Nordic-Baltic Innovation Platform

Nordic-Baltic Innovation Platform
Seed-Project Report
Report published by:
Innovatum AB, 2016-02-01
Written by:
Heidi Hautajärvi, Innovatum, Sweden
Matiss Neimanis, Green Technology Incubator, Latvia
Marit Sall, Estonian Development Fund, Estonia
Veikka Lahtinen, Demos Helsinki, Finland
Contact:
Heidi Hautajärvi, International Program Manager
Funded by: Swedish Institute,
www.si.se
Postadress: Box 902, 461 29 Trollhättan
Besöksadress: Nohabgatan 18A, Trollhättan
+46 520 289 300, www.innovatum.se
1
Index
1. INTRODUCTION
3
2. DEFINITIONS
4
3. CHALLENGES
6
3.1 SWEDEN
3.2 FINLAND
3.3 LATVIA
3.4 ESTONIA
6
10
14
16
4. SUMMARY OF CHALLENGES
19
5. SOLUTIONS AND ADDED VALUE
19
6. SWOT
21
7. SUMMARY
22
2
1. Introduction
This seed-report is a result of a feasibility study funded by the Swedish Institute - the NordicBaltic Innovation Platform. The study had the aim to strengthen the new collaboration between
Innovatum, Demos Helsinki, Green Industry Innovation Center and Estonian Development
Fund, as well as create long-term opportunities for co-action in the upcoming years. In addition,
the group have been planning a common application for the Baltic Sea Region that will open in
May 2016.
The overall goal with the seed-study has been to look at how these organisations can work
together to strengthen the growth of cleantech start-up as well as small- and medium sized
(SMEs) companies in the Nordic and Baltic area. These geographic areas have the relevant
expertise for creating a strong inter-connected smart innovation cluster. The only thing lacking is
a proper axis of cooperation that shall be created through the project at hand. The Baltic Sea
brings these countries together but also separates them geographically, which is why active
measures need to be taken in order to create a flourishing cluster.
The project group have identified a potential project that will seize the problems at hand and that
will produce new solutions and models that are in line with the EU´s Baltic Sea Region
Strategy´s objectives:
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By fostering innovation and building a smart innovation cluster, the project will
strengthen competitiveness in the region.
The planned project will focus on clean solutions and the conditions of start-ups and
SMEs in the Baltic Sea region
The whole project is carried out in order to fight climate change.
New energy solutions will be one focus area for the teams as well as green and clean
technology.
There are currently many different organisations and activities in the Baltic and Nordic countries
supporting and fostering sustainable innovation and / or start-ups. However, the innovation
infrastructure is fragmented and links among organisations and countries are weak or short term
oriented. This can be a problem for SMEs and start-ups, consequently preventing them from
taking advantage of its full growth potential both globally and in their own countries. Hence,
several promising innovations are not developing into value-creating enterprises and
competitiveness.
A present limitation (and likewise opportunity), is the lack of a functional Nordic / Baltic
cleantech cluster approaching to this challenge. Individual countries have highly developed
innovation ecosystems, incubators and successful start-ups and SMEs but more could be
benefited from the physical proximity of the Baltic and Nordic countries. The new cooperation
between Innovatum, Demos Helsinki, Green Industry Innovation Center and Estonian
Development Fund tackles this limitation by creating conditions for a land crossing project and
accordingly takes place in the prior-related area sustainable growth from increased prosperity.
The upcoming project holds a challenge with the aim to find new working models that give
SMEs and start-ups a chance to test their concept in a lean, fail fast manner and also connect
3
the teams with potential investors. This can allow for new innovation to find funding, which is a
common problem in the Nordic and Baltic countries, where capital is often hard to find for
promising start-ups. By creating a transnational pool of interesting teams, venture capital can be
lured more easily.
2. Definitions
Cleantech
This project will focus on smart and clean solutions, we call it cleantech. Clean technology
(cleantech) is a general term used to describe products, processes or services that reduce
waste and require as few non-renewable resources as possible. The Clean Technology Trade
Alliance, a global initiative to drive the expansion of cleantech, defines it as:
A broad base of processes, practices and tools, in any industry that supports a
sustainable business approach, including but not limited to: pollution control, resource
reduction and management, end of life strategy, waste reduction, energy efficiency
carbon mitigation and profitability.1
The Global Innovation Index cleantech states; “Cleantech... now permeates all realms of the
economy, impacting industries as diverse as ICT, Healthcare, Food, Electronics, Chemicals and
Retail. The term has been used interchangeably with ‘resource innovation’, ‘industrial efficiency’,
‘sustainable technology’, but all essentially have the same meaning – doing more with less (e.g.
fewer materials, less energy expenditure, reduced water availability), while making money doing
so."2
This project will work in line with these definitions. Cleantech as technologies, processes and
tools that supports a sustainable business approach that includes all realms of the economy,
from areas such as ICT, healthcare and food to softer areas such as service and creative
industries.
