Recent developments in the Baltic PE
and VC markets and EIF's role in them
24th October 2013
Richard Pelly
Chief Executive of European Investment Fund
1
Agenda
 Overview of EIF
 Our Presence in the Region
 Past: Individual Countries & Transactions
 Present: Pan-Baltic Activities
 Ideas for Future Development
2
What is the EIF?
“
We’re the leading developer of
risk financing for entrepreneurship
and innovation across the EU
”
Helping
Fulfilling
Addressing Working
SMEs, microenterprises and
European regions
innovate and grow
by making finance
more accessible
our dual goal and
pursuing EU
policy objectives
as well as financial
sustainability
market needs by
acting as a
countercyclical
investor in tough
economic times
with financial
intermediaries
across the 27 EU
countries, EFTA
and all Accession
countries
3
A few key facts about us…
“
We’ve supported over 1 Million SMEs
over 15 years
”
1994
2000
Shareholders
AAA-rated
founded and started
providing venture
capital to European
businesses in 1997
Majority owned by the
European Investment
Bank (EIB)
62% EIB, 30% EC,
24 public and
private financial
institutions holding
the remaining 8%
We’re AAA-rated by
all major rating
agencies, with a
strong capital base
4
Helping start-ups
“
Young, innovative companies are key
to our knowledge society, but they can be
seen as risky and thus hard to fund
Working with
leading venture capital fund investors,
backing venture funds including the top quartile
”
We’re helping
build an effective, liquid European Venture
Capital market to support these start-ups;
EIF has invested in 80% of active European
Venture Capital
5
EIF-managed Fund-of-Funds and
Holding Funds across Europe
Fund-of-Fund Activity
UK FTF: GBP 200m
BIF (LT,LV,EE): EUR100m
ERP (DE): EUR 1000m
DVI (NL): EUR 150m
LFA-EIF (DE): EUR 50m
PGFF (PL): EUR 90m
Dahlia (FR): EUR 300m
NEOTEC (SP): EUR 183m
Future initiatives
PVCi (PT): EUR 111m
LFF (LU): EUR 150m
iVCi (TR): EUR 160m
Holding Funds Supported by Structural Funds (JEREMIE)
BULGARIA: EUR 349m
LITHUANIA: EUR 67.1m
CALABRIA (I): EUR 45m
ROMANIA: EUR 100m
CAMPANIA (I): EUR 90m
MALTA: EUR 10m
CYPRUS: EUR 20m
PACA (FR): EUR 20m
EXTREMADURA (ES) : EUR 10m
SLOVAKIA: EUR 100m
GREECE: EUR 250m
SICILY (I): EUR 60m
LANGUEDOC
ROUSSILLON (FR): EUR 30m
SICILY ESF (I): EUR 15m
6
EIF’s longstanding activity in the region is
marked by these milestones:
?
Up to €166m Committed
Past: summary of EIF’s history
in the Baltic countries
7
Present: EIF becomes member of
VCAs of all Baltic countries
Earlier in 2013, EIF was delighted to join the other Baltic investors as an
associate member of all three Venture Capital Associations
Another step in EIF’s quest to build the industry across the Baltics
8
Baltic Innovation Fund update
Livonia
€20m from BIF
€20m from BIF,
Total €75m expected
€15m from BIF,
€15m from MFG
Total €60m expected
Up to €55m Committed
Inception:
EIF has received inquiries from more than 20 potential fund managers
9
Livonia – latest BIF addition
EIF Board approval on October 21st 2013, subject to legal agreement
Mindaugas
Rain
Kristine
Kaido
Adam
Utkevicius
Lõhmus
Berzina
Veske
Vaina
 Livonia is a new independent pan-Baltic private equity fund manager
established by the former investment team of LHV Capital
 The minimum fund size is EUR 50m, with an EUR 85m target
 The team intends to build a balanced portfolio of 8 to 12 companies, with
investment size in the range of EUR 3-15m, following the “buy-and-build”
strategy successfully deployed by LHV Capital across the Baltic States
10
Future: Our Goals
 Our goal is to create a healthy and sustainable private equity and venture
capital market across the Baltics with:
 Qualified fund managers that can raise private capital without public
cornerstone investors
 Strong flow of startups and SMEs that are able to attract financial
investors and deliver positive returns
 There may always be the need for public support of emerging local and
regional fund managers that support emerging local enteprises, before they
‘graduate’ to non-public stage
11
SME Cash Flows /
Investment Rounds
Market Development Plan
BIF is focused on this
stage
EUR
100m
EUR
6m
PRE-SEED PHASE
Private
EUR
60m
VC & Early Stage
Business Angels, Seed
Fund mix
Public
Formal VC & Mezzanine Funds
EUR
11m
EUR
20m
EUR
25m
EUR
50-60m
EUR
50-60m
Baltcap
BPM Mezz
EUR EUR
8m 8m
SEED PHASE
START-UP PHASE
EMERGING GROWTH
DEVELOPMENT
SME Development Stages
HIGHER RISK
SFs to be used to stimulate
early stage market
LOWER RISK
12
Future development: EIF view
Time
• Creation of well functioning venture capital ecosystem takes time (perhaps decades)
Support
• Government support through careful use of
Structural Funds, especially for seed and early
stage, implemented according to EC regulation
Continuity
Dialogue
• Continuity from the bottom up, from seed and startup
funds through to BIF, creates a foundation and
pipeline for a mature, independent industry
• Active dialogue with market participants (VCs,
entrepreneurs, other LPs) to understand the market
needs and raise awareness of private capital markets
13
Future Developments:
Promoting Excellence in Region
2014
EIF’s Annual Breakthrough
Achievement Award for Private
Equity in the Baltics
To be selected based on nominations from national VC Associations,
LGA, Invega and KredEx
14
Summary
 EIF is the leading developer of risk financing for entrepreneurship
and innovation across the EU
 In the Baltic region, EIF has been present since the first BaltCap
transaction in 2001, followed by JEREMIE funds in 2008-2012
 Last year, EIF launched the EUR100m Baltic Innovation Fund in
co-operation with LGA, KredEx and INVEGA
 In the long term, EIF’s goal is to assist the Baltic governments in
creating a well-functioning private equity infrastructure for all
stages
15
Thank You. Questions?
