Venture Capital in CEEVenture Capital in CEE– – challenges and drivers challenges and drivers

Sylwester JanikSylwester Janik

MCI Management MCI Management

MCI Management MCI Management

Who we areWho we are

MCI Management SA is one of the most established and experienced private equity management firms in CEE, focused on venture and growth capital.

Founded in 1999; listed on the Warsaw Stock Exchange since February 2001 with institutional and private investors.

Over PLN 300 million (~€90 million)* of total assets under management.

Four funds under management:

TechVentures 1.0TechVentures 1.0- early stage and growth technology fund (VC)

EurEuroVentures 1.0oVentures 1.0- mid-market buyout fund (PE)

HelixVenturesHelixVentures Partners Partners 1.0 1.0- seed & start-up technology fund (VC)

BBioVentures 1.ioVentures 1.00- early stage health care & biotechnology fund (VC)

* Book value of assets as of 31st Dec 2008

MCI’s presence in the CEEMCI’s presence in the CEE

• MCI is active across the main countries of the CEE region: Poland, the Czech Republic, Slovakia, Bulgaria and Romania.

• 8 Partners with diverse background and experience, supported by team of experienced investment professionals

Sector specialization - areas of particular interest are:

- Internet

- Software

- Telecommunication,

- Wireless & mobile,

- HealthCare & Biotechnology,

- Retail & Distribution,

- Cleantech (practice in development.

Diversified portfolioDiversified portfolio

VC & the CEE market opportunityVC & the CEE market opportunity

by Sequoia Capital

VC & the CEE market opportunityVC & the CEE market opportunity

Fast-growing economy

The stability of the political, legal & regulatory environment

Attractive investment opportunities - success stories (Skype, Grisoft (AVG), Bioton, etc;)

Well-developed exit environment

On average, the CEE countries grow at least 2x faster than USA, Japan and developed countries of the European Union

Source: International Monetary Fund, The World Bank, Eurostat, The Economist Intelligence Unit, Goldman Sachs, Morgan Stanley

Political and legal stability of the region (EU regulations) gives PE/VC funds an advantage to invest in emerging market growth at a risk, that is comparable to that of Western Europe

VC & the CEE market opportunityVC & the CEE market opportunity

2007 2008 est. 2009 F 2007 2008 est.2009 F

(IMF)2009 F (banks)  

USA 2,0% 1,3% -0,5%

GD

P G

row

th

6,0% 4,4% 3,6% -1,9%Czech

Rep.

Japan 2,4% 0,4% -0,4% 6,2% 8,5% 4,7% 1,7% Romania

China 11,9% 9,8% 6,7% 6,6% 5,4% 3,8% 0,0% Poland

UK 3,0% 0,7% -1,0% 6,2% 6,5% 4,5% 0,0% Bulgaria

Canada 2,7% 2,7% -1,2% 10,4% 7,0% 4,9% 1,5% Slovakia

Euro Area 2,6% 1,2% 0,1% 7,6% 6,4% 2,5% -2,0% Ukraine

4,5% 3,4% 2,7% -1,5% Turkey

1,1

95

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0,6

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0,6

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0,5

67

0,5

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0,4

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Latv

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Denm

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Belgi

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Fran

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Finl

and

Euro

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Lith

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Serbi

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Norway

Hunga

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Germ

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Switz

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Spain

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VC & the CEE market opportunityVC & the CEE market opportunity

Substantial growth opportunities for PE/VC funds in relation to developed countries of the European Union

An emerging generation of well-educated and highly motivated entrepreneurs able to build companies successfully competing in a global marketplace

Majority of the region’s investment activity and new investment opportunities concentrated in Poland, the Czech Republic, Romania and Bulgaria

PE/VC investments as % of GDP in 2007

Source: EVCA / PEREP

%

VC & the CEE market opportunityVC & the CEE market opportunity

Viable exit routes for PE/VC funds due to meaningful M&A activity and developed stock exchanges

Venture backed companies are exited mainly by trade sale, but number of IPOs is growing dynamically

Source: EVCA

Geographic interest of LPs worldwideGeographic interest of LPs worldwide

18%

27%

29%

29%

50%

52%

58%

58%

62%

69%

81%

89%Western Europe

North America

India

CEE

China

Other Asia

Japan

Australasia

South Africa

Latin America

Israel

MENA

Source: LP Allocation to Private Equity 2008, Almeida Capital survey (130 LPs)

VC in the CEE region –VC in the CEE region –

challenges & driverschallenges & drivers

EU accession Political as well as economic risks are much lower than they used to be and also

much lower than in other emerging markets

Improvement of ICT infrastructure across CEE Significatnt improvement over last 5 years (+); differences between countries

and regions are still huge (-)

„Come back” of many Eastern Europeans to their home countries Management experience, personal networks, motivation, knowledge, start-up

capital (sometimes)

The attitude towards starting an own business Between what it is in the USA and Western Europe; the region still lacks the

critical mass of people who want to start out on their own

DriversDrivers

An excellent academic track record and a reputation for outstanding scientific research

Still a long way to go to leverage and unlock a commercial potential of universities, incubators and technology parks.

The massive capital inflow into the private equity asset class during the credit boom years

Investors look outside their traditional territories

search for returns and investment opportunities at the smaller end of the investment spectrum following the credit crunch

DriversDrivers

Entrepreneurial environment needs to improve

Investments in infrastructure are needed to form stronger basis for future

growth

Wider adoption of incentives for venture capital investors

government-sponsored programmes , tax breaks, Development of venture

capital-friendly environment & infrastructure

Language and cultural issues

Cost advantage of the CEE region is disappering

Limited number of serial entrepreneurs

Equity gap - seed / early stage investments

ChallengesChallenges

www.mci.euwww.mci.eu

sylwester.janik@mci.com.plsylwester.janik@mci.com.pl