Transcript Strategiset lausumat

Investing in risk capital funds –
The role of a government supported
fund-of-funds and the mission to promote
economic growth
Baltic M&A and Private Equity Forum
Riga, 25 October 2013
Jouni Hakala, Chairman of EFVIN
Content
Risk capital as an instrument to generate economic growth
Venture capital and public sector investments
European Venture Fund Investors Network (EVFIN)
Case Finland: Finnish Industry Investment Ltd
Way forward…
2
Risk capital as an instrument to generate economic growth
3
Evaluating the contribution of private
equity to economic growth*
• Relevant dimensions of private equity activity:
*Source: Exploring the impact of private equity on economic growth in Europe,
A report prepared for the EVCA by frontier economics, May 2013.
4
Evaluating the contribution of private
equity to economic growth*
Innovation, productivity, competitiveness
•
Private equity attracts investible funds into Europe providing much needed risk capital for
businesses. In the 12 largest private equity markets in Europe, private equity invested almost €250
billion in more than 19,400 companies between 2007 and 2012. Of this, an estimated €50 billion was
raised from outside Europe.
•
Private equity builds businesses that are more innovative than non private equity-backed
firms. Patents granted to private equity-backed businesses between 2006 and 2011 are likely to be
worth up to €350 billion. Private equity participation increases the number of patent citations by 25%.
With increased numbers of citations corresponding to greater economic value, this suggests it uses
resources more effectively to deliver higher returns on investment. In some sectors, private equity
finance can be up to nine times more effective than non-private equity financing.
•
Private equity boosts productivity by improving management, operational expertise and
production processes. Private equity backing also leads to improved productivity (measured by
EBITDA (earnings before interest tax, depreciation and amortisation) per employee) of 6.9% in large
private equity backed companies over a six year period.
•
Private equity contributes to the creation of up to 5,600 new businesses in Europe annually.
Venture capital investment directly leads to the creation of 2,800 new companies across Europe each
year. In addition, a ‘spill-over’effect - caused by knowledge sharing, networking and inspiring role
models- leads would-be entrepreneurs to create approximately 2,800 more businesses each year.
*Source: Exploring the impact of private equity on economic growth in Europe,
A report prepared for the EVCA by frontier economics, May 2013.
5
Net sales in Finnish portfolio companies
Statistics Finland: Net sales of Finnish limited companies grew on average approx. 5.4% in 2011 compared to 2010.
6
Job creation in Finnish portfolio companies
Statistics Finland: the number of jobs in Finnish limited companies grew on average approx. 1.4% in 2011 compared to 2010.
7
Venture capital and public sector investments
8
Venture funds have raised €22bn during last 5 years;
importance of government agencies is high
•
The share of Public actors’ capital in VC-funds has been increasing in Europe
Source: EVCA
9
European venture capital market
• Finland’s private equity and venture capital market is fairly developed,
since the supply of venture capital funding is in relation to GNP
at a good level internationally
Source: EVCA
10
Average Venture returns have been disappointing
in Europe (and in the US…) for the last 10 years
Note: Five-year rolling IRRs
Note: Five-year rolling IRRs
Source: EVCA
European Venture Fund Investors Network (EVFIN)
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About EVFIN
 Set up in March 2011 in response to the continuing funding crisis
affecting the VC industry across Europe
 A platform for dialogue gathering 10 major national VC operators
(€24 bn under management) representing 8 European countries
 Mostly public Fund of Funds, they all foster equity financing for
SMEs through supporting best VC funds and contribute to develop
domestic VC markets
 Members: Caixa Capital (Portugal); Capital Dynamics (UK); Capital for
Enterprise (UK); Bpifrance (France); Enterprise Ireland (Ireland); Finnish
Industry Investment (Finland); KFK/BGK (Poland); PMV (Belgium);
SRIW (Belgium) ; TANEO (Greece).
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EVFIN Objectives
 Share best practices among EU LPs & develop a common
understanding of the EU VC market
 Encourage pan-EU joint initiatives to address the VC crisis
 Act as a partner to the European Institutions by providing input
regarding projects and policies related to SMEs financing
 Offer opportunity for a constructive dialogue between all
stakeholders of the EU VC industry (EIB Group, EVCA, Gps etc.)
