A welcome change in government venture capital

It is good that the government wants to pursue the plans for a new structure for state venture capital. Properly implemented, the change could be an important part of the government's investment in life sciences.

On Monday, Mikael Damberg, Minister for Enterprise and Innovation, presented the bill The State and Capital with proposals for a new structure for state venture capital.

The proposal only deals with how state risk capital should be organized and does not go into the focus of the new funds. Decisions on direction will be taken after the new structure is in place. According to Mikael Damberg, Minister for Enterprise and Innovation, priority will be given to areas where there is great potential but where market-complementary capital is needed.

– As mentioned in today’s presentation, life sciences is one such area. These are companies with enormous potential, but they often require large investments over a long period of time and there is a high risk that the individual investment will not succeed. The government has a stated ambition to strengthen growth in the life science sector in Sweden. Allowing one or more of the new funds to focus on life sciences is a very important part of this work,” says Ingrid Heath, Vice President and Head of Policy at SwedenBIO.

The changes proposed in the bill are largely the same as those proposed in Hans Rydstad’s report in June 2015. The state venture capital will be organized in a single overarching fund, Fondinvest, which will invest in specialized sub-funds consisting of half private capital and half state capital. The sub-funds will in turn be run by specialized private VC teams that decide on the individual investments in companies.

– SwedenBIO has always advocated a fund-in-fund solution that takes advantage of the expertise available among private investors and we welcome this change, says Ingrid Heath.

According to the proposal, no new money will be invested in Fondinvest, but the capital will come from uninvested funds in the state funds Fouriertransform and Inlandsinnovation. According to Mikael Damberg, it is about SEK 2.5 billion, some of which is needed to make follow-up investments in companies that Fouriertransform and Inlandsinnovation have already invested in.

– The bill also proposes that €1.5 billion be invested in a demonstration facility fund. If you are not currently prepared to invest additional funds in Fondinvest, you should consider the balance between different investments,” says Ingrid Heath.

Since Hans Rydstad’s report was presented last summer, SwedenBIO has seen increased interest from both Swedish and international investors.

– We are approached by investors who have heard about the planned changes. They keep track of Swedish life science entrepreneurs but often have not taken the full step of investing. This interest shows that there is a potential for state venture capital to be the catalyst needed to boost investment. For life sciences, it is particularly important that the new Fondinvest works proactively to attract investment from international investors,” said Ingrid Heath.

For further comments contact Ingrid Heath, Vice President and Head of Policy at SwedenBIO, at ingrid.heath@swedenbio.se or 0701 74 76 33.

Read SwedenBIO’s previous comments on government venture capital:

SwedenBIO’s response to the inquiry “A fund structure for innovation and growth”

SwedenBIO’s proposal for a change in government risk capital policy