Lab. Innovation. Wednesday, 09 July Emilia-Romagna Region Office, Brussels

Transcription

1 Innovation Lab FINANCIAL INSTRUMENTS AND REGIONAL DEVELOPMENT Presenting the new equity instruments of the ESIF (European Structural and Investment Funds) Wednesday, 09 July 2014 Emilia-Romagna Region Office, Brussels

2 Financial Instruments and Regional Development Presenting the new equity instruments of the ESIF Introduction META Group Brussels, 09 July 2014 Emilia-Romagna Region Office, Brussels

3 Introduction The Innovation Lab The European programming period , compared to the past, will present significant innovative elements in the design and implementation of financial engineering measures. As an example, off-the-shelf instruments and the possibility to integrate different types of Structural Funds will be introduced. Financial instruments, and in particular those related to proof of concept, start-ups and SMEs, will significantly increase in terms of the amount of resources dedicated. This Innovation Lab aims at providing a practical guide for the activation of these instruments presenting operational tools and practical information to significantly reduce time to market on the implementation of new measures, while ensuring a responsible design and an efficient implementation of financial engineering measures from the strategic and operational point of view. Contents and objectives The Innovation Lab will present the most critical aspects related to the implementation of off the shelf co- investment facilities, including the European regulatory framework, the criteria for choosing the most appropriate financial model and off the shelf instruments (size, target companies, investment modalities, etc.), the steps to take to launch the off-the-shelf. A range of practices, taken from European cases on different investment targets (from innovative start-ups to traditional SMEs) will also be presented and discussed in terms of results and regional impact.

4 FIs- proposals MFF Source: European Commission (*) Current price Centrally managed by COM Shared Management Research, Development Innovation Growth, Jobs and Social Cohesion Infrastructure Horizon 2020 Equity and Risk Sharing Instruments EUR 4bn (*) Competitivenes s & SME (COSME) Equity & guarantees EUR 1.4bn (*) Social Change & Innovation Micro-finance EUR 192m Creative Europe Guarantee Facility EUR 210m Erasmus for all Guarantee Facility EUR 881m Connecting Europe Facility (CEF) Risk sharing (e.g. project bonds) and equity instruments Budget not yet decided Instruments under Structural and Cohesion Funds EU level Off-the shelf instruments Tailor made instruments Significantly higher amounts than currently

5 Introduction Knowledge intensive young firms are crucial for the regions => New companies account for 100% of new jobs => Fast growing young firms (<1% all companies) generate roughly 10% of new jobs every year Start-ups need money BUT they are not attractive for banks nor to traditional VCs => Their value is based on intangibles and future cash flow There is a market gap in early stages There is an opportunity for Public intervention to attract private investors (PPP) Each region has to follow its own approach

6 Early Stage Financing and Regional Development Presenting the new equity instruments of the ESIF ) Financial Instruments within ESIF for the period Andrea Di Anselmo - META Group Brussels, 09 July 2014 Emilia-Romagna Office, Brussels

7 Financial Instruments Wider scope & significant amounts FIs using European Structural and Investment Funds (ESIF) can be used to support all 11 Thematic Objectives and all funds (not only ERDF &ESF) Thematic Objective 1 Strengthening research, technological development and innovation (RDI) Thematic Objective 2 Enhancing access to, and use and quality of information and communication technologies (ICT) Thematic Objective 3 Enhancing competitiveness of SMEs, EAFRD and EMFF Thematic Objective 4 Supporting the shift to a low- carbon economy in all sectors Thematic Objective 5 Promoting climate change adaptation, risk prevention and management Thematic Objective 6 Protecting the environment and promoting resource efficiency Thematic Objective 7 Promoting sustainable transport and removing bottlenecks in key network infrastructures Thematic Objective 8 Promoting employment and supporting labour mobility Thematic Objective 9 Promoting social inclusion and combating poverty Thematic Objective 10 Investing in education, skills and lifelong learning Thematic Objective 11 Enhancing institutional capacity and an efficient public administration

