the european venture capital landscape bruno robino european investment fund athens, 28 june 2006
TRANSCRIPT
The European venture capital landscape
Bruno RobinoEuropean Investment Fund
Athens, 28 June 2006
Agenda
Private equity in Europe: 2005 a record year
EIF venture capital in Europe
Vision for the future
Conclusion
Private equity in Europe: 2005 a record year
Private Equity Investment as % of GDP in 2005
0.0
04
0.0
05
0.0
22
0.0
53
0.0
58
0.0
64
0.0
65
0.0
67
0.1
2
0.1
23
0.1
48
0.1
54
0.1
65
0.1
77 0.2
94 0.4
19
0.4
31
0.4
65
0.5
06
1.0
61
1.3
31
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Slovac
Rep
ublic
Greec
e
Czech
Rep
ublic
Hunga
ry
Austri
a
Poland
Belgium
Irelan
d
Germ
any
Switzer
land
Finla
nd Italy
Portu
gal
Norway
Spain
Europ
e
Fran
ce
Nethe
rland
s
Denm
ark
Sweden
United
King
dom
* Source: EVCA / Thomson Financial Venture Economics / PricewaterhouseCoopers
Divestments at cost € 29.8bn
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
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
EIF venture capital in Europe
EIF at a glance
1994 EU specialised financial institution for SMEs,
acting through: Venture Capital (fund of funds) and Guarantees for SME portfolios
AAASubscribed capital of EUR 2 billion : - 62 %: European Investment Bank - 30 %: EC for the EU- 8 %: 20 financial institutions
PPPArt 2 : « pursuit of Community objectives » such as growth, employment, knowledge-based economy, innovation, regional development, LisbonArt 24 : « generate an appropriate return on its resources »
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)
EIF : mainly a manager of external resources (mandates)
EUR 600m EUR 4 000m EUR 800m
To be committed in venture capital funds and financial institutions in the EU and Candidate Countries
European Community
Revolving
over 500 000 SMEs indirectly benefited from EIF support
BMWA - ERP
Etc…Up to EUR 1bn
Dahlia SICAR S.R.
Assets under management - EU based Fund-of-funds (Eur millions)
16,000
7,775
4,750
4,450
3,275
3,250
3,230
2,473
1,610
1,435
1,292
1,225
1,138
1,074
900
900
900
840
745
742
560
Alpinvest
Pantheon - Russell Private Equity
European Investment Fund
Capital Dynamics
LGT Capital Partners Ltd
Standard Life Investments
Partners Group
ATP Private Equity Partners
Swiss Re Private Equity Advisors
AXA Private Equity
CDC Capital Partners
Adveq
SGAM Private Equity
Danske Private Equity A/S
VCM
AGF Private Equity
Access Capital Partners
Unigestion
Fondinvest Capital
SVG Capital
Robeco
Sources: Thomson, VentureXpert database, Almeida Capital & companies' websites.
European fund-of-funds market
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
Credentials
Venture Capital commitments of EUR 3.2bn (as at end 2005)
Key investor in major markets
Niche opportunity seeker in smaller markets
Austria(58m)
2%
Belgium(37m)
1%
Denmark(54m)
2%
Finland(78m)
3%
France(522m)
17% Germany(242m)
8%
Greece(20m)
1%
Ireland(99m)
3% Italy
(244m)8%
Luxembourg(19m)
1%
Netherlands(21m)
1%
Portugal(16m)
1%
Slovakia(5m)0%
Spain(185m)
6%
Sweden(61m)
2%
United Kingdom(433m)
14%
Central and Eastern Europe(138m)
4%
Multi-Country(875m)
28%
EIF vs the European Venture Capital market
EIF portfolio stage distributionby % of amount invested
Buyout7%
Expansion19%
Generalist25%Seed
5%
Start-Up44%
European PE/VC market stage distributionby % of amount invested
Seed 1%
Start-up11%
ReplacementCapital
4%
Expansion27%
Buyout57%
• EIF: tendency towards early stage investments (49%)• EIF: investments biased towards tech (56% in ICT and LS)• EU: tendency towards later stage buyouts (57%)
* Source: EVCA / Thomson Financial Venture Economics / PricewaterhouseCoopers
EIF’s 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.
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 fundsAbility to construct portfolio that meets specific risk profile – proprietary systemAbility to structure transactions that meet the risk appetite of most potential investors –
financial engineering, guarantees
More complex products for more demanding clients
EIF’s 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”
EIF’s vision for the future
EIF’s 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
EIF’s focus
Later-stage
Buy-out
IPOs
Tech
Transfer
Incubators
Business
Angels
Expansion /
Dev.Capital
Early StagePre-Seed
Seed
SME LIFE CYCLE
« VENTURE CAPITAL » « PRIVATE EQUITY »
New policy areas
European Investment Fund
CIP COVERAGECURRENT MANDATES COVERAGEGAP
The innovation cycle covered by EIF
New investment focus- Business Angels - Side Funds- Tech transfer - Incubators - Pre-Seed
Existing markets- Early Stage - Expansion - Development Capital
Fundraising underway in these
new areas
New fundraising in our
existing markets
CIP
TTA
JEREMIE
CIP: Competitiveness & Innovation Framework Programme
Successor programme for MAP for period 2007–2013 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
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)
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
USUniversity Revenues (€m)Columbia University 115.4University of California 65.3Stanford University 50.0University of New York 49.9Sloan Kettering Institutefor Cancer Research 43.3University of Rochester 33.5
Europe
University Revenues (€m)
Pasteur 32.6
Edinburgh University 4.5
Utrecht* 4.0
Cambridge 3.1
INRIA* 3.0
VIB* 2.7
Technology Transfer
R&D Tech transfer / proof-of-concept Marketable product
«Licensing» Special Protection Vehicles
Virtual LABCreated by leading R&D
Centres
Potential exits for the SPV projects
Licensing to corporation
Sale to corporation
Purchase / investment by other investors
IPO
Investment focus of TTA
«Technology» Intellectual Property «Prototype» Intellectual Property
Looking for new funds from EU to stimulate tech transfer
«Spin-off» Special Protection Vehicles
«Hybrid» Special Protection Vehicles
Funding gapFunding: FP7 Funding: CIP
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
JEREMIE: Phases
Venture CapitalFunds
Preparation of
Operational Programmes
EVALUATION PHASE
2006 2007 - 2013
IMPLEMENTATION OF NATIONAL FUNDS
DISBURSEMENT PROCESS
MicrofinanceProviders(MCPs)
Tech TransferActivities
Guarantee schemes
Transforming parts of the ERDF grantsinto financial products for SME
Multiplier effect on the budget by attracting EIB & IFIs’ lending
SMESMEs
SMESMEs
SMESMEs
SMESMEs
SMESMEs
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.
Thank you for your attention
European Investment Fundtel.: (+352) 42 66 88 1fax: (+352) 42 66 88 200
Bruno [email protected]
For more info:[email protected]