We mean that cleantech is smart solutions that has a positive impact on our climate.
Small and Medium Sized companies and Start-ups
This project will mainly work with start-ups and early stage small and medium sized companies.
Small and medium-sized enterprises (SMEs) represent 90% of all businesses in the EU. The
European Commission has made a definition of an SME.
The first step to qualify as an SME is to be considered an enterprise. According to the definition,
an enterprise is “any entity engaged in an economic activity, irrespective of its legal form”. This
wording reflects the terminology used by the European Court of Justice in its judgments. It is the
economic activity that is the determining factor, not the legal form. In practice this means that
the self-employed, family firms, partnerships and associations or any other entity that is
1
Whatis.com: http://whatis.techtarget.com/definition/clean-technology-clean-tech
2
The Global Cleantech Innovation Index 2014: http://www.cleantech.com/wpcontent/uploads/2014/08/Global_Cleantech_Innov_Index_2014.pdf
4
regularly engaged in an economic activity may be considered as enterprises. An economic
activity is usually seen as “the sale of products or services at a given price, on a given/ direct
market”.
The category of micro - small and medium-sized enterprises consists of enterprises which:
employ fewer than 250 persons; and have either an annual turnover not exceeding 50 million
euro, OR an annual balance sheet total not exceeding 43 million euro.
By comparing its data with the thresholds for the three criteria, an enterprise can determine
whether it is a micro - small or medium-sized enterprise3.

Micro-enterprises are defined as enterprises that employ fewer than 10 persons and
whose annual turnover or annual balance sheet total does not exceed 2 million euro;

Small enterprises are defined as enterprises that employ fewer than 50 persons and
whose annual turnover or annual balance sheet total does not exceed 10 million euro;

Medium-sized enterprises are defined as enterprises that employ fewer than 250
persons and whose annual turnover or annual balance sheet total does not exceed 50
million euro.
Start-ups
Stanford Professor Steve Blank famously defined start-ups as “temporary organisations
searching for a scalable business model”. Extending that definition, smartups could be
described as organizations searching for a scalable business model to free their users from a
dependency on natural resources. And to succeed they need to gain access to underutilized
resources. In other words, smartups are basically creating new resources (“proliferation”) via
smarter use or re-allocation of available resources."4
The Business Dictionary defines start-ups as:
Early stage in the life cycle of an enterprise where the entrepreneur moves from the idea stage
to securing financing, laying down the basis structure of the business, and initiating operations
or trading.5
This project will work with start-ups and SMEs - in most cases early stage SMEs, defined as
micro-enterprises by the European Union.
3
http://ec.europa.eu/DocsRoom/documents/10109/attachments/1/translations/en/renditions/native
4
The Smartup Manifesto: http://www.demoshelsinki.fi/wp-content/uploads/2014/11/Smartup-Manifesto-Demos-Helsinki.pdfT
5
http://www.businessdictionary.com/definition/startup.html
5
3. Challenges
3.1 Sweden
Innovation
In the Bloomberg Innovation Index, Sweden rounded out the top five in the 2016. The index
scored economies using factors including research and development spending and
concentration of high-tech public companies6.
Sweden has a National Innovation Strategy with the purpose to meet the long term economic
and social demands. Success in the global market is essential for the Sweden as it has an
export-dependent economy where roughly half of production is exported. An increasing part of
the global production has moved from single firms and nations, to become dispersed across
many firms and nations in what is called "Global Value Chains". The national origin of products
and even innovations has thus become increasingly blurred and more difficult to measure. This
is stated by the Swedish Agency for Growth Policy Analyses.
The agency means that even though Sweden score high in innovation ranks the country still has
some areas that needs attention:7
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A majority of Swedish companies, with a procurement contract, does not perform any
innovation activity at all
Falling results in the Swedish education system
Degraded quality of Swedish universities’ research in comparison to other countries
Sweden’s contribution of value added in exports has not developed as positively as in
other innovation-leading countries
Another report from the same agency also states that8:
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The quality of state-funded research has dropped with regard to share of most-cited
scientific publications;
The number of patents within the field of societal challenges has dropped compared with
our rival countries. Patent propensity in general is going down in Sweden;
The R&D intensity of small and medium enterprises has decreased;
The availability of early-stage venture capital has decreased;
Sweden’s exports of medium and high-tech industrial products and knowledge-intensive
services are developing less well than in our rival countries, especially when compared
with Germany.
