Valuating intellectual property in innovation support OSEO s experience
: French public SME support institution Three major business lines: Innovation support Guarantees on bank financing Direct Financing Coordination of actions through a single network Development of products synergies 2
OSEO in 2010 OSEO Guarantees 6,2 billion of issued guarantees on 10,8 billion financing 66 000 SMEs Co-financing Medium, long and short term loans 16,2 billion 12 000 SMEs Innovation support Subsidies and loans (0,650 m ) Leading to 1,9 billion financing for 3100 SMEs Total amount of financing associated to OSEO s actions in 2010: 29 billion in 2011: 31 billion 3
The missions of OSEO Support French companies innovation Facilitate the access of Small and Medium-Sized Firms to bank loans and to complementary equity (Venture Capital, Business Angels) Strengthen SMEs financial profile and support their growth in France and abroad Common features on the three actions: Accept risk-taking on entrepreneurs initiatives Control risk level with adapted technicality 4
An organization within a network European programs International partnerships SME support public actors Regional authorities Ministries Research bodies, Universities Clusters Incubators Banks Venture capital External technology experts Consular networks Networks of accompaniment to Start-ups Professional federations 5
An institution at the service of Small and Medium-Sized Firms and their partners Financial and technical institution assuming actions of general interest with all actors of the financial sector (neutrality) Operator for the State and local authorities (Regions) Objectives : To supply a possible financial solution for all stages of SME life, from start up to transfer to a new owner To avail a type of support for all risk profiles of SME presenting a credible project To offer a dynamic / «facilitator» / incentive effect on the banking sector 6
Coordination with French Regional Authorities support to innovation (regional guarantee funds for innovation) Main principle: the Regions agree to give OSEO a delegation of authority to analyse and decide regional support. Regions select beneficiaries, priority sectors according to their own choices; they are represented in regional decision committees. Support (grants, zero interest loans, reimbursable advances) is normally granted in co-financing by OSEO and the regional fund. The system creates a multiplier effect (1,4) on loans and advances from regional budgetary resources. ERDF resources allocated to Regions can be integrated in the same process. 7
Innovation Direct support Accompany and finance the projects of innovation with convincing market perspectives New products, proceeds or services With 3 main programs SME Innovation programs Large collaborative programs on innovation breakthroughts Major programs supported by Clusters and Reseach Centers 8
Innovation support Industrial Strategic innovation Accompany and finance the project needs and the SME in every stage of the innovation process Company with up to 2 000 employees Financial support up to 3 M Subsidies and refundable advances at 0% interest OSEO, partner of the national Competition to support the innovative Start-up, led by Ministry of Research Facilitate the emergence of European champions Technological breakthrough Industrialisation Collaborative projects: a leader (Small and Medium- Sized Firm / ETI *) private and public partners Support from 3 to 10 M Subsidies and refundable advances with interest * Workforce: 250 to 5000 employees, CA < 1 500 M, or total balance < 2 000 M 9
FUI Program for competitivity clusters Accompany and finance the R&D programs of collaborative projects of enterprises and public laboratories or research institutes belonging to competitivity clusters All enterprises (small and large) are eligible Large financial resources issued by different Ministries: 158 M in 2011 Support in subsidies representing 25 % to 100% of eligible programs Reserved for high economic potential projects with high innovation intensity 10
OSEO supports all stages of innovation DIRECT FINANCING MEZZANINE FINANCE STATE SUBSIDIES TRADITIONAL LOANS Emerging company Maturity Early stage Start up Seed GUARANTEES ON BANK LOANS 11
OSEO s specific experience: Synergies created between financial and scientific cultures Context: Innovation is now in the heart of investment, and the key to exports. 85% of innovators can immediately adress a world market. A better technicality in the institution: full risk analysis capacity indispensable to assess individual projects and risks, in fast changing economies and markets. SMEs get more complete support service when it is closely associating financial resources and technical support Consequences: OSEO opinion on innovation projects (feasability and coherence of program components) is a key element for bankers and stakeholders in innovative SME support. 12
OSEO SME OSEO SME. subsidy Putting valor on innovation and intelligence is twinned with financial support Project feasability funding Investments Turn over increase guarantee Job creation Research and patents Innovations / opportunities National and international programs Collaborative developments International development Collaborative actions (EU, Regions) Connecting VC to SMEs networking 13
OSEO and the activation of R&D From innovation to economic development: from ideas to sales Previously: ANVAR: national agency for valuating research Diffferent approaches are taken: 1 Helping SMEs to finance the cost of their innovation programs: I.P. is one key immaterial investment 2 Changing fundamental research (universities, laboratories) into manageable economic investment 3 Matching world of Research and world of productive economy 4 Convincing SMEs financial partners of the value of developed innovations 14
A few key points in the value assessment of intellectual property To which objectives and to which demand is the technology dedicated? At which stage of development is the technology? What is the position of the technology compared with others, existing or in development? What is the ability of the technology owner (laboratory, enterprise, research center ) to transfer it to market? Situation of intellectual property : registered patent Economic potentialities of tranferable technology. How to match industrial partners and laboratories How to write a contact for collaboration, then organize the transfer. 15
