a practical guide to reinvent public subsidies for...

Federation of Hellenic Associations of Young Entrepreneurs

Response of the Federation of Hellenic Associations of Young Entrepreneurs to the Commission Green Paper on a Common Strategic Framework for future EU Research and Innovation Funding page 1 of 14

A practical guide on how to Reinvent State Subsidies and finally get a Revolution in Innovation.

“The aim is to create a kind of innovation “Facebook” combined with a cloud based ERP (we call it Innovation Resource Planning IRP), which will have a matching physical Mechanism and be available to everyone all over Europe. But not just another network, but instead a System with everything, including funds and well defined processes to Supply them in a transparent and consistent way, a mechanism with the ability to reach all innovation actors those realizing our motto of “Activating People’s Potential”. A system which will leverage community available resources, those maximizing effectiveness.” 1.0 Introduction The problem of access to finance for the innovative Start-Ups is well known to almost all actors, yet none of the measures introduced by Governments and EU has resulted to a successful massive implementation of Innovation, European wide. It’s also well known from many studies available from Kaufman Foundation those innovative Start-Ups are the main Job creators in our societies with a rate of 5 to 1 from all other actors. In the Green paper consultation the aim of Innovation Europe is also clearly stated. In this paper we will try to exhibit an alternative view of the problem and ultimately we will propose a practical solution aiming to deliver a Pan European revolution of massive innovation with the minimum cost to countries that want to implement it. 2.0 The problem A typical Start-Up needs in the Seed phase a capital of 10K€ to 50K€ and in the Start-Up phase a capital of 80K€ to 600K€ from our experience. In the case of Internet or Software only Start-Ups the startup phase capital can be from 50K€ to 200K€. Ideas as the old Greek say dictates are coming from necessity “Necessity is the mother of invention” the original phrase in Greek is “Πενία Τέχνας Κατεργάζεται”. So let’s see which part of EU population complies with that argument. A chart from “Annual Monitoring Report 2009, Social Situation Observatory, Income Distribution and Living Conditions” Directorate-General "Employment, Social Affairs and Equal Opportunities" in page 17 http://bit.ly/mcBtf6 is this chart:

If we consider that median income for year 2006 was 13.187€, it’s clear from the above chart that almost the 95% of EU population needs at least 15 to 25 years of savings to gather a mere 40K€ to 80K€, if we subtract the cost of the rest of survival needs like food, clothing, transport, house etc. an individual has. That fact makes 95% of EU population, that has a good idea due to his education or his inventiveness to be Crowd Out from all EU measures, because the major clause of all such measures is, the own capital contribution. Additionally a bank loan needs an asset for collateral to be given; such an asset (typically a house) is very difficult to be accumulated by an individual without years of hard work. And even in such case, EU measures require most of the times at least 20% to come not from loan but from savings, a fact that makes even harder the access to EU subsidies. In the case in which the entrepreneur has all the above, he has first to pay the 100% of the investment and then wait to get paid by the authorities the subsidy that he requested, which means the entrepreneur has to have the ability to fully finance his project from beginning to end.



