FinancingtheBioeconomyintheBalticSeaRegion

June2015

ThomasWinther InnogateApS,Copenhagen

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1.IntroductionAround theBaltic SeaRegion one can observe a number of efforts and goodpractices thatalready moves the macro-region towards realising the bioeconomy. However, making atransition“frompocketsofsmartnesstobecomegenuinelysmartaboutthebioeconomy”callsforlargerandmorewidespreadefforts1.Thereareanumberofchallengesandbottlenecksrelatedtopolicycoherenceandcapacity;private sector engagement; research, technology and innovation; civil society andcommunication.Referenceismadetothe2015-18BSR-Bioeconomystrategyandactionplan2.Overallthechallengesandbottleneckrelatestoforexample:

• Behaviouralbarriers–intheformofe.g.producerandconsumerinformationfailures,humancapacity,budgetcycles,andnon-economic(emotional)decisions.

• Structuralbarriers–intheformofe.g.fragmentedmacro-regionalmarkets,differentandsometimeconflictingpolicyincentives,andlackofdatafortargetingpolicies.

• Legalandregulatorybarriers–intheformofe.g.regulatorydistortions,burdensomeprocedures,andissuesrelatedtoownershipofintellectualproperty.

• Financialbarriers – in the form of e.g. upfront investment costs vs. payback time,

insufficientpricingofnegativeexternalitiesfornon-bioalternatives,lackofawarenessabout business cases, and lack of scale leading to an emphasis on the low hangingfruits thatmayprovidesmall immediateresultsbut thatmayalso lead to lock-inonsmall-scalebenefitsratherthanstructuralchangeenablingbigleapswithmuchlargersocietalbenefits.

Whereas behavioural, structural and legal barriers undoubtedly are very important toaddress–alsobecause thesebarriers impacton financialbarriers– thegreatestand in theshorttermmostsolvablebarrierisproperlyimprovingthedeploymentoffundsandfinanceinthebioeconomy.Financingthebioeconomydoesnotcallfordevelopmentofanumberofnewtechnologiesandinnovations but rather that the large amount of existing public and private financialinstruments and tools are applied in conventional or new ways to, quite simply, increaseproductionandconsumptionofbioeconomyproductsandservices.

1Referenceismadetomappingreport”ABioeconomyfortheBalticSeaRegion”,NordicCouncilofMinisters&Innogate,March2014.2Referenceismadetopaper”BSR-Bioeconomy2015-2018StrategyandActionPlanTowardsaBSRBioeconomy”,NordicCouncilofMinisters&Innogate,February2015.

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Essentially one can look at financing the bioeconomy through two types of deliverymechanisms, either directly into companies (“company-level finance” in the figure 1) orindirectly into organisations, institutions and/or a number of companies (“project-levelfunding”inthefigure1).Figure1liststhemostcommontypesoffunding–allofthemrelevanttoapplyintheprocesstowardsrealisingthebioeconomyintheBalticSeaRegion.Figure1:Maintypesofcompany-levelandprojectlevelfinanceTypeoffunding Company-levelfinance Project-levelfinanceGrants ü Angelfinance ü Venturecapital ü Privateequity ü Strategicequity ü Infrastructurefundsequity ü Taxincentives ü Publicprocurement ü ü Greenfunds ü ü AlternativeFinancialServices ü 2.GrantsGrants are usually non-repayable funds disbursed by e.g. a government department,corporation, foundation or trust, to a nonprofit entity, educational institution, or businessorganization.AsaresultofEUstateaidandcompetitionlawspublicgrantsmayingeneralnotbedisbursedtosinglecompanies.Thereareexceptions to thisrule,oneof thembeingrenewableenergyproduction (biogas, wind etc.). Rarely though are such company (or personal) subsidiesdisbursedasgrants.Mostlysubsidiesareprovidedasco-investment,taxandtariffincentives.Wewillcomebacktosuchincentiveslaterinthispaper.In theBalticSeaRegion thereareanumberofproject levelgrantopportunities– targetinggroups of companies and usually in cooperationwith public and semi-public organizationsandinstitutions.Someofthesetargetdirectlythebioeconomy–otherstargetmoregenerallysustainableenvironmental,socialandeconomicdevelopment.Someexamplesare:

• NordicCouncilofMinisterspre-seedfundingforbioeconomycooperationprojects.

