial strategy “establishing a robust industrialization and operational Almost 2 SMEs: Elaborate plan” 9 ready Market study / “to develop an innovative technological process” Business Plan “The scale-up optimisation for large-scale production 1 SME: develop and of brighter fNDs and the business development for the commercialise a new two targeted applications” product “elaboration of a business plan is needed in order to analyse the market, map and confirm commercialization alternatives and prepare the roadmap for scaling-up” “A business plan will set out the technical 44

developments needed and costs to demonstrate the commercial viability” “up scaling and industrial exploitation” “to study the feasibility of the GO to be the centre of the herein proposed innovation project, and design in a more accurate way the breakthrough innovation activities to take the tailor made GO materials into the market“ “The commercialization of the system will help to secure a position as a global PAT-based solutions provider to the pharmaceutical sector” Not 1 SME: Achieve “has led us to a new technology to build a full portfolio 1 ready technical accuracy of cost-effective”

Among the 16 SMEs beneficiaries from the Nanotech and other advanced Tech. for manufacturing and materials topic participating in this action, 6 SMEs have been assessed as ready, 9 as almost ready and 1 not ready. These SMEs have a different maturity level: 5 less than 5 years, 5 between 5 and 10 years and 6 more than 10 years; and different places of origin: 5 from UK, 5 from Italy and 1 from Lithuania, Netherlands, Spain, Finland, Denmark and Sweden respectively.

All companies have been founded by more than 3 people, in 2014 possessed an average of 12.61 FTE structure. But we can see that these businesses have two distinctly different profile: the first, very intensive in human resources (i.e., companies show great teams whether they are mature companies like are not, and therefore whether billed or not), and on the other hand, companies with a very small structure (less than 10 people even for companies with a turnover over € 1 M€). If we analyse the team depending on the age of the company, note that the distribution of the founders is similar: 4 for companies less than 5 years, 3.4 for companies between 5 and 10 years and 4.17 for companies founded over 10 years ago. As for the human resources structure, we can find clear differences: the youngest companies have small structures with 3.98 workers, compared to 19.65 in companies with more than 10 years. This shows that companies are clearly at different stages of maturation.

All 16 companies have at least a member of the team with a good previous experience in creating new businesses and also all companies present a team of individuals whose skills and experience nicely complement each other’s expertise and are willing to review and adapt their roles continuously. 63% of the companies have an advisory board.

The TRL in the not ready company is TRL3, while the rest is between TRL5 and TR8. All companies in these this topic respond to a long innovation cycle, that is, companies must invest several years to complete product development and reach the market.

Investment ready SMEs

The SMEs implementing the 6 ready projects have been created from 1950 to 2012 which we can be classified into 2 subgroups: 2 ripe companies created in 1950 and 1999 and 2 younger companies created in 2006 and 2012.

Companies in this sector are high-tech companies, as evidenced by the high percentage of them that have a patent (69%). If you look at their investment readiness level, we can see that this percentage rises to 83% for investment ready companies.

The 6 companies have validated its revenue model and they have managed to close 2014 with sales between 490 k€ and 12 M€ and positive EBITDA, which have shown that its business model is accepted by the market and can create a profitable company. We do not have all % international sales parameter, but presumably they all have a relevant % of sales in several countries.

Almost ready SMEs

The SMEs implementing the 9 ready projects have been created from 1909 to 2014 which we can be classified into 3 subgroups: 3 ripe companies with more than 10 years, 2 companies created between 5 and 10 years and 4 younger companies created in 2011 and 2014.

The almost ready companies (idem than the ready companies) are having a more complete team of founders (3.5 founders on average), versus not ready that has only one founder member. For the rest of the structure of human resources, also the almost ready have a complete structure, with an average of the FTEs in 2014 of 15.32. Also remarkable is the presence of an advisory board (management or technician): 67% of these companies have some type of advisory committee. We can also see that a high percentage of them that have a patent (67%).

According to the experts all these companies have a good financial plan. We have the sales information for 2 of the 3 oldest companies. These are consolidated and profitable companies with more than 13 M€ turnover and positive EBITDA at the end of 2014. Additionally, if we evaluate in the most mature companies (over 10 years old), we can see that the margins of these companies are all above 30%.

Notably, companies less than five years of this group start to invoice from the first year of constitution and even 2 of them already have positive EBITDA. We do not have all % international sales parameter, but presumably they all have a relevant % of sales in several countries. With existing data, the 56% of the companies have international sales and the average percentage of international sales is over 35%.

Numb Year of Private financing including FF, Granted SMEs/value IRL er of establishme BA, VC SMEs nt < 2012 2012-2014 < 2012 2012-2014 The same first 1 SME raised SME raised 60 67 k€ from k€ from BA and FF, 244 k€ SeedVC 3 SME ~3 SME with from BA and (probably 1950; 1999; with 30 500 k€ – 885 244 k€ from second tranche); Ready 6 2006; 2007; k€;1669 k€ per year SeedVC; The 2nd SME 2007; 2012 k€ and on average 1 SME raised raised 45 k€ 900 k€ 620 k€ from from FF and BA; BA and 130 2 additional k€ from VC; SME raised 280 k€ and 485 k€

from BA and 2300 k€ and 460 k€ from VC. (Average The same SME 1997) - ~7 SMEs 1 SMEs raised 1000 k€ 2 SMEs 2013, 2011, with 200 k€ – raised 600 k€ from BA and Almost with 80.5 9 2013, 2007, 250 k€ per from BA and 1600 from VC; 1 ready k€ and 2014, 1993, year on 200 k€ from additional SME 122 k 1909, 2010; average SeedVC raised 100 k€ 2001 from BA. Not 1 1994 0 k€ 50 k€ - - ready

Analysing how the investment ready and the almost ready companies have been funded until 2014, we can see that investment ready projects have achieved an average funding of 7.6 M€, far from almost ready projects that only have an average of 1.3 M€. The vast majority of these funds are from the companies with more than five years. This has shown the difficulty to find funding for such projects in their earliest stages. It is also surprising that only 3 companies have a venture capital investor.

According to the experts, all these companies have a clear financial plan and know how to cover financial needs. The companies hope to achieve during 2015 a total of over 17 M€, of which 6.4 M€ will be private equity financing (FF, BA, VC) and 10,6 M€ non-dilutive funding, of which 5.6 M€ are anticipated as bank debt and 5 M€ as a public funding.

All companies that have indicated the amount of financial need for the next five years exceeding 500 k€, with an average of 5.6 M€. So, this implies that these companies mainly, in the case of a private investor search, will require a Series A venture capital investment. Analysing the questionnaire, the best aspect valued by the companies is the financial aspect (21.71 out of 25), and the worst aspect of the market (34.4 out to 40). From the expert opinion, the best aspect valued is the team aspect (23.86 out of 30), and the worst aspect of the market (29.2 out to 40).

A qualitative level, the capacitation plans valued positively the founding teams especially at scientific knowledge level. They also say they have extensive knowledge of the market, but in general, the capacitation plans do not have well defined the main value KPIs. In the funding strategy, most intend to get Phase 2 before submitting the project to a private investor.

Nanotech, tech for manufacturing and materials (NMP) - Phase 2

Number IRL Focus Quoted sentences from abstract of SMEs 2 SMEs: “will move from a semi-manual production towards a mass Improve the production process” production “consolidate its position in the laser engraving/texturing Ready 1 process to services while extending its business “ achieve a new “deliver consistent, scalable manufacturing of cell-based market models used by multiple industry sectors to evaluate 1 SME: materials ranging from new drugs to healthcare products

improve the and functional foods” prototypes “feasibility study is needed to conduct a more detailed 3 SMEs: market study” Elaborate “we can mass produce the modules which would speed up Market study / the service and reduce the price” Business Plan “it is necessary to show customers customized designs as 1 SME: well as to get feedback from the market on sales and price develop and models, implementation strategies and product features” commercialise “A business plan will set out the technical developments a new product needed and costs to demonstrate the commercial viability”

“to confirm the commercial application” “to investigate the feasibility of developing different size machines with different specifications, examine the 1 SMEs: commercial and technical risks of the process, develop confirm the strategies to meet different standard requirements and commercial develop strategies to commercialise our unique product” application “establishing a robust industrialization and operational 6 SMEs: plan” improve the “to develop an innovative technological process” prototypes + “The scale-up optimisation for large-scale production of define brighter fNDs and the business development for the two commercial targeted applications” Almost strategy 1 “elaboration of a business plan is needed in order to ready 2 SMEs: analyse the market, map and confirm commercialization Elaborate alternatives and prepare the roadmap for scaling-up” Market study / “A business plan will set out the technical developments Business Plan needed and costs to demonstrate the commercial viability” 1 SME: “up scaling and industrial exploitation” develop and “to study the feasibility of the GO to be the centre of the commercialise herein proposed innovation project, and design in a more a new product accurate way the breakthrough innovation activities to

take the tailor made GO materials into the market“

“The commercialization of the system will help to secure a position as a global PAT-based solutions provider to the pharmaceutical sector”

Among the 2 SME beneficiaries from the Space topic participating in this action in phase 2, 1 SME have been assessed as almost ready and 1 investment ready. SMEs have been created in 1996 and 2009 and are respectively from Hungary and Italy. They have 7 and 1 owners, and 30 and 13 FTEs in 2014 respectively.

Investment ready SMEs

According to expert opinion, the leadership team has a strong background and all the capabilities to take the innovation to the market. The founding team and the management have complementary skills and very convincing entrepreneurial and commercial expertise gained in the past 20 years. Both the business and technology sides of the team are proven and credible. The team would benefit from setting up a formal Advisory Board able to ensure a more transnational outreach to the enterprise.

The product is in operation, having paying customers (sales: 3,332 k€ in 2014) with a positive EBITDA. The company has a 70% of the sales in international markets and at the moment is developing the next generation of the product to make it more scalable on both domestic and international markets. To achieve this, the company needs 2 million €. Until now, all the financial needs have been covered by owner’s capital (809 k€), Banks (116 k€) and grants (48 k€).

Almost ready SMEs

According to expert opinion the founding team has complementary skills, but an advisory board would need to be formed. There are multiple products in various stages of development, and the company has international patents. Some risks still exist and there might be challenges related to freedom to operate.

The product is in operation, having paying customers (sales: 3,697 k€ in 2014) with a positive EBITDA. At this moment, the company has a 12% of the sales in international markets and the leadership team has to define the growth strategy and speed of development. To achieve this, the company needs 1 M€ as first approximation. Until now, all the financial needs have been covered by owner’s capital (809 k€), Banks (116 k€) and grants (48 k€). We can’t see the details of the past finance strategy, but according to the expert, as there was not so much previous exposure to fundraising, some professional help might be needed.

Numb Year of Private financing including FF, Granted SMEs/value IRL er of establishme BA, VC SMEs nt < 2012 2012-2014 < 2012 2012-2014 Ready 1 2009 200 k€ 48,9 k€ - - Almost 1 1996 - 50 k€ - - ready

2.4.2.7. Diagnostics devices and biomarkers (PHC)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 2 3 Almost ready 11 0 Not ready 0 0

Diagnostics devices and biomarkers (PHC) – Phase 1

Number IRL Focus QUOTED sentences from the abstract of SMEs ‘now requires funding to get it medically Product/Technology (1 certified allowing it to be used by doctors Ready 2 SME) support their diagnosis’

‘Within the project, we aim to identify end- users for validation, discuss the handling and identify possible variations to enhance the usability and acceptance of the new system in phase 2. In addition, we prepare a revised version of a “freedom-to-operate” analysis’. ‘In phase 1 of the proposed project, we will perform a feasibility study with focus on market related activities in Europe’ ‘is a feasibility study to assess the commercial IPR/legal (1 SME) viability and quantify the business Product/Technology (1 opportunity’ SME) ‘At the end of Phase-1, an intensive feasibility Almost Market related issues (5 11 study, including market and profitability ready SMEs) analyses’ Financial aspects (e.g. ‘Develop a commercialisation strategy across costing/pricing) (1 SME) the major European countries by conducting a Other (1SME) market research assessment of the market size, route to adoption, pricing and reimbursement mechanisms’ ‘Exploring clinical validation’ ‘The output of the feasibility study will be a full business plan, including an analysis of the European and global stroke market, an analysis of direct, indirect and potential competition;

Not ready 0 - -

Out of the 13 SMEs assessed, all from Phase 1, 2 SMEs have been evaluated as investment ready, and 11 SMEs are almost ready for investment.

Investment ready SMEs

One of the SMEs evaluated as investment ready was set up in 2007 and had raised some early revenues between 2012 and 2015. This SME has also experience in raising venture capital of up to 4m Euro, and are now seeking to raise about 15-20 M€. They have filed a number of patent applications, but none granted so far. They currently have some 25 employees.

SME’s leadership appear to have relevant experience and bring in a wealth of senior sector profiles and prior entrepreneurial experience. They have also augmented their team with appropriate advisory boards, and have access to legal teams and HR for advice. Their prototypes have been tested in clinics are expecting to run further clinical validation across Europe. They have also a full understanding of associated cost structures, including at scale and have a robust IP strategy in place.

Their customer relationships is being developed, but they have demonstrated good understanding at a clinic level, and are now looking to extend it beyond into Europe. They have also initially validated their revenue model with dermatologists and within clinics, but requires full market validation. They have identified clearly their financial needs and are pursuing multiple routes to securing finance.

The other SME was established in 2010, and has raised some small revenues between 2012 and 2015. With significant proprietary knowledge and IP (2 applications and 1 granted), this SME has raised some private venture capital of about 815 k€ since 2013, and are now seeking to raise some 3m. This SME also demonstrates strong leadership capability. Their product is getting tested in commercially relevant environments with early and positive results, and they have a strong marketing plan and a customer base.

Almost ready SMEs

6 out of 11 companies assessed as ‘almost ready’ were revenue generating and in terms of age, they vary from 18 years old to as recent as 3 years old. Number of employees vary as well from 3-20, 7 SMEs had established management and technical advisory boards to augment their leadership teams. 5 SMEs had no granted patents, whereas 6 of them had at least 3 granted patents. Two of them had a vast portfolio of granted patents with 34 and 43 patents demonstrating a good IP strategy and portfolio. Their need for financing indicates a range between 3-7 M€.

7 SMEs scored low on leadership readiness due to a mix of factors including lack of sufficient leadership expertise from the sectors, or previous entrepreneurial experience. Other areas where SMEs have scored low is around lack of experienced technical and management advisory boards to further augment their leadership teams. 9 SMEs have indicated that the next big step for them is clinical validation and on this basis, these companies have scored low. It is reasonable to expect a vast number of these companies to be at this stage of advanced prototyping, but pending clinical validation studies. Linked with their current stage of product development, most of the companies assessed as ‘almost ready’ also have a challenge in fully engaging with the clinical market. Only 4 SMEs appear to have fully engaged with their customers and have demonstrated a tested value proposition and a clear revenue model.

Moreover, given the nature of the PHC topic, most Phase 1 proposals are focused around market validation and they expect to follow up this activity with a thorough clinical validation prior to commercial launch. Given the timescales it takes to run through these stages including regulatory filings, most of these ‘almost ready’ companies have at least 2-4 years before 51

commercial launch. Many SMEs have commented that they too early to be able to deliver robust revenue plans, which is an understandable position.

Private financing Grants /total value Number of Year of including FF, BA, VC IRL SMEs establishment 2012- 2012- < 2012 < 2012 2014 2014 Ready 2 2007 and 2010 - - 2.75 M€ 3.16 M€ Almost 9 1998-2012 165 k€ 1.9 M€ 16.7 M€ 4.42 M€ ready Not ready ------

In general, as this topic relates to clinical diagnostics and biomarkers for diagnostics, there is a strong dependence on the clinical validation stages in addition to proving the core technology readiness. The TRL terminology doesn’t seem to be recognised very widely amongst these SMEs and hence, the assessment has to reflect that.

Diagnostics devices and biomarkers (PHC) – Phase 2

Number IRL Focus QUOTED sentences from the abstract of SMEs

“The results of this clinical study and ongoing market research are being used to support design of the commercial device and the full clinical validation programme, which is the subject of this application”

Clinical validation “Analytical validation and clinical Ready 3 Final product validation performance “

“will drive platform development and pilot production, with clinical validation and usability trials in multiple PoCT segments to TRL8”

3 SMEs were assessment as ‘investment ready’ under this topic, phase 2. The SMEs were founded in 2007, 2009 and 2012, and 2 out of these 3 are pre-revenue companies, with very small revenues generated between 2012-2015. One SME (founded in 2007) has been generating moderate revenues since 2012 with small margins. This SME has 55 employees and has >15 patent applications pending and 5 granted and this SME has secured significant debt finance (~20 M€) and grants (3.65 M€) and venture capital. The other 2 SMEs have collectively raised venture capital (6m) and grants (2.2 M€). 2 SMEs are looking to raise between 5-7 M€, whereas one of them is looking at more substantial funds (total of 120 M€, with some funds coming from possibly an IPO). These funds are required for further clinical validation and market launch. The

assessment in the case of SME founded in 2007 has been carried out for the parent company (group level) and hence some of the results of the analysis are likely to be indicative of that.

All 3 SMEs were evaluated strongly against leadership readiness. The SMEs have experienced members with prior entrepreneurial experience and they have also established very strong advisory boards (both technical and management).

In terms of product readiness, all 3 SMEs are at very advanced stages of development, and are pending full clinical validation. However, they have established very substantial market traction and in 2 out of 3 cases, are able to demonstrate early revenue generation.

Challenges around market readiness are not unexpected at this stage of development, and in 2 out of 3 cases, they need to further development their route to market and distribution channels. 1 SME, which is part of a much larger group has more resources around sales, distribution and marketing activities. These SMEs are also strongly supported by medical associations, key opinion leaders and leading clinicians who bring required credibility.

All SMEs have robust revenue models, and in 2 out of 3 cases have been able to demonstrate early revenues. The assessing experts note that, pending positive clinical validation, these SMEs are well positioned to generate substantial revenues and grow. The revenue plan strongly depends on the adoption rate, and as with most med tech products, all these SMEs face the challenges associated with market adoption. Given the high burn rates, 2 out of 3 SMEs face significant risks if they are unable to raise additional capital in time, as it will affect their cash flow positions.

Private financing Grants /total value Number of Year of including FF, BA, VC IRL SMEs establishment 2012- 2012- < 2012 < 2012 2014 2014 2007, 2009 and Ready 3 220 k€ 2.71 M€ 2.05 M€ 10.2 M€ 2012

2.4.2.8. Eco-innovation and sustainable raw material supply (SC5)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 2 1 Almost ready 9 0 Not ready 1 0

Eco-innovation and sustainable raw material supply (SC5) - Phase 1

Number IRL Focus QUOTED sentences from the abstract of SMEs Product/Technology (1 SME); ".... orientate its technology towards the Market related issues (2 Ready 2 commercialization of its already commercially SMEs); viable products." Financial aspects (e.g. costing/pricing) (1 SME) "...During the project, we will scale up our current pilot equipment to industrial scale together with our partner. We will also confirm the expected Product/Technology benefits of our technology in industrial environment and optimise the technology for a broad range of feedstocks to cater all customer needs." "We will map where demonstrations could be made with varying technical issues and geographical location." "elaborate an exhaustive technical feasibility study focused on scale-up beyond our current prototypes, design and industrialization (ii) elaborate a detailed business plan. " IPR/legal (1 SME); "The main objective of the project is to introduce Product/Technology (4 and sell an innovative technology." SMEs) "building concrete relationships with Almost Market related issues (5 collaborators and ultimately producing an all- 9 ready SMEs) embracing business plan." Financial aspects (e.g., "The purpose of the project is to create a pilot costing/pricing) (1 SME) plant .... and also to develop a new business others (5 SMEs) model that will set up a production ..." "Phase 1 project aims at assessing the activities needed to standardize the product, scale up to a large pilot implementation and test the market to achieve a sound business model." "The objective of this project proposal is to prepare a thorough business plan and feasibility study in the scope of Phase 1" Not Other focus (overall "Main goal of phase one is to collect all relevant 1 ready feasibility study) information for a reliable feasibility study."

Among the 12 SME beneficiaries from the eco-innovation and sustainable raw material supply topic participating in Action 9, 2 SMEs have been assessed as investment ready, 9 almost investment ready and 1 not investment ready.

Investment ready SMEs

According to the available data, ready SMEs operating in the eco-innovation and sustainable raw material supply topic were established in 2005 and 2007. According to the average founding years (2010 for not ready SMEs; 2004 on average for almost ready SMEs and 2006 for investment ready SMEs) ready SMEs tend to be older respectively more mature. Investment ready SMEs tend to grow faster in terms of revenues and gross margin. Within the topic, ready SMEs show a small number of owners (on average 2.5 owners) and approximately 9.5 FTEs (including owners and employees).

Regarding the historical type of finance, investment ready SME instrument beneficiaries operating in the eco-innovation and sustainable raw material supply topic have been relying heavily on owner's capital as well as VC. Ready SMEs forecast to rely on strategic financing options (investors for licensing companies - franchising model, buy-back option for existing shareholders, stock market) resources. Additionally, they do expect to raise VC funds in the near future and experts recommend supporting the expansion by complementary grants. However, only 2 ready SMEs will seek debt finance provided by a bank in future as well. Therefore, as remarked by experts, ready SMEs need strong guidance to find investors and establish clear strategies for the international competition, given that in the past they did not have such approach. As already mentioned, this topic appears to be characterised through a low awareness of alternative sources of finance. A tailored information seminar for this topic could increase this information decency. In addition, guidance through an advisor for developing and constantly improving the business (model) is also required with respect to the abovementioned efficient use of resources.

Almost ready SMEs

According to the available data, almost ready SMEs operating in the eco-innovation and sustainable raw material supply topic were established in 2014, 2013, 2013, 2011, 2010, 2006, 1993, 1991 and 1989 (average 2004). Overall, investment ready SMEs tend to grow faster in terms of revenues and gross margin. However, almost ready SMEs show positive EBITDA while investment ready SMEs are characterised through continuously decreasing negative EBITDA. This is a sign for a kind of aggressive growth of investment ready SMEs, which appears to be taken into investors' consideration. Fast growth seems to be related to the risk attitudes of entrepreneurs operating in the eco-innovation and sustainable raw material supply topic.

