© businessoulu 2011, the innovation systems and financials tools. case-finland/oulu. petri...

© BUSINESSOULU 2011, WWW.BUSINESSOULU.COM

The Innovation systems and financials tools. Case-Finland/Oulu.

Petri Karinen, Head of International Affairs

BusinessOulu

Oulu, Finland

Innovation policy and systems Innovation policy remains an art rather than a science. There are innovation policy theories but they are often mute on how to

adapt and change existing policies into new directions. At least since the works of Solow (1956, 57) and Arrow (1962), it has

been widely acknowledged that innovation is the principal engine of economic growth.

The Finnish innovation policy system is currently based on a subset of main tools:

intellectual property, subsidies (and R&D funding) and public production.

Co-operation between different organizations (public/private) is very important

Petri Karinen, © BUSINESSOULU 2011, WWW.BUSINESSOULU.COM

Source: Discussion papers No. 1185, Tuomas Takalo, RATIONALES AND INSTRUMENTS FOR PUBLIC INNOVATION POLICIES, ETLA 2009.

The complexity of the Finnish innovation system


Source: Veugelers, Aiginger, Breznitz, Edquist, Murray, Ottaviano, Hyytinen, Kangasharju, Ketokivi, Luukkonen, Maliranta, Maula, Okko, Rouvinen, Sotarauta, Tanayama, Toivanen, Ylä-Anttila. 28 Oct. 2009. Evaluation of the Finnish National Innovation System – Policy Report. Taloustieto Oy.

Regional Innovation policy Innovation policy is national, the regional dimension is nonetheless rather

important. Innovative activity is highly concentrated regionally in Finland. Should innovation policy

ignore regional pattern and consider it only as a natural outcome in a globalised world or

should it take the regional dimension into account and aim reducing regional variations.

According to the Ministry of Employment and the Economy (MEE), there is only one rationale behind ’regional’ innovation policy: It aims at seeking innovative potential in all regions by reducing the information gap of the local actors.

it varies far more by the size than by the location of firms. The target group is small and medium-sized enterprises (SMEs)


Geographical distribution of public R&D units



OULU

VILLE HEIKKINEN © BUSINESSOULU 2011, WWW.BUSINESSOULU.COM

Finland’s innovation activity

Finland’s innovation activity Finland’s innovation investment and performance are among the strongest in the

OECD area. Gross expenditure on R&D (GERD) was 3.7% of GDP in 2008 and Finland aims at

GERD intensity of 4% of GDP

Finland’s strong R&D investment is reflected in solid innovation-related outcomes.

64 triadic patents per million population in 2008 (almost double the OECD average) 1 573 scientific articles per million population in 2008 (third among OECD countries

and contributed 0.5% of the world share of scientific publications)

In 2008 Finland led the OECD with 16 researchers per thousand employment, and almost 60% of all researchers were in the business sector

Finland’s key economic sector is manufacturing, principally the wood, metals, engineering, telecommunications and electronics industries

(Source: OECD SCIENCE, 174 TECHNOLOGY AND INDUSTRY OUTLOOK 2010 © OECD 2010)


Evolution of total R&D hours worked in Finland by sector


Source: Veugelers, Aiginger, Breznitz, Edquist, Murray, Ottaviano, Hyytinen, Kangasharju, Ketokivi, Luukkonen, Maliranta, Maula, Okko, Rouvinen, Sotarauta, Tanayama, Toivanen, Ylä-Anttila. 28 Oct. 2009. Evaluation of the Finnish National Innovation System – Policy Report. Taloustieto Oy

Sectoral research in Finland by research area, budget funding (2009)



R&D investments in some countries

Source: OECD, Main Science and Technology Indicators

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Percentage of GDP

EU member states’ innovation performance

Source: Innovation Union Scoreboard (IUS) 2010

Sweden, Denmark, Finland and Germany are innovation leaders in the EU.SII points 2010 (Summary Innovation Index)

Innovation and competitiveness

Source: The Information Technology and Innovation

Foundation ITIF; The Atlantic Century II, Benchmarking EU & US, Innovation and competitiveness

Finland was ranked second with R&D input and personnel, venture capital, productivity and trade indicators.

