Development of Venture Capital Industry & HRD Challenges

Transcription

1 Development of Venture Capital Industry & HRD Challenges Assoc. Prof. Wong Poh Kam Director Growing importance of high tech start-ups in the more advanced economies Since 98, Fortune 5 companies in the US have lost > 5 million jobs, but 3 new million jobs were created, mostly by fast-growing SMEs ( gazelles ). The top % of the fastest growing new firms accounted for 9% of net job creation in the US over the period (Birch et.al. 999). New and smaller firms accounted for 55% of all innovations in 36 industries and 95% of all radical innovations in the US in the same period Risk financing in the form of Venture Capital and business angel investment are key to the growth of high tech start-ups. Despite recent recession, Silicon Valley remains the largest high tech hub in the world with the largest share of VC investments Financing Mechanisms at different stages High of the Start-Up process Founder, Friends, and Family Business Angels GEM Total Entrepreneurship Activity (TEA) Prevalence Rate Country THAILAND INDIA CHILE KOREA Rate (%) Rank 3 Country DENMARK SINGAPORE ITALY UK Rate (%) Rank 3 Level of Investment Risk Assumed By Investor Venture Capitalists Non-financial Corporations Equity Markets ARGENTINA N ZEALAND BRAZIL MEXICO CHINA,P ICELAND US GERMANY SLOVENIA NETHERLANDS SPAIN FINLAND POLAND C TAIPEI IRELAND 9. SWEDEN. 3 Commercial Banks CANADA CROATIA Low NORWAY 8.7 H KONG AUSTRALIA FRANCE 3. 3 Seed Start-up Early growth Established SWITZER 7. 6 BELGIUM Stage of Development of Entrepreneurial Firm ISRAEL 7. 7 RUSSIA.5 36 HUNGARY JAPAN.8 37 Source: Onasbrugge et. al. () 3 S AFRICA OVERALL MEAN 8. Source: GEM Report High-potential TEA Prevalence Rate, Ranking Country Prevalence Ranking Country Prevalence Iceland 3.97 New Zealand 3.5 Netherlands.73 3 Chile.93 Finland.7 South Korea. Italy.7 5 Canada.67 3 Thailand.7 6 Ireland.5 Croatia.65 7 Slovenia.5 5 Belgium.6 8 Germany.7 6 Spain.6 9 Australia.6 7 Sweden.63 S ingapore.33 8 France.57 Norway.5 9 Hong Kong.5 China. 3 Argentina. 3 Israel. 3 Mexico.3 Switzerland.7 3 Brazil.5 5 UK Poland.9 6 Denmark.96 3 Japan.6 7 C Taipei Russia. 8 US.8 36 India. 9 Hungary South Africa. Source: Autio, E. & Wong, P.K. National Factors Influencing the Prevalence of High-Potential Start-Ups 5 Total High Tech vs. Non High Tech Start-Up Rate High- Tech Non High Tech Total High- Tech Non High Tech 9,87,59 7, ,6 3,6 3,96 Growth Rate in Start-Up Formation Total Number of Start-Ups Formed in 36,57 5, 3, , 3,76 9, ,33,699 9, Source: Department of Statistics, High Tech Industries are derived according to the classification of the US Bureau of Labor Statistics 6

2 Growth of s VC Industry (Cumulative Fund under Management) Cumulative No. of VC-Backed -Based Companies Source: EDB 7 Source: EDB 8 Number of VC Professionals Structure of Venture Capital Industry in Source: EDB Early stage (%) Expansion stage (%) Later stage (%) Investment size (US$m) No. of active deals Mean Source: Wang() Median S.D US (Taiwan) Mean 8 (3) 56 (6) 5 (3) 8.9 > Domestic Classic Venture Capital Invested (% of GDP) 999 HRD challenges for the VC Industry As a newly emerging industry, the industry is critically short of highly experienced people at the senior level. Besides attracting experienced industry veterans from overseas (especially the US), there is a need to increase training of local VC professionals at middle and junior level Learning by doing is a key part of HRD for an industry like VC, and international exposure and networks are important as almost all deal flows need to have regional/global expansion plans VC research capabilities are still limited in local universities Source: Reynolds, P.D. et al (). Global Entrepreneurship Monitor: Summary Report