If we add to our equation that studies has shown that an entrepreneur to succeed needs at least 3,4 times to fail, a fact that imposes an additional huge barrier to almost everyone coming from the 95% of EU population. All EU measures which aiming to entrepreneurs, assuming a level of wealth from the entrepreneur’s side that simply doesn’t exist, even if they actually risk all their belongings to an idea that wouldn’t be enough. Moreover don’t forget that the problem will only get bigger, since the widening of the gap between poor and rich, is vanishing the middle class with extreme speed. 2.1 Investors Someone would say that “why don’t entrepreneurs find an investor?” this is a typical argument from the side of authorities. Let’s investigate the possibilities. In a recent EPP event in Brussels has being stated that annual Angels and VC investments in EuroZone are 5$ per capita, in EU27 10$, in US 100$ and in Israel 250$, that’s a clear singe of risk aversion from EU VC’s and Angels. If we search EVCA numbers we will see a continuing drop of the number of investments through the years http://bit.ly/l3pxTh . Moreover we can also see the drop of investments from early stage to more mature stages http://bit.ly/msXet5 . Actually the early stage funding for all over Europe is something more than 5 Billions per year combined VC’s and Angels and its declining fast. In a study that Entrepreneurs Commons did, they have found that from inc 500|5000 list of the highest growth start-ups in year 2009, 87% has reach the point to enter the list and considered high growth, financed by only own savings and not with any of assistance from Angels or VC’s while most of them in some point in time request it, but disqualified, that’s an additional sing of how many good ideas are lost. So, why investors are doing that? Entrepreneurs are devastated by the ongoing disconnection of the Financial System from the real economy as is pointed out from European Parliament in the resolution of 8th of March 2011 for FTT, which states in the preamble: «C. whereas the spectacular rise in the volume of financial transactions in the global economy within the last decade – a volume which in 2007 reached a level 73.5 times higher than nominal world GDP, mainly owing to the boom on the derivatives market - illustrates the growing disconnection between financial transactions and the needs of the real economy,» http://bit.ly/jLYPIL Investors from all over the world are more and more seeking lottery level profits from early stage funding, while on the some time are trying to get them more predictably. At the end they financing a tiny fraction of the proposals submitted. This Phenomenon is closely related to the Financialization of our Economies that’s affecting the real economy with a devastating speed. Investors in the modern financial system have a tremendous range of financial instruments to invest their capital and risk for profits, in a way that is by far easier for them to understand and control than a startups are, especially in the pre-product, pre-revenues, pre-breakeven phases of seed-startup investment stage, an investment area that is also called “Valley of Death” for a reason.

It’s clear that for investors, the area between 50K€ to 600K€, is considered as very high risk. The words that typically used are indicative of the status quo, Friends, Family and Fools is the FFF, “Angels” are called the investors of this area, like they are coming from heaven to help… the “Valley of Death” is another often used phrase… In reality we keep on trying to push unwilling people to drive our prosperity and create Jobs.



2.2 Lets investigate the issue deeper The main issue is directly related to Wealth - People distribution:

As we see in the previous diagram there is a real problem in the area that the wealth is not available. So what we do as Governments and EU to tackle the problem of access to finance? We introducing a set of intervention mechanisms that are related closely to the essence of wealth balancing:

We allocating a tiny portion of taxpayer’s money, that most of them are coming from indirect taxes (VAT, Gas, Cigarettes etc.), to investment subsidies in a risk sharing basis with the wealthy and willing ones that are coming from the 5% richer area of the population distribution pyramid. Also we using experts “Fund Managers” to assess ideas and proposals that most of them are coming also from the wealthy side, since their income is much higher than 50K€/year. We must also notice that about 80% of the taxes are coming from the not wealthy side of the graph, that’s the 95% of EU population that lives with less than 35K€/year. In reality we are trying to fix a problem that’s lay’s in the left side, while we getting the trigger from the right side:

That method has a fundamental issue…



To explain it with more engineering terms, is like we have a Heat Pump (Air Conditioner) in a room that we want to heat up and instead to put the temperature sensor in the room we want to adjust the temperature, we put it in a nearby room that doesn’t has a temperature problem:

That’s a typical automation problem, we could say that’s a Social Automation flaw, to try to get the wealthy ones to trigger, finance and ultimately fix the problems of the poorer side, given the fact that already funds are allocated from taxes in a level that are enough to fix the problem and while taxes are coming by 80% from the suffered with unemployment and lack of growth side of the graph. In a real life implementation, the guys in the room we want to heat will freeze to death… Something similar is happening in reality, in Europe, today… 2.3 The problem conclusion In a worldwide financial environment that uncertainty is dominant, we are keeping on trying, despite all the sings, to push unwilling and not in a necessity state, wealthy people, to either finance our prosperity or innovate. And with that fact, we return to were we started, the lack of necessity to innovate. This gets us in to the root of the problem, even 2500 years ago, Philosophers have teach as that “Necessity is the mother of invention” and if we paraphrase that, it can be “Necessity is the mother of Innovation”… So how we expect, people, that have hundreds of thousands euro’s or even millions of euros in savings to get inspired and start innovating, since they don’t have a direct necessity to do so? It’s like we all waiting from the 5% of the population to have either all the ideas, or wanting to start-up, or to invest its money in risky and unpredictable business, while the financial ecosystem gets uncontrollably huge, jobs are vanishing and trade balances making Europe to turn from a leader, to a follower… Concluding, it’s obvious that the necessity argument complies only with the 95% poorer part of EU population, those it’s willing but its unable to innovate… and these brave ones, that are trying to start-up due to lack of adequate finance are loosing even what they already had and at the end, they are becoming bad examples for all the others. 3.0 The solution While all this is happening we are having a tremendous level of resources available for innovation. Europe is the leader in Research; we have so many Universities with millions of good brains all over, we have so many resources in North, South, East and West… Specialty Labs, Production Resources, Consultants, Business Lawyers, Marketing experts, Incubators, lot’s of Incubators in all sizes public, private all kinds… Not to forget the Billions allocated for Innovation from EU and nationally. Just from EU there are allocated 143 Billions for the 2020 target http://bit.ly/jXPJZi , so funds are not the issue also.

