Role of the State

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Role of the State Partnershipwith the Private
Sector to stimulateAccess to Finance for SMEs
Denis Marnane Head Equity Venture Capital
Investment Services Enterprise Ireland,
Dublin www.enterprise-ireland.com
IRE Workshop Innovation Financing on Regional
Level Ministry of Education Prague - 15/11/04
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ENTERPRISE IRELAND

• MISSION
• Accelerate National and Regional Development by
  working with Irish companies to grow and compete
  in world markets.

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AGENDA

• Focus of Enterprise Ireland
• Enterprise Irelands clients
• Enterprise Ireland development approach
• Enterprise Ireland- Direct Investor
• Enterprise Ireland- Seed and venture capital
  investor

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IndustrialDevelopment Strategy- two parallel
tracks

• Overseas Direct Investment
• (IDA-Ireland)
• Local Industry Development (Enterprise Ireland)

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Enterprise Ireland

• Resources
• 30 overseas offices
• 8 regional offices
• Staff 950
• Budget 2004 Euro 260m.

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Who are our clients?

• Manufacturing and internationally-traded services
  companies employing ten or more
• High-growth start-ups
• New businesses that are likely to see sales grow
  to around 1.27m and employment to between 10 and
  20 people in early years and export oriented
• Overseas companies in the food, drink and timber
  sectors that seek assistance to locate in Ireland

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EI Client Base

• Irish-owned employing 10 2,900
• Irish-owned emerging start-ups 300
• Overseas Natural Resources 100
• Total 3,300
• Over 90 of EI Clients are SMEs employing less
  than 250.

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EI Approach -Existing Clients
RD
Production/ Operations
Finance for Growth
Marketing
HR Development

• Support for
• development
• plans
• Seed and
• Venture
• Funds

• WCM
• Supplier Development
• Benchmarking
• Expansion facilities

• RD/ RTI Support
• Innovation. Management Training
• Technology Transfer
• Partnership

• Market assessment
• EI Incubator offices overseas
• Targeting OEM customers
• Partner identification

• Training initiatives to
• develop capabilities
• and address specific issue
• Strengthen management

RD
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Sectoral Level

• Development plan for each sector
• Lessen dependence on primary processing, low
  level assembly, and sub supply
• Drive productivity improvement, scale and
  partnerships WCM, supplier development
• Focus on growing higher Value Added sectors eg
  Prepared Consumer Foods, Proprietary Electronics/
  Engineering Products, Healthcare / Biotech,
  Software, ITS
• Support increased investment in Innovation,
  Design and new high Value Added products
• Focus on and support export led growth and
  internationalisation
• Develop Human Resource capability

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New Start ups and Emerging Sectors /
Technologies

• Central element in EIs strategy
• Dedicated team for each main sector
• Seed and Venture funds
• Targeting emerging sectors / technologies

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Comprehensive Services

• Feasibility Studies
• Equity Participation
• Development Grants
• R D
• Venture Capital
• Management Development
• Productivity Quality
• Continuous Professional Development
• International Marketing

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Sources of Equity FinanceStage of Business
Development
RD
Start-up
Early growth
Accelerating growth
Sustaining growth
Maturity growth
Stage in Cycle
Proof of Concept Funding
Seed Corn
First Round
Second Round
Development Capital
Replacement Capital MBO / MBI Development Capital
Type of Funding
Public Sector
Founders, family and friends
Business angels
Source of Funding
Venture capital funds
Corporate venturing
Public listing / IPO
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Enterprise Ireland as Investorin Irish Industry

• Ordinary Shares High potential start-ups (HPSU)
• Preference Shares (with conversion option)
• Preference Shares (Expansions/Developing
  companies)
• Normally 5 year Term with low coupon rate
• Redemption after 5 years

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Enterprise Ireland as Investorin Irish Industry

• EI will typically take up to 10 of the share
  capital
• Balance of funding in the form of grants and/or
  preference share normally on a 50/50 basis
• Convertible preference shares may be used
• Very early stage start-ups milestone funding
  e.g.
• Completion of critical element of RD activity
• Development of a Beta Model
• A patent application in a specific location
• The level of EI funding determined by the
  potential level of exports and job creation

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Enterprise Irelands Direct Equity PortfolioAs
at 31st December 2003

• Overview
• 600 investee Companies i.e. Ord.Shares Pref.
  Shares
• Investing since 1988
• 248m - Valuation at Cost
• 300 Companies
• Ordinary Shares
• Convertible Pref. Shares
• 9 Quoted
• Realisations 251m

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RISK FUNDING PROFILE
Stock Market
Venture Capital/ Corporate Venturing
Venture Capital
Enterprise Ireland/ Venture Capital
Size of risk Funding Requirement
Seed Venture Capital
Entrepreneurs / Family Business Angels Enterprise
Ireland
Stage of Development
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THE SEED VENTURE CAPITAL MEASURE OF
THE OPERATIONAL PROGRAMME 1994 - 1999
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Seed/Venture Capital Objectives

• The Seed/Venture Capital Measure under the
  Operational Programme 1994-99 was targeted at
  Venture Capital Funds and Promoters with the
  overall objective of stimulating the growth and
  employment potential of growth oriented
  enterprises through the provision of additional
  equity funding at the lower end of the
  seed/venture capital market.
• Venture Capital Funds or promoters with
  management resources and expertise and a
  commercial remit.
• To fill the gap left by existing venture capital
  funds.
• To stimulate the investment by the Private Sector
  of funds into Venture Capital in a process of
  partnership through matching EU (Public) and
  private finance.
• To specifically assist start-up operations and
  early stage development companies.

