Financing Innovation: the Lombardy Region approach

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Horace Mason
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1 Financing Innovation: the Lombardy Region approach Alberto Trombetta PhD Head of Venture Capital, Finlombarda Gestioni SGR Milan, 2 December 2009

2 An ad hoc management company for Venture Capital in Lombardy Finlombarda is the financial company of Lombardy Region. It provides assistance to the regional administration by developing public-private partnership investment models and using innovative financing tools such as project financing and private equity Finlombarda created Finlombarda Gestioni SGR, a management company regulated by Bank of Italy, specifically to institute and promote Venture Capital and Private Equity Funds 2 Finlombarda Gestioni SGR manages two funds: NEXT and Euromed (dedicated to investments in the Mediterranean area) for a total of Euro 100 million under management NEXT was created by Lombardy Region and Finlombarda to support high-tech startups and university spinoffs

equity Finlombarda created Finlombarda Gestioni SGR, a management company regulated by Bank of Italy, specifically to institute and promote Venture Capital and Private Equity Funds 2

3 An integrated approach by Lombardy Region Committed to date: 82 ML Recipients: over Seed Fund 2004 NEXT Fund 2004 Ingenio Scouting Business Idea 2006 Vouchers Technology Due Diligence & Business Plan Patenting Support Research Cheque Pre-Seed Seed Start Up Early Stage Sustained Growth

000 2008 Seed Fund 2004 NEXT Fund 2004 Ingenio Scouting Business Idea 2006

4 SEED Fund A financing instrument for the first steps REGIONE LOMBARDIA SEED Fund 10 ML Process innovation Ditte Individuali 4 Product innovation Istitutional Investors Società di Persone Società di Capitali Dedicated to: Companies less than 6 months old University spin-offs less than 2 years old Individuals committed to create a company within 3 months from receiving SEED funding

Società di Capitali Dedicated to: Companies less than 6 months old University spin-offs less

5 SEED Fund How it works Provides up to Euro financing for up to 36 months SEED financing is subordinated to bank debt No guarantees required Non payment due in case of bankruptcy, 50% due in case of liquidation 5 Invested to date Euro 2 million in 15 projects including: Energy / Environment New, lower cost, photovoltaic technologies Innovative processes for waste treatment Innovative biomass energy production Health Development of dietary supplement with pharma applications ICT Web portal for retail distribution S/W based on parallel computing for finance applications S/W for remote control of POS terminals

of liquidation 5 Invested to date Euro 2 million in 15 projects including: Energy / Environment New, lower cost, photovoltaic technologies Innovative

6 NEXT - Venture Capital Fund of Funds and Co-investment Fund REGIONE LOMBARDIA FINLOMBARDA S.G.R M Management 37 ML Guarantee Fund NEXT Fund of Funds Invests (> =50% of resources) Invests (< =50% of resources) invest VC Funds 6 Institutional Investors Co-invest Target companies Qualified Investors

3 M Management 37 ML Guarantee Fund NEXT Fund of Funds Invests (> =50% of

7 NEXT Portfolio (Euro( 20M invested to date) NEXT DIRECT INVESTMENTS INDIRECT INVESTMENTS Principia Fund Innogest Capital Coinvestment with Fondamenta, Principia, law 388/00 Coinvestment with TVM, Index Ventures, BB Biotech, LSP Final closing: 15,5M Final closing: 80M 7 Coinvestment with Innogest Capital, law 388/00 Coinvestment with law 388/00 TLcom II First closing: 51M 360º Capital One Final closing: 102M

Ventures, BB Biotech, LSP Final closing: 15,5M Final closing: 80M 7 Coinvestment with Innogest

8 8 NEXT - Participations in 43 high tech companies Biotech Altro ICT Graphvine New Media Medtech

9 NEXT a significant leverage obtained to date Lombardy Region 12.3M 3x NEXT 37M 9 7x 2M DIRECT INVESTMENTS 20M 18M INDIRECT INVESTMENTS Already 50M 14M dedicated to 36M Lombardy startups 2x

10 Key learning points An integrated approach is key to create a startup friendly environment VC funds are central, but scouting and other supporting measures are equally important A funds of funds and coinvestment fund approach helps kick-starting a local VC network Cornerstone investor in funds to facilitate birth of new players Coinvestment mechanism to reduce due diligence costs and attract other investors 10 With a leverage approach even a small fund can steer significant capital towards local companies Acting as local player can attract sophisticated international VCs It takes time to get traction in a new market More than anything it is the need to change mentalities But a few success stories facilitate emulation

reduce due diligence costs and attract other investors 10 With a leverage approach even a small fund can steer significant capital towards local companies Acting as local player can

11 Contacts Alberto Trombetta PhD Head of Venture Capital Finlombarda Gestioni SGR S.p.A. Piazza Belgioioso, Milano - Italy Phone Fax alberto.trombetta@finlombarda.it 11

Piazza Belgioioso, 2 20121 Milano - Italy Phone +39 02

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