Our problem is the capital barrier at first level and at the second is the lack of streamlining the innovation process in a way that will activate all actors in the innovation pyramid to break Innovation barrier and reach the goal.



3.1 Don’t Push Investors, just Pull them… Yes, it’s that simple, why we keep pushing unwilling investors to help us? If we compare how many are investing today, to how many they don’t, it’s a clear sing that Angels are just the exception of the Law… So, why we keep “Pushing”? Why don’t we just start “Pulling”? How? Let’s create a system that does few simple things… To start “Pulling” capital to innovation, we have firstly to do a fundamental thing; we have to allow ideas to become as predictable as possible with financial data available to show for its performance, without spending a fortune and without throwing away money. 3.2 Activate People’s Potential If we manage to Activate People’s Potential and Crowd Source expertise while we activate and use all Available Resources we could minimize the cost of management of thousands of start-ups tries, while on the some time we could give equal opportunities in a clear Democratic and transparent manner to all, towards to innovative entrepreneurship. To give some numbers, how we can with just 4 Billions euro’s invested, have them recycled in an 8 to 10 years cycle and by then do 32.000 startup tries and create 200.000 Jobs and because the funds have being recycled, continue to create Jobs indefinitely? When to, just to manage 32.000 startups with fund managers and mentors we need only for management fees and mentoring almost 2 Billion euro’s… When EBAN’s data show that the total number of deals is not passing the mark of 1100/year… How we can at last, connect Researchers with the Markets and create innovation? 3.3 iDea Framework structure Simply, by utilize the massive power of People and Internet. Innovation is about people having opportunities, as many as we have, that much will be the result. So a massive number of tries equals to Massive Innovation output.

iDea Framework is a combination of an Off Line structure and an On Line cloud based structure, both parts are creating an ecosystem that has physical as well as electronic interactions, process and functions. iDea creates a Bio-mimetic model of value exchanging relationships. The relationships are dynamic and the system evolves naturally as immediate consequence of the interactions taking place, Uncontrollably. Trusting that since interactions and actions happen only to add value, there is no need for control. The combination of both levels, Off-line and On-line is extremely critical because the two worlds are complementary balanced. If we do an only On-line action, then we are actually trying to create only intangible value and on the other hand if we try to do an Off-line action we do create tangible value but we miss the massive reach and hype of the On-line world. If we closely combine both and integrate them with process and interactions we can effectively allow a chain of value exchanging in all levels to take place those we quadrupling the result. In example we have many resources available like i.e. an electronic microscope that’s located in a Public R&D lab, innovators that want to use such an instrument they don’t really know if there is one available and were, so they spend money to reach an equivalent asset just to test an idea they have. Another example is people that are able to do Business Development and today are unemployed or they do a job that’s not fitting their abilities, in Spain, UK, Ireland and don’t have a way to reach those that have ideas in Greece or Germany or Austria that are seeking first funds and then partners. A barrier here is that both are lacking funds. Additionally do we know how many volunteers Mentors we could mobilize if we set such a system in place? Today they mast have capital to assist and risk it to be Angels. Incubators on the other hand are getting filed with low level innovation startups, we have seen that fact to be spread all over and we feel that the next step for incubators is to accommodate hairdressers… a self employed that does web pages or an engineer that supplies local markets with green consulting isn’t considered from us as innovator. On the other hand we can found real innovators that have burned the first 50K€ and while they visibly created 5 to 6 jobs and