8 Common Provision Regulation (CPR)* Article 37.1: FINANCIAL INSTRUMENTS. The ESI Funds may be used to support financial instruments under one or more programmes, including when organised through funds of funds, in order to contribute to the achievement of specific objectives set out under a priority.. Article 37.2: Support of financial instruments shall be based on an ex ante assessment which has established evidence of market failures or suboptimal investment situations, Article 37.7 Financial instruments may be combined with grant support, interest rate subsidies and guarantee fee subsidies, Financial recipients supported by financial instruments may also receive grants or another assistance from a programme or from another instrument supported by the budget of the Union. *CPR to be adopted by end of November/early December

9 Mandatory Ex-Ante Assessment (Art 37.2 CPR) Prior to allocating resources to a FI, the managing authority (MA) shall undertake an Ex-Ante Assessment Purpose: to gather evidence of market failures or sub-optimal investment situations, and the estimated level and scope of public investment needs, including types of FIs to be supported. (Demand analysis, added value of FI, other instruments available etc) MA can use any appropriate methodology; can be carried out in stages The design, set-up, and implementation of FIs requires specific expertise (external Assistance) Mazars Survey June 2013

10 Common Provision Regulation (CPR) Art In implementing the art 37, managing authorities may provide a financial contribution to: a) FIs set up at Union level, managed directly or indirectly by the Commission; b) FIs set up at national, regional, transnational or cross border level, managed by or under the responsibility of the managing authority. Art For FIs under 38.1b) the MA might provide a financial contribution to: a) FIs complying with the standard terms & conditions laid down by the Commission by means of implementing acts in accordance with the examination procedure referred to in Art 143 (3). (Off the Shelf Instruments) b) already existing or newly created financial instruments which are specifically designed to achieve the specific objectives set out under the relevant priority. (TAILORED MADE INSTRUMENTS)

11 3 options are proposed: 1. MAs can continue creating tailor-made instruments under shared management principles, aligned with some common rules inspired by the EU equity and debt platforms under development for the EU instruments; 2. Use of "off-the-shelf instruments" under shared management principles which would facilitate the set-up of instruments for Member States as well as ensure compatibility with the EU-level instruments; 3. MAs may dedicate part of their structural funds in compartments of EU level instruments "ring-fenced" for investments in regions and policy areas covered by operational programmes from which structural funds resources are contributed ("joint instruments").

12 EIB Mazars survey (June 2013) on Financial instruments Choice of implementation structure Majority of regions want to set up tailor made instruments: 57% Directly managed by MAs 31% Under FoF 26% Standardised off the shelf instruments for quick roll out: 13% Contribution to EU level FI under central management: 6% Direct implementation of FIs directly by MA (only loans & guarantees): 6% Do not know: 15% vey_en.pdf

13 "Off-the-shelf" financial instruments 1. Objective 2. Type of instruments proposed 3. Selection of bodies implementing financial instruments 4. Compatibility with state aid rules 5. Term sheets describing instruments

14 1. The objective To provide standard terms & conditions for a set of predefined FIs that can be set up and managed by MAs under Article 38 (1) (b) of the CPR. Not an obligation but an opportunity for MAs to deliver faster & safer financial means to the final recipients

15 2. Types of instruments proposed Loan for SME's based on a portfolio risk sharing loan model (RS Loan) Guarantee for SMEs (partial first loss portfolio) (Capped guarantee) Equity Investment Fund for SMEs and start-up companies based on a co-investment model (Co-investment Facility) (in the future) Loan for energy efficiency and renewable energies in the residential building sector (Renovation Loan) Loan fund for sustainable Urban Development (UD Fund in the future)

16 3. Selection of bodies implementing financial instruments Art 38.4 CPR for FIs under 1.b) Managing Authorities may: a) invest in the capital of existing or newly created legal entities ; or b) entrust implementations tasks to: EIB IFIs in which a MS is a shareholder or financial institutions acting in public interest / under the control of a public authority A body governed by public or private law selected in accordance with EU and national rules c) undertake implementation tasks directly for FIs consisting solely of loans & guarantees Delegates acts include terms & conditions to select implementing bodies, their roles and responsibilities, the rules concerning funding agreements, as well as management cost & fees. They also include the specific requirements regarding the transfer & management of assets managed by the entity to which implementation task are entrusted.