To safeguard the country’s innovation climate the following areas have been identified by the
Swedish Agency for Growth Policy Analyses:
 Sweden has an increasing number of international doctoral candidates;
6
http://www.bloomberg.com/news/articles/2016-01-19/these-are-the-world-s-most-innovative-economies
7
Rapport 2014:06, Innovationsklimatet i Sverige 2014,
http://www.tillvaxtanalys.se/download/18.201965214d8715afd16ae04/1432805517318/rapport_2014_06_Innovationsklimatet+i+Sve
rige+2014.pdf
8
Report 2015:06, Innovation climate in Sweden – an analysis of the Innovation Union Scoreboard
6

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The framework conditions for enterprises are good;
Swedish companies have a high degree of innovation in their new products and
services.
Financing the innovation
CBInsights data show that $787.6m of venture and growth capital was pumped into Swedish
companies last year, excluding private equity deals, making 2014 “the best year for funding
since the dotcom boom 15 years ago”, according to Torbjörn Bengtsson of Stockholm Business
Region Development, the city’s official investment promotion organisation.9
The gap between investments made by private or public funds have decreased
When private and public fund investments are looked at separately the statistics shows a major
decline among private investments during 2008–2013. The volume of private VC-investment is
still larger than public VC-investment, but the latter (public funds) has almost quadrupled their
investments over the period which has decreased the gap between private and public funds
investment levels.
Investments are increasingly directed to the expansion phase
During the studied period the share invested in the expansion phase has increased every year
except 2010, while investment to the start-up phase has decreased every year except 2012.
The most significant change has occurred among public funds where 68 percent of the invested
capital in 2013 went to companies in the expansion stage. In comparison, 49 percent of the
investment volume from private funds went to the expansion phase.
Majority of companies are micro enterprises
The combined statistics from the SVCA (The Swedish Private Equity & Venture Capital
Association) and Growth Analysis databases show that the majority (78%) of the companies
that can be linked to certain companies have between 0-9 employees (micro enterprises) and
half of all the invested capital goes to these micro enterprises. The majority of the companies
9
Telegraph http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/11689464/How-Sweden-became-thestartup-capital-of-Europe.html
7
are located near or in the larger cities in Sweden, such as Stockholm and in the west and south
of Sweden. These regions also receive the majority of all the VC investments.
Even though Sweden rank high in various evaluations the country still has some challenges
ahead. The Swedish Growth Analysis Institute furthermore says that the availability of earlystage venture capital has decreased.10 Also an inquiry from the Swedish Parliament states that;
“In general, the Swedish financial markets are well developed by international comparison.
However, the inquiry identifies a need for stronger support in very early stages of the
development of new or innovative enterprises. There is also a lack of capital when financing the
interval 5–50 million SEK. Furthermore, measures should be taken to enhance the availability of
loans for small and medium sized enterprises in general”11.
The inquiry means that the support for innovation for companies must be strengthened,
especially in early stage levels.
The organisation Swedish Incubators and Science Parks (SISP) also states that early stage
companies with a high potential for growth often tackles with a long and capital intensive
processes. They need support from qualified teams, to develop technique and international
sales12.
Clean Tech sector overview
Environmental awareness, early environmental regulation and an innovative and industrious
society, have made Sweden one of the global leaders in the cleantech sector. In fact, Sweden is
globally ranked number four according to the 2014 World Wildlife Fund Cleantech Innovation
Index.
Sweden is one of the leading nations in innovating, implementing and exporting green
technologies, commonly known as greentech or cleantech. Sweden has been proactively
pursuing and practicing policies that have encouraged research and development in water
purification, sanitation, sewage and wastewater treatment, waste management and waste-toenergy, production of biofuels, as well as generation of renewable energy from wind, biomass
and solar power.
Sweden hosts a nationwide network of advanced R&D centres clustered around first-class
universities. This has been acknowledged by the European Union selecting Sweden for further
funding of prestigious centres of excellence such as:
 KIC InnoEnergy-Sweden: to develop prerequisites, technology, and services for Smart
Grids and with the goal of achieving a breakthrough in Energy Storage. Budget: € 100
million euro.
 ESS & MAXLAB: facilities for materials research based on synchrotron radiation and the
world’s most powerful neutron source. Budget: € 1.5 billion euro.
 Graphene Flagship: one of Europe’s first 10-year FET flagships. Budget: € 1 billion euro.
10
Innovation climate in Sweden – an analysis of the Innovation Union Scoreboard, Serial number
Report 2015:06,
11
Statens offentliga utredningar 2015:64, En fondstruktur för innovation och tillväxt
12
http://www.sisp.se/nyheter/2015/utm%C3%A4rkta-f%C3%B6rslag-i-utredningen-om-statliga-finansieringsinsatser
8
Swedish municipalities are also important driving the development and implementing solutions
in for example waste management, water treatment, district heating and renewable energy.
