Title: Delivering Public Support to Private Companies
1Delivering Public Support to Private
Companies Case of TTGV in Turkey
A. Mete ÇAKMAKCI Technology Development
Foundation of Turkey
Knowledge Economy Forum Prague, Czech
Republic March 28-30, 2006
2RTDI in Turkey Supply / Demand
76 Universities are operational 1,900,000
enrolled students (40 female) 25,000
enrolled in PhD programs 110,000 enrolled
in Masters programs 76,000 academic
personnel (37 female) Engineering enrollment
113,681 16,481 graduates Sciences enrollment
(incl. Computer Science) 102,897 14,700
graduates (2003 data) 20,400 educating abroad
(15,1 K undergrad, 3,2 K masters, 2,1 K PhD.
1,000 are supported by the state, including 714
in PhD programs.) (2002 data)
100 public RD institutions with approx. 2,000
researchers. (11 are under TÜBITAK)
26 of enterprises are involved in technology
innovation activities of some sort. (State
Institute of Statistics - 2002)
RTDI Research Technology Development and
Innovation
3Public Funded RTDI Support Programs
- Technoparks Technology Development Zones Law
passed in 2001 - Tax exemptions for RD activities,
- VAT exemption for services and products created
in the zones, - Laxed regulations on academic staff
participating commercial private activity. - 22 approved, 10 operational with 349 firms.
Around 5,000 RD FTE staff employed. - TEKMER Incubator Program Government owned and
operated incubator program - 13 TEKMERs, 14 DTIs operational with 149 current
tenants. TEKMERs graduated 197 - firms so far.
- USAM University Industry Joint Research
Centers TÜBITAK funded private operated centers
for shared contract research using the university
research capacity. - Project Supports to Private Companies
- TÜBITAK Grants to industrial research
projects - TTGV - Matching fund soft-loans to
technology development projects - Finance for RD investments Capital
investments credit at market rates. - Other indirect supports (such as RD tax
discounts etc.) Tax deduction for up to 40 of
annual RD costs.
42010 Targets
- In 2004 Supreme Council for Science and
Technology (BTYK) adopted national RD targets
for 2010 - Total RD expenses to reach 2 of the GDP
(current level is 0,67) - Half to be provided by the private sector
(current level is 30) - FTE RD staff to reach 40,000 (Currently
estimated to be 30,000) - Extra budget allocation had started in 2005, to
be increased annually.
- An assessment of the targets
- Turkeys GDP in 2010 will be 400 Billion USD (in
2005 USD - a very conservative assumption) the
private sector will need to spend an additional
3,5 Billion USD from the current levels - Strong stimulation is needed to draw in the
private money - Goverment funding should be used to create a
multiplier effect - Assuming 150 K USD per researcher in 2010 (1) ,
the private sector will need approximately 25,000
FTE researchers, i.e. 3 times the current levels.
strategic development of human resources is
urgently required
(1) ROCs data for 2003 was 87,000USD per
researcher.
5Current Bottlenecks
1998 1999 2000 2001 2002 2003 2004
of Patents (TPE) (1) 946 1313 1307 2404 2187 1910 2648
Share of High-tech in Exports (2) 4,3 4,9 3,9 1,9 2,1 1,8
Private Sector FTE RD Staff (x 1000) (3) (4) 5,2 5,6 6,0 5,6 5,9
Share of Private Sector RD Expenditures in Total (3) 31,6 38,0 33,5 33,7 28,7
- Turkish Patent Institute
- Foreign Economic Relations Council and EC
- State Institute of Statistics
- Total FTE RD Staff in 2002 was 28,964
- i.e. private sector RD staff was 20 of the
total.
EU - 25 Turkey
EPO Patents/ 1M pop. 133,6 1
USPTO Patents / 1M pop. 59,9 0,2
Turkish exports between 1998 2004 increased
134 !
Very low global grade production of technology
even though number of national patents are
increasing
6What is TTGV ?
- Established in 1991 as an NGO (with a WB
project). Established as a transparent,
accountable, flexible and dynamic organization to
implement/manage public funded programs. - Founders 26 private companies, 6 government
entities, 10 umbrella organizations, 14
individuals. - Subject to laws and regulations concerning
foundations and the private law (like private
companies) - A foundation established under law can use and
manage government funding programs. - TTGV is a member of TAFTIE (The Association for
Technology Implementation in Europe) and will
chair TAFTIE in 2007
7How does TTGV operate ?