17 4. Compatibility of off the shelf instruments with state aid regime Off the self financial instruments will need to take into account state aid rules and will be structured in such a way that their terms and conditions do not require state aid notification and subsequent clearance by the Commission. Any aid has to be either market conform or in line with De Minimis regulation OR the General Block exemption regulation (GBER) OR successors in order to be exempted from the obligation to notify to the EC De minimis Aid. Draft Regulation (Art 3). Total amount granted per Member state should not exceed per undertaking over 3 years The cumulation rules have to be respected. 17

18 At the level of investor In order to respect the DM regulation, any aid to the private investor shall be quantified and remain under the de minimis thresholds. In order to respect the GBER, any aid to the private investor shall comply in particular with Article 21 (risk finance aid) of the new GBER (Applicable as of 1 July 2014). At the level of financial intermediary and/or its manager When developing FIs through FoF, potential aid to the FoFs manager must be assessed by the MA. The co-investment facility may provide direct aid to managers to support their scouting cost or initial screening prior to formal due diligence (Art 24 GBER) At the level of the final recipients For equity and quasi equity instruments there is no aid at this level when there is no aid to private co-investors and the financial intermediary, which is commercially managed and financing decisions are independent and profit driven. If aid is present at the level of financial recipient it shall comply with DM regulation or the GBER. Total amount of risk finance to the eligible SME is 15M (Art 21 GBER)

19 Combination of FI & other forms of support: The FI may be combined with a grant or for scouting, or advisory service to support the deal flow and accelerate growth the benefitting companies. Conditions: The grant can be part of the FI operation (Article 37.2 (e) CPR) and managed by the body implementing the FI => The programme contribution to the FI includes also the grant and the financial intermediary shall be entitled to a fee. or can be provided through a separate operation supported by the operational programme => MA is free to give direct support to an enterprise or select the institution which will manage the scheme. Gran to the benefit of final recipient Total amount of grant shall be in compliance with GBER Art 28 (advisory support) and Art 24 (scouting cost and initial screening) The expenditure covered by the grant cannot constitute part of the investment to be financed by the loan.

20 5. Term sheets Structure of the financial instrument Aim of the instrument State aid implication Lending/ guarantee/ investment policy Pricing policy Programme contribution to the financial intermediary (product details) Programme contribution to financial instrument (activities) Managing authority's liability Duration Alignment of interest Eligible financial intermediaries Targeted results (reporting, monitoring and evaluation) Final Recipients eligibility Characteristics of the product for the final recipients Evaluation of the economic benefit MAs may add conditions if not altering the minimum technical & legal requirements

21 Early Stage Financing and Regional Development Presenting the new equity instruments of the ESIF Ex-Ante Assessment How to design FIs for different regional environments Andrea Di Anselmo META Group Brussels, July the 9 th 2014, Emilia Romagna Office, Brussels

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24 One size does not fit all Regional goals When it comes to set up a new ESIF instrument it is essential to match program goals with the economic and innovation main regional features: creation of new knowledge intensive companies; innovation and growth of existing companies; attraction of entrepreneurs and investors in the region.

25 Socio-economic dimension: Demography; Industrial specialisation and composition of the region; Quality & quantity of innovation and R&D activities (n. of Universities, n. of European Patent Applications, n. of Clusters in specific industries), etc.; Entrepreneurial dimension Previous Spin off and start up activities; Ecosystem Relevance Completeness of service providers One size does not fit all Regional main characteristics Contribution of private investors (Business Angels, other VC funds);

26 Main features of the financial instrument depend on the targets: Young companies: Start ups with high growth potential; Academic Spin-off; New companies from existing industries exploiting new markets. Existing SMEs: One size does not fit all Different types of entrepreneurship need different types of Funds Companies already active in the Region (innovation, internationalization, etc.).

27 One size does not fit all Ex Ante assessment Need for intervention and the financial characteristics of the coinvestment facility have to be based on a market failure (ex-ante assessment Article 37.2 of the CPR: Must be carried out prior to decision to support financial instruments (Article 37.3 of the CPR), Justifies the size of support to the financial instrument, Determines the co-investment allocation within one financial intermediary to ensure sufficient diversification.