Today, several hundred biogas plants provide electricity, heat and fuel to Swedish cities and
suburbs, and district heating/cooling systems reach the majority of the Swedish population.
At the national level there is an ambitious program to increase renewable electricity production
by 25 TWh to 2020 (relative to 2002) and a further goal to reach a 50% share of renewable
energy by 2020 was already achieved in 2012. Each year there is a great flow of new start-ups
from and around ground breaking research at our universities. Many of the companies and
ideas have potential; however they need a much larger market than Sweden as well as a larger
industrial context to fully exploit this potential.13
In Sweden today there exists a lot of support for companies within cleantech. Many of these are
within commercialisation of R&D, development on the home market and international growth.
Many of these have focus on guidance and marketing. There is no lack of actors in the support
system, but an ambiguity and a lack of understanding of how these actors are connected and
what their roles are in relation to the national support system and their own priorities14.
Summary
Sweden is one of the leading nations in innovating, implementing and exporting green
technologies and became the first country in Europe to meet the renewable energy targets, set
by the European Union (EU) for 202015. Nevertheless, there are some challenges ahead for
start-ups and small and medium sized companies:

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
13
The R&D intensity of small and medium enterprises has decreased;
The availability of early-stage venture capital has decreased;
Sweden’s exports of medium and high-tech industrial products and knowledge-intensive
services are developing less well than in rival countries, especially when compared with
Germany;
In need of a much larger market than Sweden;
A larger industrial context to fully exploit this potential;
A more coherent support system;
Large city regions receive more VC investments than smaller regions /cities /towns;
Measures should be taken to enhance the availability of loans for small and medium
sized enterprises;
Support from qualified teams needed, to develop technique and international sales.
http://www.business-sweden.se/en/Invest/industries/Cleantech/the-swedish-cleantech-market/
14
Swedish Agency for Economic and Regional Growth, Kartläggning av aktörerna på miljöteknikområdet, Uppdragsnummer
N2014/2726/E
http://www.tillvaxtanalys.se/download/18.636af32a14deed3059bd9779/1434961578692/Kartl%C3%A4ggning%2B_milj%C3%B6tek
nikakt%C3%B6rer.pdf
15
Swedish Cleantech, http://www.swedishcleantech.se
9
3.2 Finland
Innovation
Finland has fared well in innovation listings and ranks among some of the top EU countries.
Finland, like Sweden, is among the top EU countries when it comes to patent applications (in
relation to GDP). 16
Finland is above the EU average in terms of employment in high-skill-level jobs but falls below
many countries. Finland´s export of knowledge-intensive services falls below the EU average.17
Finland´s R&I structure is going through a restructuring with focus on multi-disciplinary and
societally significant research, which will eventually benefit the genesis of new clean solutions.18
Very recently the Finnish government has ruled heavy cuts on universities as well as the Finnish
innovation agency. This will undoubtedly lead to significant effects on the innovation potential of
Finland but the concrete outcome remains to be seen. Business R&D investments have fallen
significantly since the fall of the telecommunications industry. Finland´s overall R&D investment
level is projected to fall short of its long term 2020 goal.19
Financing the innovation
Finland has a competitive cleantech industry. The country is listed among the top three of the
world ́s strongest cleantech innovation ecosystems (Global Cleantech Innovation
Index 2014). However, the current economic situation presents significant problems, as low
growth does not drive new investments. Only recently the situation has been predicted to
improve (http://www.bofbulletin.fi/en/2015/3/finland-falling-further-behind-euro-area-growth/).
The table below shows that seed-level venture investments have been permanently low after
the 2008 financial crisis:
16
http://www.stat.fi/artikkelit/2012/art_2012-04-04_004.html?s=0
17
http://www.stat.fi/artikkelit/2012/art_2012-04-04_004.html?s=0
18
http://ec.europa.eu/research/innovation-union/index_en.cfm
19
http://ec.europa.eu/research/innovation-union/index_en.cfm
10
A recent survey conducted with industry leaders and researchers indicates that Finnish
cleantech has great international potential, although the lack of investment capital slows down
export growth20. Another survey concluded that a weak home market is a central hurdle for
cleantech companies. Smart and clean start-ups meet a threshold when it comes to becoming
international.
Source: http://www.cleantechfinland.com/content/facts-figures
Clean Tech sector overview
Finnish clean companies see their major business opportunities abroad and particularly in a
Nordic/Baltic context. 51 % of the companies interviewed in 2014 list Sweden as their number
one market21. This shows that a common platform for start-ups around the Baltic Sea would be
beneficial for Finnish start-ups.