Competitiveness

Sources: WEF, The Global Competitiveness Report 2011-2012 and IMD World

Competitiveness Yearbook 2011

Total ranking 2011-2012

IMDTotal

competitiveness2010

WEFGlobal

competitiveness2011

534

11014122620

1 768

2313

4

132

45896

12111013171914

123 56789

10111213141516

157

2011

SwitzerlandSingaporeSweden

USAGermanyNetherlandsDenmarkJapanGreat BritainHong KongCanadaTaiwanQatarBelgiumNorway

Finland

Innovation index

09-2The Innovation index covers quality of research institutions, company spending on R&D,

university and industry research collaboration, availability of scientists and engineers,

utility patents and intellectual property protection.

Source: WEF, The Global Competitiveness Report 2010-2011010

Points according to WEF

Finland leads in technology and innovation

Measurements of the comparison are R&D investments as percentage of GDP, scientific and engineering researchers per capita and patents per capita.

Source: Martin Prosperity Institute: Global technology rankings.

12

34

56

78

910

1112

1314

1516

1718

Ranking

Ranking of EU countries The Lisbon Review

Info

rmat

ion

soc

iety

Inno

vatio

n

and

R&D

Lib

eral

isatio

n

Totalrank

Networ

k

ind

ustri

esFin

ancia

l

ser

vices

Enter

prise

env

ironm

ent

Socia

l i

nclu

sion

Sweden

DenmarkNetherlandsLuxembourgGermanyAustriaFranceGreat BritainBelgiumIrelandEstoniaCyprusSloveniaCzechia

Finland284751639

111813101520

13672945

14111710121915

42761

17101211

853

131519

3214598

1314

61116

71510

13567249

1011

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1532796

104

1413

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1248976

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Susta

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ent


Oulu today and Oulu ecosystem

Petri Karinen, senior advisor

BusinessOulu


Basic facts about Oulu

The largest city in northern Finland, Sweden and Norway Founded in 1605. The name Oulu comes from a word in the Sami language meaning

floodwater. Situated by the Gulf of Bothnia, at the mouth of Oulu River, an old

trading site The capital of Oulu province since 1776 Oulu is known for its cooperative, competent people, active

development, high-class services, versatile business structure and strong economy. Oulu offers an excellent setting for study, work, research and development.

Oulu University

Dept. of E

lectronics Engineerin

g

VTT Electronics Laboratory (T

echnical Research

Centre of F

inland)

Oulu Technology Park (Technopolis )

Oulu - the City of T

echnology1

95

8

19

65

19

74

19

82

19

84

19

90

Medipolis (Technology Park of h

ealthcare)

19

99

IPO of Technopolis

...

20

00

19

70

KERA (Regional Development Fund)

TEKES (National Technology Development Fund)

19

89

TeknoVenture Ltd (Regional VC –fund)

Multipolis network

Oulu Inovatio

n

20

05

20

06

Development Time Line

Oulu Wellness In

situte


Oulu University

Dept. of E


g

VTT Electronics Laboratory

Oulu Technology Park


echnology1

95

8

19

65

19

74

19

82

19

84

19

90

Medipolis

19

99

IPO of Technopolis

20

00

19

70

19

89

Multipolis network

Oulu Inovatio

n Ltd

20

05

20

06


Creation of Education Base

Creation of R&D Base

Creation of Business Dev. Infra

”Birth” of the SME’s .

Attracting of Larger Corporations

Growth of Telecom Cluster

Globalisation of Telecom Cluster

Transformation...

Oulu Wellness In

situte

2010


BusinessOulu

Oulu University

Dept. of E


g

VTT Electronics Laboratory

Oulu Technology Park


echnology1

95

8

19

65

19

74

19

82

19

84

19

90

Medipolis

19

99

IPO of Technopolis

...

20

00

19

70

KERA (Regional Development Fund)

TEKES (National Technology Development Fund)

19

89

TeknoVenture Ltd (Regional VC –fund)

Multipolis network

Oulu Inovatio

n Ltd

20

05

20

06


Basic Industries (Forest, Metals, Food, ...) towards higher processing grade with higher productivity

Electronics, Instruments, Machines, Automation, ...

Wireless Telecom Industries, R&D-, Manufacturing, Services

Software, Medical, Wellness, Bio, Environment, Water, Renwable Energy, ...

.... ???

Industrial Focus

Oulu Wellness In

situte


Oulu Today

A global leader in wireless IT technology Fifth in R&D spending per capita in Europe First in R&D spending per capita in Finland A true testing and piloting laboratory Leading edge technologies for a global market place Headquarters for Europe’s largest technology park Second largest university in Finland Second largest airport in Finland City region population of more than 230,000, more than 100 different nationalities City of 30,000 students 32.6% of population in Oulu with university degree (EU average 20%)


Population on 1 Jan 2011 141 000 men 63,484 48.8 % women 66,694 51.2 %foreighner 2 417 1.9 %

In terms of population, Oulu is the sixth largest city in Finland One of the fastest growing urban centres in the country The average age of people living in Oulu was 36 years.