28 One size does not fit all Ex Ante assessment Identify: i) market failures, ii) suboptimal investment situations and iii) investment needs Evaluate: i) effective added value ii) consistency with the objectives of the programme, iii) state aid implications. Estimate additional public and private resources to be raised and leverage effect and evaluate preferential remuneration to attract counterparts Analyse lesson learnt from the past to be sure to build on existing knowledge Define the investment strategy: i) products, ii) focus and final recipients, iii) combination with grant support Specify expected results (achievement of specific priority objectices) Monitoring and reviewing provisions: methodologies and procedures for updating ex ante assessment

29 One size does not fit all Some examples of existing instruments Ingenium Emilia Romagna I: first Italian public-private fund; designed for early stage deals; Ingenium Sardegna Fund: public-private fund more oriented to expansion deals; Ingenium Catania: first Italian public-private fund; designed for early stage deals including additional measures linked to the development of the instrument;

30 One size does not fit all Indicator Emilia Romagna Sardinia Slovenia Poland Population GDP/capita , , , ,00 Inhabitants/Km 2 195,8 69,4 100,0 121,9 Youth unemployment rate 18,3% 44,7% 12,4% 23,7% Public exp in education (% GDP) 2,9 5,3 5,2 5,38 Number of Universities Productivity Level , , , ,40 EU Patents applications per million inhabitants 118,64 7,16 118,85 3,5

31 Take aways Financial instruments within ESIF can be used to support KICs A deal by deal approach is key to leverage at its best the contribution of the private sector Co-investment fits the need by managing authorities to support KICs and R&D results exploitation and engage private funds Co-investment facility (finance and services) to maximise impact (scouting, investment readiness etc.) The co-investment instrument attracts more informal investors (Bas) and contributes to their professionalisation. An ex-ante assessment is needed prior to any money allocation Financial Instruments must be designed in close co-operation with the private sector (is not just money but also expertise and know how (services, coaching,etc)

32 Early Stage Financing and Regional Development Presenting the new equity instruments of the ESIF Regional VC Schemes and Case Studies Luigi Amati META Group Brussels, July the 9 th 2014, Emilia Romagna Office, Brussels

33 Portfolio Time Period Zernike META Ventures Zernike Meta Ventures + Zernike Group 1993 present Average deal size # of Exits 110 Invested Total NAV* Avg holding period 5-7 years * For companies not exited is based on pre-money valuation of last round or other company s valuations

34 I fondi di ZMV Results from portfolio of funds Ingenium ER II Ingenium Sardegna ATI PRISMA I ATI PRISMA II In progress 14,000,000 34,000,000 30,000,000 5,000,000 7 Investments 12 Investments 12 Investments 7 Investments 2 follow on Fully invested 5 exits Ingenium Catania META Ingenium doo Ingenium ER I Ingenium Poland ,000,000 7,000,000 9,000,000 20,000,000 3 Investments 2 Investments 7 Investments 2 Investments + Scouting + BP Competition Fully invested

35 Fondo Ingenium Emilia-Romagna

36 One size does not fit all Ingenium Emilia Romagna I Ingenium Emilia Romagna I Fund has been the first public-private investment fund in Italy. It can finance only start ups in the early stage based in less dynamic part of the region; 7 million EURO under management; resources 70% public 30% private; focus on ICT, Biotech and innovative industries). A private management company responsible for all activities: deal sourcing, due diligence, investment, monitoring and divestment.

37 Ingenium Emilia Romagna II 50% Private Investors 50% Regione Emilia Romagna 14 Meuro Venture capital fund SEED FINANCING. START UP FINANCING EXPANSION FINANCING Innovative companies Based (o willing to be based in Emilia Romagna Up to 2 Meuro per company per year

38 Ingenium Emilia Romagna II Fund is the continuation of the previous fund It can finance companies in seed, start-up and expansion stage in all the region 14 million EURO under management resources 50% public 50% private; focus on ICT, Biotech and innovative industries. One size does not fit all Ingenium Emilia Romagna II A private management company is responsible for all the activities: deal sourcing, due diligence, investment, monitoring and divestment.