Within the topic, ready and almost ready SMEs show on average an equal number of owners (on average 2.5 owners). Nevertheless, the number of owners does not change significantly across the recent years for all SMEs operating in the eco-innovation and sustainable raw material supply topic. In addition, almost ready SMEs tend to have a higher number of FTEs – 11.75 – compared to the investment ready SMEs – 9.5 – (FTEs including owners and employees). This might be a sign that investment ready SMEs tend to be more efficient with available human resources. This broad assumption might be biased through the small sample size, however, requires attention within an initial review in this topic when increasing the readiness level of almost ready SMEs.

Regarding the historical type of finance, almost ready SMEs tend to count on grants, FF and BA until 2012. Starting in 2012, only 2 almost ready SMEs engaged more intensively with private finance. Today, despite 10 out of 12 SMEs affirmed to be in contact with investors at the time of 55

the assessment, only 3 granted SMEs have been supported by private investors. However, only 2 almost ready SMEs will seek debt finance provided by a bank in future as well. Therefore, as remarked by experts, almost ready firms need strong guidance to find investors and establish clear strategies for the international competition, given that in the past they did not have such move towards. Accordingly, this topic appears to be characterised through a low awareness of alternative sources of finance. A tailored information seminar for this topic could increase this information decency. In addition, guidance through an advisor for developing and constantly improving the business is also necessary.

When assessing beneficiaries form this topic experts stress that almost ready SMEs require a higher attention to legal issues even almost all assessed SMEs have already defined a clear IP management process and know how to protect IP. This issue has to be kept in mind for the guidance of almost ready SMEs to investment ready ones. Furthermore, almost ready SMEs are characterised by few shortcomings such as sole entrepreneur, too small teams with too many tasks, and limited legal skills. This observation also highlights the high need for an external advisory board through raising awareness in this topic. However, the reasons for advisory boards need to be explained as well that the SMEs are convinced of the added values through such external support.

9 SMEs beneficiaries do know their product's readiness level or Technology Readiness Level (TRL) precisely and know how to achieve next levels. Only 3 almost ready SMEs are struggling to define its current TRL stage. Once again, almost ready SMEs need to raise the awareness for all these investor relevant areas. Information seminars about the different essential requirements or in other words about key success indicators from an investor's point of view appear to be vital for these SMEs.

The leadership team of almost ready SMEs is aware of the time frame needed to develop the product or service to the required maturity level for commercial adoption, has a basic plan, but requires a revised plan. In line with this argumentation, almost all beneficiaries, which are almost investment ready, climbed the product/ service readiness level since entering the SME instrument. Based on the experts' recommendation Phase 1 beneficiaries are heading to Phase 2 while business development guidance appears to be relevant when improving the investment readiness level.

From the market perspective, the majority of SMEs participating to Action 9 do know the type of relationships that each of the customer segments expect them to establish and maintain. Almost ready SMEs demonstrate an idea of distribution channels or a first step in this direction. However, targeting adequate distribution channels appear to be a strong weakness of this topic. Furthermore, the almost ready SMEs have to reinforce a clear Go-to-Market Strategy. Moreover, almost ready SMEs tend to implement external feedback to a substantial extent; however, reinforcement would be beneficial according to the experts. Next, the almost ready SMEs appear to be expanding all their relationships. Overall, all assessed SMEs appear to know exactly their main competitors (direct and indirect, potential for substitutes, new entrants etc.). Nevertheless, additional information might be requested to SMEs in order to direct them towards relevant programmes for improving their weaknesses (e.g. legal issues).

Although the almost ready SMEs tend to have a financial plan, it requires further in-depth analyses according to the experts. Usually there is no in house real expertise in terms of finance. It is a classical dilemma for eco-innovation and sustainable raw material supply - financial plans must be stressed more under different scenarios and under different funding schemes. Nest, almost ready SMEs are working on raising capital while improving a clear financing strategy. As a consequence, since the eco-innovation and sustainable raw material supply topic is characterised 56

through a MIC and a high amount of financing (to put it into numbers and linking it to this sample - 1 to 50 M€) needs, SMEs in this field need more different and alternative opportunities to access finance.

Not ready SMEs

According to the available data, the ready SME operating in the eco-innovation and sustainable raw material supply topic was established 2010. According to the average founding years (2004 on average for almost ready SMEs and 2006 for investment ready SMEs) almost and ready SMEs tend to be older respectively more mature. Investment ready SMEs tend to grow faster in terms of revenues and gross margin than not ready SMEs. Within the topic, not ready SMEs tend to have few owners. Nevertheless, the number of owners does not change significantly across the recent years for all SMEs operating in the eco-innovation and sustainable raw material supply topic. In addition, across the recent years on average not ready SMEs tend to have a low number of FTEs – 2.25 (FTEs including owners and employees).

Regarding the historical type of finance, not investment ready SME instrument beneficiaries operating in the eco-innovation and sustainable raw material supply topic have not been relying on any alternative source of finance whereas they tend to count on owner's capital (250 k€), bank debts (300 k€) or other financial facilities (125 k€) until 2012. There is no data available for financing after 2012. Therefore, not ready firms need strong guidance to find investors and establish clear strategies for the international competition, given that in the past they did not have such approach. Accordingly, this topic appears to be characterised through a low awareness of alternative sources of finance. A tailored information seminar for not ready SMES within this topic could increase this information decency. In addition, guidance through an advisor for developing and constantly improving the business (model) is also required with respect to the abovementioned efficient use of resources.

In addition to the above analysis related to the historical type of finance of SMEs operating in the eco-innovation and sustainable raw material supply topic, when assessing the leadership team of this group of SMEs, experts highlighted that often a small and highly experienced core team is dominating. Not ready SMEs do not see or is not aware of the value of an advisory board. These circumstances stress the need for further awareness rising in this topic. In addition, not ready SMEs have not climbed the TRL since entering the SME instrument. This confirms that Phase 1 beneficiaries require a Phase 2 while business development guidance appears to be relevant when improving the investment readiness level.

From the market perspective, the not ready SME participating to Action 9 does know the type of relationships that each of the customer segments expect them to establish and maintain. However, the approach related to the customers elaborated by the not ready SME appear to be more opportunistic, rather than methodical according to the experts. While ready SMEs show current sales of the products - in other words, do know through which distribution channels their customer segments will be reached, the not ready SME demonstrates an idea of distribution channels or a first step in this direction. However, targeting adequate distribution channels appear to be a strong weakness of this topic and especially for not ready SMEs. Nevertheless, while ready SMEs highlight a clear Go-to-Market Strategy, the current version of the market strategy of not ready SMEs has to be reinforced. Moreover, the not ready SME tend to implement external feedback to a substantial extent, however reinforcement would be beneficial according to the experts. The not ready SME appears to be in a learning curve with first steps into potential relationships. For this reason, additional information might be requested to SMEs in order to direct them towards relevant programmes for wide spreading and convincing others of the Unique Selling Proposition. 57

Not ready SMEs tend to have a financial plan with questions to be clarified. Usually there is no in house real expertise in terms of finance. It is a classical dilemma for eco-innovation and sustainable raw material supply - financial plans must be stressed more under different scenarios and under different funding schemes according to the experts. In addition, not ready SME are relying on owner's capital and debts. As a consequence, first of all, the awareness creation of different alternative sources of finance and an in-depth review about the essential requirements, while getting in touch with the relevant contact persons, are requested.

Private financing including Granted SMEs/value Number Year of FF, BA, VC IRL of SMEs establishment ≥ < 2012 2012-2014 < 2012 2012-2014 2012 1 SME 1 SME with 1 SME raised raised 100 2005 and 1 SME with 174 k€ per 750 from BA Ready 2 k€ from FF 2007 231 k€ year on and 1 M€ from and 2.4 M€ average VC from VC 2 SMEs / (Average 2 SMEs/ 118 k€ 104 k€ 2004) - 2014, 2 SMEs 4 SMEs from FF, 31 k€ from FF Almost 2013, 2013, with 100 with 178 k from BA and 9 and 42 k€ ready 2011, 2010, k€ and per year 36 k€ from VC from BA 2006, 1993, 1419 k€ on average (on average per year on 1991, 1989 per year) average Not 1 2010 50 k€ - - - ready

In addition to the above analysis related to the historical type of finance of SMEs operating in the eco-innovation and sustainable raw material supply topic, when assessing the leadership team of this group of SMEs, experts highlighted that often a small and highly experienced core team is dominating. However, ready SMEs have an advisory board as well as strong contacts to relevant networks. Overall, all ready SMEs consist of a leadership team with all relevant skills and experience, which has access to all relevant infrastructure and resources to develop the product to the required maturity level for commercial adoption, and has already implemented first steps. In line with this argumentation, investment ready SMEs climbed the product/ service readiness level since entering the SME instrument.

From the market perspective, ready SMEs participating to Action 9 have done a deep market study. In addition, these beneficiaries do know which customer segments to serve and which segments to ignore. Furthermore, ready SMEs show current sales of the products - in other words, do know through which distribution channels their customer segments will be reached. Ready SMEs highlight a clear Go-to-Market Strategy. Moreover, ready SMEs implement feedback from customers and technical advisors intensively in their activities and have developed successful relationships with key supply and value chain partners through letters of interest and memorandum of understanding. Overall, all assessed SMEs appear to know exactly their main competitors (direct and indirect, potential for substitutes, new entrants etc.). Nevertheless, additional information might be requested to SMEs in order to direct them towards relevant programmes for wide spreading the Unique Selling Proposition and finally to convince potential investors. According to the available data, ready SMEs tend to be more mature in this sphere and used to sell the idea to third parties. Finally, all this above mentioned areas stress the high need

of presentation seminars related to important aspects for increasing the readiness level. In this way these SMEs might be better prepared to sell their ideas to potential investors.

Ready SMEs have a clear financial plan and know how to cover financial needs. They know precisely how much money they need and how to use it to complete the business plan. Ready SMEs have a clear financing strategy and are currently in advanced discussions to improve it. As a consequence, since the eco-innovation and sustainable raw material supply topic is characterised through a MIC and a high amount of financing (to put it into numbers and linking it to this sample - 1 to 50 million Euro) needs, SMEs in this field need more different and alternative opportunities to access finance. First of all, the awareness creation of different alternative sources of finance and an in-depth review about the essential requirements while getting in touch with the relevant contact persons are requested. In this sphere, tailor made presentation seminars especially to this resource intensive sector would increase the investment readiness level of participating SMEs.

Overall industrial development of new technologies in the eco-innovation and sustainable raw material supply topic requires tailor made financing schemes because of longer duration of development and higher entrance barriers for new industrial technologies. Consequently, long term financing is essential. Here a solid own capital structure of the company is crucial. For instance, an assessed SME's time frame to develop an innovative technology as well as preparing market introduction took more than six years, and still requires further effort for product development. EC funds for research & innovation are available for SMEs to contribute developing research. Once the maturity level of projects or technology is around TR7 / TR8 and the SME can start working on its sales plan, corporate finance for financing the commercial plan is not made available by private banks (nor those managing EC Funds for SMEs or Innovation programs like Jessica or InnovFin due to low Company´s turnover at the starting phase of sales. So it may happen that after having invested a significant amount in a development of a new technology, financing tools for commercialization and implantation are not available for SMEs active in eco-innovation and sustainable raw material supply (even when clients have signed precontracts and first contracts are ongoing). In order to avoid this situation, EC could follow up the commercial development of projects that have finished successfully the research phase. This can be done by matching pipe line projects ready for commercial development or ready for investment with financial intermediates managing EC funds for innovation in order to ensure that the projects find the necessary financial resources for the implementation phase.

Direct investments of EC funds into innovative companies as a (minority) shareholder could be also an option especially for SME active in the topic eco-innovation and sustainable raw material supply. If the experts of EC detect a strategic interesting technology, EC funds could enter directly into the capital structure of the enterprise developing this technology. That way the EC fund could nominate one or more internal or external experts who represent them in the board of the company. This would give direct access to board information and decisions, and facilitates the control of the usage of funding. The board members representing the EC funds can assess and influence on board decisions of the company (real time coaching), which would give additional support to the managing team.

Eco-innovation and sustainable raw material supply (SC5) - Phase 2

Number IRL Focus QUOTED sentences from the abstract of SMEs Product/Technology (1 SME); ".... orientate its technology towards the Market related issues (2 Ready commercialization of its already commercially SMEs); viable products." Financial aspects (e.g. costing/pricing) (1 SME) "...During the project, we will scale up our current pilot equipment to industrial scale together with our partner, a European biogas producer. We will also confirm the expected 1 Product/Technology benefits of our technology in industrial environment and optimise the technology for a broad range of feedstocks to cater all customer needs." "We will map where demonstrations could be made with varying technical issues and geographical location which links to market potential and technological challenges. " "elaborate an exhaustive technical feasibility study focused on scale-up beyond our current prototypes, design and industrialization (ii) elaborate a detailed business plan." "The main objective of the project is to IPR/legal (1 SME); introduce and sell an innovative technology Product/Technology (4 for the lubrication of industrial machinery on SMEs) the global market." Almost Market related issues (5 "building concrete relationships with ready SMEs) collaborators and ultimately producing an all- Financial aspects (e.g., embracing business plan." costing/pricing) (1 SME) "The purpose of the project is to create a pilot others (5 SMEs) plant .... and also to develop a new business model that will set up a production ..." "Phase 1 project aims at assessing the activities needed to standardize the product, scale up to a large pilot implementation and test the market to achieve a sound business model." "The objective of this project proposal is to prepare a thorough business plan and feasibility study in the scope of Phase 1" "Main goal of phase one is to collect all Not Other focus (overall relevant information for a reliable feasibility ready feasibility study) study."

Investment ready SMEs

The investment ready SME from Phase 2 was founded in 2009. While EBITDA is negative, but improving over the last years, total owners' capital has been increasing rapidly recently. Revenue and margin are still 0. Two owners, who are expected to be increased by one additional owner in 2015, were accompanied through 16 FTEs in 2015. While there is a management advisory board, there is no technical advisory board in place. The SME relied on own funds - approximately 600 k€ on average in the past 5 years. In addition, they expected to receive 280 k from Business Angels and 500 k€ from Venture Capitalist in 2015. They have already received 750 k€ in 2012 and 191 k€ in 2014 from Venture Capitalists. The beneficiary is currently granted with 497 k€ and was granted with 50 k€ in 2012. The Phase 2 beneficiary needs approximately 3 to 10 M€ external financing in the next 5 years.

Overall, the revenue model was designed, and is currently under proving procedure with clients. There are no regular sales currently. However, according to the expert the company shows deep understanding of all the factors impacting revenue stream and has conservative financial practice. The final business model will be clarified only after initial industrial implementations. The company is collecting all possible cost parameters at the moment. Acceleration of sales/crowd and extension of market presence appears to be ongoing, as well as operational financing for scaling up machinery and enabling to enter onto USA markets. In particular, Venture Capitalist and preferably strategic investors are targeted. The company has already collected experience with investors - national, private, and EU-wide. The company stress proven experience to attract and work with external investors. Finally, the beneficiary faces following financial risks (1.) delayed next round investment and (2.) delayed payments from customers. In general, the company has all necessary profiles in management. There is an informal advisory board with senior experts. The advisory group appears to be an extraordinary collection of talents.

The integrated and actual system will be built and tested in operational environment under H2020 Phase II project. The SME is currently at TRL5. The company did a deep analysis for almost all risk factors. Since entering the SME instrument they climbed from TRL 5 to TRL 7. However, the beneficiary is aware of following risks (1.) fermentation technology and (2.) technical challenges for equipment size and planning.

The company elaborated very close partnerships with its clients. It has demonstrated an exemplary engagement mechanism with the market/customer base and the team appears to have a robust process to incorporate feedback into their prototype development activities. The company elaborated a comprehensive SWOT analysis with its H2020 project. The Phase 2 beneficiary is in a process of a constant learning curve. Their approach differs from customer to customer. The company designed a methodology for selecting customers. Currently a direct sales model is running. The company builds trust every day among their clients. There are estimations for potential sales volume. The company is testing different sales models for different client groups. A go-to-market strategy and different business models will be tested and clarified after completion of H2020/Phase II project. Overall, the demand from customer site appears to be there even before the product/service is ready for industrial implementation. The company established working relations with both sites - supply partners and end customers. However, risks are seen on the one hand (1.) at the level of competitors and on the other hand (2.) at an EU/ global level through an economy decline as well as (3.) at the critical legislation/regulation situation.

Overall, the SME faces execution key risks in the area of (1.) wrong/delayed delivery from supply partners. Secondly, (2.) the size of company appears to be not adequate for the business 61

goals/plans and thirdly (3.) the time window for scaling up on to global market is crucial. All the above mentioned status and risks shape a great need to be guided through a business development process to reach just at the right time the right investor. Even when companies have experience with investors, they are aware that it is not easy to convince the right people at the right time especially when there are delays and unexpected external situation. As a consequence, based on the one and only assessed Phase 2 beneficiary in the sector of eco- innovation and sustainable raw material supply there exists a strong call for external inspiration and guidance when accelerating business through alternative sources of finance. The external point of view and experience through the improvement phases appears to be a key issue when it comes to external unexpected changes and developments especially in the sector of eco- innovation and sustainable raw material supply.

2.4.2.9. Sustainable food production and processing (SFS)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 0 0 Almost ready 3 1 Not ready 1 0

Sustainable food production and processing (SFS) - Phase 1

Number of IRL Focus QUOTED sentences from the abstract SMEs Ready 0 - - "we will carry out final product development, scale- up manufacture, validation and final customer trials prior to commercial launch" "....cleaning of the grain is only performed by mechanical methods, as the most effective Almost ready 3 Technology synthetic chemical insecticides available for the protection of stored product, such as phosphine, are now banned." "....SME-Inst-Phase-1 feasibility Study- we aim to do DNA trials & investigate technical and commercialization risk reduction." Technological "The main objective ... is the determination of the ... and Not ready 1 technological and economic feasibility." economic

feasibility

Among the 2 SMEs beneficiaries from the topic "sustainable food production and processing" participating to Action 9, 1 SME has been assessed as not investment ready and 1 SME as almost investment ready. As a consequence, this analysis might be biased and limited because only two SMEs, which has been assessed.

Almost ready SMEs

According to the available data, the three almost ready SMEs from the abovementioned topic were established in 1815, 1979 and 2013. According to the expert there is no available balance sheet data from one almost ready SME (founded in 1979). This company appears to be established just for the reason of this project. While the recently founded almost ready SME shows a steady growth in revenue, no data is available for EBITDA and margin. The more mature SME was founded in 1815 is characterised through a continuous growth in revenue, EBITDA and margin. While the owners' equity for the rather young SME is on average approximately 740 k€ per year, it reaches on average approximately 1.38 M€ per year in the more mature SME. When assessing the financial strategy, the almost ready SMEs have defined the revenue model but it is necessary to validate it in the market. Within their financial plans, the SMEs tent to be fully aware of all costs inherent in their business model. Moreover, the almost ready SMEs have a clear financing strategy and are currently in advanced discussions to achieve it. Despite the optimistic outlook, the almost ready SMEs are also seeking for debt capital. Obviously, a risk is seen that

more funding for completing project scale-up is needed. Clinical trials and certification delays increase financial risks. As a consequence, since the sustainable food production and processing topic is characterised by a MIC and a high amount of financing needs (e.g. to put it into measureable numbers and linking it to this sample - external financing from 1.9 to 25 M€ are expected to be needed in the next 5 years), SMEs in this field appear to be tailored trained to access finance. It will be important to train the entrepreneurs how to convince investors for the high amount of money requested having cost-intensive production facilities and especially the high risks of delays regarding required clinical tests, evaluations and certifications in mind. In particular, the fundamental of sustainability has to be taken into consideration. However, at this stage it is important to highlight that there have been assessed just three almost ready SMEs.

Within the topic, the almost ready SMEs tend to have from one to eight owners on average. Interesting is that the oldest SME has the highest numbers of owners (8). The other rather younger companies had only one or two owners on average across the recent years. Nevertheless, the number of owners does not change at all across the recent years for all SMEs operating in the sustainable food production and processing topic. Interestingly, the most mature SME tend to have a high average number of FTEs (FTEs including owners and employees) over the last years (150) while the other two almost ready SMEs appear to be rather understaffed in this sphere (0 and 2 FTEs on average).

Regarding the historical type of finance, the almost ready SMEs tend to count heavily on own sources of finance (e.g., owners' capital) which appears to be linked to the years of establishment. In parallel, based on the figures they appear to be rather immature regarding alternative sources of finance. After 2012, only the “youngest” SME has been engaged intensively with private finance 900 k€, which draws attention to the importance of this source of finance especially for young sector newcomers.

Private financing Granted SMEs/value Number Year of including FF, BA, VC IRL of SMEs establishment ≥ < 2012 2012-2014 < 2012 2012-2014 2012 Ready ------1979, 1 SME with on 900 k€ (SME Almost 20 k€ on 3 1815 average 6 M€ - founded in ready average 2013 per year 2013) 38 k€ on Not 1 2006 75 k€ average per - - ready year

Overall, only one (the youngest SME) beneficiary has been supported by private investors. However, the other SMEs state to be in contact with potential investors at the time of the assessment and are optimistic to raise funds in the near future. Furthermore, the almost ready SMEs intend to also seek debt finance too. The most mature company relied heavily on debt financing in the past. Therefore, as remarked by experts the almost ready SMEs need tailor-made guidance to attract investors and more importantly make them aware. Overall, these SMEs do not appear to be informed adequately about potential opportunities related to alternative sources of finance. In particular, guidance in business development through a longer period of time appears to be important for this specific topic to highlight the sustainable strengths and decrease the linked weaknesses within this approach from an investor's point of view.

In addition to the above analysis related to the historical type of finance of SMEs operating in the sustainable food production and processing topic, when assessing the leadership team of the SMEs, the experts highlighted that there appears to be experience in line with the objectives of all SMEs. Only little experience in business and financial management exists in the younger SME. They have a strong gap to fill related to the financial management and management control. In addition, especially the newcomer seems to lack a clear leadership role and someone who can give them the right support in order to manage a potential scale up. However, all almost ready SMEs are very experienced in the business and management related sphere. While the most mature SME has no advisory group in place, the other assessed SMEs take advantage of such a guidance. At this point experts stress that it might lack important technical or business knowledge. However, all SMEs know their product's readiness level or Technology Readiness Level (TRL) precisely and know how to achieve next levels including the time frame. Nevertheless, since entering the SME instrument the almost ready SMEs state that they have not been able to climb the readiness level. According to the entrepreneur whilst a little early in assessment the funding has been key in developing the robust demo. In addition, funding is important for especially the newcomer. Accordingly, this observation stresses the importance of business development guidance, which needs to be topic tailored especially for new novices. In addition, the idea of sustainability has to be taken into consideration which could represent a serious disadvantage from specific investor's point of view.