• Nordforsk, Nordic Innovation and Nordic Energy Research research and innovationprogrammesongreengrowth.

• TheEuropeanUnionStrategyfortheBalticSeaRegionSeedMoneyFacility.

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• EuropeanUnionTerritorial CooperationProgrammes, such as theBaltic SeaRegion,

theSouthBaltic,andtheCentralBalticprogrammes.

• TheEUFrameworkProgrammeforResearchandInnovation,Horizon2020.

• ThePilotFinancialInitiative(PFI)oftheCounciloftheBalticSeaStates.

• TheProjectSupportFacility(PSF)oftheCounciloftheBalticSeaStates.

As it appears there are numerous opportunities in theBaltic SeaRegion to attract project-levelfinancetobioeconomycooperationanddevelopmentefforts.It isachallengethat theabove-mentionedfundsandprogrammesare insufficientlyaligned,making it difficult (and expensive) for the target group to navigate between the fundingopportunities. For society the risk of duplication of efforts and lack of synergies betweenprojectfundingprogrammesmayfurtherleadtoinefficienciesinuseoftaxmoney3.TheEuropeanUnionStrategyfortheBalticSeaRegion(EUSBSR)withassociatedActionPlan–andwiththeNordicCouncilofMinistersasco-leadofPriorityAreaBioeconomy–providesaplatform for advancing coordination and alignmentof project-level grants tobioeconomycooperationactivities.Efforts have commencedwithin the EUSBSR framework to network representatives of theabove-mentioned funding programmes – and there are a number of efforts on-going tosupport potential project cooperation partners in navigating between the differentinstruments. For example, the bioeconomy seed money facility of the Nordic Council ofMinistersandtheProjectSupportFacilityoftheCounciloftheBalticSeaStatesaimdirectlyatsupportingstakeholders incomingtogether inpre-projectactivitieswithaviewtospinoutcompetitiveand largerproject applications to e.g. theEuropeanUnion territorialBaltic SeaRegionprogramme.Also,theNordicinstitutionsNordicEnergyResearch,NordicInnovationandNordForsk(theNordicresearchcouncil)havemadeeffortstoalignfundingopportunitiesthroughjointcallforproposals.Proposal: It is proposed to make further efforts in this area. One approach could be toestablisha forumwithrepresentativesof thegrantprovidingorganisationsand institutionswith a view to increase information exchange about bioeconomy grant opportunities andtherebyhelptodirectapplicantstotheforthembestsuitedfundingopportunity.Another approach could be to undertake (more) joint call for proposals to a multi-organisational pool of funds for bioeconomy cooperation. As attractive as this would be,experience shows that good intensions with such fund integration efforts are difficult topursueinpractice.Thelikelihoodisthereforethatsuchfundsintegrationwillnothappenata

3Referenceismadetoworkshoppaper”ABioeconomyfortheBalticSeaRegion–impact,engagingtheprivatesectorandfinancingcooperation”,NordicCouncilofMinisters,September2014.

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larger scale – making it all the more important to support potential project cooperationpartnerstonavigateassmoothlyaspossibleamongdifferentgrantopportunities.3.AngelfinanceandventurecapitalAs opposed to grants, angel finance and venture capital are rarely provided to a group ofcompanies or other partners – but is rather provided as company-level finance to a singlecompany.Angel finance is when an investor – or “business angel” – provides capital for a businessstart-up,usuallyinexchangeforownershipequityorforbeingabletoconverttheinvestmentinto cashat a laterpoint in time.BusinessAngelsareusuallyaffluent individuals.Theyareoften retired entrepreneurs or executives seeking high-risk, high-return investmentsopportunities.Inmanycasestheirmotivationismorethanjusttheopportunityforfinancialreturnsbutalso to “remain inbusiness”byengagingwith thenextgenerationofpromisingentrepreneurs through provision of funds aswell as business developmentmentoring andnetworks.Business angelsmay act as individuals – identifying and engagingwith start-up companiesthroughreferralsetc.intheirpersonalnetwork.InaBalticSeaRegiondimensionitwouldberathercumbersometoengagewithbusinessangelsonanindividualbasis.However,thereareanumberofbusinessangelorganisationsandnetworksaroundtheBalticSeaRegion.Theseorganisations and networks would be attractive to engage within a Baltic Sea Regionperspective. Firstly, because they often accredit or have other standards for thequality/capacity of the business angels they have as members. Secondly, because thesenetworksalreadyfacilitateanumberofbusiness-to-angelpitchactivities–oftenbothintheformofpre-pitchtrainingforstart-ups,otherkindsofmentoring,andbusiness-to-angelface-to-facemeetingsinconnectiontoconference-typematchmakingevents.SomeofthededicatedbusinessangelnetworksactiveintheBalticSeaRegionare:

• Thenationalangelnetworks,suchBusinessAngelDenmark,BusinessAngelsNetswerkDeutschland (BAND), Norwegian Business Angels Network (NORBAN), LewiatanBusiness Angels (LBA, Poland), Estonia Business Angels Network (EstBAN), andFinnishBusinessAngelsNetwork.

• Cityandregionfocusedbusinessangelnetworks,suchasBusinessAngelsCopenhagen,Connect Vest Business Angel Network (Bergen), and the Scandinavian AngelInvestmentNetwork.

• At the pan-European level there is The European Trade Association for Business

Angels,SeedFunds,andotherEarlyStageMarketPlayers(EBAN).Venturecapitalisbroadlyspeakingthenextlevelofriskfinancing.Muchlikewithbusinessangels,financeisprovidedtoearly-stage,high-potential,growthstart-upcompanies.

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However, unlike business angelswhom typically invest their own funds, venture capitalistoftenmanagefundsofothers.Anotherdifferenceisthatventurecapitaliststendtofocusonslightlymorematurecompaniesandventurecapitalistsusuallydonotengageinthepersonal“mentoringway” thatbusinessangels tend todo.Consequentlyventurecapital investmentstendtobeonlyagainstequity(andtherebyco-ownership)andlessintheformofothertypesofsecuritiesthatcanpayareturnontheinvestment.Howeverbecauseofthesimilarities,businessangelandventurecapitalnetworksintheBalticSea Region tend to overlap. A number of the above business angel networks are thereforepart/memberof largerventurecapitalnetworksandorganisations in theBalticSeaRegion,suchas:

• ThenationalventurecapitalassociationswhichexistinallcountriesaroundtheBalticSea:TheEstonianPrivateEquityAndVentureCapitalAssociation;theLatvianVentureCapital Association (LVCA); the Lithuanian Private Equity and Venture CapitalAssociation (LT VCA); the Danish Venture Capital and Private Equity Association(DVCA); the Swedish Private Equity & Venture Capital Association (SVCA); theNorwegianVentureCapitalAssociation (NVCA); the IcelandicNSAVentures; theTheFinnish Venture Capital Association (FVCA); the Polish Private Equity and VentureCapital Association (PSIK); and the German Private Equity and Venture CapitalAssociation.

• At the transnational level there are also a number of networks and partnerships,includingtheNordicVentureNetwork(uniting9leadingtechnologyventurefirmsintheNordicregion)andCleantechScandinavia(unitingmorethan50partners,someofthem venture firms, others being large corporates, universities and authorities); aswellastheEuropeanVentureCapitalAssociation(EVCA).

• Venture Cups: In Sweden, Norway, Finland and Denmark nationwide non-profit

organizationsseektodiscoveranddevelopuniversitystart-upsthroughcompetitions,mentoring, idea development and networking. Though the Venture Cups areessentially large national business plan competitions – rather than tailoredmatchmakingwith investors – the Venture Cups help to build investment attractioncapacityinstart-upcompaniesandexposethesetowardsventurecapitalists.

• Nordic Cleantech Open: Once a year since 2010 business idea/plan competitions

within cleantech has been co-organised by partners from the five Nordic and threeBalticcountries.Also,theseplatformshavehelpedbuildinvestmentattractioncapacityin numerous start-up companies and exposed these to a large number of venturecapitalists.

• Yet another example is the annual Cleantech Venture Day. This event provides animportant meeting place for Nordic cleantech companies and investors. CleantechVenture Day emerged from the Nordic Innovation Accelerator, aiming to accelerategrowth through networking and cooperation, including bymatch-making companieswithventurecapitalistinvestors.

