Financing for Research & Development

14 th December 2006, Brussels

EIF at a glance

Established 1994 Operational platform acting through Venture Capital, Guarantees

for SME portfolios and

financial engineering

•

AAA Rating Standard & Poor’s: AAA Moody’s: Aaa Fitch: AAA

•

MDB status 0% weighting

•

Shareholders EIB, EU, Financial institutions

•

Portfolio EUR 14bn (600 000 SMEs) Specialised European institution for SMEs

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Resources and objectives

EUR 600m + Capital increase EUR 4bn Revolving

BMWA ERP European Community

EUR 450m (MAP) EUR 1.1bn (CIP)

Dahlia SICAR S.R.

Up to EUR 1bn To be committed to venture capital funds and financial institutions (eg: guarantees) SMEs

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EIF assets under management

(at 30/09/06)

VENTURE CAPITAL GUARANTE ES TOTAL Total commitments New commitments

(1 January 2006-30 September 2006)

Vehicles EUR 3.7bn

EUR 10.3bn

EUR 450m EUR 490m 240 funds 180 banks/ guarante e institutio ns EUR 14bn EUR 940m

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• • • •

Venture capital: portfolio of EUR 3.7bn

(at 30/09/06)

14% Geographic spread

Balance portfolio between expansion capital and start-up / early stage Portfolio biased towards

Multi-country 29%

technology (65% in ICT & life sciences) Around 30% of portfolio in multi-country funds

Track record in backing new teams in Central and Eastern Europe Central and Eastern Europe Rest Western Europe Italy 7% United Kingdom 15% 5% Germany 8% Spain 7% France 15% Key investor in major markets Niche opportunity player in smaller markets

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Private Equity Stage Distribution by % of Amount Invested

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2001 2002 2003 2004 Buyout Replacement Capital Expansion Start-up Seed 2005 2005 European Private Equity Survey 6

EIF’s experience as a fund-of-VC funds

• High risk; very qualified management teams needed with all relevant skills (Investment , monitoring and exit) • Critical mass requirements • Good VC fund governance (independence of managers vs. investors, transparency, etc.) • Balance public/ private investors? Optimise the use of public funding, fight for efficiency and quality • Proximity of “technological clusters” (Heidelberg, Cambridge, Finland, etc…) very important esp for seed-early stage • Focus on market gaps

more than money !

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Inefficiency in Tech Transfer is a major issue for the seed funding gap

1. Mixed results of tech transfer initiatives

• Many universities struggling - technology transfer not their mission • Most universities do not have the means to hire professionals with industry background having the right skill set • Incubators have a mixed record at best • Many initiatives are sub-scale

2. Venture often more suited to grow business rather than seed them

• Larger deals more attractive • Milestone driven approach vs. need for flexibility • Fixed life time of funds 8

Competitiveness & Innovation Framework Programme

(CIP) EIF responsible for the financial instruments of the Entrepreneurship and Innovation Programme: •

High Growth Innovative Companies Scheme

o Early and expansion stage VC funds o Co-investments in side-funds with business angels o Eco-Tech equity window •

SME Guarantee Facility

o SME loan guarantees o Micro-credit guarantees o Mezzanine guarantees o SME loan securitisation •

Capacity Building Scheme

(Seed Capital Action and partnership with international finance institutions)

Budgetary envelope: EUR 1.1bn (2007-2013)

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JEREMIE draws lessons from the past …

• Under utilisation of financial engineering instruments in Cohesion Policy • Grant approach ≠ revolving character • Difficulties in implementation (regulation, time frame, procedures, expertise) 10

JEREMIE: The System

2006 2007 2015

SME SMEs SME SMEs SME SMEs SME SMEs SME SMEs Microfinance Providers (MCPs) Tech Transfer Activities Guarantee schemes DISBURSEMENT PROCESS Venture Capital Funds IMPLEMENTATION OF HOLDING FUNDS Transforming parts of the ERDF grants into financial products for SME (Lending of national contribution by EIB possible) EVALUATION PHASE Preparation of Operational Programmes

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JEREMIE or not JEREMIE?

SME Access to Finance JEREMIE • Interim Payment • Delegation Expertise • Use of Market-driven revolving

instruments/flexibility, (after 2015!)

• Management and administration

assumed by Fund Manager

• Lisbon earmarking • Portfolio approach 12 No JEREMIE • Time delays • Less flexibility • Fragmentation/case by

case approach = Less impact in the regions

European Investment Fund

EIF 43, avenue J. F. Kennedy L-2968 Luxembourg Tel.: (00 352) 42 66 88 1 [email protected]

www.eif.org