Leveraging the competitive advantages of investment promotion agencies and economic development boards in global startup value chain
The objectives of investment promotion agencies (IPAs) and economic development boards (EDBs) are changing rapidly. The number of mandates covered by IPSs and EDBs is growing and new trends are emerging in the startup and innovation economy around the world, but foreign direct investment (FDI) has been slowing down. To remain competitive, IPAs and EDBs will need to adapt to an ever-changing environment. They will need to optimise their performance by positioning themselves in the fast-growing startup value chain.
This panel will identify opportunities for IPAs and EDBs in early and post-early stage equity and capital markets to leverage a country’s FDI capacity. They will also explore innovative ways to develop collaboration between IPAs, EDBs and entities such as private equity funds, wealth management institutions, angel investor groups, corporate ventures and VCs, thus expanding co-investment opportunities. In addition, they will discuss how current trends in the global startup and innovation chain can facilitate world class investments.
Foreign direct investment in SMEs from startup to scaleup to exit to boost cross-border investments: How can startups and scaleups contribute to FDI growth?
One of the biggest contributors to alternative investment markets is perhaps the startup phenomenon, which has taken hold globally to become a game changer for the world economy. With more and more people turning into entrepreneurs, policymakers have realised the potential of startups in the growth of the economy, and they have come up with various schemes that encourage startups by making it easy for foreign investors to venture into their startup ecosystem. The role played in the past by small-scale industries has been taken over by startups! Economy administrators and policymakers have been making the process easier for the young entrepreneurs, startups and scaleups that have the potential to attract foreign direct investment.
The surge in FDI will also go a long way in encouraging the already-booming startup scene around the world. In fact, investors worldwide who have been keeping an eye on startups and scaleups see that startups are generating a diverse range of innovative ideas. Governments have been very supportive of the growth and have devised numerous strategies to support startups. FDI can nudge the efforts of the government in the right direction by funding startups at different funding stages. Many entrepreneurs with a great idea who lose out on funding might find assistance through FDI. And this will give an excellent opportunity to the FDI industry to leverage their investment size and capacity.
In line with such benefits – and in order to give a fillip to foreign investment in startups – India, for example, through its Consolidated FDI Policy 2017, has allowed foreign venture capital investors to contribute up to 100% of the capital of startups, irrespective of sector. The investment can be made in equities or equity-linked instruments or debt instruments issued by the startups; if a startup is organised as a partnership firm or an LLP, the investment can be made in the capital or through any profit-sharing arrangement. Special provisions specific to startups have been created for the very first time with the goal of attracting foreign direct investment.
This panel will discuss what sorts of national investment policies can be developed to attract more and higher quality investments in the startup investment ecosystem and what factors determine how successfully IPAs and EDBs are able to attract more investment. They will discuss how early-stage equity markets can contribute to main FDI players (investment promotion agencies and economic development boards) through angel investors and how early-stage capital markets can contribute through angel investment funds, private equity funds, corporate venture capital and wealth management institutions such as family offices.
New role for IPAs: Connecting local startups with global investment markets & Easing access to smart finance and increasing FDI for the country
From the corporate perspective, companies (current, past and aspiring unicorns) are faced with a truly global choice of competing locations, and they need to look beyond the basics of a country’s market size, as this is not the only factor that makes a location attractive. The most successful companies pay attention to factors such as what international markets are accessible from that country, the quality and quantity of talent resource available, and how tight the local labour market is. They also consider overall operating costs, including the tax situation, and what the local tech scene is like. It takes time to research all these, but doing this homework is time well spent.
This panel will identify a possible new role for investment promotion agencies. A new role might encompass such activities as connecting local startups with global investment markets, launching one-stop-startup-investment-shops for investors who want to reach investment opportunities in early-stage equity and capital markets, organising demo days for foreign investors to introduce good startups, cooperating with the local entrepreneurship ecosystem to list investable startups (and connecting them with qualified foreign investors), and providing information on the quality and quantity of the talent resources available in their countries.
Leading and driving the FDI process for startup businesses: A step-by-step road map for investment promotion agencies and economic development boards
96% of the world’s economy is driven by entrepreneurs, startups and small and medium-sized enterprises (SMEs). These SMEs are the main drivers of economic stability. They recruit more than 60% of the entire working population of the world. In order for them to contribute more to the economy of their countries, they need new financial instruments quickly. The continuing rapid development of financial instruments such as crowdfunding, angel investment, acceleration programmes and co-investment funds plays a vital role in the easing of access to finance for SMEs, entrepreneurs and startups and therefore plays an important role in a country’s economic development.
SMEs, entrepreneurs and startups should be supported by foreign direct investment (FDI) and smart public money, so it is important to develop new policies for converting public money to smart money if the goal is to create an entrepreneur-friendly environment. One has to consider such actions as developing tax incentives; co-investing with angel investors; regulating crowdfunding; providing incentives for company-based in technoparks; recognising qualified investors; introducing innovative financial instruments; providing capacity-building programmes; recognising and awarding success; connecting SMEs, entrepreneurs and start-ups with global investment markets; and developing new incubation and acceleration programmes. All these are extremely important factors in the development of an efficient SME and early-stage investment market in your country or region.
If your investment promotion agency or economic development board is keen to respond to the needs of the country and wants to create a healthy, early-stage investment market that will turn the country into a regional innovation hub and attract more FDI, you should attend this panel discussion.
The discussants will propose a step-by-step programme for initiating and implementing the objectives of accessing foreign direct investment. They will also show how startups can be matched with foreign financial and non-financial instruments and how global investors (corporate ventures, private equity funds, family offices, wealth management institutions, angel investor groups) can be connected with promising startups and scaleups.
By working together across borders, with a common vision, and with these smart dynamics in mind, we are well placed to bring about positive change in the global economy
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