In this latest Spotlight feature Georgios Gatos (MSc Business Studies), Business Consultant at Atlantis Consulting S.A. in Greece looks at the 'European Paradox' of funding for applied research.
About 6 years ago I was spending my first time at the Aston Triangle as an MSc in Business Studies postgraduate student and a Stafford Tower resident. Those of you that have been around these days maybe remember the parties at the 18th floor and the long studying hours at the Business School’s lounge. Some of us had the opportunity to meet for an unofficial reunion in Chalkidiki, Greece in the summer of 2008.
Looking now back, I should say that these days were a milestone for what was about to come, that changed my life as a person and as a professional. I studied 2 out of the 3 semesters at the Aston Business School, since I had the opportunity to participate in an exchange program at the University of Florida, where I concluded my MSc studies.
In Florida I started my career as a Business Consultant to Start Ups and Innovative companies, a job that I still do as a strategy and business development consultant at Atlantis Consulting S.A., a business consulting firm in Greece. I focus on entrepreneurship and innovation and my main focus is to assist companies accessing finance from Venture Capital firms.
Even though in Europe there is a vast amount of money spent into financing research and EU countries play a leading global role in terms of top-level scientific output, only a small percentage of applied research results have been able to convert into successful, wealth-generating innovations in the market. Europe is lagging behind the US in terms of technological performance and does not seem to be catching up. Its world leadership in scientific performance appears to be deteriorating. The above mentioned conjecture is often called the “European paradox”.
A major factor contributing to the problem of innovation financing, is the so-called challenge in regions. As it is well-known, the deal flow is limited in regions and furthermore, there is a lack of experience and skills needed in all the stages of the financing procedure. Another factor for limited innovations is the “equity gap”, or otherwise stated the “valley of death” in the value chain of financing. The “equity gap” represents the shortage of financing availability between the business angel phase (BA) and the venture capital (VC) phase. These problems appear to be common in all European regions.
Another qualitative characteristic that underlines Europe’s problem in innovation financing is the return of VC-backed companies on original investment. From data collected for the 1990’s, the return of 10 VC-backed companies in the EU was 20 times, while the return of 11 VC-backed companies in the US was 250 times. Furthermore, returns to early stage venture capital financing of young new technology-based firms are extremely unattractive for investors.
Among others I am currently working on projects that aim to solve these issues by strengthening parts of the EU and Greek Vertical Innovation Financing Ecosystem in the Mobile Value added services and Microelectronics sectors.
Applied research ideas are generated by the research community. For their successful commercialisation, they need to follow a path in which many actors are involved (the Vertical Innovation Financing Ecosystem):
- Pre-incubator schemes
- Incubators
- Technology Transfer Officers
- Business Angels
- Seed funds, start-up funds
- Venture Capitalists
- IPO, Buy-out experts
Even though Europe is lagging, the future looks promising and I am happy that my work might contribute one day to see a EU start up standing among the most successful innovative companies worldwide.