20
http://docplayer.fi/1549882-Tulevaisuuden-muutosvoimat-ja-niiden-vaikutus-osaamiseen-teknologia-alalla-2025.html, p. 24
21
http://www.slideshare.net/cleantechfinland/cleantech-industry-in-finland-2014
11
According to the Finnish Ministry of Employment and the Economy, Finnish start-up companies
are in need of increased outside mentoring22. A stronger acceleration offering is listed as a key
solution to this challenge.
A Climate survey carried out in 2015 showed that over 80% of Finns see low-carbon services
offered to the consumer as important23. However, another study shows that few consumer
cleantech services are out there at the moment.24 There is particular potential in Finnish housing
and mobility solutions where many pre-commercial companies are developing new solutions
(Consumer Cleantech, 40). Lack of venture capital is key here as well.
Particular characteristics of the consumer cleantech field are listed in the following SWOT chart:
22
https://www.tem.fi/files/37613/TEMjul_25_2013_web_07102013.pdf p. 50
http://www.demoshelsinki.fi/2015/04/16/kysyntaa-muttei-tarjontaa-suomalaiset-haluavat-vahapaastoisia-palveluja/
24 http://www.etla.fi/wp-content/uploads/ETLA-Raportit-Reports-43.pdf
23
12
13
Summary
 Finland has a competitive clean sector with promising solutions in traditional and
consumer cleantech
 There is a significant lack of funding as well as mentoring
 Companies see the Nordic context as primary for their operations
 New acceleration programs could solve problems related to lack of investment and
mentoring
3.3 Latvia
Innovation
There are currently many different elements in innovation infrastructure in Latvia. It consists of
several technology transfer offices, eight business incubators located in regions of Latvia, one
technology based and one creative industry incubator located in Riga, several university-based
students incubators, and foundation ConnectLatvia that are focused on technology developed
by both – researchers as well individual inventors.
There are initiatives like “Idea Cup”, “Commercialization Reactor”, business accelerator
“TechHub Riga”, event “Seed forum” and Demola and other activities (Ministry of Economics
(Republic of Latvia), 2015th: 1.2.2.2. activity. Innovation and entrepreneurship motivation
programme. Preliminary Assessment. Latvia). As well there are different associations dealing
with innovation matters, six competence centres, 11 clusters and others who target audience
are mature companies or start-ups (Gazelle) already working on global arena. (see picture
No1.)
Picture No1 (source: Neimanis.M, 2015)
Financing the innovation
There are entrepreneurial development problems in Latvia, there is a small number of newly
developed high and medium technology intensive enterprises, new high-risk entrepreneurs lack
14
seed funding, as well as there is only one technology incubator for rapidly growing enterprises in
Latvia (Ministry of Economics (Republic of Latvia), 2015th: 1.2.2.2. activity. Innovation and
entrepreneurship motivation programme. Preliminary Assessment. Latvia).
In the coming years all financial support instruments will be concentrated and managed by one
organization – Latvia development financial institution – Altum.
Cleantech sector overview
Cleantech is quite new and not yet an explicit sector in Latvia, but there is good preconditions
for achieving significant results in future. Both research institutions and mature companies as
well as start-ups represent the cleantech sector.
With the aim to foster and promote Latvian cleantech companies, organizations, joint ventures,
research and educational institutions, on 2012th was established the non-governmental cluster
organization “CleanTech Latvia”. Cluster is representing 28 industry enterprises and 5 related
research institutes, covering the most common sectors such as recycling, development of
alternative energy sources, biomass, biotechnology and nanotechnology. On 2014th the total
turnover of members of CleanTech Latvia was 87m EUR and they employed around 1000
persons.25
Summary
Challenges within innovation infrastructure:
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Too fragmented, hard to find support and get the idea from axe to bred;
Weak links between innovation fostering organizations and activities including
universities;
Poor knowledge of supporting business and innovation;
Lack of investment ready knowledge-intensive business ideas;
Too complicated for start-ups, inventors, researchers, entrepreneurs;
Challenges within start-ups and authors of business ideas (within technology intensive sector,
including clean tech):
 Too complicated or too simple business models
 Focus on technology not on product;
 Poor knowledge in presenting the business idea;
 Weak ambitious and lack of knowledge to go on export markets;
 Sitting on two «chairs» (How to finance the team?)
 How to finance prototype and where to manufacture it?