still are depressed to a small incubator room in the same size of the one that the lady which makes web pages use… This innovator also faces the problem of access to capital to expand but none can help him. The aim is to create a kind of innovation “Facebook” combined with a cloud based ERP (we call it Innovation Resource Planning IRP), which will has a matching physical level and be available to everyone all over Europe. But not just another network, but instead a system with everything, including funds and well defined processes to supply them in a transparent and consistent way, a mechanism with the ability to reach all innovation actors those realizing our motto “Activate People’s Potential”. A system which will leverage community available resources, those maximizing effectiveness. Someone would thing that we might have already in place such organizations. Yes that’s true, but they aren’t combined seamlessly and additionally they don’t have the basic ingredient integrated, a Funding System. iDea Framework proposes a reorganization of all of them in a much - much more efficient way. 3.4 Organizational structure Such system can heavily be compromised with management burden and create a new level of red tape. Our design goal was to get the opposite result. To have a system that allows typical and low expertise process to happen in an institutionally organized manner, while on the other hand innovators to have a protection barrier from bureaucracy in order to let entrepreneurship to freely be expressed in context. A context of well quantified aims controlled with many small milestones that can easily be assessed those creating a well defined funnel in which people can operate with transparency and freedom.

If we don’t allow funds to be given on the hands of innovators but instead to be handled directly by audited accounting departments of accredited incubators, according to approved business plan cash flows, then we can set the quantified aims and supply funds in milestones according to aims reached.

To give an example, a milestone could be a fully operational prototype that the presentation will be video recorded in front of a community based judging body and uploaded in the system’s web portal in order everyone to be able to verify the milestone reached and also the system in this why gets Democratically transparent and accountable. Another example could be to successfully exit, a triggering aim could be a momentum in sales growth of lets say 15% per quarter, a target that’s totally verifiable from the incubator accounting department. Entrepreneurs will know exactly their targets and also, that if they don’t deliver within limits they are out. If in this system we use actors coming from the community we can allow them to create value while on the same time allow them to get cross assessed, we could minimize the management burden considerably.



In this way we will create an area that will be characterized by absolute Direct Democracy or Libertarianism and not disorder and lawlessness, a fact that’s the definition of Organized Anarchy, which is the only state that entrepreneurship can flourish free from bureaucratically barriers and red tape. But how we can do that and People be combined and self assessed without adding the risk factor? If we manage and find a method that will, combine the equivalent of the own capital risk in the assessment phase of ideas, with the market and business expertise along with mentorship, we might revolutionize the assessment method for startups. Now if we add to the picture social media and the power of internet to reach and combine people from all over Europe, we can create a mechanism that massively assesses ideas, mix and match people… That’s the Innovation Dipole Entrepreneurial Assessment, iDea Framework. 3.5 Innovation Dipole First let’s define what Innovation Dipole is. Innovation Dipole is referring to the duality of a creative mind set on one side of a dipole and a business mind set on the other. This dipole has to be in complementary balance and in resonance (to use an antenna engineering term), to reach the desired result which is, to stimulate innovation and hence drive entrepreneurship (“Innovate”). The dipole concept, in more specific terms supports the notion that behind innovation are two key human drivers leading to success of business venture: the idea promoter (or entrepreneur) and the business developer.

The entrepreneur is the creative mind or the person that has the new idea, the innovative vision and wishes to attempt a startup of a business venture around his/her idea. The entrepreneur is often an engineer or a researcher while other times it is just a creative or an inventive mind or even an ex end-user that has foreseen the need and envisioned a unique solution. Sometimes it is both end-user and engineer. The business developer is a person that has a more business oriented mind set, which is primarily in marketing and communication. He/she has business studies, an MBA most probably and typically a long résumé in sales and international marketing. This person has experience on how to position a product or service in the international markets, knows how to reach clients, and knows how to manage a company. It’s paramount for his or her effectiveness, to have an entrepreneur and an engineering activity background and to have had failures and successes in order for a new enterprise to capitalize on this experience. These two actors (entrepreneur and business developer) are the main enablers of every business venture that wants to win the market and finally innovate. In short, they constitute the “Innovation Dipole”. When the two poles of the Innovation Dipole exist in one person, then we have a natural innovator or a serial entrepreneur. There are other factors that prescribe the possible success or failure of a business venture. Innovation drivers require specific technical or other similar skills, like management, consulting and mentoring. The reality is that these skills can either be hired or offered for free. What cannot be bought is a good and profitable idea, entrepreneurial vision, drive and passion, perception of markets and core talent. Innovation Dipole is the soul of Innovation.