3 HRD challenges for the VC Industry Because VC requires both operational/ technical experience as well as financial skills, the best approach is to attract people with significant operational experience or significant technical expertise to join the industry, and to give them fast track formal training followed by on the job learning under experienced senior partners. Specialization in particular technology businesses (e.g. biotech) is particularly in demand. Successful entrepreneurs who have exited from their previous ventures are also an important source of venture capitalists; returnee entrepreneurs may be a Entry-level Skills and Knowledge of Venture Capital Investment Managers in Importance Financial Analysis Management finance Negotiation skills Technology Industry specific experience Management Cross culture skills Leadership Financial markets Governance Board skills Marketing 3.59 critical source Note: : most important : least important Source: Clement Wang, Preliminary Results of SVCA Training and Development Survey, February Ethics Networking Economics Skills and Attributes Requirements of a Senior Investment Professional Methods of Providing Additional Skills and Knowledge to Professional Staff Importance Leadership Ethics Negotiation skills Management Board skills Networking Management finance Cross culture skills Governance Financial markets Financial Analysis Industry specific experience Economics Technology Marketing Note: : most important : least important 3 5 Source: Clement Wang, Preliminary Results of SVCA Training and Development Survey, February 5 Importance In house or on job training Courses or seminars with commercial training providers Courses or seminars with institutions of higher education.7.73 Note: : most important ---- : least important Source: Clement Wang, Preliminary Results of SVCA Training and Development Survey, February Training and Qualifications of VC Professionals On average, the annual budget per individual for training and development of Investment Managers is S$5+, while the annual budget per individual for training and development of Senior and Executive Staff is S$6K. Only about one fifth (.3%) of the VC companies in have applied for and received training and education grants or subsidies from the government in the past. 7.5% of the responses have either not applied for, or not received grants or subsidies from the governments. (with 5.% not applicable) 59.3% of the respondents think VC investment managers should be licensed or meet basic professional qualifications, while 39% of the respondents don t agree with this statement (with.7% showing no opinions). Source: Clement Wang, Preliminary Results of SVCA Training and Development Survey, February 7 HRD: The role of SVCA Venture Capital Association (SVCA) is a non-profit, private sector initiative with the following objectives: Promote, develop and maintain a local venture capital and private equity industry as a source of equity finance To promote venture capital and private equity investm ent as a profession Represent the local industry in dealing with parties from other countries Foster interaction among members, investors and investees 8

4 HRD: The role of SVCA & Universities SVCA has contributed to the HRD development of the VC industry by conducting executive development programs for their member firms senior and mid-level staff through collaboration with universities (INSEAD, SMU) Manpower development subsidies available for participants in these training programs from Monetary Authority of Need to compete with and differentiate from other training programs outside, e.g. Institute of Asian Private Equity Investment (a Hong-Kong based training institute), Harvard Business School, etc. Local universities have yet to focus on VC education and research in a significant way 9 HRD: The role of Business Angel Investors Despite the media attention on formal venture capital firms, informal business angel investment actually plays a more significant (and complementary) role; worldwide, the amount of informal investment is estimated to be five times that of VC investment (GEM report) Worldwide, while there has been significant public policy attention on education and training of entrepreneurs, there has been relatively less recognition of the importance of informal business angel investment education 8% Business Angel Prevalence Rate Angel Investing in : summary of findings from a survey of 5+ angel investors (Wong 3) 7% 6% 5% % 3% % % % Level and intensity of angel investment still relatively low Depth of experience relatively limited, network and organization not well developed Relatively low recognition of importance of management team (compared to VCs) and mentoring role Source: GEM Master Dataset Public Policy towards Angel Investment Promotion in Limited scale of policy intervention S$ million Business Angel co-investment fund, introduced by NSTB briefly in, discontinued in S$5 million Startup EnterprisE Development Scheme (SEEDS) introduced by EDB in Oct. to co-finance start-ups with private sector investors. About 6 start-ups had received SEEDS co-funding support so far 3 HRD challenges: Educating Business Angel Investors While (and many Asian countries) have many high net-worth individuals, there is inadequate participation of such individuals in business angel investing, unlike what is found in Silicon Valley and Taiwan Key challenge is to educate many of these high net-worth individuals with technical/ operational knowledge in high tech industries on the risk, reward and skills for angel investing and business mentoring