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The national business angel and venture capital networks and associations representhundreds of specialized investors looking for opportunities in early-stage, high-potential,growthstart-upcompanies.Keyprioritiesforthesenetworksandassociationsaretoimprovetheventurecapitalmarketse.g.throughdialoguewithpolicymakersandtofacilitatebusinessmatchmakingthatspinsoutcompaniesthatareinnovativeandwithhighgrowthpotential.Businessangelsandventurecapitalistsusuallytargetsnoveltechnologiesorbusinessmodelsinhightechnologyindustries,suchasbiotechnologyandICT.Moreandmoreonecanobservethat business angels and venture capitalists gain interest also for cleantech start-ups.Altogetherthereseemtobeatrajectoryamongbusinessangelsandventurecapitalfirmsandorganisationleadinginthedirectionofthebioeconomy.Proposal:Itisproposedthataneffortismadetoexplorecooperationopportunitieswiththeabove-mentionednetworksandorganisations.Astartingpointcouldbetoestablishwhattheinterest and opportunities are for targeting a sub-set of early-stage, high-potential, growthstart-up bioeconomy companies and subsequently facilitate their matchmaking withinvestors. These explorations could take place in connection to one or more of the majormacro-regionaleventsthatalreadybringstogetheranumberofbusinessangelandventurecapitalrepresentatives,e.g.inconnectiontotheCleantechVentureDayinLahtion29October2015and/orinconnectiontoEuropeanVentureCapitalAssociation’sannualVentureCapitalForuminBerlinon22October.Also,aprojectapplication“BSRStarsS3”hassuccessfullypassedthroughthefirstapplicationstage to the EU Baltic Sea Region Programme. If the application is finally approved in thesecondhalfof2015,thisprojectwithbioeconomyanddigitaleconomyasoverarchingthemeswill provide a number of opportunities to pursuematchmaking of bioeconomy businesseswithangelandventureinvestors.4.Private,strategicandinfrastructureequityThese three types of finance are also company-level finance aimed at single companies/infrastructures.Privateequity differs fromventure capital inanumberof importantways:Firstly,privateequity firms mostly take 100% ownership in established mature companies that aredeteriorating or not making the profits because of inefficiencies. Private equity firms buythesecompaniesandsubsequentlystreamlineoperationstoincreaserevenues.Asmentionedabovebusinessangels andventure capital firms invest rather inearly-stage,high-potential,growthstart-upcompanies.Secondly,businessangelsandventurecapitalfirmsusuallyinvestmuchsmalleramountsandtheyneversizefullcontrolofthe(start-up)company.Thirdly, private equity firms buy companies from any industry, while business angels andventurecapital firms tend to focusonstart-ups in technologybased industries suchas ICT,biotechnologyandcleantech.

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In other words: “In private equity, you start with the numbers, and then you try to fiteverything into thenumbers. Inventurecapital, youstartwithpeople, and thenyou try tofigureoutwhatnumbersyoucanmake.”(MarkKachur,theformerCEOofCUNO).Becauseprivateequitystakeholdersaremoreofthekindof“WallStreettypeplayers”–banksand large funds and institutional investors – and because private equity does not target inparticulartechnologybasedindustrieswithstrongcross-overstobioeconomy,engagingwithprivate equity firms seems unlikely to be able to fast-track a transition towards thebioeconomyintheBalticSeaRegion.Strategicequityhasanumberofsimilaritieswithprivateequity–oneimportantdifferencebeing that strategic equity investors does not necessarily buy out decaying companies butrather competitors or companies with complementary products and services that can advalueandcustomerstothestrategicbuyer.For the same reasons asmentioned for private equity firm, engagingwith strategic equityfirmsseemsunlikelytobeabletofast-trackatransitiontowardsthebioeconomyintheBalticSeaRegion.Infrastructureequityisalsousuallyprovidedasbuy-outinvestments,howeverinthiscasenot usually buyouts of companies but rather acquisition of mature unlisted infrastructureassetsine.g.transport(suchasroads,railways,airportsandports),energyandutilities(suchaselectricity,gasandwatersupply)andsocialinfrastructures(suchashealth,educationandwastetreatment).Infrastructure equity fund investors are typically looking for infrastructure assets withpotentialtogeneratestablelong-termreturns.Becauseenvironmental,socialandeconomicpoliciesareusedtoguideinvestmentdecisionsandmanagement of the portfolio (where to buymore andwhere to exit) theremay be anopportunityforfast-trackingthetransitiontowardsthebioeconomyintheBalticSeaRegionbyengagingmorewithinfrastructureequityfirms.Proposal: Though generally it is still a rather small fraction of infrastructure assets in theBaltic SeaRegion that are listed or under other kinds of private ownership – the tendencyseems to be that more and more infrastructures for e.g. energy and waste treatment areprivatised fully or transferred to public-private companies. Infrastructure equity investorsplay an important role in this transition – whereby communicating new-found economicopportunities of the bioeconomy could trigger more investments e.g. sustainable energyproductionandwastetreatment.InfrastructureequityinvestorsintheBalticSeaRegionareusually institutional investors such as pension funds, insurance companies, savingsinstitutions,foundationsand(other)largeinvestmentcompanies.Thusitwouldbethesekindofinvestorsthatwouldbethetargetgroupforsuchimproveddialogue.

