Early stage companies usually have plenty of technological competence and promising business ideas, but what they often lack is the final key to success – sales and marketing skills. Sitra’s DIILI service offers new entrepreneurs the help of senior sales professionals in international trade to provide know-how and to share some of the risks of entrepreneurship.
DIILI is the latest tool in Sitra’s PreSeed service, which aims to improve the business skills of early stage companies and gathers together new technology companies, business angels and marketing professionals.
Risto Kalske, director of Sitra’s PreSeed service, says that since its launch in 2002, DIILI has been met with enthusiasm. Currently, the service involves a team of 85 sales professionals. DIILI has helped speed up early stage companies’ investor negotiations and thereby eased the rocky path of new entrepreneurs. The service has resulted so far in fifteen sweat-equity deals. In a sweat equity deal, or knowledge capital investment, a professional sells his or her work input against partnership.
“The bottle neck in the internationalisation of Finnish small businesses is the lack of competent and experienced sales and marketing personnel. Early stage companies simply lack the money to hire such professionals. Another problem is that early stage companies have few gimmicks with which to attract institutional investors,” says Kalske.
According to Kalske, the ‘inventors’ in R&D can in this model concentrate on what they know best without having to spend their time and energy on something they are not very good at, that is sales and marketing. Academic, research-oriented entrepreneurs often feel awkward about suddenly becoming salesmen, or they simply don’t have the time and skills.”
To head the sales and marketing efforts of these companies, Sitra is offering the services of professionals who have experience and merits in sales, and have a strong entrepreneurial spirit. The sales professional works full-time and is expected to have feasible views on how the company’s business should be developed. For the co-operation to be fruitful, the personal chemistries of the sales experts and the entrepreneurs also need to match. This is tested during the trial period.
Experience meets youth
“The PreSeed service has been built piece by piece on the basis of the needs of the users. DIILI is a channel for seeking business professionals with strong experience in technological industries and international trade. Many have had a long international career in a large corporation and have now returned to Finland.
They have reached a certain watershed in their lives and are looking for new challenges,” Kalske says.
DIILI key people are secure financially and they need new interests, new drive, sales challenge and risks. A seasoned sales professional brings capital into a young company that can only be acquired through experience. If anything, a mature age is a plus in DIILI. The pay of the sales professional may not be that high to begin with, but the remuneration is often linked with the company’s success through share or option arrangements.
In addition to DIILI, the other tools in the PreSeed service are LIKSA and INTRO. LIKSA funding is granted to the commercialisation and construction of a business plan for a technology project. So far, LIKSA has provided consultation for 510 entrepreneurs and provided funding for 135 companies.
INTRO is an initial investment channel introducing companies that have been through the LIKSA process or are otherwise equally lucrative to private venture capitalists. INTRO is a protected online service accessible to registered users only, and it arranges company introduction forums and targeted investor negotiations.
Most of the INTRO companies are from the software, electronics or life sciences fields. A couple of furniture manufacturers, who use new technologies in their product design, are also involved. For companies to be accepted in the INTRO programme, entering global markets has to be a priority for them from the start.
In Sitra’s view, business angels could be a significant, but as yet under-utilised, resource in Finland. Business angels have previously had no national channel to the investment markets of small enterprises, which has led to decisions being made solely on a local basis or through personal networks.
Sitra’s tools raise European interest
Companies that have been accepted to INTRO via Sitra’s PreSeed service have been carefully screened. This challenges them to improve their operations even further, making them a highly attractive investment target. According to Risto Kalske, the purpose of Sitra’s tools is to develop the field of private venture capital in Finland.
Globally, most capital investments are made by business angels, private venture capitalists. Their input is of particular importance to early stage companies. In many countries, including Finland, this form of investment is still minor. There are 125,000 active business angels in the EU, but the European Commission estimates the number of potential business angels to be closer to one million. Kalske takes part in the work of EBAN, the European Business Angel Network. Through EBAN, internationally attractive INTRO companies can be introduced to European business angels.
“Sitra’s tailored PreSeed services have received positive interest outside EU, too,” Kalske says. In a European comparison, PreSeed was discovered to be the most effective tool in the commercialisation and funding of new businesses. Belgium, for example, is following Sitra’s example.
It is possible that in future, the Nordic countries and Estonia might establish a joint business angel network, a database including investment targets in all of the countries involved.
By Elina Ranta, Verkkotie Oy