Transcript Document

Financial Instruments for
Innovative SMEs in Bulgaria
Sofia, 30th October 2014
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EIF activity - key figures
“
We are the prime provider of SME
financing in Europe
”
Equity
Guarantees &
securitisation
2013 commitments:
EUR 1.4bn
which mobilised
EUR 7.1bn
2013 commitments:
EUR 1.8bn
which mobilised
EUR 8.6bn
Microfinance
480 venture and
growth funds
2013 commitments 306 banks, guarantee
and promotional
EUR 53.8m
institutions
which mobilised
27 funds-of-funds and
EUR 201m
holding funds
EUR 13.5bn in total outstanding commitments mobilise EUR 79bn
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Instruments tailored at each
stage
Public Stock Markets
Portfolio Guarantees & Credit Enhancement
Formal VC Funds & Mezzanine Funds
VC Seed & Early Stage
Microcredit
Business Angels,
Technology Transfer
PRE-SEED PHASE
SEED PHASE
START-UP PHASE
EMERGING GROWTH
DEVELOPMENT
SME Development Stages
HIGHER RISK
LOWER RISK
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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 150m
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
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JEREMIE Equity and Debt
Portfolio in Bulgaria
Mature stage
400 M EUR
301 M EUR
60 M EUR
Early stage
21 M EUR
21 M EUR
Seed
funds
Venture
Capital
Fund
Private funds - investors
OP Competitiveness (JEREMIE)
Coinvestment
Funds
First Loss
Portfolio
Guarantee
Portfolio Risk
Sharing
Loans
Financial Instruments
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JEREMIE Start-Up Funds in
Bulgaria
Key Highlights
Investment Committee
Fund
Manager
(1% own capital
contribution)
Pool of
mentors
Acceleration and Seed Fund
Acceleration
Compartment
Start-ups

A dedicated facility
two-compartment
structure;

Due to the very high
risk no private support
could be expected at
the facility level;

Investment
limit
capped at EUR 200k
to
allow
private
investor contribution in
follow-on rounds

Opened
to
entrepreneurs from the
region
to
create
competition
and
collaboration
across
the Balkans
Seed
Compartment
Pre-seed
Seed
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Acceleration and Seed Funds Process
 Application process: Fully online
SEED STAGE
ACCELERATION STAGE
Application Window
 Investment: EUR 25,000 – 50,000
 Equity share: ~10%
Selection & Funding
 Stage term: 3-12 months
 Graduation Goal: Working prototype,
beta version
Incubation
Graduation External
day
companies
 Investment: up to EUR 200,000 (on
aggregate)
 Equity share: 30 - 49% (on
aggregate)
SEED Portfolio
 Stage term: 12-24 months
 Goal: Commercialization,
internationalization
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JEREMIE in Bulgaria - Creating
start-up ecosystem from scratch

Two acceleration & seed funds were created in Bulgaria in Q4/2012 with a total budget of EUR 21m. Two
years later the developments are as follows:
The Numbers

More than 4,000 applications for funding
mainly from BG but also from the entire
Balkans;

Investments in 146 start-up companies for
a total of EUR 9m;

20-30% of start-ups are set-up by non-BG;

EUR 6m invested as follow-on in 12
successful companies by BAs, VCs;

Over 300 high-paid jobs created;

More than 20 entrepreneurial conferences
and workshops were held in BG for 2013
only
The Details

The majority of start-ups are in the ICT,
digital, engineering and med-tech sectors;

Follow-on investors in the companies
include Earlybird, TechStars, Y-combinator,
Tim Draper;

More than 20 of the companies are already
revenue-generating, with one making EUR
600k for 2013 only;

Employees are 2-4 per company on avg.,
with one having 20+ people on payroll;

Regional VCs are now looking onto
Bulgaria much more opportunistically;
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JEREMIE in Bulgaria - Creating
start-up ecosystem from scratch
City
# startups in 2013
London
255
Dublin
237
Sofia
92
Berlin
87
Paris
87
Brno
73
Amsterdam
49
Tallinn
44
Barcelona
42