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5.TaxincentivesItiswellknownthatoneofthemaineconomicbarriersformakingaspeedytransitionawayfromthefossil-basedandtowardsthebio-basedeconomyisthatthenegativeexternalitiesoninparticulartheenvironmentareinsufficientlypricedintotoday’sproductsandservices.Tax incentivesonproductionandconsumption thatalter thecurrentprice competitivenessbetween fossil-based and bio-based alternatives can play an important role to alterinvestmentsdecisions,productionandconsumption.As regards producer tax incentives, the renewable energy space offers many examples offavourableinvestmentschemes,feedintariffs,producertaxbreaksetc.Thesepracticescouldbeadaptedtoanumberofbioeconomyvaluechains.Therearealsoanumberofexamplesoftaxesprovidingdis-incentives inproductionsuchas taxon residualdischarge fromsewagetreatment,taxonnutrientdischargeinagriculture,andotherpolluterpaystaxes.As regards consumer tax incentives theenergy spaceagainoffers anumberof examplesofincentives: disincentives by taxing consumption of energy and encouraging incentivesthroughtaxbenefitstoindependentpowerproductionsuchasPVpanelsondomestichouses.More“oldschool”examplesareeco-taxesonconventionalplastic,paperbagsandbottlesthatencourageconsumersandproducerstoreuseresources.Altogethertaxesprovideanumberofverydirectandimmediateimpactsthatalterproductionand consumption patterns – and can therefore be a very powerful tool to fast-track thetransitiontowardsthebioeconomyintheBalticSeaRegion.Importantly, taxes are however also about creating revenues for governments. EUmemberstatestendtoguardintenselytheirsovereigntyinmattersoftaxpolicy.AttheEuropean–aswell as theNordic andBaltic Sea level – therefore, so far only little coordination has beenachievedinthisarea.Proposal:TherewouldseemtobeanopportunityforcooperationaroundsharingpracticesontaxpoliciesandincentivesthatenablethetransitiontowardsthebioeconomyintheBalticSeaRegion.Notonlywouldsuchpolicyexchangeprovidea resource fornational taxpolicymaking that supports the bioeconomy, it would also support a better alignment of taxincentives by more countries (voluntarily) adopting similar policies. More approximatepolicieswouldinturnmeanmoreuniformbioeconomybusinessframeworkconditions.Withthatanumberofopportunitiesforcompaniestoengageinthemacro-regionalmarketwouldarise, rather than it isoften the case todaywherebioeconomycompaniesare restrained toengageonlyathomemarketswithnationalspecializedtaxincentives.6.PublicprocurementPublicprocurementcanliketaxincentivesverydirectlyprovidenewmarkets,beitforsinglecompanies or for a group of companies and RTI institutions coming together to solve a

