Emerging. in the Baltics. An introduction report

Transcription

1 Emerging Cleantech Sector in the Baltics An introduction report

2 The founding members of Cleantech Scandinavia in the Baltics are: Arengufond (Estonia), BaltCap (Estonia Latvia - Lithania), Borenius Group (Finland - Baltics), Conor Venture Partners (Finland), Eko Investors (Latvia), Enterprise Estonia (Estonia) and LitCapital (Lithuania).

3 0 content Emerging Cleantech Sector in the Baltics An Introduction report Introduction 1-2 Key factors and actors in the cleantech area 3-4 Public organisations 5-6 Private investors 7-10 Incubators and start-up activity Cleantech companies Opinions and Insights Three countries on the other side of the sea, the so-called Baltic states: Estonia, Latvia and Lithuania, have been on an exciting journey of independent democratic development for the past two decades. They have been advancing rather fast in terms of market economy and European integration, and have made great progress in many areas. We at Cleantech Scandinavia have been closely monitoring and agitating the cleantech sector in Scandinavia since 2007, and have seen an increasing number of indications that the Baltics are becoming more viable on the cleantech scene. We also had a number of expressions of interest into this region from our existing members. All things considered, we thought it was about time we all have a check on what is going on in the cleantech area in the Baltics, and to enrich our network with contacts, investment opportunities and expertise from this region. This report marks the launch of Cleantech Scandinavia in the Baltics as we from now on are happy to include these countries in our coverage of deals, investment opportunities and business intelligence. We hope you enjoy the reading.

4 1 Introduction Introduction The purpose of this report is to introduce the emerging cleantech sector in the Baltic states, describe the current situation and identify and profile some of the main actors and points of growth on the cleantech scene, including profiling several cleantech companies. The founding members have contributed a lot to our understanding of the situation, and some of them have also shared their experience and viewpoints in a number of interviews presented in this report. This was Cleantech Scandinavia s first take in doing research in this region, and we will definitely continue to work on it. In particular, we will include dealflow information from the Baltics into our upcoming dealflow reports. Throughout the report the term Baltic countries will be used quite often, especially when pointing out similarities or common trends. It doesn t mean that we do not recognise the differences that exist in the three countries, and more specific issues are addressed on the national basis, but similarly to the use of Nordic or Scandinavian when we refer to this region, we think that such a common identity helps seeing shared strengths and provides a more advantageous representation particularly on an international scene. To give a general perspective, the Baltics in a Nordic comparison, is a relatively small region: it is 2,5 times smaller in physical area size than Sweden, and 6,9 million inhabitants combined in the three countries. Historically the three countries share a lot: each will celebrate 20 years of official independence from the Soviet Union in 2011, and although each country had its own challenges, all went towards European integration and became members of the European Union in The market economy as well as corresponding financial institutions are therefore very young, but have been developing rapidly throughout the 1990s with the support from the European Bank of Reconstruction and Development and other EU organisations. Estonia will be the 17th country to adopt Euro from the 1st of January Latvia and Lithuania will follow, but the date is not yet defined. Recent recession hit the Baltic countries hard, and undermined both the economic situation as well as financial image of the countries. But the damage was not irreversible and, as also confirmed by some of our interviewees, there is renewed financial activity and growing interest from foreign investors. To conclude this general introduction we present brief country profiles.

5 Estonia 2 Introduction Population: 1,34 million* GDP per capita in 2009: $17,908* Main cities: Tallinn, Tartu, Narva Structure of the energy system: Absolute majority of electricity production comes from burning oil shale. Until 2008 only under 1% of consumed energy derived from renewable sources such as hydropower and wind, but during 2009 it increased to up to 6,1% mostly due to the increased use of CHP plants based on wood fuel and a 47% growth in wind power installations. By the end of 2009 the installed capacity for wind energy in Estonia reached 142MW.** The most promising renewable energy resources in Estonia are wind and biomass.*** * Data source: International Monetary Fund, ** Data source: Estonian Wind Energy Association, *** Data source: EBRD Renewable Energy Initiative, Latvia Population: 2,26 million* GDP per capita in 2009: $14,254* Main cities: Riga, Daugavpils, Liepaja Structure of the energy system: 74% of electricity is produced by hydropower and renewable energy sources in 2006 represented 33% of the primary energy share. Latvia has good wind energy potential with over 500 MW being technically feasible, mostly on the Baltic coast. Over 20 MW of wind energy capacity has been installed by 2009.** Latvia is also a the largest in the Baltics producer of wood pellets, but the majority of produce goes on export to other European countries. * Data source: International Monetary Fund, ** Data source: EBRD Renewable Energy Initiative, Lithuania Population: 3,33 million* GDP per capita in 2009: $16,542* Main cities: Vilnius, Kaunas, Klaipeda Structure of the energy system: Electricity production in Lithuania has long been dominated by nuclear power until on the last day of 2009 the last reactor of Ingalina power station was shut down. At the moment a new gas powered station is being built, and the country remains dependent on imported primary energy resources. The target for renewable energy use was set at 12% in 2010, and it is constituted primarily from small hydropower, wood-based biomass and wasteto-energy installations. By the end of 2009 about 81 MW of wind energy capacity was installed, and the plans for 2010 were to increase it up to 200 MW.** * Data source: International Monetary Fund, ** Data source: EBRD Renewable Energy Initiative,