The almost ready SME appears to reflect a very good understanding of the IP management process and the leadership team knows how to protect their IP and has implemented the IP strategy. In line with the abovementioned conclusion, this examination also stresses the high need of tailor-made guidance, which needs to be addressed in an initial review. Especially in the sustainable food production and processing topic, IPR plays an important role in the long run, which is of high interest to certain type of investors. Entrepreneurs' attention has to be drawn on this key indicator when becoming investment ready.

From the market perspective, the majority of SMEs participating to Action 9 and operating in the sustainable food production and processing topic do know which customer segments to serve and which segments to ignore. However, according to the experts, further market research and engagement is necessary. This holds true for the marketing plan and the distribution channels for all SMEs too. In addition, according to the experts more emphasises should be on the Unique Selling Proposition. For this reason, additional information might be requested to SMEs operating in the sustainable food production and processing topic in order to direct them towards relevant programmes for elaborating and wide spreading the Unique Selling Proposition convincingly. According to the available data, the almost ready SME appears to know exactly their main competitors (direct and indirect, potential for substitutes, new entrants etc.).

Not ready SMEs

According to the available data, the not ready SME was founded 2006. Interestingly this SME grows approximately 100 % each year on average in terms of revenues. EBITDA appears to be volatile between 2 k€ and 19 k€ from 2012 to 2015. When assessing the financial strategy in- depth, the not ready SME has defined the revenue model but it is necessary to validate it in the market. Within their financial plans, the SME tends to be fully aware of all costs inherent in the business model, however the expert stresses that the not ready SME needs to be more cost efficient in the value chain and has to create added value perceived by the potential customer. Moreover, the beneficiary has a first version of the financial plan but there are several questions that need to be clarified. In particular, the financial plan and analysis of the not ready SME contains some methodological errors. The not ready SME knows what types of financing exist currently, but do not exactly know the most suitable ones for their needs and how to access 65

them. However, the not ready SME is aware that they need public and private investors (they are already in contact with potential ones). So far, the main financial source of the not ready SME has been banks (approximately 30 k€ per year on average in the last four years). As a consequence, since the sustainable food production and processing topic is characterised by a MIC and a high amount of financing needs (e.g. to put it into measureable numbers and linking it to this sample - external financing from 1.9 to 2.6 Million Euro are expected to be needed in the next 5 years), SMEs in this field need to be tailored trained to access finance. It will be important to train the entrepreneurs how to convince investors for the high amount of money requested having cost- intensive production facilities in mind. In particular, the fundamental of sustainability has to be taken into consideration. However, at this stage it is important to highlight that there have been assessed just two SMEs.

Within the topic, the ready SME shows on average 9 owners. The number of owners does not change significantly across the recent years for the SME operating in the sustainable food production and processing topic. Interestingly, across the recent years the not ready SME tends to have on average 1 FTEs (FTEs including owners and employees).

Regarding the historical type of finance, the not ready SME instrument beneficiary operating in the sustainable food production and processing topic has been relying primarily on grants (approximately 38 k€ per year on average the last four years respectively from 2012 to 2014) and bank debt (approximately 30 k€ per year on average the last four years), as well as tend to count on own sources of finance too (e.g., owners' capital). After 2012, the SME has not engaged more intensively with private finance.

Overall, no beneficiary has been supported by private investors. However, the SME affirmed to be in contact with potential investors at the time of the assessment and are optimistic to raise funds in the near future. Therefore, as remarked by experts the not ready SME needs tailor-made guidance to attract investors. Overall, these SMEs do not appear to be informed adequately about potential opportunities related to alternative sources of finance. In particular, guidance in business development through a longer period of time appears to be important for this topic to highlight the sustainable strengths and decrease the linked weaknesses within this approach from an investor's point of view.

In addition to the above analysis related to the historical type of finance of SMEs operating in the sustainable food production and processing topic, when assessing the leadership team of the SMEs, the experts highlighted that there appears to be experience in line with the objectives of all SMEs and that there is few experience in business and financial management. They have a strong gap to fill related to the financial management and management control. In addition, it seems they lack a clear leadership role and someone who can give them the right support in order to manage a potential scale up. However, the assessed SME has an advisory group but experts stress that it might lack important technical or business knowledge. In addition, the SME knows the product's readiness level or Technology Readiness Level (TRL) precisely and know how to achieve next levels including the time frame. Nevertheless, since entering the SME instrument the not ready SME has not climbed the readiness level. According to the entrepreneur whilst a little early in assessment the funding has been key in developing the robust demo. Accordingly, this observation stresses the importance of business development guidance, which needs to be topic tailored. In addition, the idea of sustainability has to be taken into consideration which could represent a serious disadvantage from specific investor's point of view.

The not ready SME appears to reflect a very good understanding of the IP management process and the leadership team knows how to protect their IP and has implemented the IP strategy. In line with the abovementioned conclusion, this examination also stresses the high need of tailor- 66

made guidance, which needs to be addressed in an initial review. Especially in the sustainable food production and processing topic, IPR plays an important role in the long run, which is of high interest to certain type of investors. Entrepreneurs' attention has to be drawn on this key indicator when becoming investment ready.

According to the experts, further market research and engagement is necessary. This holds true for the marketing plan and the distribution channels for all SMEs too. In addition, according to the experts more emphasises should be on the Unique Selling Proposition as well even assessed not ready SME implements feedback from customers and technical advisors in the activities. For this reason, additional information might be requested to SMEs operating in the sustainable food production and processing topic in order to direct them towards relevant programmes for elaborating and wide spreading the Unique Selling Proposition convincingly. In particular, the not ready SME detected significant key execution risks in the sphere of an appropriate marketing plan and commercialization strategies. However, the not ready SME appears to know exactly their main competitors (direct and indirect, potential for substitutes, new entrants etc.). Once again, these findings stress the importance of business development guidance.

Sustainable food production and processing (SFS) - Phase 2

Number of IRL Focus QUOTED sentences from the abstract SMEs Ready 0 - - "In this project, the technology will be completed and Almost ready 1 Technology qualified for commercialization and a licensing system will be implemented for market introduction." Technological and "The main objective ... is the determination of the ... Not ready 0 economic technological and economic feasibility." feasibility

The almost ready SME of Phase 2 was founded in 2007 and since that it shows a steady climbing in revenue while data for margin appears to be not available and EBITDA kept decreasing over the last years. There are only few owners and on average 6 FTEs. There is a supervisory board consisting of two persons familiar with the founders - business and research expertise is provided. However, unfortunately regarding the historical financing no data was provided from the SME.

The revenue models are thought through and they are currently being tested in the market. Overall, the company has a clear financial plan. They know precisely the most suitable type of financing for their company and how to access it - Non-dilutive investments that serve social goals.

There is one serial entrepreneur, but the founders have a long experience in the sector. Passion of the management team appears to be pretty high - They love their innovative work. They clearly want to make the world a better place. Furthermore, the leadership team has access to all relevant infrastructure and resources to develop the product to the required maturity level for commercial adoption. A plan with key resources required to scale up is outlined too. They appear to be professionals with lots of experience in the market.

The marketing plan is well thought through and is ready for introduction. A moderate volume of sales for demonstration purposes has already taken place. There is a (1) value creation model and (2) a cost-plus model. Furthermore, the well-networked management team is able to get (and process) feedback from the market on a constant basis.

Overall, risk is seen in regard to the long processes in this sector - acceleration is necessary! In addition, this SME also faces a lack of financial buffer. Consequently, this Phase 2 beneficiary of the sustainable food production and processing sector draws important attention to the high potential impact of alternative sources of finance to survive short-term financial needs which can be linked to several tests and certification delays. Tailor-made long-term guidance and presentations with respect to the above mentioned risks has to be shaped when introducing such SMEs to investors.

2.4.2.10. Low carbon energy systems (SIE)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 4 1 Almost ready 15 2 Not ready 0 0

Low carbon energy systems (SIE) - Phase 1

Number IRL Focus Quoted sentences (from the abstract) of SMEs Feasibility within the breadth of the water network requirements as well as product range analysis is now needed before heading to the standard Market (2) product development and industrialisation (will Multifaceted trigger a phase-2 request) feasibility (1) Ready 4 The project is a game-changing innovation for Probably tidal energy: it will result in reliable, cost-efficient technology- blades... The two collaborating SMEs will develop product (1) clean, affordable technology solutions that increase security of supply of electricity, protect the environment and grow the economy. The aim of the feasibility study is to investigate the market positioning and commercialisation strategy of the proposed upscaled CHP ... followed by the SME Phase 2 project. The project will allow to meet the forging industry needs and its application on the European market Market (11), will obtain significant energy saving on European mostly combined energy networks. We estimate our kit will allow to Almost with: 15 save about 210 MWh/year... ready Financial (4) The project will play an important role in creating Technical (4) a new European industry The two collaborating Unclear (2) SMEs will develop clean, affordable technology solutions (The) project aims at scaling up a green, affordable and straightforward process for the industrial synthesis of graphene-based materials for their use as new project... Not ready 0 - -

Investment ready SMEs

The SMEs implementing the four ready projects have been created in 1997, 2008, 2010 and 2012 in a broad spectrum of areas (tidal-turbine blades and offshore wind-turbine blade structures, geothermal energy, electrically powered actuators, picoturbines for power production). The corresponding staff is 51, 18, 5 and 5, while the 2014 revenue varied from 0.18 to 2.57 M€. The older the company, the larger in terms of staff and revenue. For the four projects, staff is increasing from 2012 to 2014; the revenue is increasing also in two of the cases. Approximately 69

17% of the funds are raised from external private funding (FF+VC+BA) in 2012, a fall from the 26% before 2012. Owners’ contribution increases from 58% before 2012 to 59% in the 2012-14, grants from 6% to 9% and other sources from zero to 11%. The shares of external private funding and for grants are due to one of the four projects. A total of 7.6 M€ has been input into the 4 firms from all sources before 2012 and 10.6 M€ between 2012 and 2014.

Two of the companies are aiming at enhancing market perspectives of the corresponding projects, one aim at multiple issues including market, while one project abstract is unclear as to the aims or activities to be pursued. The estimated external financing required for the next three years by the SMEs themselves varies from 3 to 15 M€ by SME. In two of the four projects, further funding from Phase 2 of the SME I is foreseen in the CPs. In one case the CP proposes 10 M€ in two phases, initially in quasi-equity and then in medium term debt. In another case the CP proposes 5 million funding from debt and quasi-equity. In the third case the SME is searching also for 10 M€ through private equity. In one case, the assumptions on which are based the revenue forecasts are questioned.

The four projects present minor issues on the leadership team and staffing problems. The experts recommend a comprehensive human resources development plan, staffing risks identification and a scientific board establishment. The experts also recommend fine tuning of the industrial costing model, acceleration of product certification and preparation for contract negotiations. TRLs for these projects are 6 or higher: In three cases there are multiple products at different levels of technology readiness varying from 6 to 9.

As to the market readiness, in one case the expert underlines the need for clarification of the market dynamics and customer requirements, while in another case the dependence on Phase 2 funding is paramount for the advancement of the project. In this case, exploration of new market segments, drafting of a comprehensive commercialisation strategy, scaling up and down of product versions are scheduled for the next Phase of the SME Instrument. To improve financial management, the experts recommend securing the revenue streams and the financing of capital expenditures and working capital.

Almost ready SMEs

The SMEs implementing the 15 almost ready projects have been created between 2000 and 2012 in 10 cases, 3 firms where established in 2013-14 and two before 2000. As to the employment in 2014, 11 SMEs employ less than 10 staff, one employee between 11 and 20, another three 40 to 50 people. Among the 15 SMEs, 6 declare zero 2014 revenue, another 6 a revenue below 1 M€ and three 5, 7 and 17 M€ each. For four of the projects, revenue is increasing from 2012 to 2014. A total of €3.3 million has been inputted from all sources to the firms before 2012 and 42.8 M€ between 2012 and 2014, of which 65% comes from bank debt. Private financing (FF+VC+BA) was raised by 3 projects and brought 0.4 M€ before 2012 and 2.4 M€ between 2012 and 2014. Grants passed from 1.4 M€ before 2012 to 4.6 M€ in the period 2012-2014 (6 projects).

The future needs of the firms are estimated by themselves at 72.6 M€. In 12 cases the CPs are providing for funding by Phase 2 of the SME Instrument, and nine of them from other public funding sources. VCs are mentioned as potential funding sources in six cases and BAs in two. Private investors, banks and own funds are also included as potential sources. The TRLs of the 15 projects vary significantly. In seven cases they are at 7 or higher, in another three at 6, in two lower than 6, in two it is composed of high TRL components but the system appears unready and in one more there are no data available.

Deficiencies of the leadership team are identified in the lack of adequate support in sales and marketing and in financial issues. The absence of an advisory board distinctive of the administrative board is noticed in some cases, sometimes in the same cases the evolution of roles presents problems. Need for IP strategy is noticed once. The experts focus on the integration into the leadership team of the missing expertise.

The experts identify several problems with the analysis of the time frame for the scaling up of the project, the cost and the risks involved. The value proposed to the customer’s needs to be more clearly defined and also be validated. Scaling up is foreseen for the next Phase; the experts require clear definition of costs and risks in advance as well as the needed human resources (including their training). TRL improvement during Phase 1 is appreciated variably: some experts consider that this not the goal of Phase 1, while other notice that TRL rose without indicating whether this is due to SME Instrument support or to internal activities of the SME. The expert, in addition to technical recommendations, raises the need for field tests and validation of the system performance.

Market readiness suffers from various flows: relations, mainly to customers, customer segmentation, distribution channels, detailed go-to-market strategy, in depth analysis of the value created and its understanding by the market. Feedback in not systematically collected in all cases and relations insufficiently developed. There is room for improvement for competitors’ analysis. Experts suggest the involvement of potential customers in co-financing the development of the innovation, the identification of the most effective distribution partners and system, continuous market and technology watch, acceleration of the time-to-market strategy, clear definition of priority targets and strategic alliances in the value chain.

The revenue model needs clarification in a few cases, the revenue streams need to be more realistic and in any case be validated. Detailed costing is necessary to be credible and cash flow management supported by professional financial officers. The experts recommend the elaboration of a realistic financial strategy, taking into account partnerships and cost elasticities, the establishment of performance indicators, the investigation of the customers’ perception of the product’s value, considering alternative options for the next round of fund raising.

Private financing Numb Granted SMEs/value including FF, BA, Total financial input PHASE Year of er of VC 1 establishment SMEs 2012- 2012- 2012- < 2012 < 2012 < 2012 ≥ 2012 2014 2014 2014 4 1997, 2008, 439 k€ 968 k€ 2 M€ 1.8 M€ 7.7 M€ 11.1 M€ 2010, 2012 (basically (88% to (two of (one of Ready one of the one of the 4 the 4 firms) the 4 firms) firms) firms) 15 1932, 1997, 1.4 M€ (5 4.5 M€ 400 k€ 2.4 M€ 3.3 M€ 42.8 M€ 2003, 2005, firms, 3 (6 firms, (2 (1 firm, (66% 2007(2), only 1 firms one gets comes Almost 2009(3), 2011, exceed exceeds with 68%) from ready 2012(2), 2013, 100 k€) 1 M€) equal bank 2014(2) amoun debt) ts)

The comparison of the financial inputs justifies to some extent the readiness levels of the first four projects, since they have proportionally received in the ante-2012 period most of the necessary funding and they have probably matured earlier. This trend is confirmed not only in the total funding figures but also in the private ones. On the opposite, the investment ready projects win much more grants.

Low carbon energy systems (SIE) - Phase 2

Number IRL of SMEs Focus Quoted sentences (from the abstract) Phase 2 Objective of the business innovation project is providing market readiness for our Mobile Energy Systems (Li-ion Market, Ready 1 batteries ‘on wheels’) …. The business innovation project is technical a necessary pre-requisite for company growth to 200 m EUR turnover and 380 personnel in 2020. The objectives of this project focus on solving the technical and commercial bottlenecks identified during Phase 1 of the project. Market, The Integrated Roof Wind Energy System (IRWES) Almost ready 2 technical …addresses European and global challenges such as reducing the risk of carbon “lock-in”. …prepare the IRWES mass-market launch, positioning it as a game changing solution on the European market.

Investment ready SMEs

Among the three SIE Phase 2 projects examined is this Action only one is found investment ready by the experts. The SME has developed mobile energy sources in co-operation with academic and business partners with batteries that can be charged from rooftop photovoltaic installations, wind power or combined heat and power plants or from the grid. It had a revenue in 2014 of 0.4 M€ and employed 4 staff. All its income throughout the years of reference came for grants and the future needs are estimated by the SME at 6 M€.

The leadership team of the project is satisfactory, according to the expert’s assessment; one experienced entrepreneur is heading the firm while advisory bodies including legal ones are in place. The TRL is estimated at 7 and the team targets level 8 for 2017, after validation work. The firm has five patent and one design applications. Scale up is secured and costs are analysed in detail. The business plan provides for cash flow forecasts until 2021. The project requires an input from VCs of up to 5-6 M€ for a total budget of 22 M€, with priority investment in international scaling up after the product, process and distribution channels having been tested and optimised.

The expert recommends the implementation of market research in the target markets, signing advisory agreements with board members, securing VC funds, testing and validating distribution channels, enhancing the KPIs, formalising the advisory board and lowering manufacturing unit cost.

Almost ready SMEs

There are two projects under this category. One is focusing on power saving in using heat exchangers and the other one in decentralised power production by roof windmill systems. The corresponding SMEs are established in 2005 and 2012. The 2014 revenue amounted 0.1 M€ in one case and 3.1 M€ in the other and the employment 3 and 12 staff. No international sales are noticed. The smaller firm shows only owners’ funding and some grants, while the other one has received substantial amounts from private sources. The companies estimate their future needs from 2.5 M€ to 10 M€.

Leadership teams are composed of experienced persons although, in both cases some reinforcement is required, mainly in management control and market analysis. The presence of VCs in one of the managing boards secures the financial management.

The TRL, in the first case is considered as “coherent” with the stage of funding, while in the second is 6, expected to rise soon at 7. Both companies are working to build their relations with customers and suppliers, and to develop full understanding of costs and risks. IP management does not raise any concern. In one case, the access to full scaling up is underway while in the other there are strategic risks from the expected certification from the EC.

Both companies need to enhance their market analyses and knowledge of customer segments and distribution channels. Better value understanding is required also in both cases. The go-to- market strategy is lacking completely in one case, which needs to improve competitors’ analysis, and requiring improvement in the second. Revenue models and revenue streams need also to be defined in both cases. Some confusion is noticed on the sources of financing.

The experts recommend the companies to deepen their market analysis to better focus market segments and applications, elaborate new quantified business plans identifying the financing sources and related scenario, as well as alternative production and business models. The financial needs in the first case are estimated at 3 M€ at a first stage and 5-10 M€ at the second stage. In the second case an amount of approx. 2.5 M€ is mentioned with very little further clarification.

Private financing Total financial Numb Year of Granted SMEs/value including FF, BA, input IRL er of establishme VC SMEs nt 2012- 2012- 2012- < 2012 < 2012 < 2012 ≥ 2012 2014 2014 2014 Ready 1 2005 250 k€ 173 k€ - - 250 k€ 173 k€ 1.9 M€ Almost 2.6 M€ (1 2 2005, 2012 411 k€ 1.2 M€ 1.3 M€ (1 4.7 M€ ready SME) SME)

2.4.2.11. Space research and development (Space)

IRL Number of SMEs in Phase 1 Number of SMEs in Phase 2 Ready 0 0 Almost ready 3 0 Not ready 1 0

Space research and development (Space) – Phase 1

Number IRL Focus Quoted sentences from abstract of SMEs Ready 0 - - “project is expected to boost the company growth in terms of turnover, launch in the market EBIDTA and employment opportunity” an innovative service “develop a feasible and flexible service, Provide a low-cost drastically increasing the availability of and fast service opportunities for in-orbit testing for the Almost ready 3 Provide a whole technology developers’ demonstrator of the community” technology: modular; “will enable space missions to have low-cost and for access to highly efficient, compact and different sectors. light-weight new generation technologies at a lower price” “focus on exploring the business opportunity related to the automatic Elaborate product tracking, by developing an innovation Not ready 1 business plan strategy supported EGNOS/Galileo and Sentinels that will lead to patent registration”

Among the 4 SMEs beneficiaries from the Space topic participating in this action, 3SMEs have been assessed as almost ready and 1 non-ready.

SMEs have been created in 1987, 2009, 2013 and 2014 and are respectively from Italy, Spain, Germany and from Portugal. All the teams are very small: they have 1, 5, 2 and 2 co-owners and 5, 4, 1 and 1 FTEs in 2014. In the almost ready companies, experts have felt that the team should be strengthened, since in all cases, companies depend mostly on its CEO. Even though the team leader has a good knowledge of the market and industry related needs, a strong and full dedicated business/commercial profile is missing and it would be also desirable to create an Advisory Board involving key partners of the company (in fact, two of them has some type of advisory board although its members do not have a remarkable experience in the industry). Nevertheless, it is important to note that in two projects, the founders have previous experience in set up a new venture.

In the 4 companies, technology/basic system prototype has been demonstrated in an operational environment but and only one of them has some patents. One of the projects is supported by ESA Business Incubator Centre, that grants some economic program for improve the Intellectual Property. 74

Regarding knowledge and approach to the market, the more mature projects have provided evidence of a large potential market and real interest of future customers, while the youngest project has still to perform this study in order to properly define its value proposition. The youngest company is classified as not ready and almost ready but both are in a very early stage. This classification is consistent with the goal set by the company in Phase 1 (study / survey intended to verify the market opportunity and define the business plan).

The 3 almost ready companies have already introduced its product in the market, and have sales in 2014 of 320 k€, 434 k€, 110 k€ and a positive margin also in 2014 from 55.5%, 12% and 9% and two of the them have a positive EBITDA (2104) close to 12 k€. Only one of them has international sales (70%). About the two more mature companies, we can see that one of them has developed proprietary technology to apply in the market through various vertical solutions, while the other, has varied over the years, its business model and now offers mainly different services. In both cases, the companies proposed in the proposal to define and add new services to increase sales.