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societalchallenge.Byprovidingneworlargermarketsforbio-basedproductsacompanyorgroupofpartnerscanmoreeasilyleverageneededinvestmentfinance.WithinthecontextoftheActionPlanforEuropeanUnionStrategyfortheBalticSeaRegionaprojectGreenPublicProcurementhasbeenimplemented.Theprojecthasdemonstratedgoodpractices and build capacity in public organisations on howGreen Public Procurement canadvanceenvironmentalinnovative,eco-efficientproductsandservices.Proposal: Itwouldseemratherstraightforward topropose thateffortsaremade togoonestep further and undertake a cooperation effort on practices and capacity building forbioeconomypublicprocurement.Alreadythereareanumberofgoodpracticesareavailable.Oneexample ispublicprocurement inpublic transport inSweden,morespecificallybiogas-propelled busses. A more recent example is from Denmark, where the Municipality ofMariagerfjordhavetaskedlocalpublicandprivatepartnerstodevelopalocalenergysupplysystemthatwillenablethemunicipalitytomakethetransitionfromfossilfueldependencytobecomefuelledonlocallyproducedbiomass.AlmostallEUMemberStates in theBalticSeaRegionhavedrawnupNationalActionPlans(NAPs) for greening their public procurement. Beyond raising awareness, the plans aim tospurdevelopmentandimplementationofpoliciesandinstrumenttoaccelerategreenerpublicprocurement.Thenon-legallybindingplansprovidesassessmentsofthecurrentsituationandnational targets for thenext three years, includingwhatmeasureswill be taken to achievethem.Theexistingcooperationactivitiesandplatforms–nationallyandattheEuropeanlevel–aroundtheNAPsforgreeningpublicprocurementcouldprovideaproductivebaselineforinitiatingcooperationeffortsonbioeconomypublicprocurement.7.GreenFundsIntheBalticSeaRegionthereareanumberof“GreenFunds”thatinvestmentsinsustainabledevelopmentofcompaniesandprojects.These funds generally provide guarantees, loans at preferential rates, investment capitalagainst equity, and (usuallyonly for feasibility typeactivities) grants –or a combinationofthese.National investment funds that targeting – partly – the bioeconomy include fundsinvestment activities of the Finnish Innovation Fund (SITRA); the green technologyinvestmentprogrammeofInnovationNorway;IndustrifondeninSweden;TheDanishGrowthFund; and the Polish Investment Programme (as implemented by Polish Investments forDevelopment and the government owned Bank Gospodarstwa Krajowego). These nationalownedfundsoftenco-investswithprivateangel,ventureandequityinvestors(refersection3and4above).There are also a number of national investment funds targeting developing and emergingmarketsinAsia,SouthAmericaandAfrica.ExamplesaretheGermanGreenClimateFund,theDanishClimateInvestmentFundandSweden’sGreenClimateFund.

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In addition there are a number of European and Nordic investment funds targetingenvironmental sustainable development; including the Nordic Investment Bank (NIB), theNordic Environment Finance Cooperation (NEFCO), the Nordic Project Fund (NOPEF), theNordicClimateFacility(undertheNordicDevelopmentFund);theEuropeanInvestmentBank(EIB), theEuropean InvestmentFund(EIF),and theEuropeanBank forReconstructionandDevelopment(EBRD).Proposal: There would seem to opportunities for accelerating investments into thebioeconomybynetworkingnationalandmacro-regionalpublicinvestmentfundse.g.throughopportunity awareness efforts and sharing of investments instruments and experiences.Asthese funds are public and therefore ties into government policies, a productive avenue toengage with these funds could be by enrolling them in cooperation efforts among grantproviders,refersection2above.8.AlternativefinancialservicesNewtypesoflendingandinvestingaregettingtractioninrecentyears.Theymaybegroupedunderaheading“Alternativefinancialservices”becausewhatunitesthemarethattheyofferentrepreneursalternative–mostlyonline-based–access tocapitalbeyondwhatbanksandotherfinancialinstitutionsnormallyoffer.Crowdfundingisonesuchexample.Essentiallycrowdfundinginvolvesthreetypesofactors:Theentrepreneurthathasanideabutneedscapitaltocarryitout;apersonorcompanythathasfreefundstoinvest;andabroker/platformthatmatchinvestor(s)withtheentrepreneurwith the idea. In short there are two basic types of crowdfunding: 1) the “reward” typewhereby entrepreneurs pre-sell a product or service to launch a business conceptwithoutincurringdebtor sacrificingequity/sharesbutbyofferinga shareof the return, and2) the“equity”typewherebytheinvestorreceivessharesofacompanyinexchangeforthemoneyprovided (in this case the fundamentals are similar to the equity financial modalitiesdiscussedinsection3and4ofthispaper).Onevariationofcrowdfundingispeer-to-peerlending.Thisisusuallyunsecuredpersonalorcompany specific loans. In early days these types of loansweremostly channelled throughpersonal social networks. Increasingly brokers/intermediaries are beginning to offer web-based platforms that are able to connect borrowers and lenders initially unknown to eachother.Oftenthereverseauctionmodelisusedasthebrokeringsystemthroughwhichlenderscompete.Thewinninglenderistheonethatprovidethelowestinterestrateontheloan.Thefact that the transactions take place online reduce costs for the brokers/intermediariesthereby enabling them to offer better returns for the lenders and lower interest for theborrowers. As a result additional business cases become viable. Another advantage of thebroker/intermediarysystemsisthattheyoffermultipleopportunitiestolend–andtherebypossibilitiesforlenderstomitigate/reducepotentiallossesthroughdiversificationinlending.Anothervariationofcrowdfundingispeer-to-investingthatsharestherationalewithpeer-to-peerlending.Inthiscasehowever,thelendersdonotjustoffercashbybuynotesasasecurity