6 3 Introduction Key factors and actors in the cleantech area Cleantech is not yet a widely used concept across the Baltic states but it is gradually being adopted as more companies start reaching out to international markets and identify themselves with it. Commonly the sectors of environmental technologies which constitute cleantech are being named separately such as for instance energy efficiency or renewable energy generation. In cases like business competitions or start-up dedicated events, cleantech companies are joined with ICT and biotech peers under a simple tech definition. There are several factors however that provide a good basis for development of the cleantech sector as well as successful international commercialisation of technologies:

7 4 Introduction» Good technical education base with universities such as Tallinn University of Technology, Kaunas University of Technology, Tartu University and Riga Technical University conducting high class research and high quality engineering education.» Due to the fact that all three countries are members of the European Union the main legislative driving forces such as renewable energy targets and framework legislation is the same as in other European countries. It creates a solid basis for incentives in reducing CO2 emissions and other forms of environmental impact. It also implies that in the framework of the common European market there are no significant barriers for international investors to participate in deals. European Union provides significant financial support through several mechanisms such as grants through Structural Funds as well as through investments and loans from institutions such as European Bank for Reconstruction and Development, European Investment Fund, European Investment Bank and Nordic Environment Finance Corporation.» A recent initiative JEREMIE (Joint European Resources for Micro to Medium Enterprises) was launched by the European Commission and the European Investment Bank group to improve SMEs access to funding, using EU Structural Funds framework As a result of this, six funds, three Latvian and three Lithuanian, have signed agreements with the EIF during 2010 and now manage a venture capital pool totalling approx 100 million Euro. Funds involve local actors as well as international players such as SEB Venture Capital, LHV Asset Management, Swedbank Asset Management and DnB NOR Asset Management in Lithuania; and Parex Asset Management, Hipo Fondi, LKB Krajfondi and Pirmais Slegtais Pensiju Fonds in Latvia. There are two types of funds: venture capital and business angel funds, and they range in size from 3 to 30 million Euro. The programme is designed for 5 years investment cycle and the size of the investments will be up to 3 million Euro per one company.» Securing reliable energy supply and energy independence is a major driver for the governments to develop new energy related technologies. This creates a big and secured market for applications such as energy efficiency solutions in industry as well as improving energy efficiency in buildings; development projects in wind energy, solar energy and various biomassbased energy solutions.» Production of renewable electricity is incentivised in all three countries through feed in tariff systems, at different price levels. These systems have been undergoing revisions lately and price levels have been adjusted.

8 5 Profiles Public organisations Arengufond Estonia The Estonian Development Fund was launched in April It was created by the Estonian Parliament with the purpose of initiating and supporting changes in the Estonian economy and society that would accelerate modernisation of the economic structure, lead to growth in exports and contribute to creating new jobs requiring high qualifications. Informally called Sitra of Estonia, the fund made seven investments so far, among them two cleantech companies BiotaP and Goliath Wind. Arengufond has the following investment strategy: profit-oriented investments with duration from 3-5 years; co-investing with private investors on equal terms; and the target companies have to show potential for fast international expansion and whose growth requisites are based on a unique idea, business model, invention, technology or market opportunity. Read the interview with Kakko, Head of Investment Division at Arengufond further in this report. Enterprise Estonia Enterprise Estonia was established by the Ministry of Economy and is responsible for a wide range of tasks related to regional development, investment and trade in Estonia as well as tourism promotion. It is one of the largest institutions within the national support system with a budget of 831 million Euro ( ) and 300 employees and is a national responsible authority for managing the EU Structural Funds. Enterprise Estonia provides grants, advice and partnership opportunities for entrepreneurs, R&D institutions and the non-profit sector. Enterprise Estonia has a global network of offices. Read the interview with Andrus Viirg, Director of Enterprise Estonia s Silicon Valley Office further in this report.

9 6 Profiles Investment and Development Agency of Latvia Latvia The objective of the Investment and Development Agency of Latvia (LIAA) is to promote business development by facilitating more foreign investment, in parallel increasing the competitiveness of Latvian entrepreneurs in both domestic and foreign markets. After Latvia s accession to the EU, the Agency needed to adopt new methods and tools, including the effective utilisation of resources from EU Structural Funds. It supports companies in Latvia trading internationally, as well as overseas businesses seeking partners or locations in Latvia; administrates state support programmes for entrepreneurs, co-financed from EU Structural funds. The Agency also provides assistance in selection and implementation of investment projects as well as legal assistance. Enterprise Lithuania/Invest in Lithuania Lithuania Lithuanian Development Agency (LDA) has been restrctured into two public organisations: Invest Lithuania and Enterprise Lithuania, responsible for each of their respective areas. Invest Lithuania is the main national institution in charge of attracting foreign investment to Lithuania, as well as developing the attractive economic image of the country abroad. Enterprise Lithuania is responsible for promotion of exports of Lithuanian goods and services. The company is involved in a variety of international projects and local initiatives: Competitiveness Center, Clusters competence network, Exporters Academy, which is giving an impact on knowledge, market intelligence and competences in each specific industry.

