“The moment is good” said Ismael Abel Vallés, expert in Innovation and Entrepreneurship, as “the actual crisis and economic situation forces everyone to find out new solutions” and moreover “ the commitment of our policy makers is very high”. Valencia region is in fact planning, on one hand, to structure a fund to sustain innovative enterprises and, on the other, to assess the ongoing industrial clusters in order to select the new regional priorities.

Veneto and Valencia share similar economic systems: high number of micro companies, traditional manufacture sectors,  low rate of investment in research, incremental innovation. This was also why the Veneto Region decided to structure a support system to facilitate the credit access (“financial engineering” programme) in particular to SMEs and to foster the investments in research and innovation. The financial aid in fact concerns only investment in industrial research, organisational innovation, cooperative research (also in collaboration with Universities and Innovation Centres) and technology transfer. The programme includes three synergic tools: revolving soft loans, guarantee system, venture capital fund. The “Financial Engineering” programme is an efficient system because “it is consistent in time as the financial resources are reinvested in the fund and then keep available for more companies” said Michele Pelloso, Director of the Industry Department at the Veneto Region, and “ the private and public partnership multiplies the effect, sharing at the same time the investment risk ”.

In this system an important role is also played by the Confidi, which, as pointed out by Marco Ronconi, in charge of the business area in Neafidi, “are private consortia, acting as intermediaries among the banks and the companies, giving advices, coaching entrepreneurs and providing the necessary guarantees”.  Another way to overcome the dimensional barrier is also enhancing the cooperation among SMEs.

This is also the aim of the “Clusters programme” currently running in the Veneto Region. Pier Antonio Nicoletti, in charge of the District Office at the Veneto Region, introduced to the Spanish delegation the main features of the “District Act” as well as the annual calls to support the Venetian clusters.

Together with the positive aspects of the programme also the weaknesses were arisen and then discussed; in particular the issue of monitoring and assessing the clusters. The Valencia Region is tackling just in this period this topic and a methodology is on process. Maybe the next time will be the turn of the Veneto Region to import practices from Valencia!

Even though in Veneto there is a very high level of entrepreneurial propensity, private funds (and also private venture capitalists), which companies or moreover starts-ups can apply to, are still lacking. The credit system is often far from the SMEs needs and, especially now because of the credit crunch, it is rather reluctant to give loans without the proper guarantees. On the other side, SMEs asking to fund innovative ideas or start-ups working in high-tech sectors like biotech, nanotech and ICT, are not always able to provide guarantees as their value is more based on intangible assets.
Public funds for innovation and research are usually connected to periodic calls which are not always in line with the company’s timescale and needs.

To overcome the barriers above mentioned, a well balanced mix of financial engineering tools, focused on research and innovation, has been set up and launched.
The Financial Engineering actions includes three integrated tools:

1-System of guarantee for innovative investments

2-Revolving Fund for SMEs innovative investment

3-Venture Capital and private equity Fund

In line with the Operating Programme strategy, the Regional Authority has launched tenders to select and charge external Bodies to manage the funds. In all the cases a high level of experience as well as a spread system of local desks is required to give companies assistance as well as coaching.
Besides another mandatory requirement for all the tools is that to the Managing Bodies are requested of an equal amount of private funds to be added to the public provision. Finally the mechanism is studied to feed itself as the guarantee system as well as the revolving fund foresee a return of money and moreover the venture capital fund is based on a reinvestments system.

The Veneto development model is characterised mainly by the wide presence of small to medium-sized companies often interconnected each other in networks and productive clusters. The small dimension of such companies although, on one side, guarantees flexibility as well as quick market reactions, represents on the other side, a possible barrier that prevents innovation as relevant and consistent investments are often not affordable for small companies.
Moreover the majority of those companies are concentrated in traditional sectors like mechanics, eyeglasses, sportswear, textile, furniture where knowledge is often acquired through “learning by doing” and informal relationships among people more than through direct investment in R&D.

This is the reason why since 2003 the Veneto Region has launched a specific programme for the innovative development of productive clusters. The programme has been designed to take into account and strengthen the spontaneous trend of companies to aggregate together (bottom-up approach), formalise such clusters and provide funding not for their governance itself but for common initiatives focusing in particular on research and innovation.

Objectives of Innovoucher

• Increasing the competitiveness of the region
• Stimulating innovation services
• Increasing the number of new co-operations between SMEs and innovation suppliers
• Creating new jobs

Methodology

Innovation calls for proposals were financed from the Innovation Fund. The National Office for Research and Technology (NORT) launched a call for R&D services in the regions for which SMEs could apply. Észak-Alföld Regional Development Agency acted as an intermediary.

One of the main interesting point of “Innovoucher” project, is how the projects, initiatives were financed.

The SME gets a 100 000 EUR virtual budget. The innovation service provider delivers the service for the SME. The invoice is sent directly to NORT with a short notice about the work done. NORT pays the bill directly to the service provider, till the SME’s budget is exhausted.

Main results

• 2 350 000 EUR spent in the region
• More, than 40 SMEs supported
• More, than 60 innovation service providers involved
• New SME-University research contracts established

Stimulating innovative high potential companies by funding them through informal investors. This project brings risk capital and innovative high risk business potentials together.

The project arranges for three to four meetings a year, where promising business start ups can pitch their plans for a group of informal investors. The regional development agency is arranging the meeting room, invitations and so on.

The pitching entrepreneurs have to have a good business plan. They have to accept shareholders, they have to bring in own capital as well. They need to have an exit strategy for the shareholders and the needed capital should be somewhere between € 50.000,– and € 500.000,.

The conditions for the informal investors are: a return on investment. Rule is that for every 10 investments 5 will have problems in paying back the shareholder, three can pay back, and two will be cash cows for the informal investors. “It has to be fun!” Informal investors mostly are looking for technological, innovative businesses. Business plans have to be realistic. Next to the demand for financial capital, they want to be used for their knowledge and experience.