3.6 How iDea is run in a step by step practically Let’s assume that we have realizing the On-Line and Off-line structure that is shown in the above diagrams. On the physical level the mechanism will be a combination of a state fund, which will also be able to incorporate private capital in a risk sharing basis, which will act as an early stage funding system, along with business incubating/accelerator infrastructures, either internal or outsourced. On the web based level, there will be a portal dedicated to the mechanism. This portal will have an administrative view, an entrepreneur view, a business developer view, an investor view, a venture view, a mentor view, an incubator view and a public view. Every view will have a different functionality dependant on interest group function in the mechanism, with different, tools, data views and access properties.

3.7 Preparation of initial operation On the physical level the administration of the mechanism will create and run a recursive accreditation procedure that will be a widely advertised campaign in the mass media, with the motto i.e. “Use your skills, Innovate!!!” which will target to the business development pole of the innovation dipole. The aim of the procedure will be, to gather a continuously growing pool of experienced business developers that will pass the criteria’s set and will be “willing and able" to get into a partnership with entrepreneurs. They can be unemployed or daring professionals that want to evolve, from all ages starting at 25 and above. Developers sing a contract that binds them in an NDA framework and in an understanding of the process rules, additionally are passing a couple of day’s seminar about the mechanism structure and the rules of conduct of all the next steps.

At the same time the system will also run a recursive accreditation procedure that will also be widely advertised in the mass media, with a motto, i.e. “Let’s help our children to Innovate!!!” which will target to volunteers experts (Mentors) which typically are well educated persons at ages above 60 years old that are having a tracking record of business achievements and are willing to mentor for one day per month, start-ups. When there will be an adequate number of Business Developers and Mentors at the pools, the mechanism will give them access to the web portal’s Business Developers and Mentors views. These views of the portal will give them access to a series of specialized tools like a categorized database, a voting mechanism, a reporting system, a live streaming presentation viewing mechanism that will have the ability to send messages etc.



3.8 Recursive collection of ideas When the above initial phase has being realized, the mechanism will run a second recursive widely advertised campaign in the mass media, with the motto i.e. “Unleash your ideas!!!” which will target to the entrepreneur pole of the innovation dipole. Entrepreneurs will be urged to register and login freely in the portal and submit an elaboration pitch with a 1000 words text and also a limited number of photos or diagrams or a short video.

They will also have to select the target market category of their business proposal from a list. If they propose something new and unique they will be also urged to secure their intellectual property rights first before submitting the proposal (that is dependant on the respective IP laws). The mechanism would also organize recursively seminars and closed group pitch slam events in order entrepreneurs to be more prepared, for the proposal submission to the system. 3.9.1 Assessment, first step The proposals would be accessible for voting, from the business developers through the portal, without knowing who has submitted the proposal. The goal is a proposal to pass a given threshold of interested business developers that want to partnership with the entrepreneurs in order to make a startup and exploit the proposed business venture together. A positive vote for a proposal will be equivalent to an offer to a direct full time employment and partnership along with the entrepreneur in the startup.

A business developer will have a limited salary for his services and as a business incentive, a percentage of the startup stocks and a bonus in cash from the second round investment, all that only if the business venture successfully graduate from the mechanism. Every two to three months the mechanism will close the call for proposals and pass to the next step the business ventures that passed the threshold, of lets say 20 interested business developers. In this point can take place an optional proof of concept stage that will allow entrepreneurs to get a limited pre-seed funding to create a more appealing pre-prototype of their product or service in order to be able to go forward to the next step with more chances. 3.9.2 Assessment, second step The next step is for the entrepreneurs that passed to that phase, to prepare and do within a period of two weeks, 2 hours on-line in depth presentation of their proposal with live streaming video to the business developers. At this point only the business developers see the entrepreneur and ask him questions that are moderated in order not to disclose their identities to him and between each other.