10 7 Profiles Private Investors Private Equity and venture capital activity in the Baltic countries has been developing since the middle of the 1990s and a number of local fund have been raised with participation of European financial institutions such as European Investment Fund and EBRD. Nordic financial actors such as SEB, Swedbank and DnB NOR have become one the most active investors in the Baltic countries. On the venture capital side, there are several established local players in the region such as for example Balt- Cap, Ambient Sound Investments and Askembla, as well as recently established funds such as LitCapital. An overview of what we have found to be cleantech-relevant private investors in the Baltic countries is presented here. Among foreign investors traditionally Finnish funds have been most active in the region, particularly in Estonia, with funds like Conor Venture Partners and VNT Management having invested in Estonian cleantech companies. For VNT Management the Baltics is not the primary region of operations, but we are always looking into this region with interest. I think that they have a good platform for developing new technology businesses by bringing together their research expertise. These are small but interesting countries, and I particularly appreciate the positive attitude of their young entrepreneurs. Vesa Sadeharju, Partner at VNT Management, Finland. VNT Management has one cleantech company from Estonia in portfolio Elcogen. Here are some examples of cleantech deals that took place in the last couple of years:» In August 2008 the Estonian solid oxide fuel cell developer Elcogen received a 2,5 million Euro investment from Finnish VNT Management through its cleantech fund Power Fund II.» Estonian Development Fund (Arengufond) during 2009 invested into two Estonian cleantech companies: 13,1 million Estonian kroons (o,8 million Euro) in the innovative environmental monitoring company BiotaP; and 7,8 million Estonian kroons (0,5 million Euro) into wind turbines developer Goliath Wind, together with PowerDrive Ltd.» In August 2009 Estonian Austrian photovoltaic developer Crystalsol received a 2,5 million Euro investment from a Nordic consortium of investors, Finnish Conor Venture Partners and Norwegian Energy Future Invest.

11 BaltCap Baltics BaltCap was established in 1995 and has since become one of the leading private equity and venture capital investors in the Baltic States with offices and operations in Estonia, Latvia and Lithuania. BaltCap supports strong management teams and companies with a vision to grow in the Baltics and beyond. BaltCap made so far 39 investments out of which 24 are now fully exited, and managed in total about 190 million Euro. BaltCap works with a broad investment scope but has a strong interest in 8 Profiles technology companies including cleantech. BaltCap is currently setting up two VC funds established under the EU JEREMIE initiative, which are dedicated specifically to investing into SMEs in Latvia and Lithiania. Lithuania SME Fund amounts 20 million EUR and in Latvia BaltCap will manage later stage growth dedicated fund, and it is expected to reach 30 million Euro. Read the interview with Peeter Saks, Managing Partner at Balt- Cap further in this report. LitCapital Lithuania LitCapital is an SME expansion capital fund dedicated to investing in Lithuanian SMEs. The fund was launched on 31 May 2010 and its current size is 20 million Euro. The cornerstone investor is the European Investment Fund. It is one of the two funds established under the JEREMIE initiative, in this case focusing on companies in the early growth stages. The Fund will consist of 14 million Euro provided by the European Investment Fund and 6 million Euro raised from institutional and private investors. Investment size per company will be between 1 and 3 million Euro. Targeted sectors are fast moving consumer goods (FMCG), IT, medtech/ healthcare and cleantech. Lit- Capital s team has more than 10 years investment experience in the Baltic countries in private equity sector. Read the interview with Šarunas Šiugzda, Founder and Managing Partner of LitCapital further in this report. Eko Investors Latvia Eko Investors is a fund and company management company, established in 2000, which has managed two venture capital funds, and has made more than 30 start-up and expansion stage companies in Latvia. Eko Investors offers investments, along with managerial and strategic support for new and high potential companies, investing up to 1 million Euro in each enterprise. The First Eko Fund specialised in companies in the waste management and recycling industries and was invested in 2004 having made 13 investments. The Second Eko Fund has general scope and was founded in 2006 with participation of the European Structural Funds. It has invested in 16 companies for the total amount of 9 million Euro. Among Eko Investors current and exited portfolio companies are ten waste management and recycling companies.

12 9 Profiles Conor Venture Partners Finland Conor Venture Partners is a technology focused venture capital fund and management company. Conor invests in early-stage companies originating from Finland, Sweden and the Baltics. Investment areas include information and communications technology, embedded software, semiconductor technology, electronics, new materials and optics. In May 2010 Conor announced the first closure of its new fund Conor Technology Fund II which raised 46,5 million Euro and will be invested in early-stage tech companies in the Nordics and Baltics. Currently Conor has one portfolio cleantech company in Estonia, a photovoltaics srart-up Crystalsol. Conor Venture Partners went in Crystalsol in 2009 with 2,5 million Euro together with Norwegian Energy Future Invest. Read the interview with Jari Mieskonen, Managing Partner of Conor Venture Partners further in this report. WNP Project Estonia WNB Project is an active private equity and venture capital firm that specialises in investments in early-stage companies with strong management team and growth potential. The company was established in 2007 and is based in Tallinn. The firm invests primarily in technology companies in the early stage, up to 1 million Euro per company with a maximum investment period of 5 years. Among WNB Project s ten portfolio companies is Estonian wind power company Goliath Wind. Ambient Sound Investments Latvia Ambient Sound Investments was established in 2003 as an equal partnership by four founding engineers at Skype Technologies to hold a minority stake in Skype, and now operates as a private investment vehicle. Today the company is managing 100 million Euro of the partners assets and growing an independent investment vehicle as well as an incubator for developing ideas in-house. Investment focus is very broad, but knowledgebased and technology companies constitute the portfolio. The fund currently has 24 portfolio companies, among them a cleantech company Clifton.

