Western Balkan Technology Fund (WBTF) Initiative

Ljiljana Kundakovic, Viktor Nedovic, Goran Radosavljevic Ministry of Science and Technological Development

Republic of Serbia

Objectives

• Stimulate long-term economic growth prospect and competitiveness of Western Balkan (WB) economies

• Further engage International Financial Institutions (IFI) in private sector development in WB

• Increase the ability of innovative SMEs to access and efficiently use equity-based investments

• Create €100M equity investment fund focused on technology

Status of the Initiative

• WBTF supported by all beneficiaries

• WBTF initiative has been presented to high representatives of EC, EIB, EIF, WB and EBRD

• Preliminary analysis of supply and demand of equity finance for SME in WB, conducted by the European Investment Fund (EIF)

Competitiveness and Innovation

On a cost basis Western Balkans businesses are competitive today

“To sustain competitiveness, the Western Balkans needs to move up the value chain: first, by differentiating through value-added services and innovation; and second, by further leveraging the region’s proximity to the EU market”

OECD: RECOMMENDATION FOR A REGIONAL INVESTMNENT STRATEGY, 2008

Financial Markets in WB are Underdeveloped

• The supply of equity capital in seed, early and expansion stages of development of enterprises is either completely absent or is at the embryonic stage

• Access to and the cost of finance are a significant constraint on investment. On average, companies in the manufacturing sector need collateral of 177%, with an interest rate of 11%.

Public intervention in creating a supply of equity finance available to SMEs is needed

OECD: RECOMMENDATION FOR A REGIONAL INVESTMNENT STRATEGY, 2008EIF: WB Venture Capital Assessment . 2010

WBTF Structure and FinancingPhase I Phase II

IPA 2011 and 2012 (multibeneficiary)/WBIF 25M

IFI/Donor Community 50M

WB BeneficiariesParticipation 10M

Albania 0.7

Bosnia and Herzegovina 1.1

Croatia 4.2

Macedonia 0.6

Montenegro 0.3

Serbia 3.1

Private Sector 15M

Total 35M 65M

Phase I (€25-25M)IPA multi beneficiary funds

IFI through WBIFWB Beneficiaries

Phase II (up to €65M)IFI/Donor Community

Private sector

Phase I Evaluation

WBTF Management

European Investment Fund Evaluation of investment proposals

Collaboration and coordination with local offices/agencies in all beneficiaries

Establishing a network of VC funds and business angels for co-investment

Local Offices

Management

BeneficiariesIdentification and preparation of investment proposals

Negotiation and closingFollow up of investments through active participation in

companies’ management

Staged Approach to Establishing WBTF

Capacity building (supported by multi-beneficiary IPA)•Training and capacity building of beneficiaries• Assistance in establishing the WBTF

Capacity building (supported by multi-beneficiary IPA)•Training and capacity building of beneficiaries• Assistance in establishing the WBTF

Developing and financing a pipeline of investment projects

•Technical support to detailed preparation of projects at the beneficiary level•Assessment of individual investment projects

Developing and financing a pipeline of investment projects

•Technical support to detailed preparation of projects at the beneficiary level•Assessment of individual investment projects

Development of full investment portfolio•Significant participation of IFIs and private

sector

Development of full investment portfolio•Significant participation of IFIs and private

sector

Investment Strategy

• Generalist with strong technology and innovation component• Equity financing with standard terms with respect to protective

provisions, Board representation and right to participate in subsequent issuance of equity securities

• Convertible debt financing

Main Investment Criteria:

• High growth potential and proven business models

• Competitive innovative product or services

• Technologies with potential to access international markets

• Leadership capable of sustaining growth

Link with EP and WB EU Agenda• EUROPE 2020 : A strategy for smart, sustainable and inclusive growth

• Priority: Smart growth - developing an economy based on knowledge and innovation

• Innovation Union – EU 2020 flagship initiative • to improve framework conditions and access to finance for

research and innovation so as to ensure that innovative ideas can be turned into products and services that create growth and jobs.

• The 2007 EU Enlargement Strategy:• The need to raise competitiveness and further stimulate

investments and SME growth through improved access to finance • Implementation of Small Business Act :

• Recommends that The EU and Member States should facilitate SMEs’ access to finance, in particular to risk capital, micro-credit and mezzanine finance

Thank you!

Ministry of Science and Technological Development

Republic of Serbialjiljana.kundakovic@nauka.gov.rs

Improved access to finance

Improved access to finance