europe’s leading developer of risk financing for entrepreneurship & innovation

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 2011Any estimates and projections contained herein involve significant elements of subjective judgment and analysis, which may or may not be correct.

European Investment

Fund

Graham CopeSenior Head of Region

North Europe & CEE

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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

EIF: Europe’s Primary Fund-of-Funds Investor

Long-term Relationship with best GPs in Europe

3

ERP Germany (launched in 2004) Co-investment 50/50: EIF/ERP (German Ministry BMWi) Size: € 1bn - € 642m committed in 20 funds

LfA-EIF GermanyCo-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 InitiativeGeneralists 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-FundsLaunched 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

Public Private Leveraging of EIF Capacity and Experience

EIF as Manager of National Funds-of-Funds

4

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

EIF: as investor in the Baltics

Key role as developer of venture capital markets

EUR 100m invested into Baltic market

5

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

• Estonia is only 0.04% of GDP, ten times lower than in Finland

Weak position

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EIF’s Development of a PE/VC market - Baltics

Continued Ecosystem DevelopmentContinued Ecosystem Development

Phase OneCareful Utilisation

of Structural Funds

Typically 70/30

Phase TwoBalanced with

Private InvestmentTypically 50/50

• 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

Legal Framework; Taxation Laws, Advisory Support Networks, etc.Legal Framework; Taxation Laws, Advisory Support Networks, etc.

• State Funds alongside IFI investment

• Second time Fund transactions

• International investors drawn in by market opportunities

• Deeper pool of Local expertise

Phase ThreePrivate Investment

flows dominate public funds

25/75

Market Maturity

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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 start-up activities that have been publicly funded

Strong evidence of market need and opportunity

BIF - Market Needs and Opportunities

“There is a clear need for action to support the market. The proposed BIF amount is well-grounded by market data.”

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Public Stock Markets

SM

E C

ash

Flo

ws

Investm

en

t R

ou

nd

s

SME Development Stages

Pre-seed Phase

HIGHER RISK

Seed Phase

Start-up Phase

LOWER RISK

Emerging Growth

Development

EIF Tool Kit for Equity investments into SMEs

VC & Early Stage

Formal VC Funds & Mezzanine Funds

Grants, Business Angels, Seed

Trade Sale/IPO

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SM

E C

ash

Flo

ws

Investm

en

t R

ou

nd

s


Pre-seed Phase

HIGHER RISK

Seed Phase

Start-up Phase

LOWER RISK

Emerging Growth

Development

EIF Tool Kit for Equity investments into SMEs

VC & Early Stage



Trade Sale/IPO

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

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SM

E C

ash

Flo

ws

Investm

en

t R

ou

nd

s


Pre-seed Phase

HIGHER RISK

Seed Phase

Start-up Phase

LOWER RISK

Emerging Growth

Development

Stage focus of the Baltic Innovation Fund

VC & Early Stage



Trade Sale/IPO

These phases barely supported

but private investors can be

stimulated to invest here

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Baltic Innovation Fund – Basic Structure

Baltic Innovation Fund

Baltic RegionSME Community

SMEs

EEEE

VC Fund AVC Fund A VC Fund BVC Fund B VC Fund CVC Fund C

LVLV LTLT EIFEIF

BIF will be managed by

EIF cooperating with local agencies

BIF will be managed by

EIF cooperating with local agencies

Institutional Investors,

HNWIs

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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)

Objectives of the Baltic Innovation Fund

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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

Objectives of the Baltic Innovation Fund

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Baltic Innovation Fund – Basic Financing

Baltic Innovation Fund = EUR 100m

Baltic RegionSME Community

SMEs

EEEE

VC Fund AVC Fund A VC Fund BVC Fund B VC Fund CVC Fund C

LVLV LTLT EIFEIF

EIF management cooperating with local agencies

EIF management cooperating with local agencies

Institutional Investors,

HNWIs

EUR 60m EUR 40m

50% from Private

Investors

A total of EUR 200m expected to be invested into enterprises by selected local fund

management teams

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BIF – in action – an example portfolio

BIF – Capital of EUR 100m

Wider Baltic RegionSME Community

SMEs

EE€20m

EE€20m

VC Fund A

€30m

VC Fund A

€30m

LV€20m

LV€20m

LT€20m

LT€20m

EIF€40m

EIF€40m

€15m

VC Fund A invests into 12 SMEs

- generalist

Co-Investments€30m

Co-Investments€30m

PE Fund A

€50m

PE Fund A

€50m

PE Fund B

€60m

PE Fund B

€60m

VC Fund B

€30m

VC Fund B

€30m

€15m €25m €25m €15m


- ICT focus


- generalist


- generalist

Co-Investments into 5-10 SMEs

Over €200m invested into approx 50 high growth enterprises

Private leverage

maximised eg: 2.0x

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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

europe’s leading developer of risk financing for entrepreneurship & innovation

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