New study finds that US venture capital industry must shrink to remain viable
16th June 2009
Contrary to popular belief, the venture capital industry is not a necessary condition in driving high-growth entrepreneurship, according to Right-Sizing the U.S. Venture Capital Industry, a new study by the Ewing Marion Kauffman Foundation. While venture capital will continue to be crucial to some forms of high-growth companies, the report concludes that the sector’s size must be reduced to be viable. The venture industry has seen stagnating and declining returns coupled with rapid expansion in venture capital assets under management in recent years.
European Investment Bank lending could reach €70bn in 2009
12th June 2009
The European Investment Bank intends to raise its total lending in the European Union and Pre-Accession countries to as much as EUR 70 bn in 2009 in response to strong demand for its funding in the current tough economic and financial climate.
Loan signatures in the European Union from October 2008 to end-May 2009 amounted to EUR 46.9 bn – a rise of 63% over the same period to May 2008. Disbursements in the same period rose 37% year-on-year, to EUR 35.8 bn.
The EIB committed itself last December to a European Economic Recovery Package that would increase overall lending in both 2009 and 2010 by some 30 percent, or EUR 15 bn, over the more typical annual total of around EUR 45 bn, provided it could identify enough suitable projects.
The EIB is already well on course to meet this 2009 target, and an ample stream of viable projects means loan signatures could now exceed the total foreseen in December by a further EUR 10 bn, President Philippe Maystadt told the EIB’s Board of Governors at its annual meeting in Luxembourg.
“This is a sign of how quickly and efficiently the EIB can deliver on its promises,” President Maystadt said. “Total lending of some EUR 70 bn would mean a truly significant contribution in terms of liquidity to European banks, corporates and public sector clients.”
Lending has advanced particularly strongly in three key areas targeted by the Recovery Package: small and medium-sized enterprises (SMEs); energy and mitigation of climate change; and investment in the poorer, ‘convergence’ regions of the EU. Loan signatures in all three of these areas in the five months to end-May show a clear increase over the equivalent period of 2008.
Lending for SMEs amounted to EUR 4.4 bn to end-May – more than half the full-year target of EUR 8 bn – while loans for energy and mitigation of climate change reached EUR 3.9 bn against a full-year target of EUR 9 bn. Loans to support convergence have been signed for EUR 7.7 bn in the year to date, compared with a 2009 target of EUR 22 bn.
As well as providing extra liquidity, the EIB is helping to ease the impact of widespread risk aversion in the wider financial sector by expanding its activities into a broader range of financial products than ever before. This entails taking on greater levels of calculated risk, while maintaining tight controls to ensure that the EIB remains on a solid footing within safe financial boundaries.
For example, approvals for sub-investment grade loans financed under the Structured Finance Facility (“SFF”) amounted to EUR 6.4 bn over the past nine months – almost as much as outstanding stock.
The EIB Group’s capacity to take on more risk is also being expanded through new guarantee products, an extended range of risk-taking instruments for the financing of SMEs and MidCaps, and increased availability of equity and quasi equity finance in critical sectors.
Kauffman Foundation Study Finds More than Half of Fortune 500 Companies Were Founded in Recession or Bear Market
10th June 2009
According to a new study by the Ewing Marion Kauffman Foundation, challenging economic times can serve as the rebirth of entrepreneurial capitalism, leading to the creation of much-needed new jobs.
The study, "The Economic Future Just Happened," found that more than half of the companies on the 2009 Fortune 500 list were launched during a recession or bear market, along with nearly half of the firms on the 2008 Inc. list of America’s fastest-growing companies. The report also suggests a broader economic trend, with job creation from startup companies proving to be less volatile and sensitive to downturns when compared to the overall economy.
"You can see the story of the American economy in these numbers," said Carl Schramm, president and CEO of the Kauffman Foundation. "History has demonstrated this time and again: new firms create new jobs and fuel our economy. Policies that support entrepreneurship support recovery."
