Private Equity & Venture Capital in South East Europe: broken dreams or hidden potential?

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1 Private Equity & Venture Capital in South East Europe: broken dreams or hidden potential? Mirna Marovic President Croatian Private Equity and Venture Capital Association (CVCA)

2 Is there a fertile ground in the region for attracting Private Equity&Venture Capital investors? Ljubljana Zagreb Sarajevo Podgorica Tirana Belgrad Pristina Skopje

3 Is there a fertile ground in the region for attracting Private Equity&Venture Capital investors? Ljubljana Zagreb Sarajevo Podgorica Tirana Belgrad Pristina Skopje

4 Venture Capital Ecosytem Entrepreneurs Government Investors Education R&D Academia Venture Capital

5 Lessons Learned from Yozma Experience: Ingredients for Success Entepreneurs Entepreneurial spirit and attitute must-win Go-global approach Proven ability to deliver competitive product/service Government / Public Investor Market failure conditions Government as a catalyst Risk sharing Predetermined exit conditions No government control Indirect investments (funds) Professional VC funds Capable to raise funds Choosing the right investments Managing the investments Building value for exit

6 Proxy for innovation ecosystem: R&D Expenditure as % of GDP EUROPE 2020

7 Overview of the public and IFIs sponsored intiatives to jump start venture capital and private equity markets in the region Slovenia VC Program EU funds Private Investors Ljubljana 6 VC funds EUR 71 m Croatia FGS Program Croatia state funds Private Investors 5 PE funds EUR 274 m Zagreb Sarajevo Podgorica Tirana Belgrad Serbia Innovation Fund World Bank 1 VC fund Pristina Skopje EUR 8 m Regional VC (CEE) EBRD VC EUR 100m Just lanuched Western Balkans IFIs, donnors VC EUR 30-40m PE EUR 44-55m Lanuch 2012/13

8 What makes Croatian PE unique? Croatian LP/GP model One of two CEE countries who has succeeded to mobilize local savings into private equity: local LPs are the most important source of funds (pension funds, insurance companies, large corporates) since 2003 Pension funds are allowed to invest in private equity funds since 2007 and all pension funds are investing in local private equity funds Croatian Government sponsored initiative to jump-start private equity market resulted in 10x increase of available investment amounts for the industry: five new funds with total commitment of EUR 274 million recently formed:. Alternative Private Equity EUR 82 million Quaestus Private Equity II EUR 72 million (second fund) Nexus Private Equity EUR 52 million (second fund) Prosperus Invest EUR 47 million Honestas Private Equity EUR 21 million

9 What makes Croatian PE unique? Outlook and lessons learned Outlook: impressive success of the Government sponsored private equity initiative has potential to increase significance of private equity activity in Croatia as well as prospects of EU Accession. Risks are on the macro-side as economy is slower to return to growth levels and has other macro-risks. Croatian success story in successfully mobilizing domestic savings into Private Equity funds could be replicated to other markets Most SEE markets are example of market failure with regards to private equity and venture capital: there is an excess of demand for equity capital, expressed and unexpressed, and lack of supply of risk capital Almost every developed country has developed a public support program to develop private equity industry Combining public and private funds to support development of Private Equity industry may be the key to solve market failure! IDEA Croatian success story can be replicated to other markets in the region

10 Transversing the Valley of Death Business Angles Innovation Fund Slovenia VENTURE CAPITAL PRIVATE EQUITY SEED CAPITAL R&D Importance of developing risk capital at all stages

11 Deals & Opportunties: Cherry Picking in the Region Ljubljana Zagreb Sarajevo Podgorica Belgrad Pristina Tirana Skopje

12 Deals & Opportunties: Selected Private Equity Investments in SEE Ljubljana Zagreb Sarajevo Podgorica Belgrad Pristina Tirana Skopje

13 VentureXchange South East Europe Investment Opportunities VentureXchange South East Europe initiative to develop private equity and venture capital markets in the SEE region Datebase of investment projects operational from September 2012 (free access to qualified investors subject to NDA) Competition for the best investment opportunities in the region (finalist to be announced mid-november 2012) 13

14 Private Equity in SEE can do better! Faster Higher Stronger Region needs convergence plus story... SEE weathered well the recent crisis and has a positive growth outlook. However, the growth story is not enough as the structural weaknesses are impeding the region to become again the global growth engine! Need to change the risk perception of global investors community... SEE offers EU-like investment environment! Government agencies, local investors and GPs have a good story to tell... Valuations are at record low and early birds will have advantage of ripping huge returns exceeding 40%!

15 Contact Details Thank you for your attention. Mirna Marovic President Croatian Private Equity and Venture Capital Association Website: and 15

16 Events, competitions and networking an initiative to develop Private Equity and Venture Capital markets in the region Database of investment projects