 EVFIN initiative has developed from the conclusions of the EU Council
meeting of February 2011 which called on the EU Commission to present
proposals for putting in place a EU VC scheme building on EIF and
national operators
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14
Case Finland : Finnish Industry Investment Ltd
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Economic and societal impact
Investments worth
€516m
in funds that have
total capital of
€8,4b
Government’s
€470m
investments
have grown into
€575m
Investments
total
€720m
Portfolio
companies
generate
€7,5b in
revenue
40 000
employees
in portfolio
companies
Investor
directly or
through funds
in 510
companies
Investment in
FoF Growth
€54m
Total capital of
FoF Growth
€135m
16
Investment stage
€m
15
Fund investments
•
•
•
•
10
Early-stage
Growth
Buyout
FoF Growth
Direct
investments
Buyout
5
Direct investments
Venture capital
(Start Fund I Ky)
1
Seed
Start-up
Early growth
Expansion
17
Investments and commitments
€719m (31.12.2012)
Early-stage funds €136,3m
7%
8%
19%
Growth funds €204,8m
64%
Buyout funds €121,3m
21%
28%
Direct investments €147,7m
29%
Start Fund I Ky €54,6m
17%
FoF Growth €54,0m
7%
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Fund investments
Increasing the supply of growth financing for
Finnish companies
Enhancing investments of foreign VC/PE funds in
Finnish companies
Developing the Finnish VC/PE market
Managing FoF Growth
Return on investment
Direct investments
Increasing the supply of growth financing for
Finnish companies
Enhancing the internationalisation of Finnish companies
Renewing economic structures
Return on investment
20
VC/PE market in Finland
Source: FVCA
21
VC/PE market in Finland
22
Financial result 1995-2012
60
52
50
40
31
27
30
48
20
10
0
-10
-20
-30
8
2 1 1 3 4
-1
-6
7
-10
-12
-6
-13
-24
23
Examples of fund investments
Focus
FII/
FoF Growth
commitment
m€
Fund
size m€
Other investors
Sentica Buyout IV Ky
Mid-market buyouts
22
114,2
EIF, Etera, Ilmarinen, LähiTapiola,
Euro Choice
2012
Vaaka Partners Buyout Fund
II Ky
Mid-market buyouts
30
101
Etera, Ilmarinen, Alpinvest, BP
Pension
2012
Creandum III
Nordic early-stage technology
companies
7,5
92,5
International institutional investors
2012
Lifeline Ventures Fund I Ky
European early-stage healthcare,
games and technology companies
6
20
Ilmarinen, Sitra, Finnvera, Juurento
Invest
2012
Vision+ Fund I Ky
Digital consumer products, games
and mobile applications
11,5
26
Nokia, Microsoft, Sitra
2011
Power Fund III
European early and growth stage
cleantech companies
20,0
42,2
EIF, Varma, Sitra
2011
Open Ocean Fund III
European early and growth stage
software companies
15,0
40,0
EIF, Michael Widenius, private
investors
2010
Conor Technology Fund II
Ky
Finnish and Nordic start-up
technologies
20,0
46,5
FoF Growth, EIF, Etera
2010
Northzone VI L.P.
Nordic venture capital
7,5
129,9
International institutional investors
2009
DFJ Esprit Capital III L.P.
UK and Nordic technologies in startup and growth phases
10,0
80,0
International institutional investors
Investment
year
Fund
2012
24
Examples of VC/buyout investments
Company
Number
of staff
Products/
services
FII
investment
m€
Total
investment
m€
Co-investors
Add.
information
Mendor Oy
30 (33)
Diabetes care products
2
8,1
LSP, Ilmarinen, Biothom,
Risto Siilasmaa
Direct investment
The Switch
Engineering Oy
150 (280)
Power conversion
technology
2,7
20
VNT, Vacon, Semikron
Start Fund
Eniram Oy
45 (51)
Maritime emission
control systems
1,2
6,3
Conor, Ferd
Direct investment
Beneq Oy
70 (70)
Nanocoating technology
4
15
Via Ventures
Direct investment
Valmet Automotive
Inc.
820 (1600)
Automotive
contract manufacturing
10
20
Pontos
International
acquisition
Holiday Club
Resorts Oy
400
Recreational services
3,9
30,1
Varma
Acquiring ownership to
Finland
3 Step IT Oy
150 (200)
IT-leasing services
4,3
8,6
Etera
Strengthening
ownership structure
Pohjolan
Design-Talo Oy
150
Residential construction
services
8
38
CapMan
Growing player in a
traditional field
Finnprotein Oy
n/a
Soy protein
8,5
100
Varma, Etera, Pontos
Greenfield investment
25
FoF Growth
• Established by FII (40%) and Finnish pension funds (60%) in
2009, total capital 135M€
• Investment focus on venture and growth funds
• To date: Commitments 110 million > 10 funds > 52 companies >
4300 employees > 475M€ in revenue
• Impact on fund raising:
800
730M€
700
600
MEUR
500
Others
12,5x
400
EIF
FoF Growth
300
FII
200
FII investment in FoF Growth
100
0
FII investment in FoF
Growth
FoF Growth
Capital raised by funds in
portfolio
26
Way forward…
27
Charlie Chaplin: Modern times (Granger)
28
Investing in Growth
www.industryinvestment.com