- A board of directors where directors from the
private sector are elected by the Founders
Assembly - 15 directors 10 from the private sector, 5
from government agencies (TÜBITAK, KOSGEB, DPT,
Treasury and Foreign Trade reps., i.e. other NIS
stakeholders) - Full-time staff of 47, supported by a pool of
1,500 experts from the industry, government and
universities. Employment is subject to private
sector rules. - Follows International Accounting Rules and
subject to 4 different annual audits including
one by an independent international auditing
agency. - Funding Its own trust, Treasury/WB (ending by
4/2006), government programs and Global
Environment Fund (GEF).
8Overview of Support Activities
- Technology Development Funding
- Matching soft loans (no interest) to technology
development projects of private companies. - Max. TTGV contribution is 1M USD.
- 1350 project proposals received and evaluated
so far - 154 M USD in total committed to 415 projects
- Helped to create a RD volume of 308 M USD.
-
- Funding to Venture Capital Funds
- Lead investor in two private VC funds in Turkey
(7 M USD in 90 M USD total 90 of all funds) - Represented in the board management of the
funds. - Start-up Funding
- First stage up to 400 K USD in equity funding
for technology start-ups closed our first
investment - Technology Support Centers
- Four centers operational to provide sector
specific technollogy services - Environment Projects
- Supported phasing out of 90 of Ozone Depleting
Substances in Turkish industry with
9TTGV Technology Development Funding
ENTERPRISE SIZE
PROJECT SIZE
ENTERPRISE AGE
10TTGV Technology Development Funding
REGIONS
SECTORS
11Success Stories - SETAS
Establishment 1966 in Istanbul Sector Textile
Chemicals Dyes
- Projects supported by TTGV Technology Development
Funding - Development of Textile Dyes - 1997
- Development of Versions of Natural Thickeners
for Textile Printings - 1999 - Improvement of Several Textile Dyes - 2001
- Advanced Filtration and Drying Techniques -
2002 - Development of Subsidiary Textile Materials -
2002 - Developing polyester and polypropylene based
masterbatch - 2003
SETAS received the Technology Success Awards for
SMEs in 2003
1997 1998 1999 2000 2001 2002 2003 2004 2005
Total sales ( in USD) 13,268,200 15,692,309 15,561,519 16,479,554 17,442,789 23,580,334 28,810,523 34,342,231 35,706,175
Exports ( of Sales) 15 15.2 15 17 21,6 10,1 3,6 3,8 4,3
RD Expenditures ( in USD) 104,238 83,462 86,330 368,232 225,037 950,000 1,000,000 1,700,000 1,500,000
No.of employees 100 122 118 116 145 163 175 178 175
TTGV support ( in USD) 51,105 39,678 72,461 442,452 1,001,641
Company data compiled by Y. Telçeken - TTGV
12Success Stories - Özçelik
Establishment 1997 in Gaziantep Sector
Textile Machinery Manufacturing
- Projects supported by TTGV Technology Development
Funding - Polypropylene Yarn Production Machine - 1998
- Making Design Production of Production of
Poly Spin Pet Combi Synthetic Yarn Production
Machine - 2002 - Polyspin Synthetic Yarn Production Machine -
2003 - Polyspin stable Syntethic Yarn Production
Machine being evaluated
Özçelik received the Technology Success Awards
for SMEs in 1997
1997 1998 1999 2000 2001 2002 2003 2004 2005
Total sales ( in USD) 569,375 631,997 710,502 1,798,248 2,173,252 5,736,040 3,246,689 10,482,387 6,449,580
Exports ( of Sales) 0 0 5.04 6.13 23.38 16.51 0 29.0 55.0
RD Expenditures ( in USD) 0 255,680 394,636 68,280 1,306,052 362,644 516,126 433,283 18,367
No.of employees 20 25 30 35 40 50 75 98 83
TTGV support ( in USD) 1.315.480 373,375 491,850
Company data compiled by Y. Telçeken - TTGV
13Success Stories - GATE
Establishment 1995 - Ankara Sector
Electronics Test Measurement Devices
- Projects supported by TTGV Technology Development
Funding - Universal Type Test and Measuring Device -
1999 - Computer Aided Test and Error Detection Tool
for Communication and Satellite Systems - 2002 - Satellite Integrated Radio Routing and Telecom
Transfer Terminal - 2002
1997 1998 1999 2000 2001 2002 2003 2004 2005
Total sales ( in USD) 3,261,00 3,705,000 3,803,000 8,706,621 5,867,003 3,995,552 7,705,413 11,406,254 19,072,064
Exports ( of Sales) 15 20 36 30 34 35 50 35 70
RD Expenditures ( in USD) 250,000 375,000 401,000 1,709,848 1,029,358 992,727 622,116 1,343,307 1,722,208
No.of employees 45 52 58 64 68 70 102 120 148
TTGV support ( in USD) 485,018 525,431
Company data compiled by Y. Telçeken - TTGV
14 Determining Additionality
- Additional RD intensity due to the existence of
the support program is the additionality. (1) - Technology Development Support by TTGV between
1999-2005 was 2 of all private RD expenditures. - Support receiving companies funded only 14 of
all projects by TTGV funds. But, TTGV funded
projects consumed 46 of all expenditures.