Surface area 449,2 km² land 369,7 km² water 79,5 km²

Population and surface area Education 2009

University secondary primary


Oulu regionNorthern ostrobothnia

Finland

Why Oulu In FinlandOulu is number 1 in regional growth competitiveness comparison in Finland

Growth competitiveness index (GCI)

Competitiveness index (CI)

Source: Tekes report 243/2009 Regional vitality and competitive advantages

GCI CIRank Rank

Growth competitiveness index emphasizes:•Regional knowhow•Innovation factors (R&D spending, patents and high technology share of added value)•Accessibility of the region (airport connections and industry connections to markets)

CITY OF OULU Ranked as one of the top 28 cities in IT in the world

HelsinkiStockholm

Malmö/Copenhagen

Baden-WüttemburgBavaria Area

Israel

HelsinkiStockholm

Malmö/Copenhagen

Baden-WüttemburgBavaria Area

Israel

KiotoTaipei

HsinchuMelbourneBangalore

KiotoTaipei

HsinchuMelbourneBangalore

Dublin London

CambridgeFlander Area

Thames ValleyParis

Dublin London

CambridgeFlander Area

Thames ValleyParis

BostonNew YorkRaleigh/Durham/

Chapel HillMontreal

BostonNew YorkRaleigh/Durham/

Chapel HillMontreal

SeattleSilicon ValleySan Fransisco

San JoseLos AngelesAlbuquerque

Austin

SeattleSilicon ValleySan Fransisco

San JoseLos AngelesAlbuquerque

Austin

SOURCE: Kaleva, Wired MagazineCopyright: Invest in Oulu/Oulu Innovation Ltd.

OULUOULU


City of Wireless R&D and Beyond

• World’s leading center of mobile communications technology and applications• Additional vertical expertise, research and business development in HealthBio, Wellness, CleanTech, Optical Technologies and Printed Electronics

• A major center for Nokia’s and Nokia Siemens Network’s R&D and production (Nokia employs approx. 5,000 people in Oulu)

• A remarkable tech economy: 17,000 hi-tech R&D jobs 800 IT companies U.S. $6.5 billion revenue

• Europe’s most significant hi-tech powerhouse


Oulu IT Track Record is a Global Success Story2010 World's First Fully 'Open' Mobile Device Powered by Moblin and

Android Communities 2009 Linux Phone launch2008 World 1st pedestrian navigation phone2007 Launch of mobile Wimax test network2005 The world’s 1st public NFC user2004 The world’s 1st commercial Edge high-speed network2003 Europe’s 1st free urban area WLAN network2002 The world's 1st WCDMA (3GPP) telephone call1996 The world’s 1st WCDMA telephone call1993 Modern menu-driven user interface style for mobile phone1992 The 1st contactless fare collection system for public transportation1991 The world's 1st GSM telephone call1991 The world's 1st GSM base station1982 Europe’s largest science park1981 The world's 1st NMT network


More than 200 Global Companies Operate in Oulu


Oulu Innovation AllianceThe Oulu Innovation system

Background Oulu has a long tradition in co-operation between education and

research institutes, companies and public sector. Oulu’s high-tech image was built on this co-operation in 1980´s. As a collaborative continuation, the city of Oulu established a

taskforce to work on suggestions for the renewal of Oulu’s innovation environment in 2007.

As a result of the Oulu Triple Helix report, a strategic innovation alliance agreement was undersigned in February 2009.

The Oulu Innovation Alliance was formed between the City of Oulu, University of Oulu, Oulu University of Applied Sciences, VTT Technical Research Centre of Finland and Technopolis.

Oulu Innovation Alliance (OIA) The ultimate target of the Oulu Innovation Alliance

agreement is to keep Oulu as an internationally acknowledged center for innovation.

The OIA founding partners have committed1. To focus their operations, education, research and

development activities on agreed innovation areas.2. To invest in the development of agreed infrastructures.3. To create and develop mechanisms for mutual use.

The initial focus areas were agreed as Internet research, printed electronics, international business, environment and healthcare sectors.

Oulu Innovation Alliance

OIA Board

OIA Working committee

Directors of innovation centers

CEHT CIECEWICPrinto Cent

SkyPro MAIGBE

VC Model...