The goal of this process is for the business developers to assess the idea, the feasibility of the venture along with the entrepreneur attitude and skills. The proposal that pass a second threshold, of lets say 6 interested business developers, goes to the third phase of the selection process. 3.9.3 Assessment, third step In the third step, is appointed from the pool of volunteers accredited mentors a three member advising committee that will follow the venture all the way from this point on. The role of this committee is to advise, mentor, assist and resolve possible problems of the venture.

The entrepreneur and the interested business developers are gathering in a meeting room and team up, with two laptops, with a goal to make the executive summary of the business plan of the venture within four or five hours. The aim of this exercise is to allow the entrepreneur and the mentoring advising committee to form a firm opinion on which business developer is appropriate to be a partner in the next steps of the startup. They need to collaborate under strict deadline to deliver. That stress will bring to surface possible character differences between them and will effectively show who matches better with the entrepreneur. If they don’t deliver within limits, the venture is rejected and everyone looses the opportunity. If the team delivers the executive summary successfully, the mentoring advising committee, with the right to apply twice veto, along with the entrepreneur decides which business developer is the best match for the venture. If there is no agreement the venture is rejected. 3.10 Seed Phase In the mean time apart from the accreditation process that is happening with Business Developers and Mentors the administration of the system also runs a recursive communication campaign to gather private service providers that are willing to collaborate with the system and want to be included in the accredited pool of resources. The pool is being filled with specific descriptions of services like, Business Consulting or Web page design or Business Legal support etc. Along with private resources the system can request to census the public available resources and are able to be provided to the ventures. All resources have to be validated and agree in a flat fee for all equivalent services, the providers have to sing a Service Level Agreement that will include a protocol of providing services to ventures. All resources will be available to ventures and listed through the web portal of the system. When the match happens, the venture is ready to begin the seed phase. In the seed phase the team gets a set of milestones to achieve. The first milestone is to create within 3 to 6 months a proof of concept (if they hadn’t took the option before) and a Business Model.



When successfully present the proof of concept to the Mentors committee a presentation that will also be video recorded and uploaded to the web portal of the system, the venture gets approved from the committee and passes to the next milestone which is the Business Plan. The venture is appointed with another deadline of three months to deliver a full business plan that must comply to specific rules, time limits, milestones and sales growth relative to cash burn in the first stages of the startup phase.

To do that they would select from a pool of accredited business consultants, that are listed in the resources of the venture view of the mechanism portal, a consulting firm to cooperate with for the rest of the phases of the venture. The next millstones on the seed phase would be, delivering of the business plan, issue all job descriptions and prepare contracts for the stuff needed to be hired and lastly form the company. When the company registers, the seed stage ends successfully and the venture enters to the startup stage. If the venture don’t catch all the deadlines is rejected again. 3.11 Startup Phase The company must be established in a business incubator that will provide logistics, basic front desk services along with security services, furniture, internet, local network and telephones. In the incubator there will be a biometric presence time clock that will record the physical presence of the team members in the venture. It will be mandatory to have physical presence in the incubator, 80% of the legal work time in the first milestone, 40% in the second and 25% in the third during startup stage, with a penalty of venture rejection. In the startup stage there are three basic milestones, one for each side of the innovation dipole:

• [product-service prototype]/[marketing plan] • [finished product production]/[marketing in full effect] • [fast client support response/action within 24h ]/[sales growth +20% Q to Q]

On each milestone if they fail to deliver the venture seizes. Sales targets can be adjusted to win certain goals like i.e. exports oriented growth.

During the startup stage, mentors are visiting venture once every month and incubator services create quarterly reports of the financials and the progress of the other activities of the venture. On every millstone the presentation of the session is video recorded.