25
http://cleantechlatvia.com/en/ Foundation CleantTech Latvia; http://www.csb.gov.lv/en Central bureau of statistics,
Latvia
15
3.4 Estonia
Innovation
There are several strong factors that are supporting the cleantech innovation in Estonia.
a) Estonia has set quite cleantech friendly government policies. Estonia as an EU member,
has agreed on the EU climate and energy packet 20-20-20, which obliges to reduce
greenhouse gas emissions by 20 percent; increase energy efficiency by 20 percent; and
ensure that 20 percent of the energy need is covered by renewable power supplies. All
these strategic goals have been included in the Estonian national development plans. It
can be seen that from 1990 to 2010 the GHG emissions decreased in Estonia by
49.78%. This decline was mainly caused by the end of large-scale industry in Estonia
enforced by the Soviet Union and by the successful implementation of the necessary
transitional reforms.
b) Government has also made generous R&D expenditures in cleantech sectors. For
example, to reach the ambitious goals, the government has set in strategies to support
the “greening” of the infrastructure and traditional industries. With the initiative of the
Government, Estonia became the first nationwide network of fast chargers for electric
vehicles already in 2013 powered 100% by renewables. The funding of this initiative
came from a 2011 deal under which the Estonian government sold 10 million surplus
CO2 emission permits to the Mitsubishi Corporation. Terms of the deal also included the
government fleet of 500 EVs. More info about government subsidies can be find in
section 2 “Financing”.
However, the viability of Estonian cleantech companies and the growth of cleantech start-ups
has remained poor, due to several factors:
 Limited access to private finance for cleantech start-ups
 Limited and weak cleantech cluster programs & initiatives
 Very few high impact cleantech start-ups
 Poor revenue of cleantech companies
 Non - existent late-stage private investments and exits
 No successful publicly traded cleantech companies
Financing the innovation
The Estonian Government has been active in supporting the renewing of traditional industries
with an aim to make them more energy and resource efficient.
The Government has supported the insulation of houses via Kredex subsidies. Additional
insulation is a way of saving both on a personal and on a national scale. The microclimate of the
rooms can be improved by the insulation. In addition, the less energy is used the less the
environment is damaged. Smart street lighting in local municipalities has been subsidized by the
Environmental Investment Centre. This project will be completed in October 2015, when a total
of 12,253 new LED lamps will be lit on the streets Estonian local villages (Kredex). In addition,
the Environmental Investment Centre has supported the construction of combined generation
plants that are based on renewable energy, reconstruction of boiler houses, reconstruction of
district heating networks to lower the amount of energy lost through it.
To meet the ambitious environmental goals and support renewable energy sector, Estonia also
uses feed in tariffs for the production of renewable energy. The following graph shows the
16
amount of government subsidies spent to innovate heating, transportation, biofuel, electricity
consumption, housing, and manufacturing.
Estonian Government subsidies spent on renewing following industries: heating, sustainable
transportation, biofuel, electricity consumption, energy efficiency, air pollution.26
Besides the government, Estonian start-ups are active in raising investments. Estonian start-ups
attracted 95,8 MEUR of investments in 2015 through 27 deals, whereas 13% of it was raised
from local investors (Start-up Estonia). As a whole we see a 33% increase from last year’s level.
In the last 10 years our start-ups have raised 268 MEUR (Start-up Estonia). In 2006 investment
money was 100% from local investors, later on the local share has remained 10-20%, but as the
whole number increases so does the activity of Estonian angels & VC’s.
Beyond Series Seed only one local alternative exist: SmartCap. The investment arm of the
Estonian Development Fund invests up to €3 million in start-ups with high growth potential on
equal conditions with a private co-investor. Until today, the fund invested in 22 start-ups. This
underlines the limited local funding activities, with many start-ups choosing to raise money in
other ecosystems such as London and Silicon Valley.
Smart Cap is also the only local fund that is focused on cleantech investments (besides
software companies). So far the fund has done 5 investments to cleantech start-ups.
Other sources of funding for cleantech start-ups include local prototyping fund Prototron and
angel investors. The lack of private investments in cleantech sector is one of the most prime
reasons hindering the development of this sector.
26
Energiamajanduse arengukava 2030. 2015
17
Cleantech Sector
Although Estonian people have considered to have strong entrepreneurial mind-set, producing
more start-ups per capita than any other country in Europe (Start-up Estonia), the success
stories from cleantech sector have been remaining rare. Typically it can be blamed on long
commercialisation time in cleantech, high funding needs and lack of cooperation. A cleantech
ecosystem study done by Tallinn Technical University in 2011 gave a good overview of the
Estonian cleantech landscape and its challenges.
