Investments in the innovation process. Sources of investment

Very often, both new companies and existing ones that are at the stage of growth and development experience a lack of funds. But the need for financing arises especially acutely when creating an enterprise, when the project is just being born and its prospects are not yet entirely clear. In all these situations, the search for investment for business development becomes acute. What projects are the most interesting for investing money? How to assess the future profitability of such an enterprise and what risks exist in such a business? Can you count on help from the state?

The difference between an innovation project and an investment project

An investment project requires investing money for an already operating or well-known business. And an innovative project often offers a completely new product and it is difficult to understand how the consumer will react to the appearance of this type of product or service on the market, whether it will be in demand, in what volume, what competitors will do, etc. Therefore, investments in innovative projects are fundamentally different from other types of investment.

This leads to another difference between these types of projects – the presence of a large number of risks. If in an ordinary investment project they try to more or less accurately assume and calculate possible risks, and provide a system for responding to them, then in investment projects it is sometimes even impossible to imagine all the difficulties that the project will encounter along the way. Therefore, the calculation of risks is very approximate. And not all innovative projects become successful - perhaps only one out of ten projects will become truly super-profitable and meet the hopes of the creators.

But why do investments in innovative areas more often attract the attention of investors? Such investment, despite the high risks, is a highly profitable business that can bring the investor more than 70% per annum. It is precisely obtaining a good profit, then the growth of a new enterprise and, as a result, the possibility of receiving significant income from the sale of an enterprise (by selling a license or technology, selling one’s share of the company to another investor) that interests businessmen-investors. Therefore, other projects that will yield less than 30-50% profit per year look relatively unprofitable.

Financing of innovative projects can be represented by a ratio of 1:10:100, where for one successful project there are nine unsuccessful ones, but one ruble invested in a successful project will bring 100 rubles in income, and sometimes more. And then such a project pays for all other unprofitable investments. Therefore, in order to diversify risks, investors often invest money in several different businesses at once. (After all, such projects often do not require huge investments; sometimes a few tens of thousands of dollars are enough).

To summarize, we can say that there are no guarantees in innovative investments; there are opportunities that can be realized in a successful business, but may not come true. And the main differences between an innovation project and an investment project are:

• availability of a new product or technology (for example patents, know-how, etc.);
• high-risk investments;
• opportunities to obtain high rates of profitability and income.

Types of business

The following types of venture business are distinguished:

1. Independent entrepreneurial activity;
2. Projects of large companies.

Small risky companies are most often opened by scientists or inventors who want to make commercial profit. They finance the project themselves with their own savings or borrow money from close relatives. Most often, these funds are not enough, so it is necessary to attract additional investments to organize a venture business. Some entrepreneurs are trying to solve this issue by lending, but not all banks agree to finance risky projects.

Scheme: venture capital funds

Another type of venture business is high-risk projects that are implemented by special divisions of various large companies. Their main goal is to develop new markets. Full financing of such research and development is provided by the company on the basis of which such a unit is created.

Innovation and innovative activity

Innovation is the result of work based on the use of advanced experience or scientific achievements to create a new product/process or improve it, which is used in practical activities. A mandatory property of innovation is scientific and technical novelty.

Innovation activity is the activity of implementing, disseminating or creating innovations, but its peculiarity is in its commercial orientation. It aims to use the results and achievements of scientific activity to expand the range of products, improve the quality of goods, improve technologies, increase productivity, which should ultimately lead to high profits.

Innovative activity requires investment and can include a whole range of scientific, technical, technological and organizational activities (necessarily supported by financial and commercial components), which together create innovations, goods or services with new qualities.

Innovation can be represented schematically as a movement from an idea obtained as a result of research to the creation of a product and its mass production.

There are several types of innovation:

Innovative investments are investments in intangible assets. Such investment helps to introduce various scientific and technical developments, new inventions into production (or the social sphere). The result is a significant improvement in production performance and increased profits.

Very often, innovative solutions are found in the field of information technology, energy saving, environmental projects or projects related to the establishment of domestic production of goods that were previously only imported.

The essence of business

In our country, this type of activity appeared 10 years ago, but for many the essence of the venture business remains a mystery. Therefore, it is necessary to understand this area of ​​​​activity in more detail.

You should know that venture businesses are risky organizations created to introduce various innovations at the top of technological progress. Some of them bring huge profits, but there are also those that burst like soap bubbles. In this case, the brilliant idea that came to the entrepreneur’s mind is not enough. To achieve success, you need to make a clear, well-thought-out plan, as well as find finances in order to bring it to life.