13 Imprimatur Capital Latvia the UK Imprimatur Capital manages two specialist technology seed and start-up funds under the JEREMIE initiative: Imprimatur Capital Seed Fund and Imprimatur Capital Technology Venture Fund. These funds aim at providing early-stage (seed and start-up) financing for innovative micro, small and medium size companies 10 Profiles in Latvia engaged in innovative technologies such as food technology, ICT, life science, medical devices, materials science, nanotechnology, new energy and the environment. International market potential is one if the key factors for choosing investments. Imprimatur Capital has offices in the UK, Latvia and New Zealand. Askembla Asset Management Estonia Askembla Asset Management is a private equity firm focusing on investments in growth companies in Central and Eastern Europe. It was established in 1994 and has offices in Sweden and Estonia. To-date Askembla invested over 100 million Euro in the Baltic region, and is currently raising its third private equity fund dedicated to investing in the Baltics. The investment focus is on later stage companies and is not limited to technology sectors. Currently there are no cleantech companies in its portfolio.

14 11 Profiles Incubators and start-up activity Several established science parks operate across the Baltics along with a few newly opened and planned ones. Here we list the most relevant science parks and incubators who have somewhat a focus on cleantech-related technology areas and have services directed to investors. Three of presented science parks already host cleantech companies (for companies description see next chapter). Business models of most incubators are similar to the ones used in other European countries and include providing office space, business development assistance and consulting services. There is an increasingly buzzing start-up activity as well as a number of enthusiastic start-up related organisations such as Estonian Startup Leaders Club ( com) and Garage 48 (www. garage48.org) who promote entrepreneurship hands-on, motivate and educate young entrepreneurs. Arctic Startup (www. arcticstartup.com) an information hub and web-community founded in Finland, is also actively involved in the Baltics. Most of the activity is naturally concentrated in and around the ICT sector but other technology start-ups participate as well.

15 12 Profiles Tehnopol Estonia Tehnopol is the largest business incubator and science park in Estonia. It is located in Tallinn and hosts 150 companies, Tallinn University of Technology, IT College and a VC fund Ambient Sound Investments. Tehnopol s mission is to increase competitiveness of innovative knowledge-based companies by offering them high-quality services and infrastructure. Established in the beginning of the 2000s, it now hosts cleantech companies such as Crystalsol and Yoga. Tartu Science Park Estonia Tartu Science Park is the oldest science park in the Baltics. Established in 1992, it is linked to Estonia s biggest university, University of Tartu, which carries out R&D activities in many sectors including physics, chemistry and engineering. The main goal of the Science Part is to provide a variety of services needed in the process of R&D commercialisation. Today Tartu Science Park hosts one cleantech company, Clifton. SeedBooster eng/vc/seedbooster Estonia SeedBooster is the Estonian Development Fund s international virtual business incubator whose objective is to unleash the international potential of ambitious business projects and develop them further until they are mature for venture capital financing. SeedBooster was initiated with the purpose of encouraging business ideas that are innovative and have a global perspective while realising the business potential of many Estonian start-up companies. No cleantech companies so far.

16 13 Profiles Latvian Technological Center Latvia Latvian Technological Center was established in 1993 and became the first technological centre in the country. It is a business acceleration centre, which stimulates establishment and growth of knowledgebased SMEs by creating relationships between research and industry as well as encouraging companies for international cooperation. Hosts one cleantech company, Vizors. Ventspils High Technology Park Latvia Ventspils High Technology Park was founded in 2005 and in 2006 opened a Business Incubator particularly for the development of companies in the field of ICT, electronics and engineering. The Park plays an important role in the development of the Ventspils area and is actively involved in various international cooperation projects. The park hosts a local energy company and a number of providers of engineering and production services. KTU Regional Science Park Lithuania KTU regional Science Park was established in 1998 with an intention to increase an efficiency of research and development activities at the Kaunas University of Technology. Its services include business and technology transfer consultancy, technical-administrative services, organisation of workshops and training courses for entrepreneurs. No cleantech companies so far, most of the resident companies in the Park represent ICT and technical consulting branches.