According to the study, Estonian cleantech businesses are:
1. Active in variety of cleantech sub-fields;
2. Some with high development potential;
3. Growing export figures in all sub-fields
4. Supported by good co-operation in leading companies;
5. Supported by growing public awareness;
However they:
1. Experience financial problems in going through what we call the dual valley of death.
2. Lack of prototyping funding;
3. Have expensive investments needs & long payback time – risky funding;
4. Experience problems in moving from the R&D phase to product commercialization and
market entry and volume
5. Experience marketing & exporting problems (Contact problems related with trust &
recognition and general market analysis)
6. Access to very few government supported programmes;
7. Weak domestic co-operations and networks;
As an opportunity, the study points out that Estonian cleantech companies are located in the
neighbourhood of advanced cleantech countries. This creates possibilities for learning, cooperation & networks. Estonian Development Fund and Start-up Estonian previous actions can
confirm one of the study’s findings: cooperation and learning from the best practices. The
organisation of cleantech ideas competition ClimateLaunchpad and business accelerator
Climate-KIC in Estonia, have created a good momentum for cleantech. One of the pillars of this
success story is definitely a link to international partners, which both, ClimateLaunchpad and
KIC Accelerator possess. Thus a joint cleantech innovation platform between the Baltic Sea
Region countries could even further support starting businesses.
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4. Summary of Challenges
Innovation is one of the most important drivers of today’s economic performance. The ability to
create, distribute and exploit innovation has become a major source of competitive advantage
for enterprises, as well as for regions and countries around the world.
Innovation, either in producing new or improved products and services, or in finding more
efficient ways of producing and delivering existing products to the customers, is at the core of
competitiveness. However, it has become increasingly important to cooperate among
individuals, companies, countries and regions as well among various agents (entrepreneurs,
scientists, politicians, etc.) creating wealth and improving the quality of life for individuals as well
for society.
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Sweden and Finland are one of the leading nations in innovating, implementing and
exporting ‘green’ technologies in EU-Despite the gap between Sweden, Finland and
Estonia, Latvia there are plenty of common challenges:
Lack of investment ready business ideas;
The availability of early-stage venture capital;
Start-ups lack of ambiguity and understanding of going globally;
Start-ups lack of knowledge about networking;
Focus on technology rather on sales of product and attracting new investments or how
to transfer technological solutions into a value proposition;
Start-ups have challenges to receive the first references about the product;
Lack of prototyping funding;
Innovation support system could be more coherent;
Start-ups needs access to larger markets than the Nordics/Baltics
In this case the gap between countries is not the weakness but a strength and a good
precondition of closer cooperation and exchange of competencies. Within the network where
agents have different experiences and understanding about the processes and they are ready
to share their competencies addressed to common challenges, and / or to apply, adapt or create
technologies and products, can be resulted in even new innovation.
5. Solutions and added value
The challenges outlined above are not easily solved as they relate to complex issues that
national economies face. However, they can be alleviated, i.e. the situation can be made easier
for each country. We propose that the new Nordic-Baltic Innovation Platform will be a part of the
solution.
The added value that the new competition brings to smart & clean innovation development can
be listed as follows.
1. Understanding customer expectations
The teams will receive coaching and deepen their understanding as to what their customers are
looking for, what types of customers are available for their solutions and which segments they
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should primarily focus on. This is done both through mentoring and meetings with potential
customers during the boot camps. The teams will be encouraged to communicate with people,
ask simple questions to test their business model and further deepen their understanding. This
will be done using a variety of methods, including “The mom test” and a product testing canvas
developed by Demos Helsinki.
2. Transferring technological solutions into a value proposition & marketing
A common challenge met when coaching cleantech start-ups and micro SMEs is that the teams
are well aware of the technical aspects of their product but find it harder to communicate is the
value of the product for an investor. What kind of return on investment they can promise, how to
communicate the usability of the product? The teams will receive coaching from user interface
experts and designers. They will also be encouraged to use design methods such as empathy
to better understand how to communicate the product value.
3. Testing the product, getting a reference
Testing a product is central for development and eventual market access. Testing is something
that can be taught through various methods such as testing process tools, lean start-up
development tools and the like. The teams will carry out tests throughout the boot camps and
document the learnings they gather. Testing will help them get references they can then use in
further negotiations with investors and partners.
4. Access to an international market
The competition will create a common platform for clean solutions from individual countries. This
means that teams are able to network internationally, get better chances at finding funding and
get international expert mentoring to further work on their business model. Individual countries
can thus join forces to create a stronger brand as a reference area for smart and clean
solutions. As the teams create an international network they also get easier market access in
the whole Nordic/Baltic market.
5. Creating awareness about cleantech
One of the problems of the cleantech market is that many investors are still unfamiliar with its
potential. Although this is not so much the case in Sweden, particularly Latvian and Estonian
awareness of the impact and market potential of cleantech solutions needs to be raised. The
innovation network will be a strong and visible communicator of this significance.
