E i fExperience from 30 years of

iinvestments

Claes de Neergaard CEO

A t ti i th tA presentation in three parts

1 I d t if d d l i th S di h1. Industrifonden and our role in the Swedish venture capital landscape

2. The role of government in the support ofg ppcommercialization

3. Lessons learned from 32 years ofin estment operationsinvestment operations

W i t i S di h th iWe invest in Swedish growth companies

SOLD

SOLD

I d t if d i b i fIndustrifonden in brief

O f th l t i t i ll S di h One of the largest investors in small Swedishgrowth companies

Total assets of SEK 3,8 billion, Investments currently in some 90 companies Staff of 28, four branches Acts on strict commercial terms Independent trust established by

t i 1979government in 1979

SEK 10 billion to more than 1,000 companies

S i l f tSpecial features

Si l t Single country

Multisector

E l t Early stage

Multiple financing tools

Evergreen fund with a long-term investment horizon

Financial strength, can invest 5-190 MSEK per companyper company

Active minority investor; partner to entrepreneursand private investorsp

32 ith I d t if d32 years with Industrifonden

Loans and grants to small

t i

Equity for SME devlopment and expansion

Soft loans tolarge companies

enterprises

1996-

19901995

1996-

19791989

OOur purpose

I d t if d i i i t t i d t i l th d Industrifondens mission is to promote industrial growth and development in Sweden by financing SME:s on commercialterms.

Operational objectives:– Industrifonden shall complement the market and collaborate with

private investors with the aim of investing about 60 percent of itsequity in companies.

– Value creation: A combination of a return on equity exceeding the five-year treasury bond yield and social economic return.

– Costs shall not exceed 2,5 percent of total assets.Costs shall not exceed 2,5 percent of total assets.

450

400General index Swedish stock exchangeFeb 20, 1980-Nov 21, 2011

300

350

250

300

200

100

150

50

AFGX index 100 = 1995 12 29

080.02.20 82.02.20 84.02.20 86.02.20 88.02.20 90.02.20 92.02.20 94.02.20 96.02.20 98.02.20 00.02.20 02.02.20 04.02.20 06.02.20 08.02.20 10.02.20

AFGX index 100 = 1995-12- 29

P fit/l d tProfit/loss and returns

251 000

Profit/loss, MSEK Return on equity, %

%

737 15

20

25

600

800

1 000 21,7%

0

5

10

0

200

400

-10

-5

0

-400

-200

0

06/07 07/08 08/09 09/10 10/1106/07 07/08 08/09 09/10 10/11

Five successful exits!Five successful exits!

40 timesinvested

it l!capital!

24 timesinvestedinvestedcapital!

Th l f tThe role of governmentThe enabling Seed Development andFundThe enablingframework

Seedcapital

Development and expansion capital

Fundof funds

D l t d d i f iDevelopment and dynamics of companies

New business activity

Median country

Sweden

New business activity

Job growth in the business sector

Number of new start-ups

No of new companiesValue-added growthwith employees

P t f iP d ti it th i

in the business sector

Percentage of emergingcompanies (employees)

Percentage of emergingcompanies (turnover)

Productivity growth in the business sector

companies (turnover)

A t fi iAccess to financing Median country

Sweden

Costs for closingbusinesses

Effective marginal corporate tax

Effective averagecorporate tax

bus esses

Access to bank financingObstacles for trade and investments

Domestic lending to private sectorEntrepreneurial obstacles

Expansion stageprivate equity

Size of stock market

Early stage private equity

Some successful VC-investments

S l l dSome lessons learned

Th l f tThe role of government Overall responsibility for a smooth and effective

financing systemg y Distinguish between general SME financing

needs and those of high tech Go Globals The annual cost of commercialization is small in

relation to R&D Tax incentives for private investors needed Tax incentives for private investors needed If SME growth is a top priority, dare to act,

experiment and develop successful models VC is not the only answer for creating a buoyant

SME sector

Financing of new companies in Sweden

Bank loans24% Customers

12%

New capital from previous owner

12%

Suppliers

6%

Company cash flow35% V t C it l

Other sources4%

Regional funds6%

Venture Capital1%

S l l dSome lessons learned

Th l f VC i tThe role of VC-investors The VC industry carries too many risks,

governance much better in Buy Outg y Relation founder/investors must be managed Syndication fine when everything smells

roses, but can be a pain when difficulties arise

Fewer local and regional VC funds partially Fewer local and regional VC funds partially replaced by

Super Angels and private investment companies

International VC:s Adds sector competence and business skills Adds sector competence and business skills

S l l dSome lessons learned

R l f t d i tRole of government owned investors: Be strong where market is thin Always respect strict commercial criteria! Always respect strict commercial criteria! Attract the best staff with market conditions.

But, there are other drivers than carry for making a good job!

Partnership with the private sector, co-finance on the same conditionsco-finance on the same conditions

Long-term investments based on evergreen structures very precious

State supported funds-of-funds and directinvestment vehicles in seed, start and growthare crucial for the formation and growth ofare crucial for the formation and growth ofnew companies.

Invests in large gcompanies while

they are smallthey are smallclaes.de.neergaard@industrifonden.se

www.industrifonden.se