Document 3:8 (2015–2016) The Office of the Auditor General's investigation of the results of the seed capital funds was submitted to the Storting on 16 February 2016.
The seed capital funds aim to contribute to the realisation of more viable growth enterprises. The first "wave" of seed capital funding was in 1998, "wave 2" came in 2006, whereas the third wave came in 2013.
The funds' investments in start-up enterprises in the seed capital phase have contributed to the emergence of multiple enterprises with between 10 and 20 employees, and a few with up to 40 employees. During the 1998-2014 period, however, none have developed into major growth enterprises.
"Our assessment is that a few enterprises with high sales value may emerge among the investments still held by the wave 2 funds. Nevertheless, the development for the enterprises that have been sold so far indicates that it is highly uncertain whether there will be any major enterprises with many employees in Norway," says Per-Kristian Foss.
Not enough systematic follow-up of the seed capital schemes
Innovation Norway is responsible for administering the seed capital scheme and for appointing managers. The OAG's investigation shows that Innovation Norway has not adequately ensured the dissemination of best practice between the funds, risk analyses of the funds' situation over time and routines for governance of the funds owned by the State. Innovation Norway also lacks a clear plan for handling the 16 enterprises it has taken over from wound up seed capital funds. All tasks associated with the seed capital schemes in Innovation Norway are handled by very few people.
"The Ministry of Trade, Industry and Fisheries should ensure that Innovation Norway facilitates a less vulnerable and more systematic follow-up of the seed capital schemes. This can be ensured by e.g. sharing best practice, risk analyses of the funds and guidelines for governance," says the Auditor General.
Funds will be unable to repay parts of their loans and interest to the State
If the funds are going to repay loans, interest and equity to the State and private investors, the sales gains must be high enough to cover losses exceeding the loss funds, in addition to administration costs.
"Historical returns from similar funds in Europe and realised investments in the Norwegian the seed capital funds so far, point to low expectations for the funds achieving positive returns. Several funds in wave 2 will be unable to repay parts of their loan amounts and the interest they owe the State when they are wound up during the period from 2018 to 2023," says Auditor General Per-Kristian Foss.