Private financing including FF, Numb Year of Granted SMEs/value BA, VC IRL er of establishme 2012- SMEs nt < 2012 2012-2014 < 2012 2014 Almost 1987, 2009 1 company 3 - - - ready and 2013 with 117,5 k€ Not 1 2014 - 50 k€ - - ready

The contribution of the partners to the company is relatively low: the average of the three companies (from the foundation until 2014) is 22 k€. Any of them has not FF, Business Angels or Venture Capital investments. Two of them has historically some debt financing (75 k€ and 50 k€) and two of them has received some public funds (50 k€ and 117 k€). The financing needs for the next five years range between 400 k€ and 2,2 M€.

In two of almost ready cases, the expert thinks that the companies have a clear financial plan (profit and loss, balance sheet, cash flow) but they do not know how to cover the financial needs. The expert recommends Phase 2 financing instrument.

2.4.3. Investment readiness analysis by other dimensions

In order to further analyse the information extracted from the available data, questionnaires and capacitation plans, and establish any significant variations, all sectors/topic were analysed along a set of critical dimensions or parameters, as described in the following paragraphs.

Innovation cycles and technology readiness levels Significant differences in experts' perspectives regarding the IRLs were detected among SMEs in different innovation cycles. As indicated in Table 10, SMEs’ with a shorter innovation cycle (e.g. ICT) tend to have a higher IRL than SMEs with a longer innovation cycle, both for SMEs from Phase 1 and from Phase 2. In addition, having a closer look into the IRL construct, significant differences were also highlighted in the product and financial readiness. SMEs with a shorter innovation cycle tend to have higher technology/product readiness as well as financial readiness than SMEs with a longer innovation cycle.

Phase 1 Phase 2 IRL SIC MIC LIC SIC MIC LIC Ready 42% 23% 25% 33% 50% 50% Almost ready 52% 68% 64% 67% 50% 50% Not ready 6% 9% 11% - - -

Table 10 - IRLs assessed by experts for different innovation cycles.

Figure 3 summarises the IRL assessed by the experts for SMEs in Phase 1 and in Phase 2 according to the different innovation cycles.

Phase 1 (130 SMEs) Phase 2 (17 SMEs) LIC LIC 11% 64% 25% 50% 50% (n=55) (n=8) MIC MIC 9% 68% 23% 50% 50% (n=44) (n=6) SIC 6% 52% 42% SIC (n=31) 67% 33% (n=3) Figure 3 - IRLs assessed by experts for different innovation cycles.

As indicated in Table 11, market readiness levels appear to be similar between MIC and LIC SMEs, but much higher for SMEs with short innovation cycle. The figure emphasises that SMEs with MIC and LIC tend to be similar IRL while SMEs with SIC tend to show higher readiness levels across all readiness dimensions - leadership team capability, product readiness, market readiness and financial strategy. Moreover, all IRL dimensions are higher for ready SMEs than for other SMEs (see Table 12).

Phase 1 Phase 2 IRL dimensions SIC MIC LIC SIC MIC LIC Leadership team capability 83,23% 78,41% 76,30% 84,44% 87,78% 86,67% Product readiness 83,59% 76,17% 74,86% 86,67% 84,76% 88,93% Market readiness 79,52% 71,25% 72,86% 80,00% 82,08% 85,31% Financial strategy 80,65% 73,00% 72,95% 80,00% 72,67% 87,50%

Table 11 - Assessed IRL dimensions for different innovation cycles.

Phase 1 Phase 2 IRL dimensions Ready Ready Other SMEs Other SMEs SMEs SMEs Leadership team capability 91% 79% 93% 87% Product readiness 89% 77% 93% 87% Market readiness 89% 74% 88% 83% Financial strategy 89% 75% 91% 81%

Table 12 - Assessed IRL dimensions for ready SMEs and other SMEs. With respect to the differences in perception of the IRLs between experts and SMEs in different innovation cycles, Table 13 outlines that the gap of perceptions and subjectivity of assessments between experts and SMEs was smaller for SIC SMEs (approximately 8%) than for SMEs with MICs and LICs (approximately 11-12%). However, this finding was not supported for Phase 2 beneficiaries. The difference was approximately 7% for SIC SMEs and 6% when assessing MIC SMEs and 7% for LIC SMEs. Nevertheless, these findings underpin that especially SMEs’ projects in Phase 1 with a MIC and LIC require further interaction between SMEs and investors at early stages. These findings also suggest that there is a stronger need for a better understanding of the factors such as supply and value chain dynamics, regulatory concerns where appropriate, as well as challenges associated with market demonstration, amongst the MIC and LIC project/companies. According to the experts, on average, SMEs with a MIC project, which are not investment ready, need to increase their product readiness level with a focus on access to development and scale up facilities. Since entering the Phase 1 of the SME Instrument, they most often do not climb the product/ service readiness level. In addition, analysis reveals that on an average, SMEs with LIC that are not investment ready do no tend to work with advisory boards to complement their leadership team capabilities and do not know much about distribution channels to reach their customer segments.

Phase 1 Phase 2 IRL dimensions SIC MIC LIC SIC MIC LIC SMEs’ perception 90% 87% 85% 90% 88% 94% Experts’ assessment 82% 75% 74% 83% 82% 87%

Table 13 - Average IRLs per innovation cycles according to experts and SMEs. Table 14 shows that 35% of the projects in the Phase 1 are in TRL 6 but more than 47% are at higher levels while 41% and 35% correspond to these TRLs in Phase 2. Low TRL was not forbidding a project to be assessed as ready, but it is exceptional. On the other side, high TRLs are not securing investment readiness in any case. The frequency of high TRLs was higher among “ready” than “almost ready” projects. Most unidentified TRLs are found in the group of “almost ready” LIC and MIC projects. In Phase 1, the share of projects with TRL 7 to 9 exceed 65% in ready and almost ready SIC, while it falls to 40% in almost ready LIC projects. For Phase 2 projects, the corresponding shares are 100% and 25%. The technological readiness was most probably linked to the type of innovations exploited by these projects and the time or investment required for their maturity. 77

Investment ready Almost ready Not ready TRL – Phase 1 Total SIC MIC LIC SIC MIC LIC SIC MIC LIC TRL equal or <5 13 - 1 - 2 4 4 1 - 1 TRL 6 46 1 3 7 4 10 13 - 3 5 TRL 7 33 6 3 1 4 10 8 1 - - TRL 8 and 9 28 4 3 4 5 5 6 - 1 - Mixed TRLs or unidentified 10 2 - 2 1 1 4 - - - Total 130 13 10 14 16 30 35 2 4 6

Table 14 - Number of projects for TRL, innovation cycle and investment readiness (Phase 1).

Investment ready Almost ready Not ready TRL – Phase 2 Total SIC MIC LIC SIC MIC LIC SIC MIC LIC TRL equal or <5 1 - 1 ------TRL 6 7 1 - 2 - 2 2 - - - TRL 7 4 - 1 2 1 - - - - - TRL 8 and 9 3 - 1 - 1 1 - - - - Mixed TRLs or unidentified 2 - - - - - 2 - - - Total 17 1 3 4 2 3 4 - - -

Table 15 - Number of projects for TRL, innovation cycle and investment readiness (Phase 2).

Short Innovation Cycles (e.g. ICT) According to the classification used in Action 9, only ODI (High risk ICT innovation) belongs to the SIC category. 31 SMEs were assessed from Phase 1 and 3 SMEs from Phase 2. The majority of SMEs from Phase 1 have a financial need ranging from 2 to 3 M€ while SMEs from Phase 2 have a financial need ranging from 2 M€ (1 SME) to 5-6 M€ (2 SMEs). In addition to the more general remarks of better cost control, validation of the business model, customer segmentation and opening to international competition, the capacitation plans are stressing the need for clear plans for upgrading the TRL, value proposition, business model and a detailed preparation of the distribution models.

The experts underline SMEs’ high dependency on EC funding and the need for guidance for finding investors. Moreover, it is important to improve the composition of the leadership team and task allocation among team members, the IP management, the market surveys and analyses, while more emphasis should be given to testing the assumptions of the business plan and to the collaboration with system integrators. A common remark was the lack of CFOs/senior finance directors and SMEs were recommended to recruit experienced financial managers as well as senior marketing managers with international experience. SMEs with a short innovation cycle project, which are not investment ready, were asked to increase their product readiness level as well as market readiness level. They tend not to have defined clear IP management process and lack skills with respect to IP protection.

Medium and long innovation cycles (e.g. NMP, Health) In the NMP topic, 6 SMEs out of 16 are investment ready. The financial needs range from 0.25 M€ to more than 30 M€, and the use of VCs was proposed in 9 cases. The high dependency on SME Instrument Phase 2 and the need to find alternative funding sources was marked here too. Furthermore, the experts underlined the need for industrial and market expertise in the leadership teams, for the demonstration of market engagement, the validation of the product

value in the market, for accurate calculation of scaling up costs, and for understanding the changes in the global competitive landscape. This aligns with the typical nature of MIC and LIC activities, where it takes longer to demonstrate to the market the value proposition, combined with alignment with the supply and value chain positioning and addressing any regulatory concerns. In Phase 2, one of the two SMEs examined was investment ready. During development phase, grants are suggested for financing; subsequently, as the company demonstrates higher readiness levels, equity investors can be sought.

Finally, in the energy topic of Phase 1, there are 4 ready SMEs out of 19 assessed. The financial needs range from 0.8 to 15 M€ by project and the suggestions are to address VCs. For almost ready projects, experts' remarked the need for more realistic cost and revenue estimations, customer segmentation and networking, organisation of the sales channels, verification of the proposed products/devices through further studies and testing, while acquiring marketing, sales and financial skills. In Phase 2 there are 3 almost ready projects with needs varying from 2.5 to 10 M€. Experts suggested financing through VCs as appropriate in two cases and banks and/or equity funding in the third case.

The combined examination of the investment readiness with innovation cycles raises interesting issues. The overview of the projects examined in all topics led to some general remarks, as discussed below:

 SMEs with medium innovation cycles, which are not investment ready, need to increase their product readiness level with a focus on access to development and scale up facilities. Since entering the SME Instrument they did not climb the product/ service readiness level. This is evident from the Phase I capacitation plans while Phase 2 data is still not available.  SMEs with long innovation cycles, which are not investment ready, tend not to have an advisory board to complement their leadership team capabilities and do not know through which distribution channels their customer segments will be reached and which are most cost-efficient.  Not ready projects do not always have access to development and scale up facilities to take the prototype through to a pre-industrial production stage. Furthermore, they appear not to be able to analyse costs and risks for a mass production of their innovative service or technology. Finally, they do not know through which distribution channels their customer segments will be reached and which ones are most cost-efficient. Furthermore, they are aware that there is room for improvement for their Go-to-Market Strategy. They do not know how their product/service will be sold and who the buyers of their product/service are. Accordingly, they have not established a well-defined inter-departmental strategic plan and plan for marketing.  Experts also stated that, on average, the beneficiaries in the leadership team in some topics tend to be less prepared to review and adapt their roles to make the company (more) successful in few years. In addition, their ability to analyse costs and risks appear to be limited.

Year of establishment The sample of projects assessed in Phase 1 shows a dispersed distribution based on the year of constitution of the corresponding SMEs: 9 SMEs established before 1990, 38 companies established in 2006 or earlier, 45 between 2007 and 2011, and 38 between 2012 and 2015. For Phase 2, 5 SMEs established before 2006, 8 SMEs between 2007 and 2011 and 4 established between 2012 and 2015.

Phase 1 Number of Average year of Average Investment Almost Not Year range SMEs estab. IRL ready ready ready ≤ 1990 9 1948 73% 1 8 - 1991-2000 14 1996 74% 4 7 3 2001-2006 24 2004 76% 7 14 3 2007-2011 45 2009 79% 18 24 3 2012-2015 38 2013 75% 7 28 3 Total 130 37 81 12

Table 16 - Investment readiness level vs year of establishment (Phase 1).

Phase 2 Number of Average year of Average Investment Almost Not Year range SMEs estab. IRL ready ready ready ≤ 1990 0 N/A N/A N/A N/A N/A 1991-2000 2 1996 88% 1 1 - 2001-2006 3 2004 82% 1 2 - 2007-2011 8 2009 88% 5 3 - 2012-2015 4 2013 78% 1 3 - Total 17 8 9 -

Table 17 - Investment readiness level vs year of establishment (Phase 2).

For Phase 1, it is noticed that younger firms (≥2014) are not ready or almost ready for investment. Only one SME established before 1995 was investment ready, while others are almost ready. The average year of establishment for ready SMEs is 2006, for almost ready is 2002 and for not ready is 2005. For Phase 2, the majority of ready SMEs were established between 2007 and 2011.

There is no significant correlation between the year of establishment and the IRL of SMEs.

However, it is worth mentioning that younger SMEs appear to need stronger guidance to climb the IRL. In this sphere a “capacitation” through mature CFOs or board members with a strong specific background and network appear to be vital and boosting. These additional board members might also increase the firm's reputation.

FTEs For Phase 1, the average number of employees is 18 for investment ready SMEs, and 4 FTEs for the not ready SMEs. It is noticed that ready SMEs tend to cluster in two groups of dimensions, around 5 and around 21 employees.

Phase 1 Number of Investment Average FTEs Average IRL Almost ready Not ready FTEs range SMEs ready ≤ 5 52 3 73% 12 31 9 6-10 32 8 75% 7 23 2 11-20 26 16 81% 9 16 1 21-50 13 30 81% 7 6 - ≥ 51 7 134 76% 2 5 - Total 130 37 81 12

Table 18 - Investment readiness level vs FTEs (Phase 1).

Phase 2 Number of Investment Average FTEs Average IRL Almost ready Not ready FTEs range SMEs ready ≤ 5 2 0 81% - 2 - 6-10 2 7 89% 2 - - 11-20 9 15 82% 4 5 - 21-50 2 30 88% 1 1 - ≥ 51 2 59 90% 1 1 - Total 17 8 9 -

Table 19 - Investment readiness level vs FTEs (Phase 2). Revenues As outlined in the table below, in Phase 1 35 almost ready SMEs and 9 investment ready SMEs are characterised through comparatively low revenue (≤ 150 k€) which represents the largest group based on this revenue analysis. On average, SMEs with higher revenues tend to be more investment ready. SMEs with revenues above 10 M€ appear not to be interested any more in alternative sources of finance or grants. It is also noted that SMEs from Phase 2 are growing faster in terms of revenues with respect to Phase 1 SMEs.

Phase 1 Number of Average Average Investment Almost Not Revenues range SMEs Revenues IRL ready ready ready (k€) ≤ 150 50 28,40 k€ 73% 9 35 6 150-500 30 300,38 k€ 76% 9 16 5 500-2.500 30 1.058,18 k€ 80% 13 16 1 2.500-10.000 17 5.401,64 k€ 79% 6 11 - ≥ 10.000 3 21.583,33 k€ 68% - 3 - Total 130 37 81 12

Table 20 - Investment readiness level vs Revenues (Phase 1).

Phase 2 Number of Average Average Investment Almost Not Revenues range SMEs Revenues IRL ready ready ready (k€) ≤ 150 4 3,99 k€ 87% 2 2 - 150-500 4 289,89 k€ 85% 2 2 - 500-2.500 5 746,26 k€ 84% 3 2 - 2.500-10.000 4 5.189,86 € 84% 1 3 - ≥ 10.000 0 N/A N/A N/A N/A N/A Total 17 8 9 -

Table 21 - Investment readiness level vs Revenues (Phase 2).

Phase 1 Phase 2

Ready Almost ready Not ready Ready Almost ready Revenues (M€) 1,16 1,63 0,15 0.78 2,41 Revenues growth rate 36% 33% 28% 51% 46% FTEs growth rate 17% 28% 31% 28% 25%

Table 22 - Average revenues for different IRL and growth rate in revenues and FTEs.

2.4.4. Historical type of finance

This section reports on the impact of historical types and levels of finances on SME’s IRLs. SMEs have all raised various types of finance before applying for funding from SME Instrument, including grants, angel or VC investment, and debt finance, as main sources. As a reminder, the groups of SMEs that have been assessed include:

Number of Investment Almost Not Age SIC MIC LIC SMEs ready ready ready >10 years 45 3 16 26 10 30 5 5-10 years 52 11 18 23 25 23 4 <5 years 50 20 16 14 10 37 3 Total 147 34 50 63 45 90 12

Table 23 - Number of SMEs analysed by historical type of finance (includes Phase 1 and 2).

Present analysis includes each type of financing from owners' capital, other equity sources, grants and bank debt. The figures extracted here are those provided to the experts by the SMEs. They were requested to provide figures in several categories: funding cumulated until 2012, funding raised in 2012, in 2013, in 2014, and 2015 (expected), as most of the assessments were made in the year 2015. Average figures take into account only SMEs that provided a figure, and results were averaged among answers received. The analysis does not take into account SMEs that did not provide specific information.

With reference to the classification according to year of establishment, the following criteria was adopted:

 >10 years are SMEs established between 1909 and 2005  5-10 years are SMEs established between 2006 and 2010  <5 years are SMEs established between 2011 and 2015

Age Labels Sum previous years 2012 2013 2014 2015 Answers 21 24 21 24 22 >10 Total funds 11.012,62 14.677,11 14.102,12 21.951,83 16.453,41 Av. funding 647,80 667,14 742,22 997,81 822,67

Answers 30 21 19 22 19 5-10 Total funds 7.104,09 3.313,47 4.766,97 5.980,51 6.518,64 Av. funding 244,97 165,67 280,41 299,03 383,45 Phase1 Answers 12 16 21 23 23 <5 Total funds 1.392,50 877,99 366,28 1.156,10 2.386,72 Av. funding 232,08 79,82 18,31 57,80 119,34 Number of answers 63 61 61 69 64 Answers 3 3 3 3 3 >10 Total funds 211,01 350,09 439,38 499,51 684,58 Av. funding 70,34 116,70 146,46 249,75 342,29

Answers 6 4 3 4 4 5-10 Total funds 1.043,51 1.493,08 630,00 563,99 1.411,19 Av. funding 173,92 373,27 315,00 188,00 470,40 Phase 2 Phase Answers 4 3 2 4 3 <5 Total funds - 141,85 120,00 1.096,85 410,85 Av. funding 70,92 120,00 365,62 205,42 Number of answers 13 10 8 11 10

Table 24 - SME averages owners' capital by age – values in k€. 82

Table 24 shows that oldest SMEs with Phase 1 projects tend to gather much more funding from owners than the younger ones (2 to 3 times more in comparison between more than 10 years and 5 to 10 years SMEs in Phase 1). This probably reflects that entrepreneurs from older companies have a higher capacity of personal investment. The lowest years of financing have been 2012 for SMEs above 5 years old, and 2013 for SMEs under 5 years old. Projects in Phase 2 attract raise use less owners' capital, this might also be explainable by the much lowest number of sample of SMEs. Also, projects in Phase 2 need much higher level of funding, that can be more from VCs and bank sources.

Sum previous Age IRL 2012 2013 2014 2015 years Ready 1.618,63 664,68 681,69 1.349,99 866,57 >10 Almost ready 321,01 679,09 791,34 920,48 887,79 Not ready 188,01 217,60 178,65 26,62 125,36 Ready 202,08 274,84 368,02 284,76 567,68 5-10 Almost ready 290,33 151,02 210,75 308,38 333,24 Not ready 89,00 20,00 20,00 20,00 28,00 Ready 720,00 176,59 15,50 145,48 52,71 <5 Almost ready 134,50 34,83 25,13 91,47 153,41 Not ready - - 3,01 4,00 66,11

Table 25 - SME owners' capital (averages) by age and investment readiness level – values in k€.

Table 25 shows that not ready SMEs have owners that have been less contributing with their own funds. By comparing this with the table below (looking at FF), lack of personal financial commitment appears to provide an indication for investment readiness. The more owners have been personally investing, the readier the company is.

Age Labels Sum previous years 2012 2013 2014 2015 Answers 8 7 6 6 6 >10 Total funds 433,84 1.935,98 1.212,10 1.225,00 160,00 Av. funding 144,61 645,33 606,05 612,50 80,00

Answers 9 8 10 12 9 5-10 Total funds 1.107,02 1.099,78 1.285,27 2.983,14 2.067,17 Av. funding 158,15 219,96 183,61 331,46 344,53 Phase1 Answers 7 6 8 3 12 <5 Total funds 80,00 80,00 230,00 615,00 1.152,93 Av. funding 80,00 80,00 76,67 205,00 144,12 Number of answers 24 21 24 21 27 Answers 2 2 2 2 2 >10 Total funds - - - - - Av. funding

Answers 3 5 5 5 5 5-10 Total funds 800,47 225,01 150,00 229,61 607,42 Av. funding 400,24 225,01 150,00 229,61 303,71 Phase 2 Phase Answers 4 1 1 - 1 <5 Total funds - - - - - Av. funding Number of answers 9 8 8 7 8

Table 26 - FF investment by age and per year – values in k€.

Table 26 above reporting on FF investments shows a big difference between Phase 1 and 2 projects, Phase 1 use quite a lot FF funding while in Phase 2 SMEs doesn't look for such kind of financing. Also, it is noticed a decrease in Phase 1 projects from oldest SMEs between 2012 and 2015, and an increase for younger SMEs. It is also noticed that younger companies benefit more from FF than the older ones in 2014-2015. It globally remains much lower than owners' capital funding.

Age IRL Sum previous years 2012 2013 2014 2015 Ready 225,07 - - - - >10 Almost ready 14,81 793,00 1.090,00 612,50 100,00 Not ready 193,96 349,98 122,10 - 60,00 Ready 183,21 23,89 123,59 249,78 166,75 5-10 Almost ready 312,50 422,00 236,32 438,53 655,87 Not ready - 11,00 6,50 21,00 40,00 Ready - - - - 50,00 <5 Almost ready 80,00 80,00 76,67 205,00 157,56 Not ready - - - - -

Table 27 - SME averages FF finance by age and investment readiness – values in k€. Table 27 shows that older Investment ready SMEs have attracted no FF funds at all since 2012. Almost ready companies are those who attract more funds from FF. Not ready SMEs are those that have also attracted less FF money (except the older ones). Almost ready projects for SMEs older than 5 years have secured good amounts of FF funding.

