Study by Vlerick and UGent shows the socioeconomic impact of ARKimedes in Flanders
A socioeconomic impact study under the leadership of Professor Sophie Manigart shows the importance of further support for the Flemish venture capital industry and argues for the expansion of the ARKimedes scheme.
Various parameters reveal that the ARKimedes scheme appears to have a significant impact on the Flemish venture economy.
Young and innovative
Between 2005 and 2013, the ARKIVs (which are financed by ARKimedes) injected 189 million euros into 164 companies.1 These were often young and innovative companies. ARKimedes has allowed Flemish venture capital funds to focus on this difficult segment in an increasingly professional way. No less than 60% of the companies are SMEs which are under three years old and 25% are innovative start-ups which are often active in high-technology sectors such as information technology and biotechnology and which also find it difficult to obtain classic sources of funding. A significant proportion of the start-ups said that they would not have been able to get off the ground without funding by the ARKIVs. Among 43% of the companies concerned, this led to at least one and even an average of 2.9 patents. After all, 39% of their staff are involved in research and development. In addition, 29% of them developed as growth-oriented spin-offs from our universities and they also create 43% of the jobs in all Flemish spin-offs.
A powerful lever
The ARKimedes scheme also works as a powerful lever when it comes to obtaining additional private funding. One euro of ARKimedes funding led to no less than 7.3 euros of total external funding, of which 4.4 euros was equity capital. The ARKimedes scheme therefore mainly mobilises private equity capital.
Together, all the portfolio companies have directly led to the creation of 1013 new jobs and are still creating new employment opportunities today. As a single high-tech job leads to the creation of an average of four extra jobs, according to the study ARKimedes has created no less than 5065 jobs.2 When comparing the cost price of the investments with the extra revenue and the reduced expenditure for the government thanks to the number of jobs created, the payback period of the fund known as ARKimedes-Fonds nv is 0.7 years. (In the case of the comparable ECF VC Catalyst Fund in the UK, the payback period is as much as 3.6 years.)
New economic activity
Half of all ARKimedes investments have already led to an exit and some initiatives have effectively contributed to major international companies setting up in Flanders. For example, Caliopa is becoming the global silicon photonics research centre for the Chinese company Huawei. Visys and Okapi Sciences are now acting as a European base for a large international group. In addition, discontinued investments could create socioeconomic value for Flanders through the reallocation of the technology, as was the case with Fugeia for Cargill and City Live for Mobile Vikings.
The study also shows that the ARKimedes scheme has made a significant contribution to entrepreneurship in Flanders. After all, it is partly thanks to ARKimedes that ambitious, serial entrepreneurs have set up new and promising companies such as Cartagenia, Clear2Pay, CMOSIS, Right Brain Interface and NG Data. Some successful entrepreneurs have now also become active financiers or coaches, who in turn are supporting young start-ups or investing in venture capital funds. Just think of Michel Akkermans and Jurgen Ingels (Clear2Pay) or Davy Kestens (Spark Central), who is now guiding driven Flemish entrepreneurs down the right path in Silicon Valley.
Professor Sophie Manigart, Vlerick Business School and UGent: “In order to continue to perform its role as a funder of disruptive start-ups, ARKimedes will need to launch larger funds in the future. After all, the private venture capital sector is increasingly funding at a later phase and is becoming more and more averse to technology risk and capital-intensive projects. Larger ARKIVs must make it possible to finance the future portfolio companies for a longer period and to provide them with more resources in order to get them across the so-called equity gap.”
More information about the ARKimedes scheme can be found at www.arkimedes.be.
Source: Manigart S., Knockaert M., Vanacker T., Standaert T., Lauwers P.: “De ARK-durfkapitaalregeling I en II; een socio-economische evaluatie” (The ARK venture capital schemes I and II: a socioeconomic evaluation) (Ghent: Vlerick Business School & University of Ghent, 2014)
1 An ARKIV is a venture capital provider which is recognised by ARKimedes Management.
2 Goos M., Hathaway I., Konings J., Vandeweyer M.: “High-Technology Employment in the European Union” (Leuven: Vives Discussion Paper 41, 2013) and Decramer S.: “De impact van investeringssubsidies op tewerkstellingsgroei bij KMO’s in Vlaanderen” (The impact of investment subsidies on employment growth among SMEs in Flanders) (Leuven: Vives Briefings, 7 August 2014)