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 rescendo’s underlying rationale is that each company needs a different solution, which will depend on its growth prospects and stage of development. To find the right one, public- and private-sector finance providers must attempt to strike the balance between their own requirements and the firm’s needs. They must also ensure that the different elements of the innovation finance value chain – sources of finance, financial tools and indirect supports – are integrated and work together effectively.
The network includes most of the major types of innovation-finance stakeholder, including regional development agencies, financial institutions, SME-support organisations, private consultancies and business-angel networks, from 16 regions in eight countries. The networking process has entailed the organisation of a series of four workshops. Sophie Mavor, the Crescendo network coordinator, says that “each workshop was perceived as a building block for acquiring an overview of the financial system as a whole. By learning about what works well in other regions and countries, network members can acquire a better understanding of how best to tackle their own problems.”
Pre-seed to Park
The first workshop in Valencia, Spain, examined financial instruments available to firms, from loans to equity, and different sorts of guarantees. A notable example from within the network it can be repaid over a long period and/or partly converted into a grant.
The second workshop, in London, looked at factors influencing supply and demand of growth finance. It focused on the nature of the equity gap and what public authorities can do to address it. From outside the partnership, Brunel University Enterprise Centre presented a recently launched seed fund called PARK (partnership in accessible research and knowledge) which aims to promote the commercial exploitation of intellectual property. The long-term approach adopted by the fund partners has enabled it to enter a market niche that is unattractive to commercial venture-capital companies.
Local lessons
In Weser Ems, Germany, the partners turned their attention to how the public and private sectors work together to increase access to finance. Of particular interest was a German local authority which, together with the regional banks, has set up a risk-capital company to provide local firms with small-scale share capital. Fund managers can bring their knowledge of the local context to bear on their investment decisions.
The fourth workshop, in Wales, examined the different elements necessary for building a viable finance system at regional level. Finance Wales, a regional government agency, is trying to make the financing structure sustainable by finding ways and intermediaries to plug the equity gap. Examples included the Wales Mezzanine Fund, which provides risk capital combining conventional bank lending with equity funding, and Xénos, the Wales Business Angels Network which finds investors for companies in a range of sectors and locations.
“For schemes to run of their own accord,” stresses Mavor, “they must be built on the solid foundations of investor readiness and strong state-region partnerships. EU Structural Funds are also vital. The UK bank Barclays, for example, clearly said that finance from Objective 1 and 2 programmes helped convince them that regional funds were a viable commercial opportunity for them.”
Rousing finale
Mavor believes that “the information gleaned from networking can be used to build solid arguments to convince policy-makers to launch new initiatives. Better understanding of what is going on elsewhere can help provide a sound rationale for schemes in their own areas.”
The Crescendo secretariat is developing an original set of mapping tools which can be used to aid discussions among regional stakeholders and to support benchmarking activities. They will provide an overview of different regional and national approaches, highlighting why some are more successful than others. Crude performance data is being gathered for different types of schemes, focused on private-sector leverage, for example. “Local situations are often too complex to make a comparison possible,” says Mavor, “but the tools should provide a snapshot of the network’s outcomes.”
Crescendo held its final conference in Cork, Ireland, last September. Open to outsiders, it aimed to round up the main issues covered by the network, and revisit some topics in the Irish context. Particular attention was given to longer-term challenges such as the sustainability of funds, while recommendations were made on how to take the best ideas forward.
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INNOVATION FINANCE
