Leveraging local workers’ transferable skills and giving prospective investors a point person are key ways that investment promotion agencies (IPA) can attract growing digital businesses, tech professionals said at a recent IPA meeting hosted by the OECD.
Their comments come ahead of a pending OECD report which shows that from next year, 91% of IPAs will spend more than a quarter of their resources on attracting investment in digital sectors. Before the pandemic, this was the case for only 58% of IPAs.
In deploying this money, IPAs — especially those in less digitally advanced economies — are being encouraged to create programmes and protocols that target small and medium-sized enterprises (SMEs), rather than established tech players. “It’s rare your first car will be a Ferrari,” said Aba Schubert, CEO and co-founder of Dorae, a cloud-based supply chain and business processing system.
Ms Schubert, along with the IPA chiefs of tech strongholds Israel and Finland, shared their top tips for luring businesses that are building the new economy.
Transforming legacy tech talent so it can be used in new applications is a key selling point for mid-sized firms. Antti Aumo, head of Invest In Finland, gave the example of its once-national champion Nokia. While the firm is no longer a telecoms leader, its alumni’s skills in miniaturising electronics, building fail-safe wireless communications and power management have proved a good fit for industrial Internet of Things (IOT) applications. “We now have a lot of companies doing [IoT] in Finland, thanks to the skillset that Nokia developed, but is now provided in a completely new area,” he said.
These workers often have an entrepreneurial mindset which, in today’s digital native culture, is valued by firms that serve individuals and smaller businesses. “You want folks who are used to using open-source tools and have a DIY mindset in the way they code or in their understanding of customers,” said Ms Schubert. IPAs can help foster these transferable skills via hackathons and training, and generate statistics that reveal hidden talent pools to investors.
Hold my hand
IPAs are encouraged to give prospective investors a single point of contact. “Someone they can call about anything … and take them by hand through each step that comes up,” said Ms Schubert. SMEs often lack the time and resources to peruse online resources. “My perspective isn’t that of an Apple or Amazon with their legion of staff,” she said. “I’m talking about … smaller, fast-moving businesses that need help from IPAs.” Guidance and support can be a deciding factor for those firms, she said, noting that her most fruitful interactions with IPAs were when people were made available and were proactive in understanding her business.
She also urged IPAs to be upfront about what they expect from investors, such as the type and number of jobs to be created and over what timeline.
Another big driver is, quite simply, money. The Israeli government’s decision in the early 1990s to launch platforms such as the Yozma Group venture fund, which shared the financial risks involved in helping start-ups expand, is a good example for countries looking to attract tech SMEs. “Sharing the risk helped the first entrepreneurs in the Israeli high-tech scene a lot, and that has led other entrepreneurs to see Israel as a hub,” said Eyal Eliezer, head of Invest in Israel.
But now that the country has established itself as a start-up nation, its focus has shifted to becoming a scale-up nation. Mr Eliezer said it is important that IPAs know where they should and should not intervene. “The main efforts of Invest in Israel [is] not in attracting investments in tech companies, [but in connecting] all the dots that make up this ecosystem,” he said. That means providing opportunities for traditional companies, innovators, academia and other stakeholders to collaborate.
Leverage bleeding talent
The world’s growing number of digital nomads has changed the rulebook for acquiring talent — a precursor to digital investment — by creating new opportunities to attract international know-how. “We all know that Silicon Valley is bleeding talent,” said Mr Aumo. “The large hubs with all their attractiveness are becoming expensive, congested and polluted, and there are some locations that are attracting digital talent with a better quality of lifestyle.” He notes that Finland’s resiliency throughout the pandemic has created significant interest among foreign talent. “The key question,” he said, “is whether you can position your country or region as something different for digital nomads in the post-digital world.”