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SMEs can be characterised in a simplified way as initiators, validators or facilitators:  Initiators: typically university spin-outs, scientist-led, and beginning the search for industrial utility of research findings, involved in bioprospecting, collection-building, early genomics and metagenomics;  Validators: typically providing the bioactive screening needed to identify molecules of interest; involved in the stage of industrial adaptation, demonstrating that marine-derived products and processes are manufacturable and scaleable. Many of these SMEs earn money by selling local adapted products e.g. cosmetics, nutraceuticals etc.:  Facilitators: typically consultancies, creating and analysing opportunities, advising; events organisers, enhancing linkages and networking; project managers; intellectual property advisors. SMEs tend to be focused at the earlier stages of the value chain, as for them it represents in many cases a cost chain (i.e. the cash-burn stage before income-generation), at the same time they tend to be the most active generators of innovations. Their generic business model is based on a very diverse product portfolio often comprising of non-marine services for fee applications. Publicly funded research collaborations are part of the funding models in most cases. Their involvement in the earlier stages of the value chain focuses on identification, validation and de-risking of industrial opportunities from marine bioresources61. They may work in collaboration with researchers at universities or at institutes and with larger industrial companies. Universities and research organisation are typically involved in the stages from bioprospecting to identification and characterisation but may also be involved in industrial adaptation often as part of contract funding by industry or publicly funded, industry-facing consortia62,63.SMEs will typically be absent from the stage of industrial production of marine natural products (MNPs), largely because of the high capital expenditure that is usually involved in setting up industrial-scale biomass generation for subsequent extraction of materials, up-scaled high-performance purification systems, or large-scale synthesis for production of products. They will also be absent from the commercial-scale or even demonstration-scale levels of energy from algae, for the same reasons of high capital expenditure (CapEx). Because of the cash-limitations of SMEs and the limited power they have to bring marine biotechnology products to market, they need downstream linkages to end-users to whom they can sell or licence their innovations, products and processes or who may become their exits through trade sale, and to investors who can help them survive longer while they validate and de-risk their developments. Opportunities and constraints for SMEs within the European landscape The analysis also highlighted particular drivers, advantages and opportunities for SMEs. In particular financing is a major issue for SMEs involved in marine biotechnology, as in other sectors. The fate of single-focus marine bioactives companies depends on success stories with a commercial outcome and, in the case of anti-cancer or other products, de-risking them by getting them into clinical trials, either alone or with a strategic partner, before cash-burn drains reserves and saps the patience of investors. In this respect, note the recent failure of the UK company Aquapharm Biodiscovery, devoted to nutraceutical and pharmaceutical molecules from marine organisms. Aquapharm’s assets have been acquired by Lallemand Nutrition, the Canadian food 61 European Science Foundation (ESF) Marine Board, 2010, Position Paper 15 Marine Biotechnology: A new Vision and Strategy for Europe, http://www.marine.ie/NR/rdonlyres/C076682C-2B32-437C-A781B2EACBAA6B62/0/ESFMBmarine_biotechnology_paper15LR.pdf 62 Marine Biotechnology R&D in Europe Strategic Analysis February 2013 http://www.marinebiotech.eu/images/Public_reports/Marine%20Biotechnology%20RTDI%20in%20Europe.pdf. Additional support from data from stakeholder database compilation of this study 63 Norgenta&dsn: Masterplan Marine Biotechnology Schleswig-Holstein, – a regional development strategy 2013 Study in support of Impact Assessment work on Blue Biotechnology 25

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