The study points out that while recessions often create widespread economic grief, they also can encourage potential entrepreneurs, acting "as an extra spur to founding a new company, if the founders perceive their prospective competition might be weakened." Rising unemployment can benefit new enterprises: entrepreneurs may view unemployment as an opportunity to start a company, and seize the advantage provided by the ability to tap into a larger pool of potential employees.
"While startups may not begin with the intention of reaching the Fortune 500 list, they're hard at work under the radar," said Dane Stangler, senior analyst at the Kauffman Foundation and author of the study. "These companies may remain invisible to most of us, or they may one day grow into household names. Either way, they’re steadily recreating our economy—generating jobs and innovations."
Stangler said companies that reach the Fortune 500 and Inc. lists demonstrate the strength and flexibility of successful entrepreneurial enterprises.
"We imagine the Fortune 500 to be giant dinosaurs lumbering across the landscape," Stangler said. "That's not the case. The turnover and churn on the list is remarkable. Successful, big companies have to be entrepreneurial, and they are."
World Economic Forum encourages a new approach to entrepreneurial education
10th June 2009
A new report, Educating the Next Wave of Entrepreneurs, has been released by the Global Education Initiative and will form part of the discussion at the World Economic Forum's 2009 regional summits in Latin America, the Middle East, Africa and India.
The report aims to consolidate existing global knowledge and good practices in entrepreneurship education around three focus areas that cover the lifelong learning process of an individual: Youth (with a focus on disadvantaged youth), Higher Education (focusing on high growth entrepreneurship) and Social Inclusion (with a focus on marginalized communities). The report also outlines specific approaches that are needed for each one of these areas, as well as opportunities, challenges and practical recommendations for key stakeholders.
The full report and an executive summary are available to download at http://www.weforum.org/en/initiatives/gei/EntrepreneurshipEducation/index.htm
European Commission proposes a legal framework for European Research Infrastructures
3rd June 2009
The European Commission, responding to requests from EU countries and the scientific community, is proposing a legal framework for a European research infrastructure (ERI) more adapted to the needs of research, development and commercialisation by providing a structure recognised in all Member States.
While its primary focus will be European it will also allow the participation of non-European countries. EU officials argue that it will be flexible enough to adapt to the requirements of the different facilities and will be easy to use. Some of the privileges and exemptions of international organisations (e.g. VAT exemption) could be provided, which would facilitate negotiations between the countries involved.
The main beneficiaries of the new legal framework will be European researchers gaining access to efficient, world-class new research facilities. The new legal framework also offers the chance to cut down drastically on the time necessary for the setting-up of such European Research Infrastructures, allowing them to become operational as soon as possible, which is crucial in the quickly evolving world of science.
For more information go to http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/09/282&format=HTML&aged=0&language=EN&guiLanguage=en
€246 million to support public-private research cooperation for a fast development of better medicines
19th May 2009
15 new research projects aimed at bringing innovative medicines more quickly to the market have been selected to receive €246 million from the European Commission and the European Federation of Pharmaceutical Industries and Associations (EFPIA). The projects will foster understanding of health issues such as diabetes, pain, severe asthma and psychiatric disorders while increasing drug safety. They will also help improve the training of researchers and clinicians involved in medicines development. The projects were chosen following the first call for proposals launched within the Innovative Medicine Initiative (IMI), a public-private partnership – so called Joint Technology Initiative- between the European Commission and the pharmaceutical industry. With this selection, IMI has reached a key milestone. This initiative marks the first time that pharmaceutical competitors are pooling their resources, together with research organisations, patient groups and other stakeholders in large consortia, in order to develop generic, pre-competitive knowledge. The Commission's contribution of €110 million is backed up with €136 million provided in-kind from the pharmaceutical industry.
The Commission's contribution will be used to support small and medium sized companies and other user groups while the big pharmaceutical companies will pay their own costs of participation.
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