39 Fondo Ingenium Sardegna

40 Ingenium Sardegna fund 50% Private Investors 50% Regione Sardegna 34 Meuro Venture capital fund SEED FINANCING. START UP FINANCING EXPANSION FINANCING Innovative companies Based (o willing to be based in Sardegna Up to 1,5 Meuro per company per year Up to 6 Meuro max

41 Ingenium Sardinia Fund has been launched in One size does not fit all Ingenium Sardinia It can finance start up and expansion stage companies based in Sardinia; 34 million EURO under management; Resources are 50% public 50% private; focus on manufacturing and innovative companies. A private management company is responsible for all the activities: deal sourcing, due diligence, investment, monitoring and divestment. The prevalence of traditional companies and the public contribution oriented the fund more to expansion deals.

42 Ingenium Catania has been launched in One size does not fit all Ingenium Catania It can finance start ups based in the province of Catania; 2 million EURO of public resources to be co-invested with private investors at the same time and conditions on a 50% base. focus on innovative companies in ICT; A private management company is responsible for all the activities: scouting, due diligence, investment, monitoring and divestment. The scheme envisages a specific line of services for scouting and deal flow creation (business plan competition) financed 100%

43 Examples of investment portfolio Investing in start-ups Fund Management Biogenera Biogenera is a biotech company engaged in research and development of treatment for pediatric cancer. The company was founded in 2009 by two professors from Bologna University. The molecule got recognition of Orphan Drug from EMA the European Medicine Agency and it is now in this Phase I research. Company got 2 rounds of financing from around 40 business angels and ZMV Last valuation of the company by independent company Mln 43

44 Examples of investment portfolio Investing in start-ups Fund Management S5Tech Srl S5Tech developed a sophisticated communication system for Retail Points of Sale that allow a real time communication and interaction of labels and customers. ZMV invested in the early stage development phase of the company that is now signing distribution agreements with an important industrial group for the commercialization in Italia and Europe. 44

45 Examples of investment portfolio Investing in start-ups Fund Management Angiodroid developed and patented an innovative medical device for peripheral interventional angiography based on carbon dioxide controlled injection substituting traditional iodinated contrast media and eliminating side effects associated with renal or diabetic vascular disease. The company recently secured a first round of financing or around 1 mln Euro and will be looking for additional round to push the commercialization of its devices in US, China and Brasil. Angiodroid Industry: medical devices Investment size: ,00 Web: 45

46 Investing in start-ups Fund Management Mnumi offers a comprehensive IT solution for managing a digital printing house in the latest Webto-Print technology. The solution is unique and provides significant competitive advantage as it covers all needs of a printing house in one system. It covers all aspects from taking orders online, through editing them in a web browser, managing them inside a printing house, managing money flow to making detailed reports. In 2011 Mnumi was chosen by Xerox Polska as the most comprehensive and advanced software solution for printing houses. Not to be discloused to third parties September,

47 B-Shiver Location: Olbia Industry: Manufacturing Investment Stage: Expansion Investment date: 2012 ZMV investment: 3 Mln INGENIUM SNO Yachts is a company operating in the marine industry offering all kind of services for yachts ranging from 12 to 70 meters. Through the company B-Shiver, where the Ingenium Fund invested in 2012 to sustain the expansion stage, the group is producing and selling luxury yachts industry, under the brand Novamarine and Black-Shiver. Thanks to Ingenium investment, the company has been able to reach high worth customers mainly in the Arabic Peninsula and to expand his producing facilities in Sardinia.

48 Sar-Med Srl Location: Iglesias Industry: Biomed Investment Stage: Expansion Investment date: 2011 ZMV investment: 1,5 Mln INGENIUM Sar-Med is the manufacturing company of Medica Group, international conglomerate active in the biomedical industry. With two facilities in Sardinia, Sar-Med is mainly focused in the production of polysulfone fibers, filters, tubing sets and catheters thanks to the 3.600m2 plant in Iglesias and 5.000m2 in Villacidro dedicated to production and automated assembly of products sold in Europe and US. Medica Group has been admitted in May 2014 into the Elite Group by Borsa Italiana in order to be followed for a possible listing in Milan Stock Exchange in the following years.