17 14 Profiles Kaunas High-Tech and Information Technology Park Lithuania Kaunas High-Tech and Information Technology Park was established in 2002 and is connected to Kaunas University of Technology. The centre s activity is focused on the creation and implementation of new high technologies: biotechnology, ICT, environment protection and renewable energy sources into industry, the establishment of the innovation companies, the innovation projects use in commerce. Currently there are no strictly cleantech companies in the Park, but it hosts Kaunas Regional Agency of Energy, which works with promoting energy efficiency and use of renewable energy sources. Klaipeda Science and Technology Park Lithuania Klaipeda Science and Technology Park was founded in 2002 in cooperation of Klaipeda University and the Ministry of Economy of The Republic of Lithuania and first opened for companies in At present the Park has more than 40 companies, public enterprises and branches of international companies acting in the innovation environment and the global market. During the seven years of work the Park has established a wide network of partners in all continents enabling boundless collaboration possibilities. It carries out intense project activities enhancing entrepreneurship and is actively working in the fields of technology transfer and transport development. Among resident companies is a producer of LED lighting solutions Ekolaitas, Sunrise Valley Science & Technology Park, Lithuania A developing science park connected to University of Vilnius and Vilnius Technical University. Open in 2008, it plans to combine physical infrastructure with the provision of a range of support services such as business incubation, risk capital financing, R&D and product development, entrepreneur development and management training. Currently there are no resident cleantech companies, but the Park hosts Lithuanian Renewable Resources Energy Association.

18 15 Profiles Affiliated professionals Borenius Group Finland Baltics Borenius Group is a group of law firms which operates in Finland and all three Baltic countries. The companies in the Borenius Group include Borenius & Kemppinen in Finland, Luiga Mody Hääl Borenius in Estonia, Liepa Skopina / Borenius in Latvia and Foigt & Partners / Regija Borenius in Lithuania. Companies practice covers all areas of corporate and business law, specialising particularly in commercial law, M&As, intellectual property and employment law among other areas. Particular interest is taken in technology innovation, including cleantech. The Group has hands-on experience in the local markets in the Baltic countries and a solid track record. Read the interview with Maria Carlsson, Specialist Partner at Borenius Group further in this report.

19 16 Profiles Cleantech companies Clifton Estonia Clifton is a high-tech company producing gallium arsenide semiconductor structures for power electronics. Clifton s main products are gallium arsenide p-i-n rectifier diodes. Due to Liquid Phase Epitaxy (LPE) process they provide better temperature performance than competing Si, SiC and GaN products. Lower power consumption, greater recovery speed, wider operating temperature range, lower weight, smaller dimensions, better radiation hardness - these features of our products are needed in most of high-tech power electronics solutions from automotive and household appliances to military, aviation and space. Yoga Estonia Yoga offers an Intelligent Building System for various types of buildings. Yoga IB is a building management system that makes indoor environments in buildings more comfortable, secured and efficient. It gives total control over the premises and provides convenient access through web-browser, smartphone or even TV, as well as saves energy whenever it is possible. Yoga IB provides the demand side control for the smart grid providing user interface to automate smart grid connectivity. Dynamic tariff information is provided to users and according to the userdefined preferences, home appliances, factory processes and other devices are targeted to consume energy during recommended tariff zones. That enables to even the load of the grid bringing better reliability and save money for the endusers willing to contribute. Crystasol Estonia Austria Crystalsol develops an entirely new type of flexible photovoltaic technology. The patented technology combines the advantages of high efficiency single-crystalline materials and low cost roll-to-roll production. The technology is based on decades of research for the Russian military and Philips semiconductor know-how from the 1960s. The core innovation is the light absorbing layer made of a patented new crystalline semiconductor powder. The light absorbing active layer of the modules is a so-called Monograin Membrane: crystalline semiconductor particles with a typical diameter of 30 to 60 μm arranged as a single layer fixed by a polymer film.

20 17 Profiles Elcogen Estonia Elcogen is developing Solid Oxide Fuel Cells (SOFC) and will produce single SOFCs and stacks based on proprietary technological solutions. Elcogen works in strategic partnership with two leading Estonian research institutions, the Institute of Physical Chemistry of the University of Tartu and the National Institute of Chemical Physics and Biophysics. Elcogen develops planar anode-supported SOFCs, using gadolinia-doped ceria electrolytes. The target market is 1-100kW stationary applications, such as grid parallel residential, commercial, industrial and off-grid remote applications. BiotaP Estonia BiotaP develops and produces high precision data test systems for analysing environmental conditions of, for example earth, using various microorganism communities. Microorganisms represent 2/3 of life and contain vast biological diversity that is the product of an estimated 3,8 billion years of evolution. In many environments, as many as 99% of the microorganisms cannot be cultured by standard techniques, and the uncultured fraction includes diverse organisms that are only distantly related to the cultured ones. Therefore, culture-independent methods, like metagenomics, are essential to understand the genetic diversity, population structure, and ecological roles of the majority of microorganisms. The main services of BiotaP are design and production of PCRbased environmental monitoring test kits; environmental diagnostics service based on high throughput sequencing methodology; and technology license sales for production of test kits for specific environment- geographical location combinations.