6. Getting investor contacts
The teams will have multiple opportunities to network and meet with investors during the boot
camps. This will particularly be focused on during the Slush conference in Helsinki. Investors
will also be used as visiting coaches during the boot camps to help the teams better understand
negotiating. Each country boot camp will include work on finding investor contacts.
7. Innovation process transfer
All participating countries have unique innovation management systems, financing instruments
and accelerators. The competition can as a common platform transfer practices and act as a
benchmark tool: the countries learn from each other about how to bring about successful smart
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and clean start-ups. Collaboration between the countries will be documented throughout the
competition and written down into a section about innovation process transfer in the final report.
6. SWOT
Based on the common challenges, project partners have analysed what are the strengths of
organizations in order to take advantage of opportunities and to minimize the effect of threats.
Strengths
 Partners with extensive experiences in developing local cleantech sector
 Partners have access to international experts and experiences
 Previous project management experience
 Partners with previous cooperation experience
 Partner countries have supportive climate and energy policies, supporting green growth
 Partners have extensive network of cleantech entrepreneurs, start-ups, support
organisations, universities active in cleantech field and investors in their local regions
 Partners are aware of the challenges in their local cleantech regions and have the
knowledge to address these shortages
Weaknesses
 Partners are located in different countries, more difficult to cooperate;
 Difficulties in cross-cultural communication
 Difficulties of incorporating additional partners which expands the number of people
involved
 Partner countries have different level of development in green policies and innovation
support, which may results in different goals/arguments between partners
 People involved in project planning are leaving during the execution of the project
Opportunities
 Baltic Sea region countries are interested in increasing their competitiveness through
innovation
 Baltic Sea region countries are interested in increasing their export of “green”
technologies
 There’s a growing need for green technologies and services in the Baltic Sea region and
globally
 Start-ups need access to larger markets than just their home countries
 Start-ups need regional networking opportunities
 Start-ups need regional visibility and marketing opportunities
 Growing number of cleantech start-ups in the Baltic Sea region
 Several funding opportunities available for the follow-up project
 There is no Baltic Sea region cleantech start-up specific supporting platform
Threats
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Difficult to get funding for the main project
Changing and unforeseen economic condition might influence the follow-up project
Follow-up project is unsustainable and dependant on public funding
Start-ups in different countries have different needs. Hard to focus
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Innovation support system could in different countries are different
Start-ups lack of ambiguity and understanding of going globally
Start-ups lack of knowledge about networking
7. Summary
As stated in this seed report there are many different scenarios related to innovation, finance,
venture capital and cleantech in the Nordic and Baltic countries. What’s common is the complex
access to finance, that often lacks in various ways and a need of a more coherent and united
support-system. Support from qualified teams and new acceleration programs could solve
problems related to lack of investment as well as mentoring. Another factor is also the need for
larger markets, this applies for all countries. With good support system and mentoring
companies could access a more international market.
Thus, the present plan for a project, to establish a Nordic-Baltic Innovation Platform, within this
field would include:
 Coaching/Mentoring – to better understand customers’ expectations and information
about how to access international markets.
 Proposition & marketing – the start-ups and SMEs would get coaching on how to
communicate their technology in a way the “everyone understands”.
 Testing facilities - the teams would be able to carry out tests throughout the boot
camps and document their learnings.
 Create awareness about cleantech – this applies especially to Latvian and Estonian
investors, the awareness about the potential with cleantech could be raised, which can
be communicated by Nordic actors.
 Investor contacts - the teams would have multiple opportunities to network and meet
with investors during the boot camps.
 Innovation process transfer – the platform will act as a benchmark tool in regards to
the innovation management systems, financing instruments and accelerators.
The long term results of this will be a permanent Nordic-Baltic Innovation Platform including
contacts to accelerators, investors and other actors. This will be a network that start-ups and
SMEs can access to get a view of the whole support system and access coaching/mentoring
and contacts to actors who can support them.
In line with the Nordic-Baltic Innovation System a model of market access will be created (a
“motor for innovation”), this will include a program for boot-camps and market support. This
model will include the various aspects that is needed to get start-ups and SMEs more support
(coaching, marketing, testing, contacts etc). The intention is that the Nordic-Baltic Innovation
Platform project group will lead this the first years with funding from the Baltic Sea Region. After
the period the support system will be run by accelerators and support actors in each country.
The Nordic and Baltic Innovation Platform will act as an active network, to transfer practices: the
countries learn from each other about how to bring about successful smart cleantech out to the
market. This will create more promising innovations in the Nordic and Baltic area and create
more enterprises and competitiveness for the region as a whole.
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