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: robert.sheffrin@iisp.rs Web: www.iisp.rs