21 18 Profiles Goliath Estonia Goliath Wind OÜ develops a new type of cheaper and more efficient wind turbines. Conventional turbines include gearings, which are the weakest link in their construction, and in the case of turbines with direct drives their shortcomings are massive size and material intensity. The company s goal is to reach wind turbines, which are lighter, more durable and with a starting capacity of 1,5 MW, and would give 15-20% cheaper electricity than is currently available for wind turbines. The new technological development is based on an idea developed by Professor Ed Spooner from Durham University and in the team are key persons with an international outreach.. Vizors Latvia Visors develops and manufactures a supervision technology for vehicles that allows monitoring of fuel consumption and losses and helps save fuel. Based on the findings of longterm research in the sphere, Visors elaborated a method protected by three patents that provides for a +/- 1% accuracy of fuel level monitoring at a constant temperature with high sensitivity levels. The method provides exact monitoring of the actual volume of fuel filled in, consumed and remaining in the tank.

22 19 Interviews Opinions and Insights Interview with Peeter Saks, Managing Partner at Balt- Cap, Estonia. Is cleantech a recognisable investment category and an identity in the Baltic countries? There is still no common definition that unites all those different sectors joined under cleantech umbrella. We speak about specific technologies in energy efficiency or waste management, but do not bundle them together. So, cleantech might very well become a new word that people will start using. What is the relationship between the Baltic countries and the Nordics? We think of the Nordic countries as our closest neighbours both from the point of view of location and culture, and there are naturally many ties that unite the two regions. We have a strong cooperation between Estonia and Finland, and in fact BaltCap was started in Finland back in 1995, but since then has become a fully Baltic entity. We work closely with some investors from the Nordic countries and would like to expand our contacts further as well. In the recent months we also feel the interest from Nordic investors, perhaps because the general economic situation starts looking better. How would you assess the innovation potential and climate? In the Baltics we have a high quality technical education and research, there are inventions and innovations. However there seems to be a gap on the way between coming up with an invention and building a company. Many young entrepreneurs are going into IT, while in fact there is more money and a greater need in cleantech area, but we need to adopt the knowledge and mechanisms that will help innovative ideas become functional companies and apply public financing more efficiently. We need more business angels and financial solutions that will support entrepreneurs. What are the prospects for cleantech growth and which sectors are most interesting at the moment? There is sufficient government commitment towards energy efficiency and renewable energy generation. For example feed-in-tariffs for wind power and bioenergy co-generation have been adopted in all three countries, and related policy frameworks are the same as in other EU countries. There are already several wind power development projects, particularly along the Estonian coast, and more projects are being planned, so wind, particularly offshore, is definitely a promising area. Other areas are recycling and waste management, improvements in wastewater treatment and water purification, as well as of course energy efficiency. In all those areas we also have policy incentives and potential for governmental support. How would you characterise entrepreneurs? We have smaller companies who have innovative solutions with great technical expertise and good business knowledge. What is still lacking in many managers however is the expertise of how to internationalise the business, how to reach out to foreign investors and clients, which is really needed. The example of Skype is quite characteristic built up on Estonian technology, but it took business developers from the US to make it big. Building up entrepreneurial competence and knowledge about marketing abroad will help many companies grow. Local markets are too small to provide enough space for real growth, but perhaps if we look at the markets of the Baltics and Nordics together, it will be a good start for many potential success stories! Is it politically correct to call Estonia, Latvia and Lithuania Baltic countries? I would say it is. It is similar to how you use words Scandinavian or Nordic. Perhaps there are more differences between the Baltic countries when it comes to language and culture than in case of the Nordics, but we prefer not to emphasise them. In BaltCap we use it and we think it s good.

23 20 Interviews Interview with Šarunas Šiugzda, Founder and Managing Partner of LitCapital and President of Lithuanian Venture Capital Association, Lithuania. What is LitCapital? LitCapital is an SME expansion capital fund, investing only in Lithuania. The fund was launched on 31 May The current fund size is 20 million Euro, and the cornerstone investor is the European Investment Fund. Investment size per company is between 1 and 3 million Euro. Targeted sectors are fast moving consumer goods (FMCG), IT, medtech/healthcare and cleantech. LitCapital s team has more than 10 years investment experience in the Baltic countries in private equity sector. Is cleantech a recognisable brand? Cleantech is yet an evolving category in the Lithuanian investment landscape. Mostly it is related to the energy sector: biomass energy production, wind and solar energy. Waste recycling segment is also developing. How would you assess the cleantech innovation potential in Lithuania? Cleantech innovation potential is quite good and promising. Lithuania has the largest and rather well developed industrial sectors compared to other Baltic countries. Vilnius University and Kaunas Technology University also produce quite a substantial number of engineers and scientists. A number of newly launched venture capital funds in Lithuania will stimulate the development of innovative cleantech companies. How would you characterise the general investment climate have the Baltics recovered from the recession? The Baltic countries, including Lithuania, have lived through the most severe economic recession since the restoration of independence. Now the survived businesses acknowledge that the worst is behind and little by little plan for the future growth, although this time not looking at as aggressive development as it used to be five years ago. While the most difficult economic/social issue is high unemployment, export-oriented companies have already presented very impressive recovery stories and start telling that there is shortage of certain specialists. Most of clean energy related start-ups are co-financed by the EU structural funds support. Wind mill parks are very well financed by banks. More sophisticated investments are not so many yet. How would you characterise Lithuanian entrepreneurs? Lithuanian entrepreneurs are well educated, usually with some engineering educational background. They are very eager to do everything by themselves. Sometimes an ambition to expand globally is missing. At the same time they tend to overinvest. They are also very creative in finding various ways to overcome obstacles and manage to survive. Is there governmental support in the areas of energy and environment? Lithuanian Government puts a lot of effort in the so called energy independence topic, which stimulates energy related cleantech investments. Lithuania also has to follow its commitments to the EU regarding green energy generation levels, waste recycling, waste water treatment, etc., which also stimulate the cleantech investments. The area definitely has a good future. Are there any particular policy instruments in Lithuania that are particularly beneficial for cleantech sector? Solar energy and wind energy generation have very attractive preferential subsidised tariffs. The Ministry of Economy declares its focus onto technological and innovative investments which it tries to support very much through the distribution of the EU structural funds. The ministry also intends to launch an additional early stage seed and start-up venture fund. They have an ambition to attract more early stage technological investments from the neighbouring countries by improving the incubators infrastructure and increasing seed funding. Tender process for international partners will soon be announced.

