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Graham Cope Senior Head of Region North Europe & CEE European Investment Fund Europe’s Leading Developer of Risk Financing for Entrepreneurship & Innovation This presentation was prepared by EIF. The information included in this presentation is based on figures available for March 2011 Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct. EIF: Europe’s Primary Fund-of-Funds Investor EUR 6 billion net commitments to PE/VC funds at end 2011 As Primary FoFs investor (over 350 funds) Biggest Fund-of-Funds investing in European Venture Capital Repeat cornerstone investor in top quartile teams in Europe Catalytic role through recognised thoroughness of its due diligence process Fund Manager for MS government mandates 1 Long-term Relationship with best GPs in Europe EIF as Manager of National Funds-of-Funds ERP Germany (launched in 2004) Co-investment 50/50: EIF/ERP (German Ministry BMWi) Size: € 1bn - € 642m committed in 20 funds LfA-EIF Germany Co-investment Bavarian Ministry of Economics LfA Förderbank, Bayern EIF. Size € 50m - € 26m committed in 4 funds NEOTEC: Spanish Technology Fund-of-Funds Tech fund in partnership with CDTI (TMT, ICT, clean-tech, bio-tech and LS) Size: € 183m - € 117m in 11 Funds and Co-investment Agreements Istanbul Venture Capital Initiative Turkish generalist VC investment vehicle for institutional investors Size: € 160m - 2 funds signed for a total of € 21m Portuguese Venture Capital Initiative Generalists funds, ICT, Life Sciences, Healthcare, Environmental & Energy Technology Size: € 111m – 2 transactions signed for a total of € 30m Dahlia: Pan-European Fund-of-Funds Joint initiative between EIF and Natixis Private Equity (NPE) Size: € 300m - over 60% of Dahlia funding has now been committed UKFTF: UK technology Fund-of-Funds Launched by the UK government and advised by EIF Size: £200m at first closing to be invested in Funds targeting UK start-ups and growth businesses in the high tech sector – 3 investments signed for £28m 2 Public Private Leveraging of EIF Capacity and Experience EIF: as investor in the Baltics As investor in BaltCap Private Equity Fund in 2007 for EUR 10m As Manager of JEREMIE Holding Fund in Latvia from 2008 Invested in Baltcap Latvia VC Fund for EUR 20m in 2009 Invested in Imprimatur Capital Seed & Start-Up Fund for EUR 17m in 2010 As Manager of JEREMIE Holding Fund in Lithuania from 2008 Invested in Baltcap Lithunia VC Fund for EUR 14m in 2010 Invested in LitCapital VC Fund for EUR 14m in 2010 Invested in Strata/MES Co-Investment Fund for EUR 8m in 2010 Invested in Practica Seed & Venture Capital Fund for EUR 17m in 2012 Note: Estonia chose not to implement a JEREMIE Holding Fund hence investment levels by EIF have been limited to date Key role as developer of venture capital markets 3 EUR 100m invested into Baltic market Baltic Equity Investments remain comparatively low • Very latest EVCA data for 2011 • European average investment level is 3-4 times greater than for Baltic Countries • Estonia is in weakest position of the 3 Baltic States Weak position 4 • Estonia is only 0.04% of GDP, ten times lower than in Finland EIF’s Development of a PE/VC market - Baltics Phase Three Private Investment flows dominate public funds 25/75 Market Maturity Phase Two Balanced with Private Investment Typically 50/50 Phase One Careful Utilisation of Structural Funds Typically 70/30 • State Funds alongside IFI investment • Second time Fund transactions • International investors drawn in by market opportunities • Deeper pool of Local expertise • First Transactions with external help • Set up of VC Association, adoption of EVCA standards • First attraction of local private capital • ‘Proof of Concept’ Phase • Education of Entrepreneurs • Establishment of BA networks Continued Ecosystem Development Legal Framework; Taxation Laws, Advisory Support Networks, etc. 5 BIF - Market Needs and Opportunities EIF asked Baltic VC associations to help in sizing the opportunity 7 Fund managers in region provided detail of expected pipeline Data provided totals EUR 320m of investment opportunities Wide range of industries covered: ICT, Pharmaceuticals, Textile, E-Commerce, Electronics, Software, Energy Efficiency, Healthcare, Industrial products etc Mainly later stage opportunities exploring regional expansion or growth into export markets Sometimes includes follow-on investments from earlier seed and startup activities