49 FOLX TV Location: Ljubljana (Slovenia) Industry: TV, entertainment Investment Stage: start-up Investment date: March 2014 ZMV investment: 1,5 Mln Folx TV is a folks music entertainment TV program, with the entire production and post-production perfomed in Slovenia, while broadcasting on foreign, mainly german speaking markets (22 million households in Germany, Austria, Switzerland and German-speaking part of Italy). INGENIUM It is based on innovative program design with MTV type of approach with entirely in-hose production, offering young artists a platform to showcase their music and work, as well as a space for already recognized artists to enlarge their target audience and promote their music. In Germany there are approximately 520 television channels, bringing to the German television industry EUR 4.2 billion of revenues. Folx music is a trend, and its attractiveness growing rapidly among all the generations..

50 MYBAZE Location: Warsaw (Poland) Industry: e-commerce, ICT Investment Stage: seed Investment date: April 2013 ZMV investment: 50k MyBaze is running commercial activity in the scope of maintaining and developing the e-commerce website MyBaze. Within the activity conducted, the company develops the project MyBaze, constituting a virtual trading and communication platform where entities co-operating INGENIUM with the company present their products to the buyers, have opportunity to contact and communicate and to make transactions. If Facebook is part of people s private life, then MyBaze would be their economic life, where everyone can freely monetize things and time. It is both a social network and a shopping platform. Market opportunity is estimating a constant growth; on one side there are 240 mio customers in Europe who use internet, among those there are 39 mio potential customers for MyBaze platform. On the side of potential sellers, there are around 1 mio out of 2 mio sellers of furniture, art and fashion designers.

51 Main conclusions Take aways

52 Take aways A deal by deal approach is what was missing so far and is key to leverage the contribution of the private sector The co-investment instrument attracts more private investors (Bas, VCs) and contributes to professionalisation of the local community of business angels. The size of the fund must be consistent with the investment focus and critical mass A minimal size for an early stage fund is around 10/15 million; A minimal size for an expansion fund is around 30/40 million; Scouting costs are relevant for smaller funds. MAs should provide grants to cover this costs;

53 META Group

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55 Back up Slides

56 Delegated and Implementing Acts

57 Delegated Act Article 290 TFEU (1) and Implementing Act (Article 291 TFEU) Implementing Acts allow adoption of uniform conditions for the implementation of financial instruments Delegated Acts allow supplementing non-essential elements of the basic legislative act to provide for a coherent framework and continuity of guidance given previously by the Commission (1) COMMISSION DELEGATED REGULATION (EU) No 480/2014 of 3 March

58 Fis-Implementing Acts Regulation Common Provision Regulation (CPR) Article Art 33.3 a) the MA may provide a financial contribution to Fis complying with the standard terms and conditions laid down by the EC, by means of implementing acts in accordance with the examination procedure referred to in Art 143 (3) Art 33.9 The EC shall adopt implementing acts in accordance with the examination procedure laid down in Art 143 (3) laying down uniform conditions regarding the transfer and management of programme contributions, managed by the entities referred to Art 33 (4).

59 Delegated Acts 32(10): Purchase of land and combination of Technical Support Implementing Acts 33(3)(a): FI complying with standard terms and conditions 33(4): Role, liabilities and responsibilities of bodies implementing FI and selection criteria and products that may be delivered 33(9): Transfer and management of programme contributions 34(5): Management, control and audit arrangements 35 (3): Withdrawals of payments to FI 35(3): Models for submitting information with application for payments 36(4): Capitalisation of annual instalments for interest rate and guarantee fee subsidies 36(5): Criteria for determining management costs and fees on the basis of performance and the applicable thresholds 40(3): Reporting 59

60 The Co investment facility Equity Investment Fund for SMEs and start-up companies based on a co-investment model (Co-investment Facility) Private Public

61 The Co investment facility Key elements The Co-Investment Facility Provides equity and quasi-equity to eligible SMEs. Co-invest in SMEs at seed, start-up, expansion stage The duration is ten years + two of grace period (with the consent of the managing authority). will be a revolving instrument. Not only finance but also services Size between an indicative range of minimum EUR [10] million and maximum EUR [50] million. Could invest up to 10M in a single SME.