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FUND STRUCTURE

• Structure Size of Investment
• Limited Partnership Less than 1m first round
• Manager Investment Criteria
• Private Sector Technology/Knowledge based
• Target Market Investing Instruments
• SMEs, Start-ups, and Ord. Shares, Prefs.
  Convertible
• early stage companies. Loans
• Investment Policy Post Investment
• To make commercial Will be an active investor
• investments in the with Board representation.
• target companies.

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Seed Venture Capital Programme 1994 1999 (EU
Seed Venture Capital Measure under the
Operational Programme for Industrial Development
1994 1999) Performance to December 2003

• Funds Set up 15 (16 Approved)
• Total Funds Committed 138 million
• Cash Returned 35 million
• EU Commitment 44 million
• Invested 119 million
• Number of Investees 130
• Number of Investments 383

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Seed Venture Capital Programme 1994 -
1999Analysis of Investments by Stage of
Development (by value) (1996 2003)

• Start-up 31
• Early Stage 43
• Development 23

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Seed Venture Capital Programme 1994 -
1999Breakdown of Investments by Sector(1996-
2003)

• Software 71.1
• Communications 11.6
• Manufacturing 8.0
• Lifesciences 4.4
• Miscellaneous 3.5
• Food 1.4

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Seed Venture Capital Programme 2001
2006Funded under National Development Plan
2001 2006

• Objectives of New Programme
• Continue the development of Seed and Early Stage
  Venture Capital Industry for SMEs
• Encourage investment in sectors difficult to
  finance
• Encompass wider geographical perspective
  encourage regionally based funds

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Seed Venture Capital Programme 2001 20069
New Funds Established in 2001

• EIs commitment 82.5m leveraging 339m
• 2 Regionally based funds
• 3 Regionally focused funds
• 2 General funds with a bias towards the regions
• 2 Bioscience

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Seed Venture Capital Programme 2001 2006July
2002 a new call for Expression of Interest was
made

• Same objectives with additional requirement of-
• Ability to enable and support entrepreneurial
  activity
• Provide seed and early stage funding to research
  based start-up companies (e.g. funds linked to
  Research centres and Science Parks)
• Funds with entrepreneurs / Business Angel backing
• First round investments of less than 500,000

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Funds Established Under 2001-2006 Programme

• DUBLIN BASED NATIONAL FUNDS
• 4th LEVEL VENTURES (17M) - UNIVERSITY FOCUS
•  
• Delta II (90M) - COMMS/TECH/SOFTWARE/LIFESCIENCES
  
•  
• EVP (5M) - HPSU ICT SECTOR
• THE HOTORIGIN FUND 1 (2.3M) - EARLY STAGE TECH
  COMPANIES
• GUINNESS IRELAND ULSTER BANK FUND (19M) -
  GENERAL FUND
• BOI VENTURE CAPITAL FUND (19M) - HIGH GROWTH
  MANUFACTURING REGIONAL FOCUS
• TRINITY VENTURE FUND (138.7M) HIGH TECH FUND
  WIRELESS/TELECOMMS

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Funds Established Under 2001-2006 Programme

• SECTORALLY FOCUSED 
• IRISH BIOSCIENCE VENTURE CAPITAL FUND (20M)
  (SEROBA)
• EUROPEAN BIOSCIENCE FUND (12.7M) (GROWCORP)
• GLAMBIA INVESTMENT FUND LIMITED (6M) (FOOD
  COMPANIES)
• SEER Partners Limited Partnership (25.0M)
  (OPTRONICS/PHOTONICS)
•  
• REGIONALLY BASED
•  
• BOI KERNEL CAPITAL PARTNERS (19M)
•  
• ENTERPRISE EQUITY INVESTMENT FUND LTD (16M)
• DUBLIN SEED CAPITAL FUND (DBIC) (2.8M)

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Seed Venture Capital Programme 2001 2006
Performance to June 2004

• Funds Set up 15
• Total Funds Committed 95 million
• Private Sector Funds Committee 310 million
• Invested 112 million
• Number of Investees 67
• Number of Investments 177

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To download Seed Venture Capital Report 2003

• Go into Enterprise Irelands website i.e.
• www.enterprise-ireland.com
• Click on Publications icon on top of page
• Click on Finance
• Click on Seed Venture Capital 2003 Report