24 21 Interviews Interview with Andrus Viirg, Director of Enterprise Estonia s Silicon Valley Office, Estonia/USA Which role does Enterprise Estonia play in the innovation system? Enterprise Estonia was set up by the Ministry of Economy in 2001 and is responsible for a wide range of tasks related to regional development, investment and trade as well as tourism promotion. We operate several mechanisms of public funding such as export promotion grants, product development and innovation grants to companies as well as universities and research institutions. Since 2004 when Estonia joined the EU, Enterprise Estonia has become a responsible national authority for disbursement of the EU structural funds. We are managing virtually all public funding that is being directed to business growth and innovation in Estonia. Enterprise Estonia also has 10 offices abroad, including the Nordic countries, China, Russia and the USA, with a wide network of contacts on local markets. How would you assess innovation potential in Estonia when it comes to cleantech? I think the development potential is very high and there is already a small but viable cluster of companies in cleantech especially in the area of energy efficiency related IT applications and software and new energy solutions such as fuel cells and solar cells development. The energy system in Estonia is largely based on burning oil shale and there is a lot of research on e.g. improving energy efficiency of the processes. We see a good export potential of these technologies as well. There are universities with strong engineering and technical base, particularly the Tallinn University of Technology which hosts the EU centres of excellence for Solar Energy Materials and Computer Science, and Tartu University which is leading in physics and chemistry subjects. How would you characterise innovation climate from the financial perspective?

25 22 Profiles We have a positive outlook and there is a lot of public interest in developing the innovation potential of our country. Enterprise Estonia s financing budget for the period of is 800 million Euro. We support many interesting projects such as centres of excellence in the areas of IT and biotech, spinout programmes from universities and industries. From the policy perspective, there are incentives for producing green electricity. You are based in the US, how do foreign investors view Estonia? The majority of foreign investors so far have been Swedish and Finnish companies who invested in areas strategic for their home markets, such as for example IT, banking, production and pulp and paper industry. Estonia has been used maybe a bit too much as a production base for European companies, and now we aim at a broader presentation of the country as a transportation and logistical hub and service provider. The energy sector is also becoming interesting for investors due to expansion of electric grids and construction of new power plants. It is quite easy for investors to establish contact with entrepreneurs English is widely spoken in Estonia, and one of the tasks of our work abroad is to help Estonian entrepreneurs learn the trade of pitching and doing business internationally. How important is cooperation with the Nordics countries? This cooperation comes naturally, especially with Finland. However, being based in the Silicon Valley I feel it even more. We have a close circle of representative offices of Nordic business development organisations such as Innovation Norway, Innovation Center Denmark, Tekes and Vinnova which we call Silicon Vikings. In the US it helps to be placed on the map faster.