that have been publicly funded Strong evidence of market need and opportunity “There is a clear need for action to support the market. The proposed BIF amount is well-grounded by market data.” 6 EIF Tool Kit for Equity investments into SMEs SME Cash Flows Investment Rounds Public Stock Markets Formal VC Funds & Mezzanine Funds VC & Early Stage Grants, Business Angels, Seed Pre-seed Phase Seed Phase Start-up Phase Emerging Growth Development Trade Sale/IPO SME Development Stages HIGHER RISK 7 LOWER RISK EIF Tool Kit for Equity investments into SMEs SME Cash Flows Investment Rounds Public Stock Markets Formal VC Funds & Mezzanine Funds VC & Early Stage Grants, Business Angels, Seed Pre-seed Phase Seed Phase Start-up Phase These phases covered by current initiatives; but must be continued. Private money very reluctant to invest here so smart use of Structural Funds is wise Emerging Growth Development Trade Sale/IPO SME Development Stages HIGHER RISK 8 LOWER RISK SME Cash Flows Investment Rounds Stage focus of the Baltic Innovation Fund Public Stock Markets These phases barely supported but private investors can be stimulated to invest here Formal VC Funds & Mezzanine Funds VC & Early Stage Grants, Business Angels, Seed Pre-seed Phase Seed Phase Start-up Phase Emerging Growth Development Trade Sale/IPO SME Development Stages HIGHER RISK 9 LOWER RISK Baltic Innovation Fund – Basic Structure LV EE EIF LT Baltic Innovation Fund Institutional Investors, HNWIs VC Fund A VC Fund B SMEs 10 Baltic Region SME Community VC Fund C BIF will be managed by EIF cooperating with local agencies Objectives of the Baltic Innovation Fund Increasing the levels of equity Investment made into Enterprises BIF will create greater levels of equity investment in the region than ever before With the expected leverage, the amount of equity investment created across the period will relate to a substantial increase of market activity Establishing a sound market-based infrastructure BIF will establish a platform and focus that will create a stable portfolio of equity fund managers in the region The BIF structure implements a best practice Fund of Funds model never before implemented in the Baltics BIF creates an infrastructural base of interest to other IFIs Generating positive returns to investors in the BIF This is not a grant mechanism, it is an investment intended to generate positive returns BIF will be structured and managed to create the best opportunity for investment returns BIF will adopt a certain level of diversification in the portfolio and across years (vintages) 11 Objectives of the Baltic Innovation Fund Creating the best entry conditions for Pension Funds BIF will act as a cornerstone investor applying the best practice standards implemented by EIF and thereby giving confidence to institutional investors BIF’s regional approach offers the geographic diversification needed to attract Pension Fund capital Attract foreign investors and investment managers to the region BIF will become a marketing tool for all 3 Baltic Countries EIF will seek to ensure foreign investment managers are fully aware that BIF offers as a market-entry opportunity and/or co-investment potential The BIF concept will raise awareness of investment opportunities in the region 12 Baltic Innovation Fund – Basic Financing EUR 60m EE LV EUR 40m EIF LT EIF management cooperating with local agencies Baltic Innovation Fund = EUR 100m Institutional Investors, HNWIs VC Fund A VC Fund B VC Fund C 50% from Private Investors A total of EUR 200m expected to be invested into enterprises by selected local fund management teams SMEs 13 Baltic Region SME Community BIF – in action – an example portfolio LV €20m EE €20m EIF €40m LT €20m BIF – Capital of EUR 100m €15m Private leverage maximised eg: 2.0x €15m €25m €25m €15m VC Fund A VC Fund B PE Fund A PE Fund B €30m €60m €50m €30m Co-Invest ments €30m VC Fund A invests into 12 SMEs - generalist CoInvestments into 5-10 SMEs VC Fund A invests into 12 SMEs - ICT focus SMEs VC Fund A invests into 14 SMEs - generalist VC Fund A invests into 12 SMEs - generalist Wider Baltic Region SME Community Over €200m invested into approx 50 high growth enterprises 14 Contact European Investment Fund 96 boulevard Konrad Adenauer L-2968 Luxembourg Graham Cope, [email protected] Tel: + 352 42 66 88 236 Martins Jansons, [email protected] Tel + 352 42 66 88 381 Jurate Azelionyte, [email protected] Tel + 370 5269 0104 www.eif.org 15