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Financing for Research & Development 14 th December 2006, Brussels

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. Shareholders EIB, EU, Financial institutions Portfolio

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Financing for Research & Development 14 th December 2006, Brussels

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  1. Financing for Research & Development14th December 2006, Brussels

  2. EIF at a glance Established 1994 Operational platform acting through Venture Capital, Guarantees for SME portfolios and financial engineering • Shareholders • EIB, EU, Financial institutions • Portfolio • EUR 14bn (600 000 SMEs) • AAA Rating • Standard & Poor’s: AAA Moody’s: Aaa Fitch: AAA • MDB status 0% weighting Specialised European institution for SMEs

  3. Resources and objectives BMWA - ERP European Community EUR 600m + Capital increase Dahlia SICAR S.R. EUR 450m (MAP) EUR 1.1bn (CIP) EUR 4bn Revolving Up to EUR 1bn To be committed to venture capital funds and financial institutions (eg: guarantees) SMEs

  4. Total commitments New commitments (1 January 2006-30 September 2006) Vehicles VENTURE CAPITAL EUR 3.7bn 240 funds EUR 450m GUARANTEES EUR 10.3bn EUR 490m 180banks/ guarantee institutions TOTAL EUR 14bn EUR 940m EIF assets under management (at 30/09/06)

  5. Venture capital: portfolio of EUR 3.7bn (at 30/09/06) 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 Italy 7% Germany 8% Multi-country 29% Spain 7% France 15% United Kingdom 15% Rest Western Europe 14% Central and Eastern Europe 5% Key investor in major markets Niche opportunity player in smaller markets

  6. Private Equity Stage Distribution by % of Amount Invested 2005 European Private Equity Survey Conducted by Thomson Financial and PricewaterhouseCoopers on behalf of EVCA

  7. 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 !

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

  9. Competitiveness & Innovation Framework Programme (CIP) EIF responsible for the financial instruments of the Entrepreneurship and Innovation Programme: • High Growth Innovative Companies Scheme • Early and expansion stage VC funds • Co-investments in side-funds with business angels • Eco-Tech equity window • SME Guarantee Facility • SME loan guarantees • Micro-credit guarantees • Mezzanine guarantees • SME loan securitisation • Capacity Building Scheme (Seed Capital Action and partnership with international finance institutions) Budgetary envelope: EUR 1.1bn (2007-2013)

  10. 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)

  11. JEREMIE: The System 2006 2007 - 2015 SME SME SME SME SME SMEs SMEs SMEs SMEs SMEs Microfinance Providers (MCPs) Tech Transfer Activities Guarantee schemes Venture Capital Funds DISBURSEMENT PROCESS Transforming parts of the ERDF grants into financial products for SME (Lending of national contribution by EIB possible) IMPLEMENTATION OF HOLDING FUNDS EVALUATION PHASE Preparation of Operational Programmes

  12. JEREMIE or not JEREMIE? SME Access to Finance JEREMIE No 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 • Time delays • Less flexibility • Fragmentation/case by case approach = Less impact in the regions

  13. European Investment Fund EIF 43, avenue J. F. Kennedy L-2968 Luxembourg Tel.: (00 352) 42 66 88 1 info@eif.org www.eif.org

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