26 23 Profiles Interview with Heidi Kakko, Head of Investment Division at Arengufond, Estonia What are the main activities of Arengufond and its financing mechanisms? Arengufond / Estonian Development Fund activates the start-up entrepreneurship and venture capital market by investing together with private investors into companies with international ambition. The Fund is open to the opportunities in the seed and start-up phase in all industries and sectors at the maximum investment size of 3 million Euro per company and takes a holding of 10 to 49% in return for the investment. Investments are made into companies showing potential for fast international expansion and whose growth requisites are based on a unique idea, business model, invention, technology or market opportunity that has realistic possibilities in the market. Investments are based on commercial reasoning, i.e. they must be profit-oriented and economically viable. Investment periods range from 5-7 years. Typical investee companies have passed the product development stage and have either entered or are entering the market. Estonian Development Fund is also a think tank for foresight of Estonia s growth perspectives, including the potential of greentech, cleantech and energy. How would you assess cleantech innovation potential in Estonia and other Baltic countries? Cleantech is generally viewed just as any other business. Neither businessmen nor general public make any special exceptions to one or other case just because it is cleantech. Of course, in particular fields and in case of particular players, attitudes can be different. For example general public is not very enthusiastic about wind energy due to visual and noise pollution and heavy subsidies. This does not mean that innovation, entrepreneurship and cleantech do not come together in Estonia. Though in both science and business fields cleantech globally is hot, it also means that a case in cleantech has to be a good business opportunity. The investments due to ethical reasons rarely find investors or those projects exist as non-profit initiatives, supported by specialised funding from public sector or other than private sources. How would you characterise the innovation climate and the seed funding accessibility? Definitely, currently there are neither enough entrepreneurs nor seed capital for innovative start-ups in Estonia, and not only in cleantech industry. But the market is improving from both the supply and demand side. Currently there is a wide range of grants available from Enterprise Estonia, several incubators and other forms of cooperation at universities and some seed and start-up capital from local angels and local/international institutional investors. The major bottleneck from the investors point of view is currently the low awareness and insufficient experiences of start-up entrepreneurs, bringing along a low quality of preparation and execution and the lack of ambition in many projects. What is your opinion about the existing legal framework for cleantech development? Public sector has been quite active in past few years, also there are some non-profit groups, making perhaps even more impact in preparing for the policy-making and the change in attitudes. There are not too many hard policies in place to force cleantech into society and economy the current approach is more encouraging instead of forcing. Which policy instruments are particularly beneficial for the cleantech sector? There are some regulations set in the energy sector regarding the sustainable energy sources like wind energy, still on a small scale, but posing an additional burden to the consumers. The legal/policy instruments should focus to enable the usage and implementation of cleantech solutions that would pose a long-term sustainable and economic effect. What do you find particularly interesting and promising in Estonia? The country-wide campaign Teeme ära! Let s Do It!, which has grown into an international scale, has proven that the community-led interest and initiative could make big things happen. I would say that the Estonian society is open and curious in regard to new innovative cleantech solutions, however the cost component is a decisive factor in several cases to impact the real implementation of those technologies. On a state-level I would see a focussed cleantechprogram combined with the specialised financing for commercialisation of new technologies via start-ups would make a real difference and give a faster pace to the development of that field, both in Estonia and the other Baltic countries.

27 24 Profiles Interview with Jari Mieskonen, Managing Partner at Conor Venture Partners, Finland How is Conor Venture Partners involved in the Baltics now? Conor has been active in the Baltic states since We are an active member of Connect Estonia, frequent speaker at venture related seminars and Arctic Startup s events. Conor currently has one investment in the region. What is similar or different compared to your home market, and what is interesting in the Baltics? What is similar is a relatively small internal market, and the difference is total absence of internal Fortune 500 companies. At the same time the entrepreneurial spirit of recently capitalized nations is fresh and living. How would you assess the innovation potential in the Baltic countries, when it comes to cleantech? Cleantech is not yet a specific category in the Baltics. There are though number of companies operating in those technology areas. Potential for new innovations rely on fast adoption capabilities. Since the infrastructure is still developing, there is a need for new development. How would you characterise entrepreneurs? They are enthusiastic but inexperienced. Which is the main challenge of startup entrepreneurs in the Baltics? Start ups are suffering from lack of local cornerstone customers. Recession left some scars to young capitalism, but young nations are eager to move on.

28 25 Profiles Interview with Maria Carlsson, Specialist Partner at Borenius & Kemppinen, Finland How is Borenius involved in cleantech sector in the Baltic countries? Borenius Group has advised clients in the Baltic countries (especially Estonia) in several cleantech projects with a focus on renewable energy (wind, biogas) in particular with regulatory advice, due diligence work and work in the sphere of emissions trading. Is cleantech already an established category? Although many companies are keen to define themselves as cleantech from a marketing perspective, renewable energy is the most common term used, which also correlates with the fact that the energy sector is the most prominent sector in the Baltics at this point when considering cleantech as a whole. How would you assess cleantech innovation potential in the Baltic countries? We see great potential in the Baltic countries. There is a rising awareness for environmentally friendly production among companies in basic industry fuelled by EU environmental programmes such as emission reduction mandates etc, and in the start-up/early stage field, there are many interesting innovations/ideas - although these very often lack the venture funding to bring them forward. What is the general investment and business climate have the Baltic countries recovered from the recession? This varies very much according to country. Estonia is recovering well from the recession, with several foreign investments pouring in and exports on the rise. The entry into the Euro system in 2011 is also keenly anticipated to bring a lift for Estonia. In Latvia, after many governmental expense cuts announced last spring, the government won a continued mandate this autumn which sends out a clear signal that reforms will continue and Latvia is on its way to recovery. In Lithuania, recovery is slow, but there are many interesting government initiatives aiming to promote scientific development in i.a. the cleantech area. What is your opinion about the legal framework for cleantech development? Generally speaking, there has so far not been a wide willingness to promote clean development mechanisms from a regulatory standpoint. However, in Latvia, a new umbrella renewable energy act is expected to be passed shortly, which would introduce uniform rules of state support for renewable energy producers. Are there any legal/policy instruments which benefit the cleantech sector? Although many interesting policy initiatives exist (such as the Latvian government s target to increase renewable energy consumption from 30% to 40% by 2020), few very concrete legal instruments are in existence today. What is particularly promising in the Baltic countries? There is definitely space to grow in the Baltic cleantech markets!