Age Labels Sum previous years 2012 2013 2014 2015 Answers 2 - 1 1 4 >10 Total funds 15.016,68 - 2.317,78 60,00 - Av. funding 7.508,34 2.317,78 60,00

Answers 8 7 6 9 6 5-10 Total funds 1.508,77 2.504,98 770,22 5.275,30 2.589,75 Av. funding 301,75 626,24 256,74 879,22 863,25 Phase1 Answers 8 8 8 13 16 <5 Total funds 230,06 230,00 432,06 2.973,04 7.813,00 Av. funding 115,03 76,67 144,02 330,34 651,08 Number of answers 18 15 15 23 26 Answers 1 1 1 1 2 >10 Total funds - - - - - Av. funding

Answers 6 5 7 6 5 5-10 Total funds 580,85 21,21 2.209,26 1.503,41 1.821,56 Av. funding 580,85 21,21 736,42 751,71 910,78 Phase 2 Phase Answers 4 2 2 2 2 <5 Total funds - 985,92 563,38 985,92 2.777,19 Av. funding 985,92 563,38 985,92 1.388,59 Number of answers 11 8 10 9 9

Table 28 - Averages of BA investment, by age of SME and per year – values in k€.

Table 28 shows irregular Business Angel funding each year, and very low also for Phase 1 projects. No BA funding in Phase 2 projects for the oldest SMEs. It can be noticed that Business angels are more regularly funding 5-10 years SMEs, even though they should be more focused on younger ones. An important increase of average funding is noticed in 2014 and 2015.

Age IRL Sum previous years 2012 2013 2014 2015 Ready 90,67 - - - - >10 Almost ready 14.926,01 - 2.317,78 60,00 - Not ready - - - - - Ready 284,90 506,54 539,86 692,12 790,33 5-10 Almost ready 475,00 500,03 280,18 1.313,00 1.250,00 Not ready - - - - - Ready - - 432,69 742,96 727,00 <5 Almost ready 115,03 76,67 65,03 309,13 764,47 Not ready - - - - -

Table 29 - Averages of BA investment by age and by investment readiness – values in k€.

Not ready SMEs didn't secure Business Angels (BA) funding. The majority of the BA funding concerns the almost ready SMEs and mainly medium and long term innovation cycle projects. Age Labels Sum previous years 2012 2013 2014 2015 Answers 9 2 2 4 6 >10 Total funds 2.565,99 124,97 198,00 100,00 235,79 Av. funding 641,50 62,48 99,00 100,00 78,60

Answers 12 6 7 7 7 5-10 Total funds 11.005,59 1.051,03 4.145,00 4.074,55 3.165,00 Av. funding 1.100,56 350,34 829,00 814,91 633,00 Phase1 Answers 7 8 7 9 11 <5 Total funds 2.000,00 1.101,00 1.301,00 3.937,47 8.033,00 Av. funding 2.000,00 367,00 433,67 656,25 1.004,13 Number of answers 28 16 16 20 24 Answers 2 1 1 2 2 >10 Total funds 1.323,41 809,17 862,18 973,95 973,95 Av. funding 1.323,41 809,17 862,18 973,95 973,95

Answers 6 6 6 5 4 5-10 Total funds 2.691,64 6.909,01 2.750,97 4.090,52 3.860,92 Av. funding 672,91 1.381,80 687,74 1.022,63 1.286,97 Phase 2 Phase Answers 4 1 1 1 1 <5 Total funds - - - - - Av. funding Number of answers 12 8 8 8 7

Table 30 - Averages of VC funding, by age of SME and per year – values in k€.

In Table 30 we see a very low level of VC funding for SMEs older than 10 years (both Phase 1 and 2) as we'll see below that they do prefer bank debt. Companies under 5 years old raise no VC funds for Phase 2 projects but they do benefit from a good level of VC funding most of all between 5 and 10 years old in both Phases, although the numbers of concerned SMEs remain low. Age IRL Sum previous years 2012 2013 2014 2015 Ready 300,00 - - - - >10 Almost ready 1.800,00 220,00 165,00 100,00 67,89 Not ready 165,99 -95,03 (1 SME) 33,00 - 100,00 Ready 1.156,02 1.141,80 670,86 957,95 934,00 5-10 Almost ready 692,09 765,06 1.020,71 737,72 730,93 Not ready - - - - - Ready - 551,00 551,00 1.056,67 1.504,00 <5 Almost ready 2.000,00 275,00 375,00 255,83 995,00 Not ready - - - - 50,00

Table 31 - Averages of VC funding, by age and by Investment readiness - values in k€.

The not ready projects have not raised much VC funding. The negative figure in 2012 comes from a not ready MIC SME and seems to correspond to a repayment of VC shares (there is the same negative figure in bank debt). Most of the VC funds concern ready LIC SMEs between 5 and 10 years old. The highest numbers concern investment ready SMEs aged 5-10 years.

Age Labels Sum previous years 2012 2013 2014 2015 Answers 15 19 19 23 18 >10 Total funds 6.865,95 41.822,47 44.567,12 53.614,10 49.830,37 Av. funding 686,60 2.460,15 2.621,60 2.553,05 3.114,40

Answers 12 9 11 11 13 5-10 Total funds 4.798,83 750,97 1.516,02 3.006,03 1.445,72 Av. funding 436,26 93,87 151,60 300,60 131,43 Phase1 Answers 7 7 9 12 11 <5 Total funds 40,00 198,11 276,00 746,77 608,25 Av. funding 40,00 99,05 69,00 106,68 76,03 Number of answers 34 35 39 46 42 Answers 2 4 4 4 4 >10 Total funds - 225,47 13,60 818,74 153,27 Av. funding 112,73 6,80 409,37 76,63

Answers 5 5 5 5 5 5-10 Total funds 1.500,00 2.259,05 3.481,53 4.634,87 8.926,01 Av. funding 1.500,00 2.259,05 3.481,53 4.634,87 8.926,01 Phase 2 Phase Answers 4 1 1 1 1 <5 Total funds - - - - - Av. funding Number of answers 11 10 10 10 10

Table 32 - Averages of Bank Debt, by age of SME and per year - values in k€. Older SMEs clearly concentrate their Phase 1 external funding on Bank debt. One SME (LIC) in Phase 1 has had a particularly high level of debt (16-20 M€ from 2012 to 2014). As always, startups (under 5 years old) have difficulties to raise bank loans. However, this source of funding was the one gathering the most answers from SME respondents, and it was also the type of finance increasing regularly since 2012, in terms of average, in terms of amount and also in terms of beneficiaries.

Age IRL Sum previous years 2012 2013 2014 2015 Ready 1.095,59 4.788,67 4.478,90 4.006,93 4.778,39 >10 Almost ready 457,17 1.126,14 1.362,10 1.755,77 1.503,17 Not ready 197,72 -197,72 (1 SME) - 47,83 - Ready 862,72 1.195,03 1.375,13 1.698,97 2.001,35 5-10 Almost ready 332,05 116,64 131,20 148,33 62,00 Not ready 162,50 18,40 42,48 51,69 27,50 Ready - 99,05 103,00 206,51 50,00 <5 Almost ready 40,00 - 35,00 70,94 89,71 Not ready - - - 50,00 20,00

Table 33 - Averages of Bank Debt, by age and by Investment readiness - values in k€. Not ready SMEs, no matter the age of the SME, are those that have gathered lower (sometime none) level of bank debt. The negative figure concerns 2 companies (including one in Phase 2), but it seems again related to repayment. The older the company and more they were ready for investment, the more they have been able to raise bank loans. Amounts seem to be more related to the age of the company than to the readiness of the project.

Age Labels Sum previous years 2012 2013 2014 2015 Answers 12 14 17 20 14 >10 Total funds 6.225,48 4.628,51 3.985,78 2.945,14 6.847,16 Av. funding 518,79 330,61 234,46 147,26 489,08

Answers 17 19 23 26 27 5-10 Total funds 9.000,89 6.035,66 8.130,55 10.389,07 12.061,71 Av. funding 529,46 335,315 369,57 399,58 463,92 Phase1 Answers 4 7 15 30 29 <5 Total funds 815,59 276,95 1.537,37 4.241,28 8.824,60 Av. funding 203,89 39,57 102,49 141,38 304,29 Number of answers 33 40 55 76 70 Answers 2 2 1 3 3 >10 Total funds 660,81 90,22 80,00 938,14 1.222,00 Av. funding 330,41 45,12 80,00 327,71 407,22

Answers 3 6 7 5 6 5-10 Total funds 900,62 555,77 1.560,84 2.086,89 5.093,62 Av. funding 300,20 92,63 312,17 418,38 848,94 Phase 2 Phase Answers - 1 2 2 4 <5 Total funds - 100,00 103,09 167,34 1.750,44 Av. funding - 100,00 51,55 83,67 583,48 Number of answers 5 9 10 10 13

Table 34 - Averages of grants, by age of SME and per year - values in k€.

Support from public entities for older companies is decreasing in average amount each year, although more companies are benefiting from grants. On the contrary average amount of grants are increasing for younger companies as well as the number of beneficiaries. More attention was given to the youngest companies.

Age IRL Sum previous years 2012 2013 2014 2015 Ready 547,86 197,74 276,77 207,27 473,56 >10 Almost ready 447,70 298,18 234,61 117,88 514,33 Not ready 234,11 134,10 23,90 21,90 70,00 Ready 847,25 354,46 510,02 592,63 726,74 5-10 Almost ready 256,21 196,29 310,37 281,92 272,41 Not ready 62,50 20,58 30,74 133,82 50,00 Ready - 15,00 34,23 102,11 61,88 <5 Almost ready 211,97 34,57 94,23 138,44 424,88 Not ready - - - - 50,00

Table 35 - Averages of grants, by age and by Investment readiness - values in k€.

Young SMEs with ‘not ready’ projects have not secured any grant so far (until 2014), other than the SME Instrument grant secured. Grants for older companies running almost ready and not ready projects have been decreasing in 2012-2014 (same as VC trend for almost ready projects in more 10 years SMEs). Grants for younger companies running investment ready and Almost ready projects have been increasing in 2012-2014.

Financed Age Owners FF BA VC Bank Grants Year 2012 667,14 645,33 - 62,48 2460,15 269,87 >10 2013 742,22 606,05 2317,78 99,00 2621,60 222,13 2014 997,81 612,50 60,00 100,00 2553,05 142,71 2012 165,67 219,96 626,24 350,34 93,87 335,31 5-10 2013 280,41 183,61 256,74 829,00 151,60 411,59

Phase1 2014 299,03 331,46 879,22 814,91 300,60 399,03 2012 79,82 80,00 76,67 367,00 99,05 20,40 <5 2013 18,31 76,67 144,02 433,67 69,00 87,47 2014 57,80 205,00 330,34 656,25 106,68 132,59 2012 116,70 - - 809,17 112,73 45,11 >10 2013 146,46 - - 862,18 6,80 80,00

2014 249,75 - - 973,95 409,37 327,71

2012 373,27 225,01 21,21 1381,80 2259,05 92,63 5-10 2013 315,00 150,00 736,42 687,74 3481,53 312,17

Phase 2 Phase 2014 188,00 229,61 751,71 1022,63 4634,87 417,38 2012 70,92 - 985,92 - - 100,00 <5 2013 120,00 - 563,38 - - 51,55 2014 365,62 - 985,92 - - 83,67

Table 36 – Average type of finance by age and per year - values in k€.

Table 36 shows that more mature companies show a much higher level of owners' investment in Phase 1, which seems logical, since they have financial leverage, their company being successful for more than 10 years (usual studies base their success rate after 3 and after 5 years of exploitation). The extreme difference with Phase 2 projects in companies older than 10 years (5 companies) is that only one raised VC funding but for 809 k€. If we compare in numbers, companies over 10 years old both in Phase 1 and 2 projects, mainly used bank loans, grants and injected owners funding. If we compare in values, 24 companies injected owners funding in 2012 for an average of 667 k€, 7 used Friends and family for an average of 645 k€, 2 used VC funding (but with a repayment which explains the low amount), 19 used bank loans for an average of 2.460 k€ and 18 did get an average of 270 k€ in grants. Then in amounts older companies do get a far higher level of bank loans, owners and friends and family, as well as (in 2013) a good level of angels funding. The particularly high level of Business Angel level funding in 2013 concerns only one SME.

5-10 years old companies in Phase 1 get more Business Angels and VC funding, but in Phase 2 preferred source is VC and bank loan again. Business Angels funding should be mainly dedicated to companies under 10 years old, which is the case for Phase 2 project only under 5 years old and Phase 1 between 5 and 10 years old. VC funds have been preferring companies between 5 and 10 years in terms of average amounts invested per company for both Phases. One big investment in 2014 makes younger SMEs amount in Phase 1 rising to 656 k€. It is surprising that companies under 5 years old in, Phase 2 get only BAs, as VCs financial capacity was much greater and for more mature projects.

Alternative financial instruments have not been mentioned (such as venture debt, series C, IPO although they are very interesting investment tools).

2.4.5. Financial strategies and required future external finance

Type of required external finance Analysis of future funding requirements for 130 companies (Phase 1) and 17 companies (Phase 2) through the capacitation plan was carried out by the experts. Of the 147 companies surveyed, 4 have not defined the type of finance forecasted for the next years. Fort other 4 companies, experts have not suggested a specific type of finance. (Thus, this analysis of future trends in financing is based on 141 companies (122 Phase 1 and 17 Phase 2). In terms of type or required external finance, experts recommend public funds/grants to 48.36% of SMEs from Phase 1 (in particular, to apply for Phase 2 of the SME Instrument, understanding this as a continuation of the previous Phase 1). This percentage drops to 23.5% for companies Phase 2. In 14 projects of Phase 1, public funds/grants were the unique source of future funding recommended, while in other cases it was proposed to supplement it with other types of financing.

In 21.31% of companies from Phase 1, BA funding was suggested, and of these, more than half were young companies with less than 5 years. However, no expert has proposed BA funding for Phase 2 companies. This is likely to be reflective of the fact that business angels usually do not fund larger amounts as required for Phase 2 companies and a hybrid funding model may be more appropriate.

Age Public FF BA VC IPO Bank Corporate Venture Debt >10 16 - 5 10 - 8 7 - 5-10 21 - 7 20 1 5 5 3 <5 22 - 14 18 1 3 3 2 Total 59 - 26 48 2 16 15 5

Table 37 – Type of future funding for companies of Phase 1 by age.

Age Public FF BA VC IPO Bank Corporate Venture Debt >10 ------5-10 - - - 1 - - - - <5 4 - - 12 2 4 6 - Total 4 - - 13 2 4 6 -

Table 38 - Type of future funding for companies of Phase 2 by age. Experts recommended Venture Capital as a source for 39.34% of companies from Phase 1 and percentage rises to 76.47% for the companies of Phase 2. As for the maturity of the companies, experts recommended this type of funding for the companies with less than 10 years, both for projects in Phase 1 and Phase 2. For more mature Phase 1 projects, experts propose bank financing (13.11%) or funding through agreements with industrial partners (12.30%). The percentage increases substantially for companies of Phase 2 to 23.52% and 35.29% respectively.

Topic Public FF BA VC IPO Bank Corporate Venture Debt BG 2 - - 2 - - 1 - BIOTEC 1 - 1 3 - 1 1 - DRS 1 - 2 4 - - - - ODI 14 - 6 9 1 4 1 1 IT 9 - 4 2 - - 2 1 NMP 10 - 3 7 - 3 2 1 PHC 6 - 2 6 - 2 2 - SC5 3 - 3 6 - 1 4 - SFS 2 - - 1 - 1 - - SIE 10 - 3 6 1 4 2 2 Space 1 - 2 2 - - - - 89

Total 59 - 26 48 2 16 15 5

Table 39 - Type of future funding for companies of Phase 1 by sector.

Topic Public FF BA VC IPO Bank Corporate Venture Debt BG ------BIOTEC - - - 1 - - 1 - DRS ------ODI 1 - - 2 - - 1 - IT - - - 3 - - 1 - NMP 1 - - 1 - 1 1 - PHC 1 - - 3 2 1 - - SC5 ------1 - SFS 1 - - 1 - 1 - - SIE - - - 2 - 1 1 - Space ------Total 4 - - 13 2 4 6 -

Table 40 - Type of future funding for companies of Phase 2 by sector. In terms of sectors/call topics there is not a clear trend.

Cycle Public FF BA VC IPO Bank Corporate Venture Debt SIC 14 - 6 9 1 4 1 1 MIC 18 - 7 18 1 7 8 2 LIC 27 - 13 21 - 5 6 2 Total 59 - 26 48 2 16 15 5

Table 41 - Type of future funding for companies of Phase 1 by cycle of innovation. The long innovation cycle companies need more funding, and for these SMEs experts propose to combine more types of funding for covering the funding requirements.

Cycle Public FF BA VC IPO Bank Corporate Venture Debt SIC 1 - - 2 - - 1 - MIC 1 - - 4 - 2 3 - LIC 2 - - 7 2 2 2 - Total 4 - - 13 2 4 6 -

Table 42 - Type of future funding for companies of Phase 2 by sector by cycle of innovation.

IRL Public FF BA VC IPO Bank Corporate Venture Debt Ready 17 - 4 14 2 5 4 2 Almost ready 36 - 20 30 - 9 9 3 Not ready 6 - 2 4 - 2 2 - Total 59 - 26 48 2 16 15 5

Table 43 - Type of future funding for companies of Phase 1 by investment readiness level.

IRL Public FF BA VC IPO Bank Corporate Venture Debt Ready 2 - - 6 2 2 2 - Almost ready 2 - - 7 - 2 4 - Not ready ------Total 4 - - 13 2 4 6 -

Table 44 - Type of future funding for companies of Phase 2 by investment readiness level.

Only in 4 cases experts suggested an IPO (2 for companies of Phase 1 and 2 for companies of Phase 2). Such four SMEs are in the ODI, SIE and PHC sectors and all are companies with less than 10 years. In all cases, the SMEs were assessed as being investment ready.

In general terms, the experts have not recommended new funding instruments. Only some references to debt instruments can be found, and these do not propose support and financing activities from incubators or accelerators, crowd funding etc.

Future finance forecasted by SMEs and suggested by experts Following tables provide views on the amounts of finance expected by SMEs within the next 5 years and the amount of funding suggested by experts. These figures provided by SMEs and experts have been averaged in some cases (e.g., when an SME forecasted to raise between 5 and 10 M€, we counted 7,5 M€). Considering both Phase 1 and Phase 2, the average suggested finance was 3.65 M€ for SMEs with short innovation cycles, 4.04 M€ to MIC firms and 7.34 M€ to LIC companies.

Table 45 shows the amount of external finance expected and recommended according to the different topics. The topic for “Greener and more integrated transport” (IT), had an anomaly due to one SME seeking 200 M€ (confirmed by the expert). (Within brackets, figures represent the value as if the SME with 200 M€ was not taken into account). If we omit this SME, the highest average of expected funding for Phase1 projects comes to Eco-innovation and sustainable raw material supply with 11,50M€.

The highest average for funding expected by SME in Phase 2 is in the field of "Diagnostics devices and biomarkers" (PHC) and, more generally, considering the amount of finance suggested by the experts, SMEs belonging to LIC sectors require on average more than SMEs from MIC sectors. The same is for the latter with respect to SMEs from SIC sectors, here represented by ODI SMEs. The same proportion among the innovation cycles is found when considering the SMEs’ expectations. This demonstrates that LIC companies needs more funding, and as shown in Table 42 experts proposed to combine more types of funding for covering the funding requirements.

The highest expected funding encountered in the Eco-innovation field (SC5), is mainly due to 2 SMEs (from Phase 1), respectively expecting 50 and 40 M€. For these 2 cases (almost ready projects), experts are recommending a lower level of investment (respectively 3,5 and 5 M€) in the next 5 years. The 2 SMEs represent the strongest divergence between amount expected by the SME and recommended by the expert. Most divergences concern almost ready SMEs from Phase 1. Differences range from 10 M€ below to 46 M€ above the expected fund raising. In 9 cases experts recommend more than 10 M€ less than the SME's expectations (2 are in Phase 2, 3 are investment ready projects, others are almost ready and Phase 1, 3 are in Eco-Innovation, 2 in Diagnostics devices (Biotec) and 2 in High risk ICT innovation (ODI).

In 2 cases, experts' recommendation upgrade SMEs' expectation by more than 10 M€ (both are almost ready Phase 1 projects in Diagnostics devices and in Nanotech - NMP). Beyond the SME with 200 M€ of recommended finance, the next two SMEs for whom experts have recommended higher level of funding are again 2 almost ready projects from Phase 1 (30 and 20 M€ recommended, almost same amount as forecasted by the SMEs themselves).

Phase 1 Phase 2 Topic Expected by Expected by SMEs Suggested by expert Suggested by expert SMEs ODI 5,06 3,43 7,00 5,66 Average SIC 5,06 3,43 7,00 5,66 BIOTEC 3,94 2,46 3,00 3,00 SFS 10,13 6,19 - - SIE 5,69 3,80 6,08 3,83 SC5 11,50 3,91 6,50 7,50 BG 2,18 3,40 - - Average MIC 6,69 3,95 5,19 4,78 NMP 7,45 6,95 1,50 4,04 PHC 5,47 4,10 44,04 33,23 Space 1,59 1,66 - - DRS 5,60 4,32 - - IT 14,30 (1,92)10 15,68 (1,50) 4,00 4,40 Average LIC 6,88 (4,41) 6,54 (3,71) 16,51 13,89 Total average 6,63 5,08 6,56 5,60

Table 45 - Amount of external finance by topic expected and recommended (M€).

Table 46 and Table 47 show the amount of external finance according to the readiness levels and the year of establishment of SMEs. Figures confirm the fact that ready SMEs need more finance having reached a level to scale up. With regard to the age of companies, it is noticed that firms with less than 10 years require more finance, especially those in Phase 2 (for those SMEs, experts recommended to go to Venture Capital investors – see Table 38). The higher difference between expected and recommended funding relates to Phase 2 projects in younger SMEs. For Phase 1 projects older SMEs are those needing the highest level of funding (in this case it is more related to development activity).

Phase 1 Phase 2 IRL Expected by Suggested by expert Expected by SMEs Suggested by expert SMEs Ready 11,59 (6,05) 10,66 (4,74) 19,45 17,24 Almost ready 5,94 3,59 5,03 4,40 Not ready 2,51 1,28 - -

Table 46 - Amount of external finance by IRL expected and recommended (M€).

Phase 1 Phase 2 Age Expected by Suggested by expert Expected by SMEs Suggested by expert SMEs >10 10,72 (4,81) 8,78 (2,80) 3,45 3,74 5-10 6,02 4,75 19,50 17,39 <5 5,99 3,73 10,53 4,80

Table 47 - Amount of external finance by age expected and recommended (M€).