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andsubsequently theyareable tosell thenotesandtherebyexit the investmentbefore theborrowerhas(completed)repaymentofthedebt.Yetanotherexampleofalternativefundingisrent-to-ownschemeswhereaproductisleasedinexchange for aphased repaymentwithanoption topurchase theproduct at somepointduring or at the end of the lease. The advantage is that this system reduces the initialinvestment.Becauseitalsoprovidesthebuyerwithanopportunityto“tryitout”–andreturntheproductifitdoesnotdelivertheexpectedresultswithoutsustainingthefullcostsoftheinvestment–itmakesunsurebuyersmoreinclinedtobytheproduct.Proposal:Thereareanumberofcrowdfunding intermediaries in theBalticSeaRegion,e.g.ToBorrow and Local Capital in Sweden and Crowdfunding Berlin. There is also the NordicCrowdfunding Alliance uniting Boomerang from Denmark; Invesdor and Mesenaatti fromFinland;KarolinaFundfromIceland;andBidrafromNorway. It isproposedtoengagewiththese organisations and their networks to investigate opportunities for propelling thebioeconomyintheBalticSeaRegionthrough(increased)cooperationoncrowdfunding.9.ImplicationsAs mentioned in the beginning of this paper financing the bioeconomy does not call fordevelopment of a number of new technologies and innovations but rather that the largeamount of existing public and private financial instruments and tools are applied inconventional or new ways to, quite simply, increase production and consumption ofbioeconomyproductsandservices.Thepaperdemonstratestheavailabilityofanabundanceoffinancialinstrumentsavailabletostakeholdersintheformofcompany-levelandprojectlevelfinance.TheopportunitiesingoingforwardwitheffortstoacceleratethetransformationtowardsthebioeconomyintheBalticSeaRegioncanbesummedupto:

1. Makeeffortstoengagemorewiththedifferentfundingandfinancepartner; increaseawarenessaboutthebusinessopportunitiesinthebioeconomy–andhowtheserelateto existing business areas in biotechnololy, ICT, cleantech and other environmentaltechnologies; and with that increase the interest for investing in bioeconomycompanieswith high growth potential.Mechanisms for relaying these opportunitiesand facilitate investor-company matchmaking could be a number of the existinginvestorandbusinessmatchmakingconferencestakingplacethroughouttheBalticSeaRegion.

2. Provide forums for policy makers and representatives of government investmentfundswhereby they can access and exchange information on financing and fundingmechanism.Thiswouldbe likely to spur fundingand finance alignment – aswell asother types of cooperation – thatwould support companies and project partners tonavigatemoreeffectivelybetweeninstrumentsandfinancingopportunities.

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The Nordic Council of Ministers has already – in its capacity of leading bioeconomycooperationeffortswith theActionPlan for theEuropeanUnionStrategy for theBaltic SeaRegion–madeattemptstofacilitatemorecooperationintheseareas,includingbyproposingtheestablishmentofamacro-regionalworkinggroup“FinancingtheBioeconomyintheBalticSea Region” bringing together a large number of funding and financing partners, includingthose mostly providing credits (EIB, NIB, NEFCO, etc); those mostly providing grants/co-financing (Nordic Innovation, NordForsk and European Commission DG Research andEducationandDGRegionalPolicy);andthosenational/regional/localfinancialstakeholdersand networks that in other ways enable and facilitate investments towards realising thebioeconomy.It is proposed that further efforts are undertaken in this area, including by connecting toexisting fora (as mentioned under point 1) and by facilitating the development of newcooperationplatforms(asmentionedunderpoint2).