Financial Instruments for Innovation

Transcription

1 European Commission Economic and Financial Affairs DG - Luxembourg, Unit L2 Jim Mc Ging - Head of Unit and Roger Havenith - Deputy Head of Unit Financial Instruments for Innovation Bruxelles, 14 November 2006

2 WHY FINANCIAL INSTRUMENTS?

3 SMEs on the European market EU25 + EFTA: approx 25 million SMEs: 99.8% of total number of enterprises (Micro 93%) 66% of total employment Access to finance second business constraint for 13% of SMEs (3,25 mio)* CIP financial instruments target approx. 500,000 SMEs *Source: Flash Eurobarometer 174 survey, September 2005

4 Debt finance main issues The main source of external finance for the majority of SMEs New bank requirements («Basel II») Collateral SMEs can provide often insufficient Specific financial needs in different phases of SME life cycle

5 Equity Investments European Private Equity Investments (2005) : 47 billion* Stage distribution by % of Amount Invested* Returns (IRR) as at ** Expansion 21,8% Replacement Capital 4,8% Start-up 5,0% Seed 0,2% Buyout 68,2% *Source: EVCA 2005 **Source: Thomson Financial, 2006

6 Venture Capital investments By country of management as % of GDP 17,4 bn 12,7 bn Source: DB Research

7 Venture Capital investments Number of deals (2005) Average deal size ( mio/ deal) , ,8 US EU US EU Source: DowJones VentureOne, E&Y 1Q2006

8 Venture Capital for early stages European VC - amounts invested in 2005 Trends in VC early stages - % of investments Seed 1% Start-up 18% Expansion 81% Source: EVCA Sources: DB Research: EVCA, PwC Money Tree

9 Pre-money Valuations US EUROPE Source: DowJones VentureOne, E&Y 1Q2006

10 CIP FINANCIAL INSTRUMENTS

11 CIP Financial Instruments Competitiveness and Innovation Framework Programme ( ) Entrepreneurship and Innovation Programme CIP Financial Instruments Objective: Support high growth potential SMEs and more traditional ones from pre-seed to early expansion stage Budget: 1.1billion (vs 500 mio for MAP)

12 CIP financial instruments - Meeting SMEs financial needs Enterprise s Revenue Public stock markets Venture Capital Funds Bank loans and guarantees Seed/early stage VC funds Business Angels Entrepreneur, friends, family Pre-seed phase Seed phase Start-up phase Emerging growth Expansion Valley of Death Enterprise s development stage HIGHER RISK LOWER RISK

13 CIP financial instruments - Meeting SMEs financial needs Enterprise s Revenue Risk Capital High Growth Innovative Companies Scheme (GIF) VC funds (~ 500 mio) o Seed and start-up o Early expansion stage (new) Business Angels (new) Capacity Building (~ 60 mio) Seed Capital Action Debt financing & guarantees SME Guarantees (~ 500 mio) Loan Micro-credit Equity and mezzanine (modified) Securitisation (new) Capacity Building Partnership with IFIs (new) Pre-seed phase Seed phase Start-up phase Emerging growth Expansion Valley of Death Enterprise s development stage HIGHER RISK LOWER RISK

14 CIP financial instruments - RISK CAPITAL (GIF) principles Commercially oriented / best market principles Minimum 50% of private investors Pari passu with private investors Catalytic effect Includes eco-innovation PRE-SEED & EARLY STAGE (GIF1) SMEs < 10 years Focus on high growth potential Support co-investment with business angels Typically up to 25% EU investment EXPANSION STAGE (GIF2) Lower EU intervention More sizeable VC funds Typically up to 15% EU investment

15 CIP financial instruments - SME GUARANTEES principles Adapted to market realities of each country/ region Additionality Risk sharing Instruments: Loan guarantees Micro-credit guarantees Equity and mezzanine guarantees Securitisation

16 Achievements ( ) EU budgetary funds committed VC funds Total funds committed 153 mio 920 mio SME Guarantees EU budgetary funds committed Total aggregate Loan amount mio mio 28 FUNDS + 14 VCFs in the pipeline (Investment Amount of EUR 150 M) Nr of Portfolios of Financial Intermediaries 69 Innovative SMEs Supported 323 Nr of SMEs supported Up to 31 December 2005

17 Achievements Leverage Effects VC funds SME GUARANTEES 6 of total funds for 83 of investment and 1 of EU funds committed 50 of loan amount for 1 of EU funds committed Total funds 153 EU Budgetary Funds Committed Amount of Investment Loan Amount 401 EU Budgetary Funds Committed

18 Geographical Distribution (MAP) EU 25+NO+BG+RO+TR

19 MAP financial instruments in Norway Instrument: Loan Guarantee Financial Intermediary: Innovation Norway Guarantee Cap: 2 million Availability Period: Average loan amount: * Nr of SMEs: 20* Instrument: Microcredit Guarantee Financial Intermediary: Cultura Bank and Microinvest Guarantee Cap: 93,750 Availability Period: Average loan amount: * Nr of SMEs: 15* * At 30 June 2006

20 CIP financial instruments - Economic impacts VC funds SME Guarantees Nr of SMEs * Nb of jobs * Average cost * + Securitisation

21 Outlook Smooth transition from MAP to CIP Reach significant number of SMEs in participating countries (including EFTA!!) seeking finance Help SMEs to grow and innovate using costeffective instruments

22 Thank you for your attention