10 Into brackets are values omitting the SME with 200 M€ suggested finance.

2.5. Capacitation plans analysis

Following the assessment of SMEs using the questionnaires, experts produced customised analysis and a set of recommendations, which were captured in the capacitation plans. Recommendations were made against each of the dimensions – leadership team, market, management and financials. Recommendations to the investment ready SMEs Leadership team capability For Phase 1 projects, hiring of appropriate high level staff is the most frequent recommendation in this part. The qualifications that were frequently recommended included financial ones, followed by marketing, sales and commercial and in very few cases the operating and technical. Many firms use external experts as advisors in specific activity areas but haven’t considered the establishment of a formal board as necessary.

Team work, while essential in the management process, is particularly required at the level of product standardisation, contract negotiation, scanning for opportunities. In several cases the experts recommended the preparation of comprehensive human resource development plans (or strategic plan for staffing), including recruitment process, policy for attracting talent and for motivating the key staff members through the participation to the stock capital of the firm as well as monitoring mechanism. For Phase 2 projects the experts found a few deficiencies in staffing the SMEs and recommended in one case the hiring of CFO and COO for scaling up the business, or a senior manager with specialised market experience, or even advisors in standards and regulations. In other cases, they recommended the formalisation of cooperation agreements with advisory board members or the creation of stock option incentives for staff.

Product readiness While in most Phase 1 projects the capacitation plan is indicating the TRL of the innovative product, there are projects in which the reference to TRL is missing and the expert requires its identification. Few plans indicate that during the implementation of the Phase 1 contract considerable progress is made in raising the TRL. Others note that raising the TRL is not the aim of Phase 1 and therefore reporting is out of scope. Much of what is necessary for the moving up of the TRL is expected to be done in Phase 2. In few cases, the experts propose to continue the RTD activity for upgrading of the products (i.e. through EUROSTARS) and/or to accelerate testing of the product and facilities, proceed to product certification, upgrade the TRL for all the components while clarifying the steps upwards, improve the maturity of the innovation, industrialise the technical solution and accelerate industrial validation. The establishment of an intellectual property strategy or the enhancements of the IP valuation emerge less frequently than expected. Experts require a sound implementation of Customer Relations Management and the preparation of a CRM related strategy, better documentation of client relationships, better knowledge of the sectoral coverage, make explicit the value of the proposed technology, improvement of end user experience and a strategic approach of the international markets. Of great concern is costing, for which various recommendations for in depth analysis, better refinement or fine tuning at the industrial stage, and continuous cost control are proposed. Calculating customer acquisition cost and customer life time value in various scenarios goes beyond the usual costing practices. Risks are also considered in many cases and analysis matrices 93

are required. Risk management and monitoring, risk minimising strategies with alternative scenarios are in general issues that attract the increasing attention of experts.

In Phase 2 the experts focus on customer acquisition activities, risk control and minimisation, mainly linked to the scaling up of the business. They recommend the establishment of comprehensive and feasible plans for accessing the necessary resources for scaling up as well as the establishment of “risk analysis matrices” to demonstrate risk awareness and control to the potential investors.

Market readiness Focus on more strategic clients and on product lines with the highest value, mapping areas of presumably higher potential, detailed market analysis and competition surveillance, drafting or reviewing marketing strategies and sales plans for the new product, intensifying competition surveillance are tools recommended for enhancing market readiness of the Phase 1 projects. Further customer and market segmentation is necessary in some cases, while focus on customers that would adopt the innovation faster and reduction of the time to payment may give advantages to the SME. Feedback and integration of customers' information is always considered of prime importance. Early price validation by sales or contract confirmation may accelerate the pace of innovation adoption. Building a brand value is a specific strategic orientation for the SME that may contribute greatly to improve the performance indicators. Benchmarking competitors or similar product/service providers constitutes a good tool for raising the level of competitiveness. Closely related to this is the adoption of performance indicators on the cost of sales, hit ratio etc. (depending on the product/service and market). The experts propose the reinforcement of distribution and sales networks, the training of distributors, specifically in the target markets, while offering incentive schemes to distributors to increase their loyalty. A particular set of techniques to face present and mostly near future competition is the building of “barriers to entry”. When the IP protection is poor and copying or counterfeiting is easy, the investors are asking for other barriers to entry to the innovation market the IPRs. Early participation of those shaping the regulatory framework, such as environment, health and energy administrations, into the continuous consultation process, when the market is regulated, is wise and preventive of undesirable effects. In Phase 2, most of the experts’ remarks are concentrated on market readiness. At the present stage, development of relations is a critical issue while in the process of building. In a few cases the companies face the partners on a case by case basis, in other they try standard approaches. The experts suggested securing suppliers and train main customers (accounts) or hiring a business development team.

Customer segmentation in some cases needs more targeted efforts, an evidence based strategy and a plan to turn clients into strategic partners. Distribution channels are already in place in some cases or under construction in other. The experts urge for targeting markets, define clearly value proposition and decide whether to build own channels or create a network of distributors. Developing support activities to clients may become a powerful tool for pointing out the value proposition. In several cases the go-to-market strategy suffers from various uncertainties which lead to suggestions for more marketing efforts, development of marketing infrastructures, expanding beyond national borders as well as prioritising feedback from the stakeholders. The competitor analysis seems satisfactory in most cases but in one or two of them a need for comprehensive analysis and risk matrix analysis is established.

Overall, enhancing market readiness requires focusing on the speed of market entrance, more effective IP management to ensure leadership, accelerating relations development with distributors and promotion of demo units, more market research and market testing, customer targeting and internationalisation.

Financial strategy A frequent recommendation of the Phase 1 capacitation plans in the field of securing financial resources is the successful application to Phase 2 of the SME Instrument (approximately 2/3 of the CPs). The beneficiaries of the Phase 1 are found at different levels of maturity, both in the technology and the market areas. The older among these beneficiaries have already been supported by equity funds or bank loans, the younger have received only venture funding and therefore they would need different combinations of private and public funding in each case. A sound financial strategy is supported by, amongst others, in depth knowledge of the cost structure in the SME, reliable forecasts of future prices of inputs and competitors' costs. Many CPs require an appropriate data base with such information. A long term strategic plan addressing key resources and facilities is important for attracting external investors. The revenue model is based also on such data and needs to be linked to profitability goals. The CPs suggests the validation of the revenue model at European and international levels. The dialogue with international investors may be critical in this respect and lead to a total revenue scheme. Due diligence and forecasts are required regularly, as well as disciplined cash flow management, documentation of the value policy and revision whenever necessary, preparation of realistic balance sheets, adequate depreciation-amortisation process, and more anticipative financial forecasts. Regular contacts and discussion with potential investors and financial intermediaries is another recommendation found in the CPs. An investment deck or a corporate financial advisor can facilitate and sustain these relationships and secure both investment spending and working capital availability. Scanning the environment for alternative funding sources is also a critical task, particularly for younger SMEs. For this reason, some CPs propose the SME to address particular European or other R&I programmes (Eurostars, InvestHorizon, INNEON etc.) and participate in pitching events. The Phase 3 of the SME Instrument is addressing specifically this area in relation to the commercialisation of the new products/services.

In Phase 2 revenue streams and cash flow management raise some concerns: although the business plans supply most necessary information, more accurate assumptions and estimations are needed in some cases and tested eventually, Cash flow could be managed more effectively with additional experts, CFOs or financial controllers, and reduce risks of not raising capital on time. Revenue models are on the testing process but in some cases the target pricing could be questioned. Initial calculations of costs have to be adapted on time to industrial implementation and to market entry conditions. As to the financial resources, the experts suggested either the use of VCs or a combination of grants with bank loans and revenue increases. In some cases, the level of maturation of the project requires the exploration of all alternative sources of further funding. Overall, the projects need to secure VC funding and/or attract strategic partners, hire CFOs or engage IPO specialists and promote pitching with videos, teasers etc.

Recommendations to investment almost ready SMEs Many of the Phase 1 proposals for action suggested for the investment ready proposals are repeated in the CPs of almost ready projects. The almost ready projects make up to 58% of the total available CPs. The most frequent proposed actions focus on the team and the product readiness. The deficiencies of the leadership team emerge as a more significant problem than in the investment ready projects. Hence, the actions proposed address staffing and use of external advisors, not only in financing and marketing but also in technical areas. For improving product readiness, the experts proposed more trials, checks, testing, evaluation and adoption of the product. International IP protection and quality assurance are important areas of improvement that could lead to the upgrading of the TRL. Market trials and experimental selling are also suggested to raise market readiness, together with intensifying the development of partnerships, focusing of businesses rather that science and better knowledge of revenue streams. The Phase 2 projects receive most experts’ proposals for action in the market readiness area. They focus on clarifying the commercial value of the products or services, product positioning and alternative pricing, analysing in detail the targeted markets and exploring how to involve the stakeholders and formalise partnerships. Continuous market research and widening international visibility (based on an international strategy), promote agreements in the supply chain and strengthening relations with distributors are additional concerns. In some cases, scaling up requires appropriate restructuring, that may include the creation of a commercial unit. Restructuring the management team and adapting staffing criteria is proposed in some cases for becoming more convincing to the potential investors. Hiring experts, in particular for commercial matters, logistics and transferring RTD results to industrialisation are recommended in some cases too. Improving IP protection, intensification of the patenting activity and standardisation are at stake, as well as in depth analysis of alternative production scenarios and risk assessment of outsourcing the production process.

The experts require clear and detailed description of financial needs, clear plans for financial growth, alternative financial scenarios, quantified and updated business plans with cash flow analysis. They urge the project managers to analyse the alternative possibilities for public and private funding and to discuss with potential investors the conditions required for financing. Recommendations to the investment not-ready SMEs The population in this category of Phase 1 projects makes only 10% of the available CPs. The experts address the lack of adequate key personnel, team structure and team integration. Business models prove to be immature and require redrafting, while KPIs are not satisfactory. The experts also urge for the participation of the leadership team at events for finding out more about both customers and investors. No Phase 2 projects were examined in this category of readiness.

2.6. Recommendations to boost the investment readiness of SMEs

Recommendations to the European Commission to boost the investment readiness of SME Instrument beneficiaries

Recommendations to the EC to bring ready SMEs in front of investors 1. Organise focused pitching events: Consider organising specific pitching events for industrial sectors and give more visibility to sectoral pitching events, in particular stimulate events for MIC/LIC sectors. 2. Organise one-on-one or face-to-face road shows with first-hand guided intermediation: guided link (also through a platform) between the SME Instrument beneficiaries that have completed the programme and potential “authorised/certificated” investors. 3. European Agenda – website with the most relevant events where it is possible to find investors as well as a directory of active investors with a description of their investment policy/approach/strategy/focus.

Recommendations to the EC to boost the IRL of “almost ready” SMEs 4. Guide SMEs from one meeting/pitching event to the next one in order to help better understand the supply chain dynamics, the regulatory environment and market challenges. This is particularly required for companies working in MIC and LIC sectors. 5. Provide mentors and coaches for entrepreneurs and early-stage companies: Better understanding of the requirements of the VCs, BAs, and banks by the new entrepreneurs requires systematic and continuous professional information as well as training material, and coaches, in particular for the almost ready and not ready projects. Create on line media platforms to discuss funding scenarios and challenges (e.g., IPO).

Recommendations to the EC to bring SMEs with “not ready” projects to the next level on the investment readiness ladder 6. Organise investment readiness information seminars, designed to fill the knowledge gap of SMEs about equity as an alternative source of finance at all stages of development. Failures and success stories can be presented. 7. Create a database with contacts of the different structures that provide support services and preparation for investment like accelerators and incubators.

2.7. Limitations of the study

The main limitation of this study is derived from the fact that the assessments have been carried out by experts who acted on behalf of actual investors. As a result, the information asymmetry presented in this report assumes that the assessing experts acted as close to investors in real life as possible.

A key result of the above stated limitation is that, although companies have been assessed as ‘ready or ‘almost ready’ or as ‘not ready’, in real life, an investor will go through their own assessment processes to determine whether or not to invest in a company.

It is also recognised that investment decisions are composed of rational, political and emotional elements. The decision to invest is a function not only of the access to relevant information but also of the capability to assess it, the appreciation of the information supplier and other factors. Therefore, in a future analysis, the decision making procedure of the investors could be investigated more in depth and under specific contextual conditions.

Furthermore, there is recognition that there are no “perfect” companies, and even the companies assessed as “ready” have some criticisms noted against them.

The assessment of the IRL of the SME as well as their proposals and recommendations, therefore, has no direct impact on these firms securing investment. The study was further limited by the fact that each SME was assessed only by one expert. As much as possible, the experts who were allocated to assess SMEs were chosen based on their strong investment experience and domain knowledge. The same SME could have been assessed slightly differently by another expert.

Moreover, the comprehensiveness of the IRL concept adopted for the assessment and the capacitation plans could be further discussed. It is probable that with a different definition of the IRL, the SMEs selected as investment ready or almost ready could not be the same, as no alternative IRL definitions have been implemented.

A second key limitation is the fact that this report has based its analysis, conclusions and recommendations on a limited sample set. This poses challenges in making too many generalisations, and therefore the steering group has refrained from making conclusions and generalisations, where it was found not appropriate.

In addition, the analyses in this study rely on data provided by the SMEs. As a consequence, this should be kept in mind when interpreting the data. For instance, different regional calculations in revenues and EBITDA or margin could bias the results. All the gathered data require further cross-checks with databases (e.g., Amadeus - Bureau van Dijk11). However, with respect to the applied data protection processes and underlying ethical decisions this study relies on the provided information solely on behalf of the SMEs respecting their willingness to contribute.

Finally, the provided analyses require further in-depth statistical investigations to strengthen the elaborated IRL scale and finally the findings. Structural equation modelling and several regression analyses at different levels linked to several indicators and elements of a due diligence as well as several financial decision making factors of investors would enhance the applied methods and procedure in this report. However, with respect to the practical focus and

11 https://amadeus.bvdinfo.com

implications of this action serving as a platform as recommendations, this further scientific in- depth investigation is highly recommended. As a consequence, this report serves as a fruitful basis for further research.

3. Analysis of the SME Instrument design Analysis of the SME Instrument in the context of investment readiness

3.1. The SME Instrument scheme

The evaluations of the predecessors of the Horizon 2020 and SME Instrument have marked various deficiencies in the treatment of SMEs and the effectiveness of incentives to their innovativeness. The ex post assessment of the FP7 raised issues such as (a) the difficulty in mobilising the large majority of the 20 M€ SMEs and (b) the role the RTOs are playing in Research for SMEs, using SMEs as a cover for their own projects (EC, 2014). In sum, the analyses of the FP7 tools in favour of SME research and innovation have shown that the European programmes have had an important impact on the business competitiveness but the return on investment could be considerably raised if certain measures were introduced in the system.

The design of SME Instrument is intended to promote actions leading to the exploitation and commercialisation of ideas, providing a light management in three distinctive and not necessarily sequential phases. The elements that the design of the instrument should be reflected in the application and evaluation processes include (EC, 2013) the openness to "all types of SMEs with an innovation potential", the need to create a high quality brand scheme, and the supply of reliable services to the interested SMEs by Commission and EASME. For the evaluation and selection of proposals the Commission uses standard criteria and four experts who work remotely and independently that give their scores to be averaged automatically.

The Commission considers that the SME Instrument caters for two ideal applicant profiles (EC, 2013):

A. An SME that was created a few years ago with the aim to commercialise knowledge developed through R&D in order to meet a societal demand or to fill an identified and already researched market niche; or B. A dynamic (young or mature) SME that has identified a new market opportunity and has developed a concept to exploit it through an innovative product or service.

The results of the first year implementation of the scheme show a progressive increase of the participation of SMEs in the scheme. The highly selective policy of the instrument in Phase 1 led in 2014 to only 13.5% of the received proposals crossing the thresholds of the evaluation procedure, while in Phase 2 the same share is 28.6%. This outcome shows on one side the high selectivity of the procedure that may lead to high quality of the projects supported, but on the other a number of potentially good proposals not securing funding.

The sample of firms examined is heterogeneous. These firms include independent start-ups, spin offs from universities or larger firms, as well as older “small” companies within traditional industries. The majority of the Phase 1 projects evaluated as either “almost ready” or “ready” for investment indicate that they would like to apply for Phase 2 instrument, suggesting that these companies see Phase 2 as a means of securing additional non-dilutive finance as they progress towards revenue generation and growth (Table 48). However, the application process clarifies that Phase 1 is not a mandatory pre-cursor to Phase 2. The assessment of Phase 2 projects shows that similar deficiencies in market and financial readiness, TRL and management maturity are 100

found in many of these projects (although the sample examined is much more limited) as in Phase 1 projects.

SIC MIC LIC Total Phase 1 IRL Yes for Yes for Yes for Yes for all SIC all MIC all LIC all Phase 2 Phase 2 Phase 2 Phase 2 Ready 8 13 7 10 9 14 24 37 Almost ready 13 16 20 30 27 35 60 81 Not ready 1 2 3 4 6 6 10 12 Total 22 31 30 44 42 55 94 130

Table 48 – SME beneficiaries of Phase 1 intentioned to apply for a Phase 2 proposal.

Results from the questionnaire regarding potential room for improvement in the SME Instrument design are presented below:

Phase 1: With respect to the current SME instrument scheme,

where is room for improvement?

78%

73%

Disagree Neither agree nor disagree Agree 68%

58%

50%

42%

39%

38%

37%

36% 36%

33% 33%

31%

30%

28% 28%

25%

22%

21%

19%

17% 17%

15% 15%

8% 5%

Simplifying the application Decreasing bureaucracy Increasing knowledge Increasing number of Increasing financial support Increasing support by other Increasing (national) Increasing support for Increasing support for process transfer between beneficiaries networking events by the European Commission local institutions and coaching support covered by building relationships with accessing international representatives such as the European Commission investors markets National Contact Points, EEN etc.

Figure 4 - Areas of improvement, according to the SME Instrument beneficiaries - Phase 1.

Phase 2: With respect to the current SME instrument scheme,

where is room for improvement?

Disagree 76%

Neither agree nor disagree

Agree

59% 59%

53%

47%

41% 41% 41% 41% 41%

37%

35% 35% 35%

29% 29% 29%

26%

24%

21%

18%

16%

12%

11% 11%

5% 5%

Figure 5 - Areas of improvement, according to the SME Instrument beneficiaries - Phase 2. 101

Figure 4 and Figure 5 outline the areas of the SME Instrument with room for improvement, according to the SME Instrument beneficiaries. 76% of the assessed SMEs from both Phases are of the opinion that the support for building relationships with investors should be increased. In parallel, increasing support for going international is requested by all assessed SME beneficiaries, in particular firms from Phase 1. Results indicate that most SMEs are satisfied with the application process. Increasing knowledge transfer between beneficiaries is perceived as a room for improvement mostly by SMEs in Phase 2. The request for more financial support is highlighted by SMEs in Phase 1, as well as the need for more National coaching support.

3.2. Potential areas of improvement for the SME Instrument

Application procedure, evaluation and selection of project proposals The SME Instrument is looking for companies with high growth potential interested to commercialise their results. However, the application forms and the evaluation procedure focus on the project to be selected and not on the company. In this context, introducing an investor’s perspective during the evaluation process would benefit the assessment significantly. Gathering information regarding the company’s financial history, strategy would help assessors evaluating the proposal. Therefore, the IIEG recommends a review of the type of funding received to date by the company (FF, business angels, venture capital, etc.) as part of the evaluation of the proposals.

Creating an innovative company with high growth potential is not easy, and teams that are leading this type of businesses have to be well connected with the different entrepreneurial tools that exist in their regions and countries, as a minimum (accelerators, incubators, business angels, networks,). The IIEG recommends including in the evaluation of the proposals a review of company’s participation in incubation or acceleration programmes.

The IIEG also recommend that the application template should ease the evaluators and provide a better understanding of the company in addition to the business proposal. The IIEG recommends redrafting of the application forms and the guidelines for filling them, in order to take into account the specifics of business development and growth, e.g. asking SMEs to discuss and specify their detailed marketing plans, outline the Go-to-Market Strategy, communication and distribution channels to reach customers/customer segments, specify Unique Selling Proposition (USP), discuss the implementation of feedback from customers. It is also recommended that SMEs provide data over a 5-year period (when discussing the expected growth potential in terms of turnover, employment, market size, IP management, sales, return on investment and profit).

The IIEG recommends revising the reporting template that beneficiaries have to deliver at the end of Phase 1, in order to be more demanding with respect to the areas where more weaknesses have been found during Action 9 analysis, according to specific sectors/call topics.

One of the issues faced by some applicants is the transition from Phase 1 to Phase 2 of the SME Instrument. This concerns directly the application and evaluation of Phase 2 proposals, following Phase 1, to minimise loss of time for the entrepreneurs. The need to speed up the transition between the two phases is paramount for those firms that do not have the capability to skip the Phase 1, and this could be done by increasing the frequency of cut-off dates for Phase 2 proposals, giving SMEs more opportunities to submit their proposals. Moreover, it should be better represented how Phase 3 can be reached, not necessarily going through both Phase 1 and Phase 2. This could be addressed by providing guidelines or manuals addressing the

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entrepreneurs, consultants and coaches, and, and explaining what are the most frequent flaws of the projects presented by SME entrepreneurs and how they can be corrected.

Given the broad range of topics, sectors and innovation cycles addressed by the SME Instrument, the IIEG recommends establishment of specific TRL classifications and descriptions according to the sector/topic, in order to make the interpretation easy for both the applicants and evaluators. The IIEG also recommends a consensus discussion (face to face or remote), at least for Phase 2 proposals, to reduce discrepancies and further improve the selection process.

Proposal evaluators are currently asked to write six individual reports per day for Phase 1 and four for Phase 2. This does not guarantee the quality of evaluations. The work load should be calculated more realistically in both cases, taken into account the volume of applications. The IIEG recommends that the workload per expert-day is reconsidered and reduced to an extent closer to the load of the evaluators of other Horizon 2020 calls, in particular for Phase 2 applications.

The individual evaluation template/methodology provided to the evaluators is not known by applicants until they receive the ESR. In addition, as the evaluation process is managed remotely, the ESRs provide scores without descriptive comments. The IIEG recommends a more transparent communication in order for applicants to better prepare their proposals. It is also advisable to communicate to applicants the major strengths/weakness and to discourage multiple resubmissions of low quality proposals. The structure of the Individual Evaluation Report in the participant portal should be adjusted to the structure of the application form of the SME Instrument.

Monitoring developments of projects and companies The SMEs instrument involves several stages of financing and therefore, it would be very useful to have information of the evolution of the company at all times in order to better assess the allocation of resources. The IIEG recommends having a customer management platform (where the company is the customer), where the EC can find all the historical information, in order to allocate better resources and follow the success of these companies.