While all these are happening on the physical level of the mechanism in the web based level, in the mechanisms portal, in the innovation dipole views the system through the administrative view are being informed and few things happening. The business developer that runs the venture is removed from the pool as occupied; the business proposal is being removed from the categorized list and gets the active status. The failed proposals get the statistics of the voting’s and remain on the list for another two rounds unless the entrepreneurs removed them. The failed business developers return to the pool as active again to try their abilities in a next good idea. At the venture view the startup has access to a directory of accredited recourses with the mechanism; the recourses can be anything from business consulting, patent attorneys, to machine shops, industrial design houses and web designers. The accredited services providers have an agreement with the mechanism to provide the services with heavily discounted fixed fees, additionally all public university laboratories are accessible by the mechanism. Also the startups are using this view to announce news and events related to their activity and it’s in interest of the public. Startups are not allowed to use other service providers outside of the list, unless first they haven’t exhaust the mechanism provided resources and only upon special permit from the mentor advisory committee. 3.12 Exit Phase The public view of the system is announcing the successful ventures, with details about the team and short description of the project. Also all the public announcements, financial and others, throughout the life of the venture are being published by the administrative team on this view of the mechanism. On the investor view, the administrative team gives access to verified investors, (Business Angels, Venture capitals, Equity Funds and others) that have sing an NDA/Non Competition agreement with the mechanism. The non competition agreement aims to do not allow investors that acting in the same markets those also acting specific startups, in order not to compromise the competiveness and the industrial secrets of the new companies that the mechanism hosts.

In this view of the web portal, the investors will have access to all authorized startups quarterly reports and milestones video presentations as well as to the business plan and marketing plans that are submitted to the mechanism. This access will not be tracked by the startups; they will only be informed that a certain number of investors are actively tracking them. This shadow operation of the portal will enable investors to have the time to evaluate the startups without hesitation and in depth. They will be able, to target the startups when they graduate successfully from the mechanism by “bidding” and “investing”. “Bid”, because the graduation process passes from a bidding process for the percentage that the mechanism holds (if it’s a state funded mechanism the bidding process is mandatory). And “invest” for the cash the company needs in order to get financed for the second round investment of the company in order to continue to operate outside of the mechanism. The percentage that remains to the mechanism is about 6% and gives the long term return on investment needed to sustain the system. The private investor or VC that will invest in this round will take the 25%. 4.0 Financials of the system As an example, to finance with a mechanism that runs with iDea framework for four years, with 4 incubators with 20 persons stuff each, able to host 25 startup each and a collaborative space for proof of concept, that can facilitate 100 people on each incubator, plus the 20 persons stuff needed from the mechanism along with advertising budged of 1mil-euros/year, we can fund with 100% capital:

• 100 startups with average capital of 300K euro’s each, • 300 seeds with 40K euro’s each, • 600 pre-seed with average of 15K euro’s each.

The budged for all the above is just 75Mil euro’s and includes ALL costs for four years; apart from actually build the incubators.



In the example above, to understand the magnitude of the introduced savings that can happen with iDea Framework; if we do the same amount of ventures "tries" with classic Fund managers and VC's, we will need to burn for *Just* the Fund Managers "management fees" the sum of about 35Mil euro's before we invest even one euro to the ventures themselves... let alone Incubator costs and other actions that need to happen to succeed an action like that... 5.0 What are the aims and the problems iDea Framework solves iDea is a novel Entrepreneurial Assessment and funding framework that can be implemented by Governments or Institutions. Using a funnel filtered Crowd Sourced matching mechanism, iDea totally eliminates the need for unnecessary business plan writing, lengthy proposals and committees of experts, from the initial assessment phase. The actors that materialize the Innovation Dipole are the entrepreneurs (or idea promoters) on one side along with the experienced business developers on the other. By implementing the Innovation Dipole for the evaluation of all ideas, a massive cross-assessment is promoted, leading to a mutual selection/matching of a pair of partners that are to be incorporated for profit. This evaluation ensures that no one will loose time running a business that is based on a bad idea or cooperating with an ineffective partner, without any kind of return. Given the fact that all selected ventures are running within specially designed incubators those allowing strict financial accountability of the flow of funds according to reached milestones with the help of a Crowd Sourced judging body that also acts as Mentoring source. This simple assessment method leads to a Crowd Sourced web-centric, peer selection process, driven only by ideas, profitable targets, market needs, business instinct, talent, motivated work and team chemistry, aiming to produce massive materialized innovation with high success rates along with large economies of scale. At the same time all types of investors play a key role in the process by having, through iDea web portal, total access on the successful ventures activities, reports and presentations in order to evaluate risk versus return and decide their potential investments. A self sustained system, designed to recycle funds in a eight year cycle, a bottom-up alternative proposal, that democratize access to capital by shifting the driving force from physical assets to intellectual assets, allowing everyone to be a part of it, a mechanism that creates innovation driven, growth. This idea/team centric peer selection process aims to these simple things:

• To capture all useful and good ideas, massively and efficiently, based on the simple assumption that a huge judging body is almost impossible to lose a good idea. The openness and the massiveness of the selection method will allow business instinct, common sense and the smell of profit to prevail and to pick the right ideas that are appealing to the market.

