Financing of hi-tech sector and advanced technologies in Poland through venture capital market development  

Piotr Pietrzak – Investment Manager

About us

TYPE OF BUSINESS (first Polish) Venture Capital Fund of Funds

LEGAL STRUCTURE & OWNERSHIP Joint stock company, established in 2005 by BGK, according to the Act of Parliament

MISSION Limiting equity gap in early stage investments up to 1,5 million EUR

PRODUCT Investment of public financial and intellectual capital in newly created VC funds

INVESTMENT PROCESS Based on the best examples of Israeli, European and American funds of funds; selection of GPs and private LPs through open tendering process, deal structuring, hands-on monitoring, exits

ASSETS UNDER MANAGEMENT ~250 m USD *

SOURCES OF FINANCING Owner’s equity, Polish Gov., EU, Swiss Gov.

TEAM 10 investment professionals (+ back office)

* USD/PLN @ 1/3,5

VC in Poland before KFK (2004) NUMBER OF PE/VC FUNDS 28

TOTAL AMOUNT INVESTED 174 m USD * (63% in Polish companies)

AVERAGE SIZE OF INVESTMENT 8,2 m USD *

STAGES OF DEVELOPMENT

Polish PE/VC market in 2004 consisted of 28 funds, usually managed by Polish GPs and foreign LPs (EBRD, Banks, Insurance Companies, Pension Funds and corporations)

From the early 90’s – the beginning of Polish PE/VC industry, in 15 years the market naturally evolved towards larger transactions, mostly buyouts and replacement investments in mature, traditional businesses, and only half of them located in Poland; none in early stage

* USD/PLN @ 1/3,5

Buyouts & replacement capital: 67%

Growth: 33% Seed & start-up: 0%

Our VC funds

AVANU VC

Management

AQUARIUM

Venture Fund

NUMBER (now/end of 2012) 15 (9 active, 6 in organization)/20+

COMMITMENTS (now/end of 2012) 288/410 m USD * KFK (now/end of 2012) 158/225 m USD (typically 50%)*

SIZE 10-30 m USD *

LEGAL FORM Limited Partnership, Closed-End Fund (Polish law, tax transparent)

PREFERENCES (for private LPs) First-to-exit (downside protection),

ECONOMICS Total cost of running the fund (inc. management fee) below 3% p.a.; up to 10% of KFK commitment in form of grant (technical assistance)

INVESTMENT PERIOD/HORIZON 4+1 (until 2015-16)/10+2INVESTMENT STRATEGY Polish innovative SMEs with

high growth potential; up to 1,5 m EUR in single company

* USD/PLN @ 1/3,5

Our VC funds’ investments

NUMBER (now/2016) 25/200+

TOTAL AMOUNT INVESTED (2016) 300 m USD *

SIZE (average) 0,1-1,7 (0,7) m USD *

STAGES OF DEVELOPMENT Seed (60%), start-up, expansion

SECTORS ICT (50%), industry, healthcare, software, others

In less than 3 years from the start of its full investment activity, in the middle of the global financial crisis, KFK has created (together with private investors) 15 new VC funds of total capitalization nearing 300 million USD, with strategy to invest in the highest risk, early stage SMEs

* USD/PLN @ 1/3,5

Opportunity & perspectives

GROWING NUMBER OF GPs VC managers, successful entrepreneurs, business angels, ex PE managers, multinational companies’

and M&A managers, financial and business advisors

KFK activity encouraged Polish professionals (50+) from different institutions and market sectors (even mature PE) to become VC managers (in some cases also investing their own money)

GROWING NUMBER OF LPs Companies listed on WSE, successful entrepreneurs, business angels, qualified investors, investment funds, banks (soon), pension funds (soon)

KFK activity encouraged Polish individuals and institutions (90+) to invest their money (some of them for the first time) in such risky asset class (investors committed 144 m USD *)

KFK track record convinced also the successful Israeli investors and fund managers – GIZA, to launch their VC operations in Poland

* USD/PLN @ 1/3,5

Opportunity & perspectives

GROWING DEALFLOW ~1,7 m Polish SMEs (99,8% of all companies)OF INVESTEE COMPANIES 4 billion EUR of EU money for Polish SMEs in 2007-2015 (majority in form of grants)30 technology parks45 business incubators

After Poland became the member of EU, the variety of grants, micro- and pre-seed financing available for Polish SMEs from structural money consistently builds the potential deal flow for KFK portfolio funds

ROLE OF KFK

The strategic role of KFK is to become „European Investment Fund” for CEE – the largest public investor with added value in VC asset class, setting best market standards, practices and expertise

TEACH Market standards, expertise for emerging VC markets

LEARN Global approach (foreign teams, investors)

EARN Hands-on monitoring, reinvesting (evergreen fund)

DEVELOP New stages (growth funds), new profiles (pre-seed, proof-of-concept, scientific funds), new investors (big institutional)

From the point of view of investment activity, Poland has currently a unique opportunity to become a leader in the CEE region in incubating the most innovative businesses with global potential  

Thank you