Intellectual property valuation and formulation Value of technology can be estimated by experts supplying OSEO with technological assessment (network of 2000 active experts, managed with a specific data base). The expertise is requested for all applications for financial support. Technology transfer can be defined by the ensemble of competences and technical results developped by a company or a laboratory, and negociated with a third party The patent and know how can be either sold, or leased with payment of royalties Training of personal by the innovative enterprise or by research centers can also be part of the deal 16
The actors of technology transfer Laboratories, research centers: are often the owners of research results, know how and technologies Entreprises: sometimes integrators or receivers, sometimes developers of new technologies, Usually need to acquire new technologies in order to accelerate, complement or confirm their own researches, to reduce uncertainty on delays, cost and success probabilities of an innovative project The structures of technology valorization: they organize matching, facilitate the tranfers, and negociate their contractual aspects 17
OSEO s support to technology transfer Creates an incentive for research laboratories to develop industrial applications for their own discoveries, with a confirmation of transfer feasability Laboratories expenses eligible for support: test, market studies, specific study for potentiel applications, research of industrial partners... Type of support: grant representing up to 40% of total costs, with a maximum of 50 000 euros. 18
Support to technology transfer acceleration The French SATT: Societies for Acceleration of Technology Transfer objectives : to ease and accelerate the passage from laboratory results to practical use of technology by enterprises Information to research bodies and their personel, detect and select projects Help projects to mature Valorise technology (licensing for existing companies or start ups). Contribution of OSEO : Support to evaluation of economic potential of projects Identify experts able to foster maturity of projects Identify qualified entreprises which are potential clients for the technology once it has matured 19
Support to «contractual research companies» (SRCs, Sociétés de Recherche sous Contrat) SRCs are private companies, which main activity is providing research contracts in specific domains OSEO facilitates relationship between the SRC, providing superior skills in their own domain, and innovative SMEs. Comfort financially the SRC, which can undergo a better complementary research and develop their know how. Grants are offered, based on the turn over of the SRC on «contractual research» with SMEs and large enterprises. 20
Volume of support granted In 2010, technology transfer activity represented 362 projects, for 78,3M. Support on transfer from Public Research Bodies: 152 projects for 8,5 M : FUI (clusters) 35 M for 120 projets ISI program: 35 M related to 90 laboratories contractual research companies : 10 M / year for 31 companies National competition for innovative start ups (in partnership with Ministry of Research) - Emerging projects: grants for feasability studies (up to 45 000 ) - «création-développement» (support to laureates projects: up to 450 000 ) Budget 2010 : 19 M 21
Beyond technical aspects: synergies in engineering new types of financing Combination of lending activity, guarantee, and aptitude for technological risk appreciation leads to new instruments. They adress mostly intangible investments, dedicated to innovation efforts or deployment on international markets for selected customers. Mezzanine (or quasi subordinated) loans: long term loans, with a long grace period, requesting no guarantee from borrower. Patient capital for projects for which financial returns are not immediate. Such loans are not proposed to SMEs by banks. Only a multi-instrument institution can supply them. They are limited to the program cost, but analysis of reimbursement capacity is based on potential project value. They represent 25 % of OSEO s lending activity in 2011, i.e 930 M. 22
Two examples of mezzanine loans 1) Pret participatif d amorçage, or pre-equity phase financing: Loan offered to a SME developing an innovation for the early stage period, leading to development of a prototype, and linked with innovation support. Equity partners will be needed; but at that stage, the SME has not enough convincing evidence to raise sufficient equity. The mezzanine loan (up 300 K) to helps covering development costs until the end of negociating phase with Venture capital firms, preserving the cash position of the enterprise and putting it in a better position to negotiate. 2) For larger and mature companies, the Contrat de Développement Participatif ( up to 3 M), can be based on immaterial investments serving innovation programs or export based development projects. The mezzanine loan has to be joined to other resources: either new equity, or a bank medium term loan 23
The indirect support to innovation value: from OSEO s equity guarantee scheme An equity guarantee scheme covers 50% to 70% of VC s investments. Conditions are based in an agreement signed with the VC. The scheme covers the portfolios of 230 French VC firms or equity funds, most of them supporting innovative enterprises OSEO labelling of projects as «innovative» allows favorable tax incentives for the VC and its own investors. Labelling is given either by provision of a service, or linked to provision by OSEO of a grant or innovation loan on the program. The guarantee consequently facilitates VC decisions, improving the allocation of ressources based on evaluation of projects economic potential. 24
THANK YOU FOR YOUR ATTENTION Visit our site at : OSEO.fr Jean Louis Leloir Head of International Technical Assistance Direction of International Affairs jl.leloir@oseo.fr 25