7th Venture Capital Forum

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The European venture capital landscape Bruno
Robino European Investment Fund Athens, 28 June
2006
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Agenda

• Private equity in Europe 2005 a record year
• EIF venture capital in Europe
• Vision for the future
• Conclusion

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• Private equity in Europe 2005 a record year

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Source EVCA / Thomson Financial Venture
Economics / PricewaterhouseCoopers
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Key points

• Fundraising
• more than double over 2004 reaching 72bn
• 80 of funds expected to be allocated to buyouts
• Investments
• reached a record at 47bn, a 27 increase over
  2004
• buyouts represent 68 by amount invested
• venture investments 23 over 2004,
  representing 27 by amount invested
• and 75 by number of investments
• Divestments
• at cost up to 52 at 30bn
• Write-offs decreased at around 5 of total amount
  divested

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Key points

• Investments benchmarks 2005
• Long term net return since 1980 10.3
• Top quarter return 22.9
• Increased distributions, with realisations
  above 2000 record level
• Strong performance compared to other asset
  classes

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• EIF venture capital in Europe

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EIF at a glance
1994 EU specialised financial institution for
SMEs, acting through Venture Capital (fund of
funds) and Guarantees for SME portfolios
AAA Subscribed capital of EUR 2 billion - 62
European Investment Bank - 30 EC for the
EU - 8 20 financial institutions

• PPP
• Art 2  pursuit of Community objectives  such
  as growth, employment, knowledge-based economy,
  innovation, regional development, Lisbon
• Art 24 generate an appropriate return on its
  resources  

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Venture Capital activities

• Acting as a Fund-of-funds
• Public Private Partnership, selecting funds
• Eligible to EU Objectives
• Able to generate risk-commensurate returns
• Biggest European early-stage investor (with a 15
  market share)
• Respected investor (even in the crowded lower
  mid-market)

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EIF mainly a manager of external resources
(mandates)
BMWA - ERP
European Community
Dahlia SICAR S.R.
EUR 600m
Etc
EUR 4 000m
EUR 800m
Up to EUR 1bn
Revolving
To be committed in venture capital funds and
financial institutions in the EU and Candidate
Countries
over 500 000 SMEs indirectly benefited from EIF
support
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European fund-of-funds market
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EIF Venture Capital

• EUR 3.2 bn have been committed in about 220 funds
• Disbursements represent 60 of the amounts
  committed
• Young age of the portfolio
• EUR 1.8bn still available for future investments
• 2 944 companies in the underlying portfolio
• Total invested by portfolio funds in these
  companies EUR 7.5bn

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Credentials

• Venture Capital commitments of EUR 3.2bn (as at
  end 2005)

Key investor in major markets Niche opportunity
seeker in smaller markets
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EIF vs the European Venture Capital market
EIF portfolio stage distributionby of amount
invested
European PE/VC market stage distributionby of
amount invested
Source EVCA / Thomson Financial Venture
Economics / PricewaterhouseCoopers

• EIF tendency towards early stage investments
  (49)
• EIF investments biased towards tech (56 in ICT
  and LS)
• EU tendency towards later stage buyouts (57)

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EIFs investment focus

• 49 of portfolio are early stage investments -
  EU average 12
  between 2000-2004 (source EVCA).
• 57 are tech-related, primarily ICT and life
  sciences,
• balanced by buyout, development and generalist
  (30).
• EIF always operates alongside private sector
  investors.
• Diversified geographical investment focus
  provides good opportunities outside main areas.
• Aims to attract more private sector funding to VC
  space.

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A unique positioning and mix of expertise

• The largest VC portfolio in Europe (about 220
  funds) with most of the current top quartile
  teams (core) and the emerging ones (satellite)
• A repeat investor in top funds
• Ability to construct portfolio that meets
  specific risk profile proprietary system
• Ability to structure transactions that meet the
  risk appetite of most potential investors
  financial engineering, guarantees

More complex products for more demanding clients
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EIFs Value-added

• Long-term, committed and pro-active investor
• Recognised know-how
• Rigourous selection and due diligence procedures
• Pari-passu cornerstone investor
• Active monitoring regular presence
• Widespread network in European venture capital
  industry
• Looking also at the more difficult segments
  (seed, first time teams)

More than money
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• EIFs vision for the future