(evaluation process is an inconvenience for
companies) - Without TTGV support 22 would have canceled the
project (12 of Large and 27 of SMEs) 44 would
have shaved the budget by 40. This would have
resulted in 34 less RD spending. - 42 of those rejected had to cancel the
projects, 19 carried out with a smaller budget. - RD intensity (2) for support recieving firms
increased 3,61 points compared to the same
profile control group. - TTGV supports had no effect on labor
productivity. - TTGV supported firms in services had
significantly higher export intensity, other
sectors scored the same. - TTGV support receiving firms had higher
employment generation, with RD personnel getting
higher salaries. - Support receiving (1993-1997) companies had
better survival ratios in 2001 crises. - Supports had better impact on low and mid-low
technology sectors
(1) Behavioral additionality is harder to
measure. Additionality requires observations for
over 5 years after the support (2) RD intensity
ratio of RD spending to total sales
15The Start-up Program
- Early stage quality finances is a serious gap in
Turkey (seed, start-up phases of enterprise
finance) the gap is between 100 K 400 K USD. - Current VC works as equity financing with
minimum investment above 1 M USD. - In recognition TTGV started with WB support a
start-up Program in 2004 first of its kind in
Turkey - A hybrid model semi-independent arrangement
- An ex-pat Turkish enterpreneur was recruited to
manage the program - A high profile investment committee was
established for investment selection - The financial model 400 K USD initial equity
investment for upto 25 of the company with
strong minority control exit option of buy-back
is granted. - Around 85 inquiries received, 35 submitted
Business Plans, 9 qualified for submittal to the
committee after initial evaluation, 1 was issued
a term sheet. (US ave. 1) 3 are being
evaluated for the committee - Most Business Plans were half baked and
required below 100 K USD and strong business
mentoring.
16Start-up Program Lessons Learned
- A hybrid model will never work. Issues of
accountability be fair to heros ? - No best practice model, need to develop your own
- Start with achievable objectives (forget about
X10 returns) make sure deal flows through the
pipeline first build confidence, establish
requirements and procedures, build capacity in
the organization - A fully independent model is difficult (at leas
initially) with public funds (a funds of funds
model arrangement can be more workable under the
right conditions) - While through put ratio is above US ave (1 in 35
BPs received), a mission program needs higher
ratios for stronger faith in start-ups - need to extend into pre-incubation / BP support
- Start-up is a culture and state of mind you
need the right chemistry, the team, vision and
the networks. - Start-up will only work as part of a functional
national pipeline. (the critical path). Issues of
deal flow. - strong seed and incubation (incl.
pre-incubation) supports are required.
17Future Directions for RTDI Support
ODTÜ Teknokent ITÜ AriTeknokent Bilkent Cyberpark
Total Number of Firms 103 24 141
Established in the Technopark 50 2 n/a
Graduate of Incubators 12 n/a -
Academic Spin-offs 8 1 17
Supported in the incubator 23 18 24
Valorization of knowledge should be a higher
program performance priority
- Three levels of coordination and management
- Policy and strategy level (such as with
regional, education, taxation and industrial
policies, i.e. enablers) program owners and
policy makers - Enterprise level program implementation and
execution agencies (accounts) - Project level project managers (outcomes)
- Need to develop a tool set of different supports
to cover all stages of RTDI value chain. - Emphasize social aspects of RTDI, networks (esp.
ex-pat networks and multi-national), mobility and
transitivity aim beyond provision of finances
18A Critique of TTGV
- TTGV offers a very progressive model for support
delivery. Management autonomy and flexibility in
operations are pluses. The cost might be the
linkages to the stakeholders, esp. the
government. - Operating as a foundation has some limiting
factors in spite of many strong advantages,
alternative corporate structures may have to be
considered. - An organizational culture is needed. Strong
identity with the organization needs to be
developed. Fast turnover in younger staff is an
issue. (for many TTGV is either the first or the
last employer!) - Strong venturing character is required. The
support organization needs to be an innovative
knowledge enterprise itself. (believe in what you
preach) - The team and chemistry are critical.
- Stay in touch with the real world of technology
market. Develop mobility and networks of your own.
19info_at_ttgv.org.tr www.ttgv.org.tr