Access to Risk Finance 2018-2020 Ignacio Puente Policy Officer Access to Finance and SMEs DG Research & Unit B.3 - SMEs, Financial Instruments and State Aid" NCP Academy Webinar - 06/11/2017
Financial Instruments Intervention Logic Guarantees & Debt Programmes Equity Programmes Public Stocks EIB InnovFin products COSME Equity Facility for Growth InnovFin SME Guarantee SME Initiative COSME Loan Guarantee Facility InnovFin VC / FoF InnovFin BA ERASMUS+ Student loans InnovFin Tech Transfer PRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH DEVELOPMENT SME Development Stages HIGHER RISK LOWER RISK
InnovFin aims to facilitate and accelerate access to finance for innovative businesses and other innovative entities in Europe and H2020 Associated Countries. Research and
Horizon 2020 Access to Risk Finance - Basics 1)What support will be on offer? - Risk-sharing in the form of loans and guarantees - Risk finance in the form of equity - Accompanying measures 2)For who or what? - RDI-driven/ innovative SMEs & small midcaps - Ambitious RDI projects carried out by a variety of recipients (companies, standalone projects, SPVs, Universities, Research Centres etc.) 3)To serve which purpose? Ø Stimulate more investment in research and innovation, notably by the private sector Ø No market distortion: intervention only to address financing gaps in the R&D&I delivery chain (notably due to high risk), and as such help translate R&D results to the market (innovation)
ARF WP 2018-2020: outline of elements Objective #1: better EFSI/InnovFin complementarity Ø Avoid overlaps and cannibalisation Ø So re-orient InnovFin on more risky projects to deliver on major policy objectives involving overcoming systemic market failures (Circular Economy, Energy Union...) è boost thematic finance Ø Develop joint products where relevant Objective #2: tackle bottlenecks Ø Expand eligibility criteria for EDP (include NER300 ones) and possibly ID Ø Reallocate some products / budgets to EIF (e.g. MidCap Guarantee) Ø Boost debt-finance take-up: Ø R&I Infrastructures + Universities + RTOs (InnovFin Science) Ø 'Moderate & Modest Innovators' + ACs (InnovFin MMI)
New Generation of Debt and Equity Instruments Succeeding FP7 debt (RSFF, RSI) and CIP early stage equity (GIF1) But more ambitious, in size (almost 3 billion out of which 1.37 billion for 2018-2020) and in scope (from early stage to expansion/growth stage and up to larger, mature companies investing in RDI) Implemented by a Delegation Agreement between the EU and the EIB Group (EIB and EIF), on the basis of a partnership based on experience, trust and professionalism where: - EIB and EIF act as EU Entrusted Entities - EIB Group is matching EU financial contribution - EU and EIB Group are risk-sharing partners
ARF WP 2018-2020: outline of elements Three (re)groups of direct and indirect products Ø Products of a general nature building on 'Large Projects' and introducing 'InnovFin Science' NEW & 'InnovFin MMI' new to improve focus and visibility Ø Thematic finance products: EDP, ID & 'Thematic Investment Platforms' NEW Ø InnovFin Corporate Research Equity Pilot InnovFin&EFSI products NEW Three portfolios + holding fund Ø Debt-type: forthcoming InnovFin Science & InnovFin MMI projects + some EDP, maybe some ID, and existing InnovFin Large Projects Ø Equity-type: Corporate Research Equity Pilot and some EDP, most/all ID Ø Blending Instrument Pilot
Basic features Stage coverage Early Stage focus Investment size up to EUR 50m Pre-seed, seed, start up phases (seed & A rounds included) Pari-passu, at least 30% investment from private investors Focus on Horizon 2020 objectives (e.g. ICT, life sciences, clean energy) Up to 25/50% of total commitmen ts x2 of investment ticket in eligible investees EU + Horizon 2020 Associated Countries Call for Expression of Interest PRE-SEED PHASE PRE-SEED PROOF PHASE OF PRO CONCEPT O F O F SEED PHASE START-UP START-UP PHASE EMERGING ING GROWTH GROWTH DEVELOPMENT SME Development Stages
InnovFin Equity- Implementation 11 operations with TT and Early Stage Intermediaries are currently considere 12 signed with, TTFs, Business Angels and early-stage Venture Capital. EUR 428 million of expected investments (TT activities, ICT, Clean-Tech, Lifescience, H
How does the product work? EIF 50% Guarantee Financial Intermediary New Loans/ Leases Innova2ve SMEs and Small Mid-Caps Open Call for Expression of Interest: Already 121 agreements signed covering 37 countries Enabling over EUR 10.8bn of loans/ leases to innovative SMEs and Small Mid-Caps. Manufacturing, Retail trade, Wholesale trade, ICT Architectural and engineering activities
Eligibility Criteria (one to be fulfilled) 1 will use the financing to develop innovative products/processes/services 2 are fast-growing enterprises have spent on R&I more than 5% of their total operating costs in at least one of the three years preceding 3 the loan application have spent on R&I more than 20% of the requested loan amount and will increase their R&I expenses for 4 at least their loan amount 5 will spend more than 80% of the loan on R&I activities 6 have received innovation support from European or national/regional schemes 7 have been awarded an innovation prize by an EU institution/eu body 8 have registered at least one technology right and will use the loan to exploit it 9 have received an investment from a venture-capital fund/business angel 10 will use the financing to enter a new product or geographical market 11 have spent on R&I at least 10% of their total operation costs in at least one of the past three years have spent on R&I at least 10% p.a. or more than 15% of their total operating costs in at least one of the 12 past three years (small mid-cap) have incurred R&I expenses qualified in the past 36 months by competent national or regional bodies or 13 institutions as part of general support measures approved by the EC have been designated in the past 36 months as an innovative company by an EU or national or regional 14 institution or body
