Lots of ideas, no money

More capital is needed to seed future innovations in Southern Scandinavia.

The southern part of Sweden acutely needs more innovation capital.  The Malmö-based daily Sydvenska Dagbladet recently published a special report on the situation.  In their report leading figures in the venture capital industry, science parks and in universities send the same message. There are any ideas but limited capital, especially for early-stage seed funding. Specifically, there are limited funding available for new investments since most of the funding committed by private players have already been invested. And the vast majority of venture capital in Sweden is focused on the Stockholm region.

I recently talked with a writer for The Economist, a science professor with affiliations in the US, China and Europe and with several years of experience in Scandinavia. In his view, there are probably a lot of undervalued ideas in that region, simply because it is off the beaten track for big international tech investors, and local investors do not have the technological insight. If may be off the beaten track for large international investors but with only one million people the very southern Scania (Skåne) county of Sweden has already an unusually high concentration of brainpower per capita and new mega investments in science and technology are expected to dramatically increase commercial opportunities. The nexus of this development is Lund, which hosts the oldest university in the country, University of Lund. The municipality of Lund and Scania are governed by a non-socialist coalition for which continued investments in research, development and innovation are at the top of the agenda. For historical and geographical reasons the psychic distance from Lund is closer to Copenhagen, the capital of Denmark, than to the Swedish capital Stockholm and this has provided many social, economical and political linkages and even a bridge/tunnel across the narrow Oresund strait. But, the risk capital industry in Denmark is less developed than in Sweden and dominated by life science.

With 3.7 million people the larger and bilateral Oresund region makes up 1⁄4 of the GDP in Sweden and Denmark, respectively. It features strong industrial clusters built 
around global corporations like Novo Nordisk, Danisco, AP Möller
 Maersk, Sony Ericsson, Gambro, Tetra Pak and Alfa Laval. The
 region is hosts three strong science universities and a 
handful science parks for commercialising technological development. Still, only a few venture capitalists take a bi-lateral, Oresund perspective, and most of them are already fully invested.

Over the next decade massive new investments in additional and world-class science facilities will attract thousands of additional researchers to the already science-intensive Lund region and this is expected to also boost the commercial opportunities. On the Swedish side a consortium of some 20 countries will fund the joint European, EUR 1.5 billion European Spallation Source (ESS) material science facility outside Lund (see my post about it) to be constructed 2013-2019. The Swedish state is currently constructing the additional EUR 0.5 billion synchrotron radiation facility MAXLAB IV next to the ESS site. Private donations in 2011 are enabling Lund University to convert Astra Zeneca’s previous site into a new EUR 50 million Ideon Life Science Village a research laboratory and business incubator located adjacent to the Ideon science park (see my post about it). Recently, private entrepreneurs announced plans to build a combined SEK 4-5 billion golf, spa and hotel retreat south of Lund, which is to be ready at the same time as the ESS facility.

Overall these unusual and international mega investments into R&D in the Lund region will further increase the general attractiveness to and high concentration of brainpower in the region. Lund is destined to become one of the most dynamic science and incubator hubs in the world over the coming years, especially in life science, cleantech, nanotechnology and materials technology. It should have all real potential to be a hub also on the beaten track of foreign innovation capital.

But capital funds need a certain scale to be meaningful and that is a major barrier of entry. In Sydvenska Dagbladet the head of the Ideon science part in Lund summarizes the situation: “One hundred million (kronor = EUR 11 million) is not enough….” And he suggests that five times that amount is a minimum level to operate such a fund. The problem is that none of the current funds with a south Sweden focus have raised that level of capital.

Somebody should give it a shot.

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