5 HRD: The role of Business Angel Network (Southeast Asia) BANSEA is a non-profit, private sector initiative with the objectives to Promote development of the angel investment community in Asia through educational workshops, research, networking with angel groups worldwide, contributing to improving the regulatory environment and corporate governance system for angel investing, and facilitating the matching of start-ups with angel investors Active in and Thailand, planned linking up with similar groupings in other ASEAN countries 5 Conclusions has already emerged as a major venture capital hub in the region, with a growing base of VC firms with significant international linkages However, the depth of experience at the senior level needs to be further developed, through both continuing educational upgrading as well as attracting more highly experienced VCs to use as their home base Next major thrust should be to broaden awareness and educational upgrading of informal business angel investment and mentoring skills 6 IP Industry Development and HRD Challenges in Assoc. Prof. Wong Poh Kam Director Growing Economic Importance of IP Intellectual Property (IP) is the Capital for the New Economy In 997 the US produced over US$ billion worth of books, music, films, TV programmes and other copyrighted products In , patents were granted by the US Patent & Trademark Office (USPTO); this had doubled to 69, in 999 In 98 less than US$3 billion of patent licensing fees were transacted; this had increased to over US$ billion in. IBM earned over US$ billion from licensing technology alone The global market size for the Creative Economy in 999 was estimated at over US$ trillion (7.3% of global GNP) (Howkins, ) 7 8 as an emerging IP hub is aiming to become a region hub for IP Creation IP Ownership IP Exploitation IP Management 9 Source: EDB website, 3

6 Total Number of Trademarks and Patent Applications Received and Filed Annually in from 997 to No. Of Patent Grants/Registrations in, 995- Year Granted to Granted to non Total residents residents Source: EDB website, No. of Trade Marks Filed in from 99 to Year National Applications received Total applications under Madrid Protocol ,66 -, ,3 -,3 99,39 -,39 995,577 -, ,899-3, ,873-5,873 3, - 3, 999 5,753-5,753,3 8,9 3,79 65,73,63 856,87 33 No. Of Designs Applications Received in, - Form D3 Form D8 Year (Application (Application for extension of period of for registration of design registered in UK upon registration) expiry of initial period of registration) Total US Patents Granted to -resident Inventors (976-) US Patents per, Population by Nationality ( vs Advanced Patenting Nations) Total patents by inventors assignee patents by inventors Foreign assignee patents by inventors assignee patents by foreign inventors.5.5 Canada Japan Switzerland USA Source: Wong & Ho(3) Note: Where a patent is assigned to more than country, it is allocated according to the country of the first-named company Source: Wong & Ho(3), special compilation from the U.S. Patent and Trademark Office (USPTO) 35 Note: Nationality of Patent is defined by Country of Residence of First Inventor All Patents include Utility, Design & Plant patents, reissues and SIRs Population data obtained from US Census Office website 36

7 US Patents per, Population by Nationality ( vs Other NIEs) Source: Wong Note: Nationality of Patent is defined by Country of Residence of First Inventor & Ho(3) All Patents include Utility, Design & Plant patents, reissues and SIRs 37 Source: Patent Counts by Country/State and Year, All Patents, All Types. January, 977 December 3,, by US Patent and Trademark Office 996 Hong Kong Ireland Israel South Korea Taiwan Patenting Intensity per, population All patents per, population () Italy.55 Ireland.7 Norway.8 South Korea.8 Hong Kong.83 France.85 UK.9.9 Netherlands All patents include utility, plant and design patents and SIRS. Nationality of patent is determined by having at least one inventor from the specified country Source: Wong and Ho (3). Denmark. Canada.56 Germany.65 Finland.96 Israel.36 Sweden.63 Switzerland.79 Japan 3. Taiwan 3.6 USA Total US Patents by Nationality, 977- ( vs Malaysia) Malaysia US Patents per, Population by Nationality ( vs Malaysia) Malaysia Note: Nationality of Patent is defined by Country of Residence of First Inventor All Patents include Utility, Design & Plant patents, reissues and SIRs Source: Patent Counts by Country/State and Year, All Patents, All Types. January, 977 December 3,, by US Patent and Trademark Office 39 Note: Nationality of Patent is defined by Country of Residence of First Inventor All Patents include Utility, Design & Plant patents, reissues and SIRs Source: Patent Counts by Country/State and Year, All Patents, All Types. January, 977 December 3,, by US Patent and Trademark Office; Population data obtained from U.S. Bureau of the Census, International Data Base, Adequacy of Enforcement of Patent and Copyright Protection, Legal Activities in Year Establishments Employment Gross Receipts Remuneration Value Added Wages/ Value added/ $million Labor ($) Labor ($) , , , , , , , , ,68, , ,9, ,87, Growth rate (%) Source: IMD, World Competitiveness Yearbook Source: Dept. of Statistics, Economic Survey Series: Real Estate & Business Services (various years); Dept. of Statistics, Economic Survey Series: Business Services & Real Estate (various years)

