Seed fund millions may disappear

Christian Wolff-Skjelbred of Innovation Norway confirms that the 150 mNOK Seed Fund that Monica Mæland, Minister of Trade, Industry and Fisheries, had made available for fund management based in Northern Norway may disappear in its entirety should there not be successful attempts at raising private investment equity for the fund.
- It would not appear sensible to repeat this drill, so we must have a look at what legal alternatives there are for the seed funds, says Christian Wolff-Skjelbred of Innovation Norway.

- It would not appear sensible to repeat this drill, so we must have a look at what legal alternatives there are for the seed funds.

That is what senior advisor Christian Wolff-Skjelbred of Innovation Norway says to High North News, following the news that Norinnova has been stripped of its task of filling the national seed fund that was to be located in Tromsø.

- We must therefore consider the state support regulations and investigate others way in which one may raise such a fund, says Wolff-Skjelbred.


A national fund

- We will, together with the Ministry of Trade, Industry and Fisheries, have further discussions with ESA (the EFTA Surveillance Authority).

We will also have discussions with the North Norwegian fund management industry and private investors about their view on the current situation, says Wolff-Skjelbred.

- We will consider a number of options and potential sizes of the fund. The state aid regulations and its exemptions are complicated, and we cannot elaborate on this until we have had the discussions with ESA.

He emphasizes that the Seed Fund, where Innovation Norway was to provide 150 mNOK to be matched by the equivalent in private investment capital, is to be a national fund, not a North Norwegian fund.


Managed from Northern Norway

- The management of the fund shall be based in Northern Norway, and after a competition the task was allocated to Norinnova. Two equivalent funds are managed from Kristiansand and Bergen respectively, but are also national funds, Wolff-Skjelbred pinpoints.

He adds that there is also an opening for up to ten percent of the fund being invested abroad – if desirable and possible.


State risk relief

The Innovation Norway advisor points out that the Seed Funds are to be operating on commercial conditions and through private actors.

- These are not grants, but an opportunity for commercially based investments with a state risk relief that has been approved by the ESA regulations. The risk relief consists of the state paying 50 percent while only having an ownership share of 42.5 percent. For private investors, these numbers are 50 percent and 57.5 percent ownership, Christian Wolff-Skjelbred says.


Halted at new year’s

As HNN has previously reported, the Tromsø-based fund manager Norinnova did not manage to fill the private part of the fund, and by the end of last year Innovation Norway called it a day and relieved Norinnova of its task.

It has also been said that the investor environment in Northern Norway has not had sufficient confidence in Innova’s possessing the competence required for such a task.

Innovation Norway will not comment on its discussions with Norinnova during the process, nor will it reveal how far outside its immediate environment the fund manager has gone in order to try and raise risk capital.


May raise funds anywhere

High North News has learned that Norinnova has tried to find investors quite far south in Nordland county, however, without success. Whether they have tried in Southern Norway and the wider Oslo region is unknown.

There are, however, no clauses in the fund’s company rules that prohibit it from raising capital beyond the boundaries of Northern Norway.


Cooperation possible

Wolff-Skjelbred of Innovation Norway says that if the attempts to establish the Seed Fund management in Norther Norway, as decided by the authorities, should fail, then the money may disappear.

- I cannot predict what the outcome will be of the discussions that we are now entering into, however, I would like to point out that there options for cooperation between management environments. For instance, the South Norway fund manager Skagerak-Maturo is the result of a cooperation between Skagerak Venture Capital in Kristiansand and Maturo Kapital in Skien.


Partial investments not an option

- Would it be possible to split the fund, so that it could be possible to invest in individual projects if the fund managers succeeded in raising the equivalent in private risk capital, for instance if Innovation Norway was to sit on the money and invest alongside with private actors in individual projects?

- No, that is not a viable solution as it falls outside the scope set for Innovation Norway’s mandate and the notifications that apply to this kind of fund. Nor are the fund management environments allowed to do it, Christian Wolff-Skjelbred says in closing.

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