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- Approaching by KOTEC- Focusing on KTRS(Kibo Technology Rating System)
Leo (Hee Chang) ParkSenior MangerTechnology Valuation Modeling Team
Korea Technology Finance Corporation(KOTEC)
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KOTEC(KIBO) at a Glance
2
General Outlook of KTRS
3
Closer Look of KTRS
4
How to minimize Assessor Subjectivity
5
Other Issues
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3
KOTEC(KIBO) at a Glance
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4
1. Establishment
2. Historical Background of Foundation in the late 1980’s
…led national consensus to boost technological innovation of SMEs
Major Businesses:
- Operating loan guarantees to technology-based SMEs- Providing technology appraisal service to Government , Bank, and Investors- Others: Direct Investment, Consulting, and Corporate Restructuring., etc
Historical Background of KOTEC’s Foundation
• Nut-Cracked btw. Japan and China• Technology Gap btw. Large and SMEs
• High Economic Growth Rate• GNI : US$ 154 in 1953 -> US$20,000 in 1989
Losing Momentum
Economic Miracle
Founded in April 1989 under Special Act (Korea Technology Credit Guarantee Fund Act)
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KOTEC’s role is vital in correcting the market failure and promoting thecommercialization of technologies
KOTEC represents a useful alternative with a low investment culture
for start-ups and technologically innovative SMEs
The Technology Rating of KOTEC (KTRS) also works as effective
Screening Measure to finding promising technology of Start-ups
Market failureGovernment investment
(policy funding)
C a
p i t a l
R&D
Private investment(private funding)
Death Valley
Start-upMarket entry (Growth Stage)
Growth Maturity
Possibility towaste Grants
Why does the market need KOTEC ?
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KOTEC’s role is vital in supporting the whole life-cycle of technology
commercialization of SMEs (Total Business Solution for SMEs)
KOTEC’s Role
Commerci
alizationGrowth
Maturity
Technology
transfer/M&A
R&D Start-up
TRM
R&D Planning
Tech Valuation Tech Valuation
Feasibility study Certification
Mentoring Consulting
R&D evaluation KTRS Start-up KTRS and KTRS-based industry specific TRSs
- One person biz- Innovative-knowledge based service evaluation- Cultural Contents Evaluation
Tech.Appraisal
&BusinessSupport
LoanGuaranteeBased on
Tech.
life-cycle of
technology
commercialization
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Organization
Headquarters
- 11 Departments
Technology Appraisal Centers
- 1 T/A Institutes
- 10 Regional T/A Headquarters
- 42 T/A Centers
Human Resources
Headquarters- 6 Executives
- 210 Staffs
1,069 Staff in total
- including 553 T/A specialized
Staffs (129 PhDs)
Organization & Human Resources
2011 Sep. 2012
Guarantee balance 10.8 11.4
New GuaranteeProvision
2.6 2.6
2011 Sep. 2012
Number oftechnologyappraisals
40,702 35,382
T/A PerformanceCredit Guarantee Volume
[unit*: bn€] [unit: cases]
* 1 € = 1,600 KRW
HybridHuman Resources
Nation-wide
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2
General Outlook of KTRS
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Decision Process Tool that screens promising
TechnologyNot Just look at Technology Level itself but
focusing on Business Feasibility of technology
…. If a technology has no practical value, there is no point in providing Government Support
Combination of the technology-oriented appraisal
factors and the real insolvency(default) risks of afirm
9
KTRS is...
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Focuses on technology based business prospects ,without analyzing financial status of company
Heavily dependant on a statistical & mathematicalapproach
Saving Cost and Time
- Speedy assessment with a limited number of Assessors
Minimizing Assessor Subjectivity
10
What makes KTRS Unique...
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Scores or rating
Risk level Tech. bizlevel
Tech. biz appraisalrating
( R7 ) ( V8 ) ( BBB )
Structure of KTRS
Classification 1(INDEX)
Classification 2 Classification 3(Indicator)
Owner’s
TechnologyCapabilityModule
Technology Experience 4 indicators
Management Capability 2 indicators
Management & Team Work 3 indicators
TechnologyModule
Technology Development &Implementation Capability
2 indicators
Investment in Technology & R&D 3 indicators
Technological Innovation 3 indicators
Technological Completeness &Expandability
3 indicators
MarketModule
Competitive Status 4 indicators
Product Competitiveness 3 indicators
Commercializa-tion &
ProfitabilityModule
Productibility of Technology andProduction Capability
2 indicators
Operational Capability 2 indicators
Profit Forecast 3 indicators
General
Bio
Environmental
S/W
Medical
Design
Fusion
AppliedTo7 Sectors
C u s t o m i z e d
I n d i c a t o r s
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Credit loan
Investment Technology transfer
Providing Credit Guarantee
KTRSM&ASupport on
Policy fund
KOTEC
Research Centers
Banks
Companies&
VCs
Venture Capital
Government
The Usage of KTRS ...