So, we have figured out what a venture business is, now let’s try to understand how to open such a company and attract investment to it? Typically, venture capital firms are small businesses. They develop new scientific technologies in order to adapt them to the needs of society. Such organizations are created on the basis of contracts involving funds from individuals and legal entities. Sometimes they are funded by the state or private foundations. For investors, such enterprises are quite risky, since no one can guarantee their success.

The initiators of the creation of a venture company are usually brilliant engineers or talented scientists who are ready to devote their whole lives to finding an innovative solution. Usually, the winners in the fight for consumers are those chosen ones who managed to look into the future several decades.

Venture capital firms are typically temporary because they are created to solve a specific problem. Employees of such a company are interested in its success, since their future profits depend on it.

Financing of innovative projects

Financing of such projects takes an innovative form of investment. Sometimes it is difficult to find investment, although there are several possible sources: venture funds, private investors, and sometimes you can get a grant, government support for a “startup”. Because first of all, the prospective investor must be able to consider the additional intellectual value in the investment project, that information that can then be implemented in the real production process.

Business investors first of all try to assess how the enterprise will develop, what will result from the use of this or that innovative technology, and what barriers will be created for competitors. The financial or business plan of such a project, like any other, must contain the calculation of standard financial indicators. It is important for investors to know the possible market capacity, what customer needs the new product will satisfy, promotion channels, what guarantees for the safety of investments, the payback period, as well as some of the most important indicators are profitability, profit margins and what sustainable competitive advantages the new product will receive.

Yet it is not financial indicators that will be decisive in many cases when evaluating innovative investments. In an innovative project, the most important thing is its team, the presence of not only a clear plan on how to implement the idea in practice so that the project turns into a profitable business, but also an experienced manager, an active leader who is able to manage the project and develop it.

Moreover, at different stages of the project, leaders with different qualities will be required. At the first stage, the strategic approach should play the main role - build a strategy based on hypotheses about the possible development of the business. (This role is often played by entrepreneurs who, in their desire to open a new business, turn to various scientific developments). And at the second stage, a leader will be required who can transform an already launched business into a developed company, with high standards of quality management, which will have the potential for long-term and profitable growth.

And very often, a project that is based on simply good development at the level of the best world standards can become more successful in terms of implementation than a project that relies on an outstanding result of scientific and technical work. Because it is the presence of a quality management system and strong leaders that can lead the project to ultimate success.

Business Features

Let us highlight the main features of the venture business. Its main goal is to obtain excess profits. An investor who invests financial resources becomes a co-owner of the business, so he gives preference to those companies that are able to prove the high profitability of their idea and the feasibility of its implementation. The investor has the right to exercise control over the internal processes occurring in the company, connect his business connections and apply experience to improve the efficiency of the company.

Typically, venture capital investment in a business is provided for a certain period, after which the investor sells his share to the owner of the company and exits the business. Venture capital financing is mainly carried out by large corporations that have free capital.

The entrepreneur and the investor are business partners, so they both strive to ensure that the business develops successfully, because if the enterprise is unprofitable, no one will win.

Development prospects

Now let's talk about the prospects for the development of venture business in Russia. According to experts, they already exist today. Of course, entrepreneurs face many problems, as in any other field of activity, but most of them can be solved using the professionalism and experience of managers. Our country has not yet created a regulatory framework that regulates the activities of venture capital. Accordingly, this mechanism is not supported at the state level, as in most developed countries. This is the main problem in the development of venture business in Russia.

In addition, it is constrained by the following factors:

• Insufficient information;
• Lack of qualified managers;
• Complex procedure for registering venture funds.

If these problems are eliminated and assistance is provided at the state level, the venture industry in Russia will develop much faster and more efficiently.

Financial investments

The capital of a venture fund is $5–10 million. Each member of the joint stock company invests approximately 750 thousand dollars. Such funds, as a rule, operate for no more than 10 years. This period is quite enough to return all investments and make a good profit. Each individual project typically invests $1–5 million.

In addition to the profit that the fund receives when exiting the project, other incentive payments are established, for example, bonuses for exceeding the planned profitability. At the time of exit from the transaction, the profit is usually 20-40% of the total investment.

Where to begin?

As in any other business, preparation for starting a business should begin with developing an action plan. The investor’s first impression of the entrepreneur’s personality and professionalism largely depends on it. The main requirements that investors put forward are the integrity of managers, experience, and management qualifications.

If you want to solve the problem of venture investment, you need to remember that all investors have one goal - to get high profits.

The most convincing evidence for them:

• Competent business plan;
• Efficient team;
• Intellectual Property Rights;
• Professional management.

They mean much more than a lot of incomprehensible technical calculations and scientific terms.