What transactions can be supported? Purpose of Financing (Term Loans + Revolving Credit FaciliBes): Tangible & Intangible Assets Working Capital Business Transfer Loan amount: min EUR 25k - max EUR 7.5 m (only Senior Debt Loan maturity: min 1 year - max 10 years Currency: EUR and local currency Max (counter-)guarantee amount is EUR 200m per intermediary (EUR 500m per intermediary group)
Two Products for Innovative Mid-Caps 1. Indirect Financing (Risk Sharing) for Senior Loans: Mid-Cap Guarantee EIF 50% Guarantee EUR 25m Financial Intermediary New Loans Innova2ve Mid-Caps 3,000 Employees 2. Direct Growth Financing (Mezzanine): Mid-Cap Growth Finance EIF Growth Finance / Mezzanine EUR 25m Innova2ve Mid-Caps 3,000 Employees
New strategic amendment to EIB products Rationale: Better complement EFSI as new products address geographies and risk segments that are constrained or excluded under EFSI. InnovFin Science aims at supporting R&I investments by public or private entities such as research institutes, universities and research organizations, and infrastructures. InnovFin Science will be delivered directly by the EIB in the form of debt or equity-type operations from EUR 25m. InnovFin Emerging Innovators bridges the R&I investment gap in Moderate and Modest Innovator EU Member-States (per the European Scoreboard) and Horizon 2020 Associated Countries. The product is delivered by the EIB or a financial intermediary via loans and equity-type operations starting at EUR 7.5m. InnovFin Corporate Research Equity addresses the market gap for large equity-type investment in the form of contingent loans, in particular with mid to long term repayments profile that are directly linked to product development cycles. The investments are delivered by the EIB or a financial intermediary and target amounts of EUR 75m. InnovFin Thematic Investment Platforms will provide access to finance via debt or equity-type products to innovative projects in specific thematic areas and will be managed by financial intermediaries selected through open calls for expression of interest. InnovFin Circular Bioeconomy Investment Platform to be launched in 2018.
New Pilots InnovFin Equity Crowdfunding Pilot InnovFin Crowdlending Pilot complementing InnovFin SME Guarantee Blending Instrument Pilot InnovFin Uncapped Guarantee for Subordinated Debt
Which projects can be supported? Pre-commercial stage; technology needs to be scalable Loan: EUR 7.5m EUR 75m; EUR and local currency; maturity of max 15 years; EIB finances up to 50% of project costs. Comprehensive due diligence including project due diligence (technical, financial, economic) EIB standard documentation
Which projects can be supported? Infectious diseases Innovative Vaccines, drugs Medical and diagnostic devices Manufacturing plants Projects which have passed pre-clinical stage and for which clinical validation is needed for further development Loan: EUR 7.5m EUR 75m; EUR and local currency; maturity of max 7 years; EIB finances up to 50% of project costs. Broad range of products from standard debt instruments (i.e. senior, subordinated, and mezzanine) to risk sharing instruments (RSL) with forgiveness options Comprehensive due diligence including project due diligence (technical, financial, economic) EIB standard documentation
Enabling access to finance Projects Advisory Improve bankability/ investment readiness Enable earlier/ faster access to finance Light Project Advisory Arctic Arc Fuel Cells and Hydrogen Joint Undertaking (H2M) Philips Health Continuum Projects Advisory Pipeline Developme nt InnovFin Advisory Transfer of Lessons Learned Horizontal Activities Synergies between Projects Advisory and Horizontal Activities Horizontal Activities Improve framework conditions for financing Develop business case for new financing mechanisms in RDI sectors Prepare studies on increasing effectiveness of financial instruments to address specific sector/rdi policy objectives Circular Economy (CE) Key Enabling Technologies (KETs) Infectious Diseases Financing Facility (IDFF) Bio-economy RTOs/EARTO
New Web Tool http://www.eib.org/products/helpingyouinnovate/index.htm
Demand side InvestHorizon 2.0 PROGRESS-TT 2.0 Supply side Financial Inst. Grant schemes Investment Gap a supply side approach to address access to finance issues must be accompanied by demand-side initiatives which enhance the quality of deal flow Mason, C. and Kwok, K. (2010)
Horizon 2020 q http://ec.europa.eu/research/participants/portal/desktop/en/ opportunities/index.html q http://ec.europa.eu/programmes/horizon2020/en/area/smes q http://ec.europa.eu/programmes/horizon2020/en/h2020- section/access-risk-finance q http://ec.europa.eu/programmes/horizon2020/en/h2020- section/innovation-smes EASME http://ec.europa.eu/easme/sme/ Eurostars - http://www.eurekanetwork.org/activities/eurostars SME Techweb http://ec.europa.eu/research/sme-techweb/index_en.cfm Horizon 2020 Financial Instruments q Finance for Innovators (InnovFin products) http://www.eib.org/products/blending/innovfin/products/ index.htm EU Access to Finance http://www.access2finance.eu More Information
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