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Introduction to Innovation Finance

By Steve Glangé - May 2001

Steve Glangé reports on how you can turn your Research and Development results into successful ventures with just a little 'LIFT'. LIFT- Linking Innovation Finance and Technology [1], is a free service sponsored by the European Commission’s Innovation/SMEs Programme that can give you help and guidance through the IT financial maze.

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Introduction

This article proposes to look at three different European success stories in the field of Information Technology and Life Science in order to distinguish the key factors for successful ventures.

In examining the cases of Gemplus, RheinBiotech and Lernout & Hauspie, we will show what made them successful in our opinion and how LIFT can help you to succeed.

We will end with the free services offered by the LIFT team and how you can benefit from these services.

The Key Factors for a Successful Venture

Let's consider each of the three case studies.

• Gemplus [2] (From France, quoted on the Nouveau Marché): succeeded in becoming the leader in the market for smart cards thanks to its founder who was able to put his strong technical skill into action and to implement a strategy focused on partnerships.
• RheinBiotech [3] (from Germany, quoted on the Neuer Markt): produces vaccines and other immunisation applications. It underwent a successful Initial Public Offering (IPO) and benefited also from a Chief executive officer (CEO) with a strong personality and ability to link technical skills with commercial opportunities.
• Lernout & Hauspie [4] (From Belgium, but quoted on the Nasdaq): became an institution on speech technology and recognition market thanks to its two founders who shared their technical skills and strategic knowledge with a motivated and customer driven team.

What made these ventures successful? Was it the market, the product, the drive…? Or was it “entrepreneurship”?

The question is how can you find the entrepreneur in you? With competition for funding fairly high it is imperative that you assess yourself and your venture in order to detect if you are ready for external funds or to accept foreign interaction in your project. You will need to assess your self on each side, e.g. commercially, financially.

Business Plan

When you have decided to go forward, it is time to prepare a quality business plan, which should include the following sections:

• An executive summary: This is the most important part and written after the other sections are completed. Generally this is the only part of your business plan read by Venture Finance firms. It should be short (not more than one and half pages) and concise. On average, a potential investor takes minutes to decide whether or not to read on. You may compare it to the back cover of a book where a publisher has only a few seconds to convince the potential buyer of the books worth.
• Market: This is where you define your market geographically and qualitatively as well as citing your competition.
• Product / service: Show your Unique Selling Proposition (USP), i.e. why a client should buy or use your product or service instead of alternatives.
• Business: i.e. The combination of your market and your product. Here you should give a thorough understanding of your strengths and weaknesses in relation to the opportunities and threats on the market (i.e. SWOT analysis).
• Marketing: The implementation of your USP.
• Production: How is your service produced and what are its prerequisites?
• Financial forecasts: State the expected cash flow, i.e. the revenue streams and how they are achieved. No need for huge calculations. Simply state your best and your most likely case.
• Management control.
• Needs: Clearly tell them what you want from a Venture Capitalist.
• Annexes: here you can include all relevant tables, fact sheets, studies, CV’s.

Now that you are aware of your needs and your objectives, it is time to tell your potential investor(s) about it. Beforehand you should study your potential partners: each is interested in another aspect of your venture, e.g. a business angel, a venture capitalist.

The next step is to approach them effectively. You may approach them indirectly, e.g. through the intermediates such as consultants or a mutual acquaintance, or through more or less public events, e.g. networking events such as First Tuesday [5] or through auctions like those organised by the European investment Forum or at other seminars.

How can LIFT Help You?

LIFT is a free service sponsored by the European Commission’s Innovation/SMEs Programme. LIFT's mission statement is to help you:

• Prepare a comprehensive and convincing business plan
• Gain a better understanding of the financial world
• Increase your knowledge of the options available to you
• Effectively present your idea to investors
• Attract investors for your high-technology business and much more.

LIFT's experienced experts offer a wide range of comprehensive services including:

LIFT Toolkit

The LIFT toolkit includes a document on Assessing your venture that lets you answer some of the questions any venture capitalist may ask and shows you how well prepared you are. Preparing a Technology Business Plan shows you how to prepare a successful business plan and finally Financing Innovation – A Guide gives you an overview of all the sources of finance and how they operate [6].

LIFT Workshops

LIFT runs a number of workshops throughout Europe with hands-on instruction and guidance.

LIFT Helpdesk

The LIFT Helpdesk provides individualised support, help and direction - via phone, fax, email or post - on a wide range of high technology business financing issues. The service is free of charge, fully confidential and currently available in English, French and German.

Conclusion

What's next? Now it is up to you to:

• Assess your venture.
• Register for the free LIFT services on the Web site [1].
• Prepare your business plan and send it to a copy to the LIFT info line [7].
• Get feedback within several working days.
• Get to know the investor world and approach them effectively.

References

1. LIFT (Linking Innovation Finance and Technology)
   URL: <http://www.lift.lu/>
2. Gemplus
   URL: <http://www.gemplus.com/>
3. RheinBiotech
   URL: <http://www.rheinbiotech.com/>
4. Lernout & Hauspie
   URL: <http://www.lhsl.com/>
5. First Tuesday
   URL: <http://www.firsttuesday.com/>
6. Brochures from the LIFT information pack (Assessing your Venture, Preparing a Technology Business Plan, Sources of Finance)
7. To contact the LIFT info line email info@lift.lu

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Author Details

Steve Glangé
LIFT (Linking Innovation Finance and Technology)
11 rue de Bitbourg
L-1279 Hamm
Luxembourg

steve.glange@lift.lu
URL: <http://www.lift.lu/>

Phone: +352 428 001
Fax: +352 428 00344

Steve Glangé is employed as a Senior Consultant at INBIS Luxembourg Ltd (a Management Consultancy branch of INBIS Ltd UK). His responsibilities include assisting entrepreneurs on their way to commercialization and implementing Technology Transfer.

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For citation purposes:
Glangé, S. "Introduction to Innovation Finance", Cultivate Interactive, issue 4, 7 May 2001
URL: <http://www.cultivate-int.org/issue4/lift/>

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