Activities of the Estonian Development Fund

The Estonian development fund – a proposal for a smart specialization committee to improve targeting the investments

The fund has made a proposal in an attempt of finding a solution to the challenges the whole EU is facing; how to find the right startups and businesses to be funded as the structure of global economy has undergone a significant structural change. The nowadays structure produces the high-growth and research-intensive companies at the cross-border of different fields whereas previously these companies were found in their own respectively specialized fields.

In it’s analysis and proposal to ministries in 09/2013 the Estonian Development Fund has established four principles to be followed by a suggested steering committee of smart specialization to maximize the profits of the investements:

1)      Monitoring and analysis should be done regularly and be closely linked to the management and creating measures to implement the findings as accurately as possible.

2)      Creating and monitoring of indicators to measure the success of smart specialization

3)      In accordance to the European Commission, quadrlupe-helix model approach (state, enterprise, science) and a triple helix-model (e.g. ministries, universities and copmanies) suggestions to increase involvment of stakeholders.

4)      To enhance cooperation with universities, companies and ministries.

The proposal includes also procedure for the next steps taken.

The Estonian Development Fund’s decision to switch into a fund based model

Previous developments of the EDF are in line with the activities on finding solutions to maximizing the profits; in the beginning of the year 2013 the suprevisory board of the Estonian Develoment Fund accepted a proposal from the management board to reorganize its investing activity. The accepted proposal is to move from a model of directly investing of capital to startups to a fund based model; investing will take place via private equity investment funds.

Studies show a fund based model increases the market growth and ables the investment to be targeted to the most prospective companies regarding expected economical growth. The investment model has been shown to be successful also on the longer term and providing more opportunities for example to pension funds which have troubles emerging to Estonian market’s on their own.

Of the Estonian Development Fund

The Fund was established in 2007, it is a public institution subject to the Parliament, and in the beginning of the year 2013 its investment company Smartcap had grown to have the largest portfolio of startups in Estonia. The Fund’s standards regarding companies they invest in include good morals, complienece with the laws and in general aims to invest into small and medium sized copmanies sepcializing in IT, life sciences, and alternative energy sector.