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EIFs strategy

• Continue to develop EIF existing markets (Early
  stage, Expansion, Small BO)
• In parallel, promote new niches
• With the aim to
• increase the availability of risk capital in
  Europe
• stimulate the development of a high growth market
  in Europe
• improve the investment environment
• benchmark best practices in Europe

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EIFs focus
European Investment Fund
 VENTURE CAPITAL 
 PRIVATE EQUITY 
Tech Transfer Incubators
Business Angels
Expansion / Dev.Capital
Early Stage
Pre-Seed Seed
Later-stage Buy-out IPOs
New policy areas
GAP
CIP COVERAGE
CURRENT MANDATES COVERAGE
SME LIFE CYCLE
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The innovation cycle covered by EIF

• New investment focus
• Business Angels
• Side Funds
• Tech transfer
• Incubators
• Pre-Seed

Fundraising underway in these new areas
CIP TTA JEREMIE

• Existing markets
• Early Stage
• Expansion
• Development Capital

New fundraising in our existing markets
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CIP Competitiveness Innovation Framework
Programme

• Successor programme for MAP for period 20072013
• European Commission proposal was adopted on 6
  April 2005
• Co-decision procedure by European Council
  Parliament
• Objectives
• Generate economic growth and create more jobs
• Boost the productivity, competitiveness and
  innovation capacity

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CIP the proposed instruments

• High Growth Innovative Companies Scheme (VC)
  (EUR 518m)
• GIF1 Early stage (ex ETF Start-Up)
• GIF2 Later stage (job creation, generation
  change)
• SME Guarantee Facility (EUR 468m)
• SME loans, Microcredit, Equity and mezzanine
• SME loan securitisation risk-sharing scheme
• Capacity Building (EUR 60m)

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Tech Transfer

• There is considerable weakness of early stage
  ventures in Europe due to structural
  differences in the transfer of technology from
  labs to industry (compared to US) . ECFIN paper
  for the EFC March 2005

US University Revenues (m) Columbia
University 115.4 University of California
65.3 Stanford University 50.0 University of New
York 49.9 Sloan Kettering Institute for Cancer
Research 43.3 University of Rochester 33.5
Europe University Revenues (m) Pasteur 32.6 Ed
inburgh University 4.5 Utrecht
4.0 Cambridge 3.1 INRIA 3.0 VIB
2.7
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Technology Transfer
Looking for new funds from EU to stimulate tech
transfer
RD
Tech transfer / proof-of-concept
Marketable product
Funding FP7
Funding CIP
Funding gap
Technology Intellectual Property
Prototype Intellectual Property
Potential exits for the SPV projects Licensing
to corporation Sale to corporation Purchase /
investment by other investors IPO
Virtual LAB Created by leading RD Centres
Licensing Special Protection Vehicles
Spin-off Special Protection Vehicles
Hybrid Special Protection Vehicles
Investment focus of TTA
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JEREMIE

• JEREMIE is an initiative of the Commission (DG
  Regio) launched in October 2005
• Joint because it combines resources from EC,
  National Public Authorities, EIF, EIB and/or
  other International Financial Institutions (IFIs)
• JEREMIE is not an organisation, but a series of
  coherent actions
• Main Targets
• Optimising use of ERDF funding for enhancing the
  access to finance for SMEs through sustainable
  and  revolving  financial instruments
• Leveraging ERDF funding with EIB loans as well as
  EIF expertise in creating tailor-made instruments
• Develop the role of Entrepreneurship in EU

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JEREMIE Phases
2006 2007
- 2013
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 Multiplier effect on
the budget by attracting EIB IFIs lending
IMPLEMENTATION OF NATIONAL FUNDS
EVALUATION PHASE
Preparation of Operational Programmes
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Conclusion Private equity as winemaking?

• It is easier to pick a good wine if one starts
  with a list of the vintage years.
• As in wine-making venture capital has its good
  years and of course its bad years.
• Sometimes the quality of the year is not apparent
  until some maturation has taken place, but in
  many cases the indicators are apparent from the
  environment and maturation merely serves to
  confirm what everybody feared in the first place
  ...
• Quality brands will always stand out.
• Chris Smart, General Partner at IDGVE, 2002.

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Thank you for your attention
European Investment Fund tel. [phone]
1 fax [phone]
Bruno Robino b.robino_at_eif.org
For more info www.eif.org info_at_eif.org