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3.3. Recommendations to enhance the SME Instrument

This section presents recommendations for possible actions that the European Commission could take in order to enhance the SME Instrument, with reference to the investment readiness of SME Instrument beneficiaries.

Recommendations to the European Commission to enhance the SME Instrument Recommendations for the application procedure, evaluation and selection of proposals 8. Simplification measures for the SME instrument application process. A single application step that covers both phases is recommended for those SMEs that have the intention to apply to Phase 2 and provided they successfully realise a Phase 1 project. This would enable evaluators to gain better understanding of the project’s market potential, 9. The evaluation of the proposals should include a review of the type of funding received to date by the company (FF, business angels, venture capital, etc.) and a review of company’s participation in incubation or acceleration programmes if they are related to the project funded by the SME Instrument. 10. The frequency of cut-off dates for Phase 2 proposals shall be increased, giving SMEs more chances to transit from Phase 1 to Phase 2. 11. The application process should cater to the specific needs of SIC/MIC/LIC. It is recommended that specific TRL classifications and descriptions according to the sector/topic is established, in order to facilitate better interpretation of the levels both from the applicants and by evaluators. 12. Evaluators shall be allowed to discuss their individual reports during the evaluation of Phase 2 proposals. 13. During the evaluation of proposals, some form of interaction with the SMEs (by evaluators/EC officers or EEN), would help better understand the SME’s strategy and intention to commercialise. 14. The application process for Phase 2 funding should seek more details on IP, patenting and standardisation strategy. This should also be reflected in the application forms and in the instructions to the evaluators of both the Phase 2 applications and the feasibility studies resulting from the Phase 1. The process should also be more demanding in terms of skills and leadership/management readiness. 15. The Phase 1 feasibility study has to cover all components of the business model canvas, with more emphasis on the right side that is value proposition, customer segments and customer relations, communication channels and revenue stream. 16. SME Instrument applicants shall be more aware about the scoring system and it is advisable to communicate to applicants the major strengths/weakness in the ESR, in order to discourage multiple resubmissions of proposals below threshold as well as to increase the overall quality of proposals. 17. The structure of the Individual Evaluation Report should be adjusted to the structure of the application form.

Recommendations to monitor developments of projects and companies 18. A customer management platform shall be introduced, in order to have information of the evolution of the company at all times and better assess the allocation of resources. 19. The reporting template that beneficiaries have to deliver at the end of Phase 1 shall be revised, in order to be more demanding with respect to the areas where more weaknesses were found during Action 9. Specific sections for sectors/call topics could be considered. 104

Gender-related consideration

Based on research by the Global Entrepreneurship Monitor (Kelley et al., 2016), female entrepreneurs represent a driving force in European’s economic growth. However, women appear to be less successful when seeking external financing compared to their male counterparts (Heilbrunn, 2004; Marlow and Patton, 2005). These studies stress female entrepreneurs face more difficulties than men when searching for financial support. Furthermore, scholars argued that although female entrepreneurs tend to receive a smaller sum of start-up capital, the capital composition between female and male led businesses do not differ significantly (Verheul and Thurik, 2001; Hill et al., 2006). Having a focus on the supply side in the market - based on an analysis of business angels in the U.K., a contribution by Harrison and Mason (2007) concludes that female investors differ from male investors in only limited respects. Finally, these prior findings are mirrored in the Action 9 sample too – few female entrepreneurs who are especially expressing their obstacles when seeking for external financing for their disruptive projects. As a consequence, InnovFin intermediaries, investors etc. should receive special incentives for promoting and supporting especially females in the alternative sources of finance business. These should take place on both sides – the demand and supply side respectively – i.e., female investors and female entrepreneurs.

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Annex 1: Alternative sources of finance and recommendations to enhance the investment ecosystem

4. Alternative sources of finance Alternative sources of finance and other financial supporting schemes for innovative SMEs

4.1. Emerging alternative sources of finance in Europe Crowdfunding as an alternative source One of the significant recent alternative sources of finance is crowdfunding. Crowdfunding and Peer to Peer lending can be defined as a collective effort of many individuals who network and pool their resources to support efforts initiated by other people or organisations. This is usually done via or with the help of the Internet. Individual projects and businesses are financed with small contributions from a large number of individuals, allowing innovators, entrepreneurs and business owners to utilise their social networks to raise capital. This financing system is the evolution of the FF that has grown significantly since 2014.

Crowdfunding is where the crowd (e.g., public, family, friends etc.) provides donations - which could be in form of money, but not necessarily. Crowdinvesting or equity crowdfunding allows SMEs to raise funds (from the crowd/ investors) in exchange for equity in their company. Crowdinvesting is a disruptive way of raising money in a dynamic entrepreneurial economy12 (Tomczak and Brem, 2013; Dorfleitner et al., 2014; Hagedorn and Pinkwart, 2015).

The United Kingdom, through the City of London, is a pioneer in the introduction and use of alternative sources and techniques for funding businesses, through the provision of loans or equity. France has the second largest online alternative finance industry, followed by Germany, Sweden, the Netherlands and Spain (Wardrop et al., 2015). In per capita volume of transactions, the UK is followed by Estonia. The total volume of online alternative financial market (AFM) amounted in 2014 2,957 M€, from which 620 M€ are non-UK transactions.

Crowdfunding is modifying the landscape in the UK financial sector with the help of new technologies. In 2014, P2P business lending amounted 749 M£ in the country (an increase 250% for 2012-2014), P2P consumer lending 547 M£, invoice trading 270 M£, equity crowdfunding 84 M£ (increase of 410%), followed by community shares, rewards crowdfunding, pension-led funding, debt-based securities and donation crowdfunding (Baeck et al., 2014). Equity crowdfunding covers a large spectrum of sectors. The borrowers have evaluated alternative lenders as more willing to take risks, more flexible, speedier and more accessible than the traditional finance suppliers. However, traditional lenders are perceived as knowing better about the business/industry, having higher standards.

The mushrooming of various crowdfunding facilities is emerging in an integrated economy, using a multidimensional arsenal of measures to face all aspects of innovation, including skill enhancing education and continuous training, culture, motivating students, pupils and teachers for innovation. Among the instruments promoted to ease financing of firms is the “Funding for lending scheme” addressing the banks and building societies with lower than market interest

12 Example: https://eureeca.com 106

rates. The government established also the British Business Bank (BBB) to enhance the effectiveness of the financial markets for SMEs. The Bank manages public schemes facilitating the access of financial markets by the SMEs. The Start-up Loans Company manages the “Start-up loans scheme” offering loans and mentoring to British 18-30-year-old entrepreneurs, while the “Business Finance Partnership” offers loans, aiming at increasing independence of firms from bank sources. The BFP invites bids from platforms that have access to SMEs. The BBB delivers the Enterprise Finance Guarantee which is focusing on guarantees to banks and other lenders and invoice finance facilities. In addition, the Business Angel Co-investment Fund invests in SMEs of selected areas, while the Enterprise Capital Funds programme supplies venture capital (equity) to innovative early stage SMEs with high growth potential.

A range of alternative asset managers addressing the SME market includes the Trade Finance Partners division of the City of London Group and the Bluehone Secured Assets for mezzanine debt (Davis, 2012). The Funding Circle is the first P2P lending site for SMEs in the UK, where the lenders can select the companies to lend to. ThinCats is another P2P platform offering loans to SMEs while Relendex.com targets the commercial property. Two more online platforms, Crowdcube.com and Seedrs.com, open to companies the possibility to raise equity finance from retail investors.

The London Business Angels and the City Corporation launched the Angels in the City as a network of financial and legal professionals aiming at creating a strong group for the use of funds in conjunction with business experience. Traditional syndicates and angel investors join their forces into the Ideas Factory. Crowdsource Capital aims at supplying services to entrepreneurs in addition to raising finance. Other relevant P2P platforms are Fundingstore.com, Finpoint UK (German initiative), GXG Markets (owned by the Swedish Global Exchange Group), ShareMark (an old retail stockbroker), AltCapX (of the New York Alternative Capital Holdings) and several factoring and invoice discounting platforms (inspired on the US receivablesxchange.com). The largest supply chain finance provider in the world seems to be Orbian, set jointly by Citigroup and the German SAP.

Of utmost importance for the functioning of this burgeoning market is the regulatory framework. P2P lending sites are not sufficiently regulated according to several observers (Davis, 2012). The companies are not authorised by the Financial Services Authority (FSA), while the lenders do not need to be Self-Certified Sophisticated Investors or Self-Certified High Net Worth Individuals. Such a certification may be granted under the Financial Services and Markets Act 2000. The industry created in 2011 its own self-regulatory body: the P2P Finance Association (P2PFA) (Wardrop et al., 2015). Since 2014, the Financial Conduct Authority (FCA) adopted a regulatory regime for P2P platforms to provide protection to consumer investors. The UK adopted the EU Prospectus Directive, increasing the sum that companies can raise with no obligation to issue a prospectus.

In France, the Autorité des Marchés Financiers (AMF)13 and the Autorité de contrôle prudentiel et de résolution (ACPR)14of the Banque de France are issuing rules and regulations for equity crowdfunding and P2P lending since 2014, in consultation with the Association Française de l'Investissement Participatif (AFIP)15 and Financement Participatif France (FPF)16. Under these

13 http://www.amf-france.org 14 http://acpr.banque-france.fr/en/home.html 15 http://www.afip-asso.fr 16 https://www.credit.fr 107

regulations, more than 20 P2P lending platforms can operate in a clear context. The BPIfrance17 provides also back office support to these activities. Among the participants to P2P funding platforms or crowdfunding projects are banks, insurers, assets managers and several public institutions. Some well-known platforms are Ulule and Wiseed1819.

In Germany, regulation allows crowdfunding, for equity raising. The Partiarisches Nachrangdarlehen (Subordinated Profit Participating Debt) is a large platform providing for mezzanine capital, allowing investors to participate in borrower's profits; therefore, interests are paid if there are profits. Various rules are under discussion in view of a new legislation foreseen for 2015. A platform for raising funds of municipal interest (public works, energy etc.) is LeihDeinerUmweltGeld20. Friendfund21 is addressing the consumer needs of the general public.

The Dutch Ministry of Economic Affairs with the regulator AFM has created the appropriate ecosystem for the launch and operation of alternative funding platforms. There is no specific crowdfunding regulation so far but the Netherlands have the highest number of platforms per capita (>100). Based on existing regulations, more than 30 companies have secured a licence or exemption to supply financial products through online platforms. Investment limitations are €20,000 for equity and €40,000 for debt per investor and platform. An important Dutch platform is Symbid22, that operates the “Crowdfunding Campus” portal to assist entrepreneurs.

In the Nordic countries, equity and lending operations are governed by regulations dating from before the emergence of the alternative online finance and drawing mainly on consumer protection considerations. Finland asks for licences to operate investment firms. The Finnish platform Invesdor provides for equity in all Scandinavian countries and Estonia. The Swedish Crowdculture is specialising on cultural projects, combining crowdfunding and public grants. Associations are also emerging in the area, such as the Danish Crowdfunding Association and the Nordic Crowdfunding Alliance. In Spain, crowdfunding faces the initial lack of awareness and the scepticism due to the financial crisis. Some specialised regulation defines the upper limit for equity and debt funding to 2 M€ per project with no accredited investors and to 5 M€ when accredited investors are involved. Verkami23 is a successful platform in Spain, particularly in the cultural area. Finally, Italy has recently adopted a new regulatory framework for alternative funding sources, related in particular to equity funding. Italy has set further limits requiring the fundraising company to be a small and young innovative start-up and requiring 5% of the funds to come from professional investors.

More detailed information on national regulatory regimes and on the various European platforms may be found in (Gabison, 2015). Some platforms have followed these regulations to operate without suffering legal consequences, some platforms adapt to stay clear of the general banking regulations and the rest challenge the unclear financial rules applying to this industry. The EC is also trying to organise the financial markets and create a harmonised environment for the MS through the necessary directives (EC, 2003). The Prospectus Directive is a well-known document fixing conditions for the investment of funds in private businesses. This initiative has been revised so far in order to adapt to the changing conditions of the markets (EC, 2013). Three main issues identified relate to the protection of investors and consumers: fraud, delays, and

17 http://www.bpifrance.fr 18 http://www.ulule.com 19 https://www.wiseed.com 20 http://www.leihdeinerstadtgeld.de 21 http://www.friendfund.com 22 http://www.symbid.com 23 http://www.verkami.com 108

money laundering (which amounts to fraud by third party investors) (EC, 2014). One more important issue raised at EU level is the lack of awareness and training among the European entrepreneurs and business staff: Only 23% of those responsible for making finance decisions in SMEs have a financial qualification; also, only 23% of SMEs are aware of the Enterprise Finance Guarantee and 17% were aware of the “Merlin agreement” despite widespread press coverage (Breedon, 2012).

 Company Builders: Unlike incubators and accelerators, venture builders don’t take any applications, nor do they run any sort of competitive program that culminates in a Demo Day. Venture builders pull business ideas from within their own network of resources and assign to internal teams (engineers, advisors, business developers, sales managers, etc.) the development. Venture builders develop many systems, models, or projects at once and then build separate companies around the most promising ones by assigning operational resources and capital to those portfolio companies.

 Media for Equity investments: Media for Equity is an innovative funding concept for high- growth entrepreneurial companies. It is a barter scheme in which advertising inventory provided by media companies is traded against equity. Media for Equity is a great idea for companies which are ready to scale through marketing but need their cash to finance their growth. With a minimal amount of cash, a significant media campaign can be realised of a size, which normally only leading global consumer companies can afford. This can catapult entrepreneurial ventures into another league in terms of new customers, brand recognition and conversion. For media groups with high quality advertising inventory, Media for Equity investments provide an effective way to optimise inventory and benefit from the growth of entrepreneurial ventures without negative impact on current advertising clients.

 Venture Debt Funds: For start-ups with an existing product/track record or existing or future assets to secure a loan, venture debt is another option to consider. Venture debt is a senior secured loan that sits on top of the pile, in terms of liquidation preference (repaid before all other debt or equity holders). Venture debt is typically issued by venture debt investors or some banks..

 Corporate Venture Capital - CVC: Corporate Venture Capital describes the investment of corporate funds directly in external start-up companies. CVC has two hallmarks, its objective (strategic or financial) and the degree to which the operations of the start-up and investing company are connected (tight or loose). The big companies that have CVC activity have strong relations with other agents of the ecosystem (incubators and accelerators, for deal flow; Venture Capital Investors to share risk investment and expertise).

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4.2. European and National tools in favour of innovative SMEs European and National policies and funds in favour of innovative SMEs: potential synergies with EU schemes and funds

Programmes and schemes

The Seal of Excellence is a recent EC initiative aiming at improving the synergies between EU funding for regional policy and for R&D24. The rationale of the scheme is based on the idea that the positively evaluated project proposals within Horizon 2020 programmes may be used with a quality label by the European regions, which can integrate these projects into their Structural and Investment Funds (ESIF) operational programmes or other regional and National financing schemes. The competent Commissioners estimate that about 100 billion Euros from the ESIF shall support RDI from 2014 to 2020 and about one third of that is earmarked for the SMEs. The Horizon evaluation system is used in this case as a selection mechanism of high quality in very broad areas of science and technology that may feed the Regional Operational Programmes with projects of good quality, not been selected for funding by Horizon due to high competition and limited resources. Each European region may put together its Research and Innovation Strategy for Smart Specialisation (RIS3)25 with the activities of its research and business entities in the framework of Horizon 2020, in order to maximise the added valued created by the regional innovation system. The initial "pilot" phase of implementation of the initiative considers only proposals applying for the SME Instrument and in particular, all those SME Instrument proposals evaluated above the quality threshold.

Pre-Commercial Procurement (PCP) and Public Procurement of Innovative Solutions (PPI) are mentioned, within the SME Instrument architecture, as possible instruments that can be used to implement Phase 3. Currently, several innovation procurement initiatives are running in Europe26 both supported by EU funds and based on regional/local authorities own investments. Current EU regulations allow for transitions between the pre-commercial and the commercial phase only by tendering processes. This may lead to potential i) delays in entering the market for innovative products and services and ii) mismatches between the demand and the offer of innovation. Comparisons can be made with the American Programme SBIR (Small Business Innovation Research), important instrument for promoting innovative SMEs and innovation in SMEs (further described in Section 4.3). SBIR Phase 3, indeed, awards where commercial applications of SBIR-funded projects are funded by non-Federal capitals, or where products/services or further research are funded by non-SBIR Federal Funding Agreements. It would be advisable then, in the European policy framework, to introduce more flexible instruments and smart regulations to accelerate the transition from research (pre- commercial phases) to market (e.g., through strong cooperation between DG RTD and DG Competition). This would facilitate public procurement of innovation and help Member States in achieving the Innovation Union targets, as remarked in the EU Directive 2014/24/EU on public procurement (Hertog, 2015).

In addition, the current generation of Structural Funds 2014-2020 strongly encourages the design and use of innovative support mechanisms for research and innovation policies. Notably used to stimulate innovation by demand, these tools may complement the financial engineering instruments. Within the structural funds, regional research and innovation strategies for smart

24 http://ec.europa.eu/research/regions/index.cfm 25 http://www.tr3s-project.eu/smart-specialisation/ 26 http://ec.europa.eu/digital-agenda/en/news/innovation-procurement-initiatives-around-europe 110

specialisation (RIS3), financed by the Structural Funds, can support the synergies with Horizon 2020. Nevertheless, it would be advisable to incorporate more synergies in operational programmes whenever this is possible (e.g., between DG RTD and DG REGIO) in order to encourage innovation in public procurement, support private demand for innovative solutions and support joint action plans between Member States and among regions. Potentially, such mechanisms and financial resources could be explored within the European Fund for Strategic Investments (EFSI) with aims to overcome the current investment gap in the European Union by mobilising private financing for strategic. Finally, with regard to the ERDF and to the evolution of macro-regional EU policies, particular attention should be given to growing dimension of macro- regional processes of governance. This can help improving the innovation governance and creating conditions to make regions more attractive and facilitating private investments, as remarked by the High Level Expert Group on KETs in their final report (EC 2015 KET).

The European Institute of Innovation & Technology (EIT) offers programmes supporting SME/start-ups within the different Knowledge and Innovation Communities (KICs). EIT Digital (formerly EIT ICT Labs) has established measures to support people and ideas as well as measures to support the acceleration and the access to finance. The Business Development Accelerator (BDA) and Access to Finance team includes more than 40 dedicated Business Developers and Access to Finance Experts located in 9 EU countries and in the USA. In 2016, the BDA will grow to include the cooperation with Accelerators to cover 21 EU countries. Selected start-ups sign a term sheet and receive a mix of services for at least 1 year. Each Start-up is admitted to the start-up Funnel and will be coached by one or more Business Developers and starts being endorsed by EIT Digital from that moment27. Services offered to start-ups include access to market, access to finance, access to ecosystem, expert in residence, access to workspace (offices), training and access to master students internships. In addition to BDA, the EIT Digital supports people and ideas through the “Idea Challenge”. Idea Challenge is an EU-wide contest for start-ups with innovative ideas in ICT. This activity stimulates the entrepreneurial undertakings of the Action Lines and strengthens the collaboration within the KIC between the Action Lines, the Nodes, and the BDA. EIT Climate-KIC and its partners co-invest in projects that build on combined know-how to take product and service innovations to market through an existing business, a new joint venture or a spin-off company through one of our academic partners. Business partners are active in a broad variety of industries and range from SMEs to multinational corporations28. Services offered to partners include market analysis, innovation projects, market creation, climate market accelerator and professional education. KIC InnoEnergy Highway is the offering of KIC InnoEnergy for early stage start-ups. KIC InnoEnergy supports business through services leading to commercial success, and contributes hedging the financial risks29. In return, KIC InnoEnergy acquires an equity stake of 5-15% of your future startup (10% in average). The KIC InnoEnergy Highway offers assets including access to office space in all KIC’s European centres and specialisation in sustainable energy (proposing energy-related technology due diligence, technical expertise and access to facilities to enhance the proof of concept). Moreover, KIC InnoEnergy Highway supports ventures with an integral approach covering the dimensions of technology, market, people and finance. The KIC InnoEnergy Venture Capital Community supports Emerald Technology Ventures, Icos Capital Management, ABB VC, Demeter Partners, Capricorn Venture Partners, MVP, Inversiones Financieras Perseo, Espirito Santo Ventures and Aster Capital.

27 https://www.eitdigital.eu/innovation-entrepreneurship/business-development-accelerator 28 http://www.climate-kic.org/for-entrepreneurs 29 http://www.kic-innoenergy.com/bcs/kic-innoenergy-highway/our-offer 111

Framework and activities favouring alternative investment funding The European Securities and Markets Authority (ESMA)30operates within the European System of Financial Supervision (ESFS), with the mission to enhance the protection of investors and reinforce stable and well-functioning financial markets in the EU. Stakeholders provide input to ESMA in particular via in particular the Securities Markets Stakeholder Group (SMSG). The EU regulatory network encompasses the European Supervisory Authorities (ESAs), the European Systemic Risk Board (ESRB) and national competent authorities (NCAs) as part of the ESFS and maintains close cooperation with other supervisory authorities such as the Single Supervisory Mechanism (SSM). Both the ESAs and NCAs will evolve into a model of even closer cooperation to face the challenges of the EU financial markets (ESMA, 2015). ESMA is empowered to develop draft regulatory technical standards (EC, 2003).

One more institution in the EU with competence in the area is the Alternative Investment Fund Managers (AIFM). These are “responsible for the management of a significant amount of invested assets in the Union, account for significant amounts of trading in markets for financial instruments, and can exercise an important influence on markets and companies in which they invest”. After a transitional period of two years, a harmonised passport regime shall become applicable to non-EU AIFMs performing management and/or marketing activities within the Union and EU AIFMs managing non-EU funds (EC, 2011; EC, 2015).

Further relevant EU documentation: (EC, 2012; EC, 2013; EC, 2014; EC, 2014; EC, 2004; EC, 2004; EC, 2014; EC, 2014; Green et al., 2013)

4.3. Good practices from non-EU schemes supporting innovation Good practices from non-EU schemes supporting innovation in SMEs and international examples of alternative sources of finance

Programmes and schemes Measures favouring the innovation in SMEs abound in various developed economies around the world, while policy makers search for good practices to transfer in their own socio-economic environments. The more traditional state support in the form of grants and tax allowances have shown their limitations, giving gradually place to new financial techniques. The wave of new techniques and instruments has been described as a “burst of innovation in SME finance underway, ...with banks no longer meeting the funding needs of businesses” (OECD, 2013).

