On 24th October 2023, at the Saffron Hotel in Bratislava, a conference under the auspices of SLOVCA organized a block of presentations titled "Venture Capital and Spin-Off: How Collaboration Works Abroad" at COINTT. In this block, Ján Kutan, President at SLOVCA, Tomáš Klinka, Partner at SIGNUM legal, and Mikuláš Vargič, Partner at Kristína & Mikuláš Attorneys at Law s.r.o., were speakers.
Ján Kutan President at SLOVCA
The first part of the presentation focused on various stages of financing for startups, including the investment of founders' own time and effort without receiving wages but rather investing in the company's future. Further financing options included funding from family and friends, crowdfunding and pre-sale campaigns, angel investors, venture capital funds, and strategic investors.
Additionally, the presentation discussed the best approaches to approach angel investors and development funds, along with a warning against selling too large a stake in the company. It emphasized the need for thorough preparation and legal advice, as well as readiness for the due diligence process when obtaining investments from different types of investors.
The second part was dedicated to the Slovak Association of Private Equity and Development Capital (SLOVCA), an interest group of investment entities active in Slovakia. SLOVCA focuses on improving the investment environment and provides a platform for representing investors' common interests. Its activities include raising awareness of alternative financing options, assisting in securing financing for entrepreneurial plans, and providing networking opportunities among members.
Moreover, SLOVCA is involved in the legislative and tax environment to promote investments in private equity and development capital. Its goal is to improve the education system and increase the number of qualified individuals in key industries. SLOVCA is also interested in monitoring the development of investments and transactions in the venture capital sector in Slovakia and across Europe.
Its activities encompass supporting the creation of investment structures and tax incentives for investors, as well as monitoring potential barriers in M&A transactions. The presentation also analyzed the expected development of these activities in the next 12 months.
Tomáš Klinka, Partner at SIGNUM legal
The presentation "Spin-off at SK universities (possibilities and limitations)" highlighted various models and conditions for establishing spin-offs in Slovakian universities. It discussed the most common "Incubator" model, citing examples such as STU Scientific, SAFTRA, and CEIT in the past. It emphasized the preferential conditions for utilizing university assets within the spin-off framework, with a particular focus on the need for prior approval from the university's board for legal actions involving the establishment of a new legal entity or investment. However, the presentation cautioned about the risk of competition prohibition.
The summary highlighted key points:
- Universities and v.v.i. can establish spin-offs without major restrictions.
- The "Incubator" model is advantageous for leveraging university assets.
- The competition ban can pose challenges for university spin-offs.
- Scientists do not necessarily have to be shareholders or directors but are entitled to compensation.
- Maintaining order within the supervisory board is crucial to avoid shared ownership.
- Proper risk distribution is key in managing relationships with investors.
- Certain spin-offs might qualify as public procurers.
Mikuláš Vargič, Partner at Kristína & Mikuláš Advokáti s.r.o.
The presentation discussed the essentials of spin-offs and their significance, emphasizing the critical role of the team and the substantial budget required. Various parties, including universities, founders, scientists, and investors, are involved in decision-making.
The high costs and initial investments needed for entrepreneurship are highlighted, along with the challenges in generating revenues initially. The presentation lists the key expenses, including salaries, research and development, rentals, services, intellectual property, and hardware.
To secure funding at the outset, options like family offices, angel investors, and incubators are considered. The subsequent financing phases may involve non-dilutive financing, venture capital, or industry partnerships, leading to a potential exit strategy.
The factors influencing funding choices are delineated, such as investment strategy, time to market, developmental milestones, the added value of the investor, the size of the stake, and partnership networks.
The investors and institutions associated with the project include i&i Prague, Comenius University Innovations Prague, and various academic and public sectors. The presentation also outlines the patent journey, beginning with the first patent grant and concluding with the start of material testing by accredited laboratories, alongside the different stages of funding and development.