... is broken

Previous VCs have become PEs

Time for new models


Equity Financing Trends

Traditional Venture Capitalists have become risk averse and prefer later stage investments

Lack of Early Stage Financing

Starting a business is faster and cheaper than earlier (cloud services etc.)

Early stage investment should carry further


Seed

Startup

A-round

B-round...

Seed and Startup

A-round, B-round...

Earlier Today

Sources of financing (current and potential)


BusinessOulu ?

Sources of financing Business Angels

Only investors investing to the seed stage

Accelerators / Micro VCs Investing thousands of euros instead of millions

VCs Has an important role in making scalable businesses to grow

fast Outside Europe have started to provide more added value

Crowdfunding Risk of having ”dumb money” Angels are afraid of crowdfunding


Future?

Visible angel investments are representing more than 5% of new jobs created in the US (Sohl 2010)

Invisible market much greater

90’s was the decace of VC investments 00’s was the decade of PE investments 10’s is the decade of Micro VC / Angel investments

Finland is really highly ranked and appreciated in the startup field Berlin considered best / easiest place to get funding at the

moment


Oulu Region and Northern Startup Fund


National VC investments versus R&D investments in 2006



H1/2011 Investment Statistics - Finland Finnish portfolio companies received 568 MEUR from

Finnish and foreign private investors 300 MEUR to life science industry 45 MEUR to companies on seed, startup and later venture

stage (“venture stage”) and 523 MEUR to “buyouts” 90 investments to venture stage companies and 63

“buyouts” 22 MEUR to venture stage companies and 399 MEUR to

“buyouts” by foreign investors (Source: FVCA statistics, 30 August 2011)

Finnish High-Tech companies received 112 MEUR 30 MEUR to Rovio/Angry Birds 58,7 MEUR as second round financing 71,3 MEUR by foreign investors 35,1 MEUR to mobile sector (Source: Technopolis Online, press release by

Technopolis Oyj, 1 September 2011)

Ville Heikkinen © BUSINESSOULU 2011, WWW.BUSINESSOULU.COM

Market Statistics – Oulu Region Foundation for Finnish Innovations evaluates about 500 innovations per

year from the region

According to Finnish Official Statistics Center around 400 new companies are founded in the ICT sector in the region every year

Around 300 companies in the region apply for Tekes funding every year

Business Oulu continuously liaise with total of roughly 100 knowledge-intensive companies (mainly in seed/early stage)

Investors located in the region and making early stage investments : Finnvera: appr. 2 first time investments per year, Teknoventure Oy: 0-1 first time investments per year, Oulun Seudun Hyvinvointirahasto: first time investment period will

end at 2012


Gaps in the Ecosystem of Northern Finland / Oulu Region

AA BB CC DD

CO

MP

ETEN

CES

RIS

K C

AP

ITA

L

Investors (as board members)Board-level mgmtskills

Executive / directorskills

Dedicated / expert skills

GAP:Experienced entrepreneurs, business managers (Business Angels)as active directors of a start-up company

New Entrepreneurs

National

Regional

GAP:Equity funding for high-growthstart-up companies

SITRA, Finnvera, Veraventures

Finnish Industry Investment

Individual VCs and VC Funds

Pre-seed Seed Start-up Growth

Avera


Northern Start-up Fund in BriefAim

Establish a 35 M€ fund for financing seed, start-up, and expansion stage companies in Oulu Region/ Northern Finland.

Fund Structure Public-Private Partnership, utilizing funding from European Union sources. 70 / 30 (Public / Private) investment proportions. Liquidation preference for private investors.

Operational Goals Attract public and private investments to finance the most promising companies. Attract international business professionals to invest in the companies and actively work for

them. Activate Business Angel Investments.

Target Companies Are in Oulu Region / Northern Finland and operate in knowledge intensive industry. Are willing and able to enter into international business and are seeking for fast growth.


Conclusion

The Finnish low success in promoting high-growth businesses and enterprises seems to be our weak point.

There is much room for improvement in fostering high growth entrepreneurship. I especially endorse two points that were addressed in the evaluation:

You need international, national and local innovation systems and policies. The financial tools are playing key role for the whole system.

there is a need to promote the activity of experienced business angels and early-stage investors/funds to assist entrepreneurs.

Taxation might indeed be a policy instrument to be used in order to create incentives for investors, entrepreneurs and other talented people who are in the core of our innovation system.


Thank you


Petri KarinenHead of International [email protected]

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