INNOVA-INVEST – pre-incubation program with equity investments
About this good practice
INNOVA-INVEST is one of the flagship Lublin Science and Technology Park startup oriented program run in 2013-2015, with internal seed fund and investment portfolio of copmanies supervised until today. It dealt with creation of conducive environment for innovative startups based in the region, ensuring them access to crucial components for comprehensive early growth through pre-incubation and equiy investments.
a. low, insufficient level of competitiveness and innovation of economy in the region,
b. insufficient flow of R&D, human and technical resources to regional economy,
c. high-risk financing / VC gap on the regional innovation market, and
d. high business risk aversion in academic and business regional ecosystems.
Thus, in 2013-2015 a pool of innovative ideas was supported to create competitive companies, including spin offs in both priority (biotechnology, medical, renewable energy / environment protection, chemical) and other sectors. As part of pre-incubation and equity program, entrepreneurs were offered:
1. training, consultancy on starting and running a business, and specific services aligned to innovative companies’ needs, and
2. investment capital (equity / seed funding) in terms of acquisition of shares of the newly created companies.
Pre-selection (eligibility and qualitative criteria) > selection (10 business ideas per batch) > incubation (4 batches) > equity investments (20 startups, up to 800K PLN per ticket).
A. Finance: 2,5 mln EUR:
• 90% equity funding
• 5,7% administration & external costs
• 0,8% marketing
• 3,1% staff costs
B. HR: 4 members – administrative, marketing, finance staff
C. Tech: premises, office equipment
The project was valued at 5,2 mln EUR in total with equity co-investments.
Evidence of success
• 20 innovative startups created
• 51 jobs created at the end of the project, i.e. more than 2 jobs per startup
• 40 innovative ideas pre-incubated
• 316 startup ideas submitted
• 2.3 million EUR of seed funding (equity investments)
• ca. 2.9 million EUR of attracted co-investments
So far, the seed fund made 2 exits: in 2019 and 2020. Currently, one of the portfolio companies (IT sector) belongs to the holding group listed on Warsaw Stock Exchange.
Potential for learning or transfer
This example have a potential for both learning and transfer to other EU regions, especially those labelled as modest or moderate European innovators. Because of seed/VC gap seen as significant development barrier for high risk companies (startups) in EU member countries, these regions with competitive human capital can rely on similar startup funding programmes.
• In this context, the instrument can trigger economic growth and capitalise on EU regions’ existing strength and opportunities, and specializations as well.
• An important recommendation here is to put more incentives at early development stages for ‘market newcomers’, i.e. pay attention to sufficient training and expertise as compared to strict financial incentives.
• Also, it is highly recommended to design a viable post-program and community support for startups. Here, we learned and recommend such good practices as Buildit Latvia, CEED Grow (Slovenia), Profitnet (Ireland) and UpScaler (United Kingdom).