EIF’s Baltic Focussed Team:
Graham Cope, Senior Head of Region
g.cope@eif.org Tel: + 352 24 85 81 236
Martins Jansons, Mandate Manager
m.jansons@eif.org Tel: + 352 24 85 81 381
Jurate Azelionyte, Mandate Manager
j.azelionyte@eif.org Tel: + 370 5269 0104
Kart Siilats, Regional Mandate Officer
k.siilats@eif.org Tel: + 352 24 85 81 506
www.eif.org
16
Appendix
Government-created Fund of Funds in
the Northern Europe region
Sweden
- Work in progress
 Since 1995, EUR 475m
 Since 2001, EUR 1,300m
Denmark
 Since 2011, EUR
EUR
475m
UK Future
Technologies Fund
 Since 2010, GBP 200m
Baltic States
 Baltic Innovation Fund
 2012, EUR 100m
Germany
 Since 2004, EUR 1,000m
Dutch
Initiative
Venture
Poland
 Since 2013, EUR 180m
 Since 2012, EUR 300m
18
Next to Baltics: PGFF Overview
Expansion VC Program
Growth Equity Program
Investments in later stage businesses through equity and
quasi-equity financing
•
Typical size of investments made by the selected funds:
Minority and majority investments above EUR 5m
•
Type of companies: SMEs and lower mid-market
•
Sector focus: Generalist
•
Geographical focus: At least 2X the PGFF’s
commitment to the funds must be invested into
Polish companies.
Investments in early and growth stage emerging and established
technology VC Funds preferably based in Poland and targeting
investments of at least EUR 2.5m in Poland.
•
Typical size of investments made by the selected funds:
Minority investments of EUR 2.5-10m
•
Type of companies: SMEs
•
Sector focus: ICT, Healthcare, Cleantech
•
Geographical focus: At least 2X the PGFF’s
commitment to the funds must be invested into
Polish companies.
•
Investment period: typically 5 years
•
Typical Fund size: c. EUR 50-300m
•
Investment period: typically 5 years
•
Typical commitment in each fund: EUR 10-30m
•
Typical Fund size: c. EUR 25-50m
•
Target diversification: c. 3-5 funds
•
Typical commitment to each fund: EUR 10-20m
•
Target diversification of the program: c. 2 funds
 Support of later stage businesses
 Building and strengthening the PE Fund
infrastructure
 Approx. size of the program: c. ~ EUR 70m
Expected IRR : 4% to 6%
 Support of Poland expansion stage tech SMEs
 Approx. size of the program: c. ~EUR 20m
Expected IRR : -2% to 0.5%
Polish Growth Fund of Funds
First closing at EUR 90m
Expected IRR : 1% to 4%
Note: no very early stage activities in PGFF
Baltic Innovation Fund overview
€20m
€20m
€40m
€20m
Baltic Innovation Fund = EUR 100m
Managed by EIF, in cooperation with local agencies with Inv. period 2013 - 2016
Invests in funds with geographic focus (min 50%) in Baltics.
Standard terms, BIF will invest max 49.9% of any fund’s capital or of a co-investment
Additional minimum of 100m expected to be raised from institutional investors
€15m
Private
investors
and
HNWs
Fund A,
Year 1
€20m
Fund B,
Year 1
€20m
€15m
€5m
€5m
Fund C,
Year 2
Fund D,
Year 3
Co-Invest.
E, Year 4
Co-Invest.
F, Year 4
SMEs
c. EUR 200m invested in
Baltic Region SME Community
20
EIF’s use of SFs in early
stage equity
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
Key role as developer of venture capital markets
EUR 100m invested into Baltic market
JEREMIE Lithuania results at a
glance
SMEs benefit from risk capital investments so far
50
23
Million EUR already invested into Lithuanian SMEs
22
Investments made by Business Angels
13
Ideas under development with Practica SEED Fund
22
JEREMIE Lithuania results at a
glance
Highlights: Imprimatur Capital
and Practica
■
Imprimatur Capital launched in June 2010; Practica launched in July 2011
■
EUR 7.2m invested in Imprimatur Capital (LGA invested a further EUR 1.8m
in 2013)
■
EUR 16.5m invested in Practica
■
Separate windows for seed funding (100% public) and venture capital (70%
public and 30% private financing)
■
Imprimatur Capital has made 13 investments and Practica 9 investments
into seed/start-up companies
■
In May 2011, Imprimatur Capital invested in Naco Technologies
■
A young high-tech company based in Riga
■
Commercialising for a global market patented nano-coating technology developed
at a leading research institute in Moscow
■
In 2013, Naco Technologies was chosen as European Project of the Week