ECSEL JU Symposium 2018 Electronics: a vision and how to get there Lessons learned from study on access-to-finance conditions Brussels, June 19 2018
50 companies, financing providers and industry participants interviewed to evaluate access-to-finance conditions in the Electronics sectors 25 innovating Electronics SMEs 10 large corporates Clusters and industry associations 10 VC firms 5 national agencies 2 2018 Deloitte Tax & Consulting
Funding gaps identified, mainly at early stage and growth stage Company funding needs Size Basic principles observed Research & development Product design and prototyping Production Technology concept formulated R&D Experimental proof of concept Technology validation in lab Device and product design Technology validation in relevant envt Demonstration in relevant environment Pilot lines Demonstration in operational environment System complete and qualified Successful mission operations High-volume production Medium and high-volume production Commercialization Risk Extremely high Very high High Key funding sources Business Angels Grants VCs Key funding gap Growth funds Venture debt Key funding gap Banks Key funding gaps Early stage Risk extremely high, mainly due to tech risk Investment requirements begin to rise (typically around 1-5 million euros) to finance product design and validation and early prototyping Growth stage Risk remain high due to tech and market risk Industrialization of production and commercialization require much larger investments (potentially above 10 EUR million) 3 2018 Deloitte Tax & Consulting Source: ECSEL JU, feedback from stakeholder interviews
Complexity and investment characteristics of Electronics identified as key specific challenges Complexity Capital intensiveness Specific factors creating challenging financing conditions in Electronics High risk Long lead-times 4 2018 Deloitte Tax & Consulting Source: Feedback from stakeholder interviews
The case for targeted funding in favor of Electronics Why targeted funding for Electronics? Strategic importance for Europe Address specific challenges Lack of private financing focus and expertise Leverage prior EIB experience Leverage on international experience Develop European champions 5 2018 Deloitte Tax & Consulting
Targeted indirect financing levers would help address current shortage of venture capital to Electronics sectors Exposure of European VC sector to Electronics Need for tailored approach to encourage indirect financing in Electronics Yozma example Number of VC funds and exposure to Electronics ~1.100 (100%) Lowered risk for private investors Value-added post investment Predetermined exit conditions 154 (14%) 18 (2%) Total VC funds in Europe Previous investment in Electronics Specialized in Electronics Funds established with private partners No government control 6 2018 Deloitte Tax & Consulting
Key takeaways 1 ELECTRONICS KEY 2 FINANCING EXTREMELY CONTRIBUTOR TO EUROPEAN CHALLENGING OWING TO INNOVATION AND ECONOMY SPECIFICITIES OF SECTORS 3 A THEMATIC FUNDING 4 INDIRECT FINANCING TOOLS APPROACH WOULD HELP ALSO NEEDED TO ENCOURAGE ADDRESS FUNDING GAP PRIVATE INVESTMENT 7 2018 Deloitte Tax & Consulting
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