Consulting -providing feedback to SMEs
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3
Closer Look of KTRS
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In Technology Level, the weights of technology innovation and businesspossibility are measured through AHP Analysis
In Risk Level, Risk of Technology is computed from the correlation
between the factors and historical default data through LogisticRegression
The final KTRS rating is the combination of Technology Level and RiskLevel through Matrix Structure
Risks in TechnologyFeasibility
TechnologyRatingGrade
Risk LevelEconomic
conditions/Corporate
environmentfactors
Environmental Risk
Technological &Commercial Viability
Matrix
KTRS
Management Capacity
Technology
Marketability
Commercialization
Technology Level
Grade : AAA – D
Success Probability
V1 - V10)
Default Risk
R1 - R10)
Structure of KTRS (1)
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In Technology Level, the weights of technology innovation andbusiness possibility are measured through AHP Analysis
In Risk Level, Risk of Technology is computed from the correlation
between the factors and historical default data through LogisticRegression
The final KTRS rating is the combination of Technology Level and RiskLevel through Matrix Structure
Risks in TechnologyFeasibility
TechnologyRating
Grade
Risk LevelEconomic
conditions/Corporate
environmentfactors
Environmental Risk
Technological &Commercial Viability
Matrix
KTRS
Management Capacity
Technology
Marketability
Commercialization
Technology Level
Grade : AAA – D
Success Probability
V1 - V10)
Default Risk
R1 - R10)
Structure of Technology Level
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In Technology Level, the weights of technology innovation and businesspossibility are measured through AHP Analysis
In Risk Level, Risk of Technology is computed from the correlation
between the factors and historical default data through LogisticRegression
The final KTRS rating is the combination of Technology Level and RiskLevel through Matrix Structure
Risks in TechnologyFeasibility
TechnologyRatingGrade
Risk LevelEconomic
conditions/Corporate
environmentfactors
Environmental Risk
Technological &Commercial Viability
Matrix
KTRS
Management Capacity
Technology
Marketability
Commercialization
Technology Level
Grade : AAA – D
Success Probability
V1 - V10)
Default Risk Probality
R1 - R10)
Structure of Risk Level
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Tech.Level
Risk Level V1 V2 V3 V4 V5 V6 V7 V8 V9 V10
R1 AAA
R2 AA
R3 A
R4 BBBR5 BB
R6 B
R7 CCC
R8 CC
R9 CC CR10 D
Matrix Combination of Tech. Level and Risk Level
Process of KTRS Rating -Matrix
The final KTRS rating is the combination of Technology Level andRisk Level through Matrix Structure
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How to Measure Technology Level?
34 factors Data
Input Variables
Scoring Model from AHP *analysis
• Using expert-advised questionnaires, give weighted value to questions
• Give different weighted scores by industries
• Rate business success prospects of the technology in terms of itstechnological ability and business prospects
*AHP(Analytic Hierarchy Process)
Scoring
Model
Technology
Level
Indices came from...
• Academic papers• Assessors’ experience • Experts‘ opinion
Finding Key
Success/RiskFactors
Selecting & Structuring
V1 - V10)
f (y) = ß1·(X 1)+ß12·(X 12)+ ß13·(X 1)+….+ ß34·(X 34)
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Logit Model Risk Level
Input Variables
Risk Level from Logistic Regression analysis
(used Factor Analysis & Principal Component Analysis, Logit Regression)
• Analyzed 22,445 data (Tech. Appraisal Guarantee data) collected from ’99
using statistical techniques
• Unlike general credit rating models based on financial variables,
this Logit model is designed to measure technology-related risks
34 rating factors data
Economic environment variables
Corporate environment variables
How to Measure Risk Level?Economic environmental
factors ( 7)
• SME Production Index• Business Survey Index(BSI)
price index• Foreign exchange rate• Interest Rate, etc.
Corporateenvironment factors
(5)• Certified Venture firms
• ROI• Certified InnoBiz firms
• Firms subject to
external auditR1 -R10)
f
(y) = ß1·(X
1)+ß12·(X
12)+ ß13·(X
1)+….+ ß34·(X
34) + ße1·(X
e1)+….
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20
4
How to minimize Assessor Subjectivity
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Minimizing Assessor Subjectivity(1)
(Quantitative, Check-list Methods) Detailed Guidelines of Indicators
- 19 indicators including quantitatives and check-lists out of 34 indicators
Quantitative Indicators (SAMPLE)
Classification 3 (Indicator) : Technology (Design) Personnel Evaluation Target: Company
After examining the technology development personnel (applying technology qualification and educational
quotient) as of the appraisal date, 5 points for special technicians, 4 points for advanced technicians, 3 pointsfor intermediate technicians, 2 points for beginners and 1 point for other technicians are given for theappraisal.
※ Point calculation formula : 5 points x (“acquired points”/ “highest standard points by industry”) In the event that the acquired points exceed the highest standard points, the highest standard points areapplied.