• To democratize access to capital, although governments and charity foundations around the world trying to spur innovation with various subsidies or aids, they continuously fail to give the feeling to people that they really controlling the flow of capital, iDea solves that by allowing people to be self assessed freely and open in a totally democratic way that is easily understood and honored. In this way iDea democratizes access to capital.

• To minimize the cost of failure, the possible failure or the minor adjustments needed to fix a little problem in a big idea happens fast and early, with the help of mentors and professional consultants, a provision that makes the mechanism more efficient and less risky.

• To attract entrepreneurs, by removing the bureaucratically oriented barrier of lengthy and “to be revised” proposals, that needed to be filed for evaluation, which often results to just a fraction of the available good ideas to be submitted.

• To have an effective and viable business plan, by creating a business plan along with a good business model with the help of mentors, business consultants, with a wide range of expertise and promptly execute it, the risks of error or misjudgment are minimized.

• To put capital on startups and not in committees, with the use of Innovation Dipole peer selection process, the need of complex and expensive organizational structures are eliminated allowing more simple organizations to run the mechanism with limited stuff and less expensive expertise.

• To get investors triggered, by giving investors full access, in shadow mode, to ventures. In this way, the mechanism effectively drags investors back to the realm of the real economy and gives all participants a better chance to match investment capital to good business opportunities.

• To get Angel investors inspired. Mentors are often Angel investors. By allowing mentors to participate in a transparent process, with no risk and while they will get involved with the startups, most of them will be incentivized by this closer relation and they finally invest. This emotional way of involvement will get Angels inspired.

• To break the “chicken and egg” cycle, by eliminating the obstacles to capital access and allowing ideas to be realized, tested in the markets and effectively allow innovation to flourish, we eliminating the problem.

• To create an executives and experts agnostic mechanism, by allowing ideas and people to mix and match freely without, executives, “experts” and barriers of any kind, getting in between ideas and capital.

• To be geographical independent, by using extensively the web, we create a web portal mechanism that can reach huge geographical areas with very small cost of implementation.

• To capitalize failure, by allowing failure to happen in a controlled environment, the mechanism gives a chance to involved parties to better assess potential losses, strengthen their resolve, and learn from past mistakes. The mechanism allows feedback to be capitalized from the community, which results in the long run, to entrepreneurial excellence.



6.0 Conclusion The whole mechanism looks like a big funnel with filters in stages, which allow everyone to have access and dependant on his skills and talent to be judged with a peer selection method that puts the business instinct in the center of the selection process. It takes advantage of a massive pool of business developers in the selection process making it very difficult for a good idea to be lost. Moreover gives the controls to policy makers to adjust thresholds and rules accordingly in order to target markets and drive growth towards to certain aims like i.e. green economy. What we had before iDea framework as Governments and EU subsidies:

What we have with the implementation of iDea Framework:

iDea with the simple assumption, that none will loose his time to run a business that is based in a bad idea or cooperate with a person that is not effective without a gain of any kind, leads to a very efficient selection method that is based not in numbers but, in ideas, people, verified talents and visible skills. What iDea claim’s is that, typical early stage funding mechanisms can be standardized and with the power of new media can be driven by the people for the people. The goal of the concept is to democratize access to capital and not to create another web based investor/entrepreneur matching service. If iDea gets combined with Financial Transaction Tax will create the ultimate wealth balancing tool. Not by giving people a fish to eat, but instead the tools to fish it. iDea teaches that innovation is a story about ideas and people, not capital. Evangelos Achillopoulos Head of committee for Institutional Interventions & proposals Mob. +306932834153 [email protected] www.idea.com.gr OSYNE Federation of Hellenic Associations of Young Entrepreneurs www.esyne.gr leading member of www.yes.be

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