Financing for Research & Development 14 th December 2006, Brussels.

Financing for Research & Development 14th December 2006, Brussels

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EIF at a glance

Specialised European institution for SMEs

Established 1994 Operational platform acting through

Venture Capital, Guarantees for SME portfolios and financial

engineering

• AAA Rating

Standard & Poor’s: AAA

Moody’s: AaaFitch: AAA

• MDB status 0% weighting

• Shareholders

EIB, EU, Financial institutions

• Portfolio

EUR 14bn (600 000 SMEs)

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Resources and objectives

BMWA - ERP

Dahlia SICAR S.R.

European Community

EUR 600m+ Capital increase EUR 4bn

Revolvin

g

EUR 450m (MAP)

EUR 1.1bn (CIP)

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)

EUR 940m

EUR 490m

New commitments (1 January 2006-30 September 2006)

180banks/

guarantee institutio

ns

EUR 10.3bnGUARANTEES

EUR 14bnTOTAL

240 funds

EUR 3.7bnVENTURE CAPITAL

Vehicles

Total commitments

EUR 450m

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Key investor in major markets

Niche opportunity player in smaller markets

Geographic spread• Balance portfolio

between expansion capital and start-up / early stage

• Portfolio biased towards 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

Multi-country

29%

Italy

7%German

y

8% Spain

7%

France

15%United Kingdom

15%

Rest Western Europe

14%

Central and Eastern Europe

5%

Venture capital: portfolio of EUR 3.7bn (at 30/09/06)

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Private Equity Stage Distribution by % of Amount Invested

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005

Buyout Replacement Capital Expansion Start-up Seed

2005 European Private Equity SurveyConducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA

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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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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

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

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• High Growth Innovative Companies Schemeo Early and expansion stage VC fundso Co-investments in side-funds with business angelso 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)

Competitiveness & Innovation Framework Programme (CIP)

EIF responsible for the financial instrumentsof the Entrepreneurship and Innovation Programme:

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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)

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JEREMIE: The System

Venture CapitalFunds

Preparation of

Operational Programmes

EVALUATION PHASE

2006 2007 - 2015

IMPLEMENTATION OF HOLDING FUNDS

DISBURSEMENT PROCESS

MicrofinanceProviders(MCPs)

Tech TransferActivities

Guarantee schemes

Transforming parts of the ERDF grantsinto financial products for SME

(Lending of national contribution by EIB possible)

SMESMEs

SMESMEs

SMESMEs

SMESMEs

SMESMEs

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JEREMIE or not JEREMIE?

No JEREMIEJEREMIE

SME Access to Finance

• Interim Payment • Delegation Expertise• Use of Market-driven revolving

instruments/flexibility, (after 2015!)

• Management and administration assumed by Fund Manager

• Lisbon earmarking• Portfolio approach

• Time delays• Less flexibility• Fragmentation/case by case

approach= Less impact in the regions

European Investment Fund

EIF43, avenue J. F. Kennedy L-2968 Luxembourg

Tel.: (00 352) 42 66 88 1

[email protected]