For 2013, Sofia is the #3 accelerator
capital in Europe after only London and
Dublin, slightly ahead of more established
startup hubs like Berlin and Paris;

There are only three accelerators & seed
funds that have invested in more startups
than Eleven in 2013 and five that have
invested in more startups than LAUNCHub;

Sofia’s emerging place as start-up hotspot
was not missed by reputable media like
Wall Street Journal, Forbes Magazine,
TechCrunch and etc;
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JEREMIE Seed in Bulgaria –
Success Story

Founded in Dec 2012 through the support of EUR 200k under JEREMIE, with
5 staff including founders;

Tech heavy company with 2 patents (EU and US) in approval process;

The application had 7m downloads and 1.2m regular users within months
from inception;

Quick market adoption and start of revenue generation – EUR 600k+ for
2013;

Attracted the attention of reputable US VC investor – Tim Draper who
invested USD 450k in the company as a business angel;

Scaled operations and open sales office in San Fran from Q4/2013 to service
USA;

Turned down an acquisition offer from US cable operator for USD 10m (3x
initial valuation) willing to buy the technology;

Staff on payroll in Bulgaria grew to more than 20 people;

Attracted the attention of big VC investors for Series A round – USD 2.5m
from Earlybird, Turkish and Bulgarian business angels;

Current company valuation in excess of USD 15m;
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New Instruments for 2014-2020:
Tech Transfer Fund
OPIC Contribution
Min 90%
of funding
University 1
University 2..
Tech Park 1
Science Lab
2..
Deal sourcing
Management fee
Private
Investors
TT Facility
EUR 30-50m
Up to
10% of
funding
Operational management
TT Facility
Private
Manager
Investors
Expertise contribution
Patents
Licenses
Spin-offs
Start-ups
Industry
Contacts
IP / patent
experts
Test Labs
Corporates
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Tech Transfer Facility (2)
Key Features:




Implement a dedicated facility to serve as a bridge between R&D / science and business, an area currently
not adequately supported by public funds.
The Manager of the facility must possess a well-rounded skillset combining financial, industrial and
scientific expertise as well as broad network in Bulgaria and abroad.
Could be fine-tuned to support industries and sectors set by State.
Dedicated solely to commercializing technology and innovations deriving from a pool of universities,
research centers and tech parks thus fostering entrepreneurship in R&D and capital intensive businesses.
Key Benefits:



Utilize an innovative market-oriented way way of “pushing” innovations to the commercial market.

Strengthening the R&D capacity in universities by providing a natural “next stage” to innovations developed
in-house.
Mobilizing private funding in an area currently perceived as “too risky” to be funded by the business.
Engagement and signaling effect of the corporate sector in providing expertise at very early stage usually
perceived as “too early”.
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New Instruments for 2014-2020:
SME Initiative
guarantee
Beneficiaries
SME n
Mezzanine risk
(EIF, EU Funds,
ESIF)
First Loss Piece
(ESIF, originator)
SME Loans
SME 2
Private
Investors
EIF
Guarantee
Rate up to 80%
Loan by Loan
Financial
Intermediary (FI)
SME 1
Senior risk
(EIB, third parties)
Risk
tranching
Retained by the originator
Portfolio of SME Loans
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The SME initiative (2)

Key objectives




Better access to finance for SMEs through capital relief, loss protection and liquidity
Increased multiplier on public budget through participation of EIB/EIF and private sector
Reduction of financial markets fragmentation.
Two risk-sharing instruments endorsed by the European Council:
1.
Guarantee facility for portfolios of new SME loans;
2.
Securitisation instrument for portfolios of both new and existing SME loans;

Eligible assets: SME Loans, leasing and guarantees. Restructured loans should be excluded, no
refinancing permitted.

Key area of intervention
 Reduction of collateral requirements for new SME loans
 Reduction of risk-related interest margins;
 Unlocking long-term lending – up to 10yrs
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