An important instrument for promoting innovative SMEs and innovation in SMEs is the American Programme SBIR (Small Business Innovation Research), classified as “pre-commercial procurement” instrument and covering the first two types of the OECD classification. It is recognised worldwide as a good practice and imitated in various and diverse national contexts. Each year, 11 federal agencies with R&D budgets in different policy areas, are required to allocate 2.8% of their R&D budget to SBIR activities, which are related to the technological needs of the agencies. SBIR is structured in three phases:

 Phase I, aiming to establish the technical merit, feasibility and commercial potential of the proposed R&D, subsidised with up to $150,000 total costs for 6 months.

30 http://www.esma.europa.eu 112

 Phase II aiming to continue the R&D efforts initiated in Phase I, based on the results of Phase I. Subsidy normally does not exceed $1,000,000 total costs for 2 years.  Phase III aims to pursue commercialisation objectives resulting from the Phases I&II. SBIR does not participate in Phase III.

In 2012, the 11 agencies allocated $2 billion to the first two phases of the programme and to 5,535 beneficiary SMEs (SBIR and STTR, 2014). Delivery of the programme through the agencies increased difficulties in managing the programme, but also increased outreach and proximity of the knowledge producing SMEs for the potential users of the RTD results. Targeted segments of the population, like women, are addressed for the increase of their involvement with entrepreneurial growth. In addition to SBIR, the SBTR programme (Small Business Technology Transfer), modelled after SBIR, requires federal agencies with extramural budgets for RTD exceeding $1 billion to set aside a percentage of their annual extramural RTD budget for Small Business Concerns that work in cooperation with universities, federally funded research and development centres and other non-profit scientific and educational institutions. The problem of effective commercialisation is continuously investigated and new approaches are introduced to improve the performance.

An academic analysis (Link and Wright, 2015) of 1,878 Phase II SBIR projects, from which 624 were discontinued prior to technical completion (self-reported discontinuation), found that the success/failure of the R&D projects is correlated to the following: (a) prior R&D experience with the technology being funded by SBIR projects, (b) amount of the SBIR award. Having a female PI, other factors held constant, is negatively related to the probability of project failure. In contrast, firm size (larger small) is positively associated with project failure. As to the reasons given on the survey for discontinuation, 24% responded that the primary reason was that the market demand for their technology appeared to be too small, another 15% responded that they had not received sufficient SBIR funding to complete the research, and another 14% responded that technical problems were encountered during the R&D.

Similar to SBIR, the Russian START Programme addresses university while PRI addresses spin offs for the commercialisation of their research results and technical knowhow (OECD, 2013). The three phase programme extends over three years as follows:

 First year: grants up to $40,000, for R&D and proof of concept to convince private investors of the commercial potential of the new venture.  Second year: grants of up to 50% to the private investment budget.  Third year: grants of up to 50% on the basis of the business plan, if sales have already started. The 3-year budget may total up to $250,000.

Another scheme, reported as a good practice, is the Australian "Commercialisation Australia"3132, (Government, 2015), placing emphasis on the valorisation of IP and offering finance and mentoring (OECD, 2013). The main components of the scheme are one year grants to access expert advice and services, two year grants to engage an experienced chief executive officer or other executives, 1.5 year grant to assist with establishing the commercial viability of a new product, process or service (proof of concept), and 2 year grant addressing activities for bringing a new product, process or service to market (early stage commercialisation).

31 http://www.business.gov.au/grants-and-assistance/closed-programs/Commercialisationaustralia/Pages/default.aspx 32 http://www.tpsgc-pwgsc.gc.ca 113

In Canada, the Public Works and Government Services (PWGSC)33can launch competitive calls for proposals in the form of collaborative partnerships, in particular with R&D requirements. The Build in Canada Innovation Program (BCIP) aims to promote innovation of firms, in particular SMEs, through innovation assessments for government end-users. The BCIP addresses the "pre- commercialisation gap", provides support to Canadian suppliers in finding buyers and entry points into the federal government procurement system, especially for innovative technologies.

In Brazil, the Banco National de Desenvolvimento Economico e Social (BNDES)3435and its subsidiary BNDES PARTICIPAÇÕES S.A. (BNDESPAR)36are providers of funding in support of, among other, innovative entrepreneurship. The Bank may participate as a subscriber of securities (i.e., shares, simple and convertible debentures, subscription bonds, options etc.), and in asset- backed investment funds (FIDC). The Bank also led the establishment of the Criatec Fund37, a seed investment fund for emerging and innovative companies and long term investment in startups. BNDES manages also the Fundo Tecnologico38 (FUNTEC) established for funding technological development and innovation projects of strategic interest for the country. FUNTEC finances innovation projects up to 90% of their budget, in which participate private firms covering 10% of the budget, technological organisations and public S&T supporting organisations. Another organisation is the Financiadora de Estudos e Projetos (FINEP)39which awards grants, reimbursable subsidies or equity to projects in all phases of the S&T development and innovation cycle.

In China, the Innovation Fund was established for exploring new models of public funding, leading local and private funds, attracting investments to SMEs, promoting technology innovation of SMEs40. The Torch Programme aims to accelerate the commercialisation, industrialisation and internationalisation of new and hi-tech achievements. In the agricultural sector, the SPARK Programme was introduced for establishing demonstration S&T intensive firms, developing equipment appropriate for rural areas and organising production, training technicians and entrepreneurs, etc.41

Public procurement Public procurement, traditionally based on transparency, value for money, delivery time and cost efficiency criteria, has been used more recently as a tool for innovation and competiveness. The leader in this approach is USA (EC, 2015), spending some 20 times more on technology procurement than the EU, mainly because of defence spending at federal level (estimated at 64% of total federal procurement, not including pre-commercial SBIR and DARPA programmes).42 Military procurement is important because of the "dual use" technologies and the “spin off” revenues resulting there from. In civil sectors, such as non-defence security, energy and health, the USA is estimated to spend in procuring RDI four times the EU spending. The US public procurement is extending to federal, state and local levels, each one having its own rules. The regulations of the states are not harmonised, while at the federal level a set of Federal Acquisitions Regulations (FAR) governs public procurement by federal agencies.

33 http://www.tpsgc-pwgsc.gc.ca 34 http://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/Institucional/The_BNDES 35 http://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/Institucional/Financial_Support/innovation_policy.html 36 http://www.bndes.gov.br/SiteBNDES/bndes/bndes_pt/Institucional/O_BNDES/Legislacao/estatuto_bndespar.html 37 http://www.fundocriatec.com.br/en-US/#all 38 http://www.bndes.gov.br/SiteBNDES/bndes/bndes_pt/Areas_de_Atuacao/Inovacao/Funtec/index.html 39 http://www.finep.gov.br 40 http://www.chinatorch.gov.cn/english/xhtml/Program.html 41 http://chinagate.cn/english/1314.htm 42 Defence Advanced Research Project Agency, 2015 114

The Canadian Safety and Security Program (CSSP)43and the Defence Industrial Research Program (DIRP) developing innovative technologies for the Dept. of National Defence as well as civil RDI public procurement are relevant activities in this area. In Brazil, FINEP funds the development of specific technologies that could be of interest for the government, while specific government, regulatory bodies and state controlled companies implement ad hoc programmes and technological orders. Petrobras is an important actor in RDI procurement, through technical cooperation agreements with equipment suppliers, which develop prototypes of equipment and machines.

The Chinese procurement system was highly centralised with the help of international experts. The Ministry of Finance published the “Products Catalogue of Independent Innovation for Public Procurement”. These products, defined very broadly, are credited with additional points in the evaluation of the offers. In this respect, innovative products benefit from a 5% to 10% deduction in the price proposed. In Japan the system is decentralised, but the competent authorities seek rather to connect suppliers with potential buyers, playing the role of demand articulators or catalysts than final consumers. Japan funds a SBIR-type programme and a second one addressing the linking of innovation to social goals. In Korea the “On-Line eProcurement System” (KONEPS) is a common instrument for the management of public procurement in the country. A series of programmes, in addition to KOSBIR, are components of the Public Procurement of Innovative Solutions (PPI) policy.

Emergence and expansion of alternative sources In addition to the more traditional mechanisms of supporting innovative entrepreneurship by the government sector and the established banking system, new forms of funding emerged from the private sector. The supply of venture capital and equity by established financial institutions and very large firms has also become a common practice in the more advanced financial places of the world and transferred with diverse success to the rest of the globe. Various types of “platforms”, most of them web-based are emerging in an unregulated or loosely regulated environment supporting “peer to peer” (P2P) money flows. In the USA, the P2P lending started with the Prosper and Lending Club44, followed by other lending platforms.

The two websites, based in San Francisco, are e-marketplaces where individuals can invest in personal loans or request to borrow money. The Lending Club was the first to register its offerings with the Securities and Exchange Commission (SEC) and trade loans on the secondary market while becoming the world largest P2P lending platform. After an initial period of operating without any restrictions, the SEC required that P2P companies register their offerings as securities, pursuant to the Securities Act (1933). Since then the system was simplified but the P2P firms have to report the details of their offerings in a regularly updated prospectus and the SEC makes the reports public through the EDGAR (Electronic Data-Gathering, Analysis, and Retrieval) system. A somewhat more complex and time consuming approach of money lending is the “peer to peer investment” (P2PI) in the USA, addressing interested “borrowers” who remain unknown to the investors/lenders.

Both P2P techniques are variants of the crowdfunding general approach, regulated to some extent by the JOBS Act45 (Jumpstart Our Business Startups Act 2012-2016). Equity crowdfunding requires registration of portals with the SEC, which is setting the regulations and guidelines to

43 https://buyandsell.gc.ca/procurement-data/tender-notice/PW-SV-057-24880 44 http://www.prosper.com; lendingclub.com 45 http://www.sec.gov/spotlight/jobs-act.shtml 115

ensure the protection of investors. In addition to the SEC, the Financial Industry Regulatory Authority46 sets rules for the membership to crowdfunding platforms. A number of well-known portals in the USA are addressing the SMEs (Earlyshares, 2015). A crowdfunding exemption movement47 is an effort to exempt relatively small investment offerings (<1 M USD), sold to the general public in small blocks, from the registration and compliance requirements demanded of large public companies. The USA, according to some analysts, provides an example of regulations preventing the movements of funds and start-ups across the Union, because of the multiple layers of regulations (Gabison, 2015).

International examples of alternative sources of finance

The availability of funds for various placements as well as the use of the most advanced information and communication technologies for the collection and reallocation of funds has facilitated enormously their visibility and accessibility from “outside” the birthplaces. Most of the platforms in operation are still working with national lenders and borrowers, but some of them have gone international.

A specific recent survey roughly estimated that nearly 50% of surveyed platforms had no inflow of funding from other countries (investor funding coming from outside a platform’s home country), while around 35% registered between 1-10% and roughly one in ten of them indicated between 11-30%. On the side of the outflow (investor funding leaving the platform’s home country) the survey shows that over 72% of platforms report no outflow activities and nearly 15% registered between 1% and 10%. Only a 5% of platforms reported that their outflow is between 91% and 100% (Wardrop et al., 2015).

On the front line, the flows seem more important among European countries. The London Stock Exchange’s AIM48 is the widest-known exchange place for SMEs selling shares to the UK public. Since its establishment, it has contributed to the creation and growth of several thousand firms across the globe. AIM offers smaller growing companies access to the "world-class public market within a regulatory environment designed specifically to meet their needs", including the support by coaches (nomads). Finpoint UK49 is a German initiative raising equity investment from financial institutions with available capital for lending and making it available to businesses in need for funds. GXG Markets is a specialist market for shares in SMEs owned by the Global Exchange Group of Sweden50.

On the other side of the Atlantic, in the framework of the JOBS Act, Orbian51 based in Connecticut with global operations in London, is a joint venture between Citigroup and SAP, leading the Supply Chain Finance (SCF). It applies 6σ method for serving clients in security through its platform worldwide. It provides e-invoicing technology and lending capacity. The financing of the clients' supply chains is based on the emission of notes, for up to 120 days, to banks or other institutional and corporate buyers. The notes are channelled through clearing houses, such as Clearstream, Euroclear or the DTCC, facilitating this way the emergence of short term working capital.

46 http://www.finra.org 47 https://en.wikipedia.org/wiki/Crowdfunding_exemption_movement 48 http://www.londonstockexchange.com/companies-and-advisors/aim/for-companies/joining/aim.htm 49 https://www.finpoint.co.uk 50 http://www.gxg.se 51 https://www.orbian.com 116

ENTREX52, based in Chicago, aims at enabling firms to issue high yield securities, branded TIGRcubs, to US institutional and “high-net worth” clients. TIGRcubs (Income Generation Rights Certificates) pay a fixed percentage yield to the investor based on company’s revenues. A&ERockethub53 is a New York based platform that supports innovative projects through crowdfunding and propel ideas to the next level of exploitation. Other USA based platforms with global surface are Kiva54 and Zidisha55, complying with SEC regulations and addressing mainly the microfinance market, mainly in developing countries (Davis, 2012). The American Lending Club56 cooperates with the Beijing based Chinese CreditEase57, “national leader in wealth management, credit management, microfinance investment and microcredit loan servicing” with a nationwide network covering 100 cities. Sequoia Capital58, a VC American firm, cooperates with the WeLab Holdings59 in Hong Kong.

4.4. Recommendations to enhance the investment ecosystem

Following table presents the recommendations from the IIEG to the European Commission to enhance the European investment ecosystem.

Recommendations to the European Commission to enhance the European investment ecosystem 1. The Group recommends opening a specific window within the InnovFin SME Guarantee Facility or InnovFin SME venture capital instrument dedicated to SME Instrument beneficiaries. 2. More synergies shall be developed with ERDF, with particular reference to the growing dimension of macro-regional processes of governance of innovation. 3. The policy framework for the public procurement of innovation at National and regional levels shall be revised/harmonised, to accelerate the transition from research (pre-commercial phases) to market. 4. In order to empower regions and foster the introduction of the “Seal of Excellence”, it is recommended to provide regions with data and information regarding the participation of organisations based in the regions at NUTS3 level. 5. It is advisable to revise the regulative frameworks, i.e. state aids, in order to facilitate a structural growth of the financial ecosystem at European level, fostering SMEs to grow faster also in those countries that today do not have a financial ecosystem. 6. The market of alternative finance is more developed is some EU countries. It would be advisable to revise the regulative frameworks in order to facilitate a structural growth of the financial ecosystem at European level, fostering SMEs to grow faster also in those countries that today do not have a strong and structured financial ecosystem. These actions further confirm what is already envisaged within the first priority of the Action Plan on Building a Capital Markets Union (EC, 2015 Cap).

52 http://www.entrex.net 53 http://www.rockethub.com 54 http://www.kiva.org 55 https://www.zidisha.org 56 https://www.lendingclub.com 57 http://english.creditease.cn 58 https://www.sequoiacap.com 59 http://www.welab.co 117

Annex 2: Workshops, events and InvestHorizon fast-track approach

According to the pitching events/workshops that experts suggested to SMEs, ICT is the sector with more dedicated events, easily recognisable by entrepreneurs and stakeholders in the field. Other projects in MIC/LIC fields many specific workshop and events. SMEs from other sectors would benefit from dedicated events for pitching projects results, and meeting investors (see below the list of workshops). Several activities were organised for action 9 beneficiaries, before the completion of the action in cooperation with the InvestHorizon programme and InnovFin, the Horizon 2020 financial instruments, both actions under the leadership of DG RTD B.3, Unit in charge of SMEs, Financial Instruments and State Aids. This showcases the synergies with other programmes and exploitation of results.

Within the conference ICT 2015 (the biggest ICT event in the EU calendar for ICT which took place in Lisbon on October 20th-22th 2015), InvestHorizon organised the first pitching event for investment ready ODI SME Instrument beneficiaries (ICT) from Phase 1, who had the opportunity to pitch their projects to investors. InvestHorizon is a programme designed to increase investments made in Innovative European SMEs through Investment Readiness development and raising Investor awareness. By doing that, InvestHorizon aimed at increasing the potential private investments into EU firms, accelerating the development of their project and bringing innovative ideas closer-to-the-market. Four ICT SMEs participating to Action 9 pitched in front of investors. Notably, SMEs pitched in front of investors within 3 months from their investment assessment and within 6 months from the establishment of the methodology, providing a concrete demonstration of the fast-track approach of Action 9 and InvestHorizon.

In addition, InvestHorizon had a special offer for companies that participated in Action 9: after the expert's assessment and recommendation on the roadmap to become investor ready, DG RTD B.3 invited the SMEs to participate in the InvestHorizon programme activities such as the Coaching Academy, which took place in Brussels on October 23th 2015, at the European Fair for Entrepreneurial Finance & Growth The European Forum for Entrepreneurial Finance, the Early Stage Camp and Investment Forum, in connection with the 4YFN and Mobile World Congress in Barcelona, on 24 February 2016.

In order to close the loop a Fast-Track procedure was extended to SME Instrument beneficiaries applying to InvestHorizon and complete their company profile, they also include if they have either a phase 1 or phase 2 SME Instrument grant. This will allow them accessing Phase 3 benefits expected in the scheme and follow-up of SMEI beneficiaries participating in the programme.

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Main conferences and pitching events

Name Description Agenda Digital-Life-Design is a global conference January 18-20, Munich, DLD15 on innovation, digitization, science and Germany culture Innovation and digital technologies February 4-6, Geneva, Lift Conference conference Switzerland The future of financial & banking Finovate February 10-11, London, UK technology A leading news platform and worldwide February 23-27, Bangalore, conference devoted to social media and Copenhagen, Hamburg, Social Media Week its future developments Jakarta, Lagos, Milan, New York One of the best European events for February 26-28, Antalya, Startup Turkey startups Turkey Future Everything An award-winning innovation lab for February 26-28, Manchester, Festival digital culture and annual festival United Kingdom The world’s largest annual gathering of Mobile World mobile and related industry C-Level March 2-5, Barcelona, Spain Congress executives Startup Camp Startup Camp serves as the largest early March 13-14, Berlin, Germany Berlin stage startup event in Berlin One of the largest global conferences that brings together entrepreneurs March 16-20, Hannover, CeBIT interested in big data, digital Germany transformation, IoT and social businesses The global and unconventional funding Capital on Stage conference where investors pitch to March 26, Copenhagen, Copenhagen startups, and founders pick investors Denmark they want to meet The world’s annual most-established TV and digital content market and the MIPTV April 13-16, Cannes, France biggest gathering of entertainment industry professionals One of the biggest tech gatherings in Europe with innovation and best Wolves Summit April 14-16, Gdynia, Poland practices in sales, marketing and technology Europe’s leading talent conference for April 17-18, St. Gallen, START Summit entrepreneurship and innovation Switzerland The leading global platform of April 20-26, 40+ cities Big Data Week interconnected community events for worldwide data The most influential digital & tech CEE Digital Summit gathering for the markets of Central & April 21-22, Sofia, Bulgaria Eastern Europe The Next Web A global event where business and April 23-24 2015, Amsterdam, Europe Conference culture collide the Netherlands

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The keynote event for startups in April 25 2015, Stockholm, Startup Day Stockholm Sweden A week-long festival on current trends in Berlin Web Week May 4-10, Berlin, Germany digital industry and society Heureka A conference for founders looking for May 5, Berlin, Germany Conference accelerating their companies Maastricht Week A 3-day interdisciplinary hub that of empowers individuals to make a positive May 6-8, Maastricht, the Entrepreneurshipas change in the world Netherlands entrepreneurs The global and unconventional funding Capital on Stage conference where investors pitch to May 14, the UK London startups, and founders pick investors they want to meet One of the leading conferences in digital ICT Spring Europe May 19-20, Luxembourg trends, user experiences and fintech A convention on the latest digital trends May 19-21, The Sage Thinking digital and innovation from leading industry Gateshead, UK experts A unique on-the-road event which May 20-21, Leuven, Antwerp Techtour Benelux showcases world-class high-tech & Rotterdam companies from the Benelux region Leading tech festival for tech innovators Pioneer’s Festival May 28-29, Vienna, Austria and investors The conference where music and tech Midem June 5-8, Cannes, France companies meet The European tech startup awards & The Europas June 16, London, UK invitation-only conference Founders Forum is a private network of Founders Forum the leading digital and technology June 17-19, London, UK entrepreneurs Startup Extreme The world’s most extreme startup festival June 17-19, Voss, Norway An event where technology, startups & Bitspiration June 22-23 2015, Krakow, music clash to inspire revolutionary Festival Poland solutions The global and unconventional funding Capital on Stage conference where investors pitch to June 30, United Kingdom London startups, and founders pick investors they want to meet An event that links entrepreneurs with September 2-3 2015, Cologne, Pirate Summit venture capitalists and business angels Germany An event that aims to connect the global September 16-17 2015, DM Expo digital economy Cologne, Germany The global and unconventional funding Capital on Stage conference where investors pitch to September 24, the Amsterdam startups, and founders pick investors Netherlands they want to meet Biohacking is the art and science of optimizing your performance and well- September 24-25 2015, Biohacker Summit being with biological & technological Helsinki, Finland tools 120

Startup Istanbul Leading startup event in Eurasia October 3-5, Istanbul, Turkey Europe’s premier student-led startup October 6-8 2015, Vallendar, IdeaLab conference Germany Webit Global One of the top business conferences October 6-8 2015, Istanbul, Congress devoted to digital Turkey Startup Istanbul Leading startup event in Eurasia October 3-5, Istanbul, Turkey Europe’s premier student-led startup October 6-8 2015, Vallendar, IdeaLab conference Germany Webit Global One of the top business conferences October 6-8 2015, Istanbul, Congress devoted to digital Turkey Conference for digital innovation and December 9-11 2015, Paris, LeWeb internet-driven businesses France The global and unconventional funding Capital on Stage conference where investors pitch to December 3 2015, the Berlin startups, and founders pick investors Netherlands they want to meet This annual gathering of the global CleanTech Forum cleantech innovation community. Multi- April 2016, Lyon Europe day program with opportunities to network, socialize, and get deals done Future prospects of the European Tech Tour venture capital ecosystem. Inviting in November 2015, Rotterdam CleanTech Forum prominent speakers from across the ecosystem, and investors The leading startup event in Northern November 11-12 2015, Slush.org Europe Helsinki TechCrunch.com An established tech venture event and December 7-8 2015, London Disrupt platform The conference serving the global biotechnology industry. The conference annually attracts leading dealmakers BioEurope November 2-4, Munich from biotech, pharma and finance along with the most exciting emerging companies

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