62 The Co investment facility The Co-investors Economically and legally independent from the coinvestment facility. Qualified long-term investors including venture capital funds, business angels, high net worth individuals, family offices, or companies with proven and sophisticated know-how and operational capacity in identifying, assessing, and structuring investments in final recipients. Must provide a different % of funding according to the stage of the target SMES: 10% for seed companies; 40% for start ups; 60% for expansion companies

63 The Co investment facility The Financial Intermediary (FI) Is a private or public entity. Takes all investment/divestment decisions with the diligence of a professional manager. Is economically and legally independent from the managing authority. Has to invest into the facility at least (1%, 4%, 6%, depending on the stage of investment). Will undertake, on a deal by deal basis, the due diligence to ensure a commercially sound investment strategy. Must select suitable co-investors. Investments within an eligible SMEs have to be profit-driven.

64 The Co investment facility The managing authority (MA) It shall not be involved in any individual investment/divestment decisions taken. It will evaluate the measure according to: numbers of projects financed; value of the investments financed; number of jobs created It must selected the financial intermediary through an open, transparent and non-discriminatory call The co-investment agreement The funding agreement Contract between the Financial Intermediary and coinvestors, which defines the terms and conditions for parallel investment in the final recipients. It is the agreement between the Financial Intermediary (FI) and the Managing Authority (MA).

65 The Co investment facility Additional measures linked to the development of the instrument The Co-investment fund may be combined with a grant type of support such as aid for initial screening prior to a formal due diligence OR advisory service to support the business development of the companies benefiting from the co-investment facility. The grant can be part of financial instrument operation or it can be provided through a separate operation supported by the operational programme.

66 Take aways 1/3 According to META Group experience in managing public-private risk capital funds: Knowledge Intensive Companies (KICs) are key for any region and need equity Financial instruments (FIs) within ESIF can be used to support KICs Co-investment facilities are suitable FIs for managing authorities willing to support KICs and R&D results exploitation and looking for Public Private Partnerships (PPPs) A deal by deal approach is what was missing so far and is key to leverage at its best the contribution of the private sector Co-investment facility (not only funding but also services) including grants and advice to improve impact (investment readiness etc.)

67 Take aways 2/3 In Financial Instruments will have broader scope and significant higher amounts of money More implementing options for MAs Off the shelf instruments not an obligation but an opportunity do deliver faster and safer to the final beneficiaries - State Aid compliant Better combination of FIs with other forms of support (grants and/or Technical assistance) Co-investment instruments must be designed in close co-operation with the private sector because is not just money but also expertise and know how (services, coaching,etc) Going from seed (including proof of concept) to expansion they are flexible facilities allowing, with good design, to reach multiple objectives. An ex-ante assessment is mandatory prior to any money allocation

68 Take aways 3/3 The size of the fund must be consistent with the investment focus of the fund: the financial need of an early stage company generally is smaller than an expansion deal A good size for an early stage fund is around 10/15 million; A good size for an expansion fund is around 30/40 million; Scouting costs could be relevant for smaller funds: such as early stage funds cannot be able to reimburse the costs to the Management Companies. MAs can provide grants to cover this costs; The co-investment instrument attracts more private investors (Bas, VCs) and contributes to professionalisation of the local community of business angels.

69 Ingenium ER I Ingenium ERII Ingenium Sardinia Umbria I Ingenium Umbria II Ingenium Catania META Ingenium doo Ingenium Poland ( 9Mill, fully invested) 7 companies in portfolio. Average investment 800K ( 14Mill) 7 companies in portfolio (2 follow-up Ingenium I); 3 in pipeline. Average investment 800K ( 34Mill) 13 companies in portfolio; 2 follow on in pipeline Average investment 1500K ( 30Mill) fully invested 12 companies in portfolio in progress ( 3Mill) 7 companies in portfolio 5 exits Average investment 100K ( 3Mill) Seed capital fund 3 company in portfolio Av. investment 400K Scouting and Business plan competition ( 10Mill) 1 Investment, 4 in pipeline ( 20Mill) 1 investment, 3 in the pipeline