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This project is funded by
the European Union
Integrated Innovation Support Programme
Venture Capital – Challenges & Support
Barriers and Solutions
Robert Sheffrin
IISP Finance Expert & SPEA Board Member
30th September 2013
This project is funded by
the European Union
2
“What is the problem”?
Many good SMEs in Serbia
…So why can’t most access funding?
Bank funding not available to all Bank funding not suitable for all Funding gap Most don’t know how to access funding
Integrated Innovation Support Programme (IISP)
This project is funded by
the European Union
3
Integrated Innovation Support Programme
EU Project:
1. Development of innovation support services
2. Development of new financial instruments (venture capital)
supply of venture capitaldemand for venture capital
This project is funded by
the European Union
4
Private Equity & Venture Capital
Private Equity is the provision of long term, equity (share) capital to private companies with high growth potential
Venture Capital is a type of Private Equity focussed on start-up, early stage companies and emerging growth companies
Integrated Innovation Support Programme (IISP)
This project is funded by
the European Union Companies that have received VC funding
This project is funded by
the European Union
6
Example – Biotech start-up
Integrated Innovation Support Programme (IISP)
Activity – crop nutrition & protection products 2003 – start up funding. Owner + business angel 2004 - £50k seedcorn finance (venture capital fund) 2005 – 6 patents – intellectual property rights 2005/06 - £1m. VC funds & business angels 2006 - £3.85m AIM (London junior stock market)
www.plantimpact.com
This project is funded by
the European Union
7
Bank vs Venture Capital
Integrated Innovation Support Programme (IISP)
Bank Debt• Collateral
• Capital & interest repayments
• Risk of withdrawal
• Monitoring relationship
• REPAYMENT – regardless of profitability
Venture Capital
• Risk funding (equity capital)
• Return only on success
• Committed
• Partner relationship - support
• GROWTH – no repayment until sufficient profit and value
This project is funded by
the European Union
8
Serbia - Issues/Problems
International - perception not good Demand for investment – underdeveloped entrepreneurial
culture Supply of investment – limited access to finance /
underdeveloped capital markets / limited intellectual property protection
This project is funded by
the European Union
9
Solutions – stimulating growth
Supply Legislation for venture capital funds Encourage investment by Serbian institutions into venture
capital funds Improve capital markets – facilitate exits from investments Tax regime – incentivise entrepreneurs & investors Fiscal consolidation & further reform of para-fiscal
charges
Demand Ease barriers to technology transfer Make SMEs investment ready - entrepreneurial
education & much more!
This project is funded by
the European Union
10
What an investor looks for
Integrated Innovation Support Programme (IISP)
High growth potential An ambitious management team that can achieve
the growth Product / service that has a good market and the
ability to reach that market Competitive edge / unique selling point Willingness to share ownership Exit route
This project is funded by
the European Union
11
20 things investors like to see
Ability to Implement Management and
visionary leadership An impressive
management team and board
Credible professional advisors
Teamwork across the company
History of the business to date
Compatibility – can you work with them?
Integrated Innovation Support Programme (IISP)
Ability to Compete A clear strategic plan Market size (local and
international) Competitors and
differentiation Barriers to entry Future products
/services potential Relevant technology How you beat
competing technology Intellectual property
you own
Return on Investment Realistic funding
requirements Assumptions used Financial plans How you are currently
financed An investable business
model A match between the
investors’ skills and the business opportunity
This project is funded by
the European Union
12
Key dimensions of investment readiness for Serbian SMEs
o Equity aversion – why SMEs are reluctant to work with investors
o Investability – what investors see as good business models
o Presentational failings – how SMEs can improve their ‘pitching’ and presentations of their investment opportunities
Integrated Innovation Support Programme (IISP)
This project is funded by
the European Union
13
Investment Readiness
Training for Serbian SMEs:• Raise awareness of investment opportunities• Develop understanding of needs of potential investors • Make SMEs attractive to investors• Formulate business investment propositions• Present SME ‘pitches’ to win the investment • Prepare for successful negotiations
• Materials developed - training in progress• E-learning platform by December 2013
Integrated Innovation Support Programme (IISP)
This project is funded by
the European Union
14
Thank you for listening….
Integrated Innovation Support Programme (IISP)
Robert SheffrinTel: + 381 (0)11 362 0923Email: [email protected] Web: www.iisp.rs