Grade A Grade B Grade C Grade D Grade E General/Bio
/Envi. Etc. 20 points ormore
15 points ormore
10 points ormore
5 points ormore
Below 5 points
S/W 25 points ormore
19 points ormore
13 points ormore
6 points ormore
Below 6 points
Classification 2 : Technology Development & Implementation Capability
Classification 1 (INDEX) : Technology Module
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Minimizing Assessor Subjectivity(2)
Feed-back System
- the system provide the relative position of evaluator
by providing the Mode(average) and standard deviation of others- Monitoring the “Tendency” and “Consistency” of an evaluator
1
4
3
3 4
4 4
2
Consistency
T
en d en c y ( R i g or o u s )
T e
n d en c y
( G en er o u s )
•Too Generous
1•Too Rigorous2
•Lack of Consistency3
•Too Extreme tendency & Lack of
Consistency4
2σ
2σ
2σ
2σ
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Overview ▣Technology is rapidly changing and needs specific knowledge
★ Hard to get information on Technology and Market▣ Research and compile information from in-house PhDs andthesis, and academic journals▣ Serve the information through the intranet
3. Minimizing Assessor Subjectivity
Academic Journal
Evaluator’s Research
Tech Rating Reports
Thesis 718 Information on Tech
TIA(technology Information Architecture)
1,161 Information on Market
Classified into 9 Different SectorsMachinery, Mechanical Engineering, Green Tech.Electronics, ICT, Bio, New Material, Chemicals
Minimizing Assessor Subjectivity(3)
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Validity of KTRS
Loan Default vs. Rating
0,00% 1,60%
4,00%
6,40%
9,40%
12,20%
21,70%
0,00%
5,00%
10,00%
15,00%
20,00%
25,00%
AAA AA A BBB BB B CCC
Rating
S h o w s H i g h C o r r e l a t i o n b e t w e e n K T R S g r a d e
A n d D e f a u l t i n
a r e a l c a s e
4.7 % on Avg.Well managed Under KOTEC’s Target (5-6%)
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5
Other Issue
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Transferability
Practical Challenges
Lack of statistical data
Lack of staff (assessors)
Cultural differences
Weights of indicators
Patent
Possible Solutions
Surveying real defaultcases
Using the external Pool Most indicators are not
different from TechRate ®
You can change via AHP
KOTEC will be open tocollaboration
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Thank you!
Merci!Dan wel!Danke Schön!Tack så mycket!
Dziekuje!Hvala!Kiitos! [email protected]
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AHP(Analytic Hierarchy Process) Analysis
• A frame work used for Multi-criteria decision making
• Methods of weight calculation using matrix equation
• Derives ratio scales from paired comparisons of criteria.
• Used for deriving weights of technology appraisal indicators
Logistic Regression Model• A technique of regression analysis used to determine which variable is significant by
using formula that classifies a group after expressing correlation between the
independent success factors(key indicators) and the subordinate variables(default)
• ex) Does a student good at math go to Ivy League?
• Is the level of the number of patents related with the default ratio?
• KOTEC tracked down the correlation every 34 factors and defaults
from the historical data (22,445 cases for five years)
Academic Background Behind of KTRS
Appendix 1
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PATENTS of KTRS
OverviewKTRS and Feedback System are Patented
Appendix 2
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Output of Matrix of Technology
Level and Risk Level(Insolvency)
Focus on Company’s
future potential
Non-Financial Measure is
dominantex) Technology Excellence
Business Feasibility
Forecast Corporation’s
Insolvency Focus on Company’s
past history
ex) Financial Records
Owner’s Credit Level
Financial Model is dominant
KTRS redit Rating System
KTRS vs. Credit Rating System Appendix 3
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KTRS TechRateⓡ
Four Modules (34 key factors)
- Management Capacity
- Technology
- Marketability
- Business Feasibility
Four Modules (24 key factors)
- Marketing
- Technologie
- Management
- Finance
Modules
Capacity of Entrepreneurs Capacity of EntrepreneursImportance
AHP(Analytic Hierarchy Process)
Logistic RegressionAHP(Analytic Hierarchy Process)Method
KTRS Vs. TechRate
They have a lot in common…
Appendix 4
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KTRS TechRateⓡ
Business Risk
- Relationship of Factors and Risk
Key Success Factors of Technology
De-emphasis on Financial Data
- One Financial Ratio(R&D Invest. Ratio)
Key Success Factors of Technology
Using Financial Data
- Financial History
- Funding Capacity
Focus
Focuses on Consistency of Evaluation Grants Autonomy of Investigators Objectivity
Screening the beneficiaries of Financial
Support (including Credit Guarantee)
Certificate, Competition
Valuing R&D Projects
Start-up Competition
Limited Use for Financial Support Uses
But There are Still a few differences
KTRS Vs. TechRate Appendix 5
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Phase I Phase II Phase III
National Authorization of TechnologyAppraisal Ratings with KTRS
Up to 2006
Groundwork for T.A.Rating and Certification
Rating Certificate enablesBank Loans with no
Guarantee
- 430 Certificates222 loans amounting13.2 million USD
2007∼ 2009
Disclosure of KTRSResults
Default rate by T.A.
Ratings are disclosed
- Opened to Public since
March, 2007
After 2010
Authorization of KTRS-
Based Ratings
T.A Ratings Replaces
Conventional Credit
Ratings
- Fine Tuning of KTRS
- Methodology to up to date
Appendix 5Development of KTRS