8 No. of Patent Agents in Date of registration No. January-March 5 April-June July-September October-December 3 Jan-March 3 3 April-May 5 Total as at May 3 77 Note: This table includes those who were practicing patent agents before Jan Source: Register of Patent Agents in, IPOS website, 3 Promoting IP in : The Role of IPOS IPOS is the leading government agency that formulates and administers IP laws, promotes IP awareness and provides the infrastructure to facilitate the greater development of IP in. Created from the restructured Registry of Trade Marks and Patents in 999 and converted to a statutory board of the Ministry of Law in Vision To foster a creative where ideas and intellectual efforts are valued, developed and exploited Mission To provide the infrastructure, platform and environment for the greater creation, protection and exploitation of IP Core Functions: To provide a sound legal and administrative framework for the promotion and protection of intellectual property To formulate and review intellectual property rights'policies and legislation To maintain and disseminate intellectual property information and documents To represent the Government internationally on intellectual property agents To collaborate with other organisations and IP offices on IP programmes To promote awareness, respect and the effective use of intellectual property rights HRD Challenges for the IP Industry A diverse range of IP professionals need to be developed, including: IP Lawyers Patent agents Trademark agents Technology transfer brokers Licensing and franchising brokers IP portfolio managers IP research/policy makers IP engineers Technology intelligence agents and a critical mass of investment bankers, corporate strategists, venture capitalists, R&D researchers, directors/ CTOs and entrepreneurs who are trained to become IP-savvy 5 6 Promoting IP HRD: The Role of IP Academy IP Academy launched in January 3 Vision To be the focal point of education and research, in the field of Intellectual Property Mission To broaden and deepen both knowledge and capabilities in the creation, protection, exploitation and management of IP. Key Strategies of IP Academy To provide continuing Education and lifelong learning opportunities for IP professionals, businesses and research organisations in and the region. To establish Research programmes to develop depth in IP competencies, enabling to keep at the forefront of IP developments and play a thought-leadership role in the region 7 8

9 Educational Courses Provided by IP Academy Aim is to provide continuing education and life-long learning opportunities for IP professionals, business organisations and research institutes. Certification courses Graduate Certificate in IP Law General Introduction to Law, and then focuses on more specific topics under IP law, such as Patents, Trademarks, Copyright and Designs. Graduate Certificate in Patent Drafting and Interpretation. Graduate Certificate in Patent Drafting and Interpretation Designed to complement the practical training which patent agent trainees undergo during their internship. It consists of two modules: ) Interpretation and Validity of Patent Specifications; and ) Drafting of Patent Specifications. 9 Educational Courses Provided by IP Academy (contd.) Executive Training courses IP Engineer Training Course Designed specifically to help researchers, scientists, and engineers become savvy in the IP regime. It enables the creators of intellectual assets to be armed with key tools necessary for building up his organisation s IP blueprint and overall IP strategy. IP Law in the Chinese Economic Zones: Convergence and Divergence Provides IP professionals with a working knowledge of the IP laws in China, Hong Kong, Macau and Taiwan. This will enable them to assist clients in their business ventures into these Chinese economic zones. Auditing Programme Offers the individual the opportunity to attend classes for a particular module in the GCIP course without any examinations. 5 Research Programmes Conducted by IP Academy Aim is to develop depth in IP competencies, enabling to keep at the forefront of IP developments. Thought Leadership programmes IP Roundtables Discussion fora International conferences Research projects Partnership/collaboration with Universities in (e.g. Chicago Graduate School of Business, INSEAD, NTU, NUS, SMU) Outside (e.g. National Chao Tung University, Taiwan, University of Technology Sydney) 5 Conclusion is still at the emerging stage of becoming a regional IP hub In the short run, attracting more global IP services firms to operate in will be necessary; in the longer run, need to promote more indigenous specialist IP services firms (e.g. Intelleigen) Need to both deepen professional specialization (e.g. life science IP lawyers, IP valuation specialists) as well as widen IP awareness, literacy and competency among the business, technical and student community and the general public 5