A new and innovative investment initiative dedicated to boosting equity investments made into Baltic enterprises has now been launched by the European Investment Fund (EIF) and Lithuania, Latvia and Estonia. The Baltic Innovation Fund will invest EUR 100 million into private equity and venture capital funds focussed on the Baltic States over the next four years through a ‘fund of funds’ process to further developing equity investment into Small and Medium sized enterprises (SMEs) to boost growth.
The Baltic Innovation Fund management agreement was signed in Vilnius 26 September by the EIF and representatives from three Baltic States. The EIF is investing EUR 40 million alongside investments of EUR 20 million each from the national agencies – INVEGA in Lithuania, the Latvian Guarantee Agency (LGA) in Latvia and KredEx in Estonia.
European Investment Fund, Chief Executive, Richard Pelly stated, “This initiative is a result of close co-operation between the EIF and the three Member States from the Baltic region to create a long-term investment scheme that will attract additional private finance and implement the best market standards for equity investing in businesses. EIF is proud to have led this process and looks forward to the implementation of investments beginning in 2013”.
Rimantas Žylius, Lithuanian Minister of Economy, stated “Lithuania welcomes this long-term partnership between EIF and the three Baltic States which is the first initiative of such kind. The Baltic Innovation Fund will increase the accessibility of private equity and venture capital for SMEs with high growth potential and operating in a Baltic region. The creation of ‘fund of funds’ will contribute towards further regional private equity and venture capital market development, will strengthen the partnership and cooperation between the Baltic States and EIF. This initiative will have a positive impact not only for further development of Lithuanian venture capital ecosystem, but certainly will stimulate the growth of employment and economic competitiveness of the Baltic States“.
Klavs Vasks, Chairman of the Board, Latvian Guarantee Agency, stated “This initiative should over next few years result in the financing of more than 50 growth-focussed enterprises, that will often either already be pan-Baltic or will use the investment capital to become pan-Baltic. The four investing parties are also adopting this pan-Baltic approach in creating this fine example of fruitful cooperation between the Baltic States and EIF.
According to Andrus Treier, Chief Executive Officer of KredEx, the new fund is a financing solution that has been missing from the Baltic market. “BIF is an excellent illustration of the three Baltic States acting together, enabling to make small capital markets together more attractive for investors and creating further financing possibilities for enterprises. Close cooperation with EIF as an experienced and well known investor ensures that the best market standards are followed giving additional assurance to possible private and institutional investors. Without such cooperation it would be very hard to attract Venture Capital investments in comparable size.”
The investment process for the Baltic Innovation Fund will begin in 2013 when EIF will start to process transactions with selected Fund Managers. Each Fund manager will be expected to attract an additional and equivalent amount of private finance from pension funds and private investors which will double the amount of investment capital within the programme. Across a 4 year investment period, between 3 to 6 Fund Managers will receive investment commitments which will then be invested into innovative high-growth SMEs.
Importantly, the Baltic Innovation Fund is the result of strong co-operation between the three Baltic States and the EIF that is unique in its nature across Europe and places the region in a position to benefit from greater levels of private investment than before. Furthermore, the three governments are taking a lead in this process by investing into the Baltic Innovation Fund through their respective national agencies and utilising the revolved Structural Funds from previously successful SME support schemes to do so. This unique trans-national process provides a real opportunity to further develop the Baltic PE & VC market.
EIF’s central mission is to support Europe’s small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture capital and guarantees instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment. The EIF total net commitments to private equity funds amounted to over EUR 6bn at end 2011. With investments in over 370 funds, the EIF is a leading player in European venture due to the scale and the scope of its investments, especially in high-tech and early-stage segments. The EIF guarantees loan portfolio totalled over EUR 4.4bn in close to 220 operations at end 2011, positioning it as a major European SME guarantees actor and a leading micro-finance guarantor.
KredEx is an Estonian financial institution helping Estonian enterprises to grow business and expand more safely to foreign markets, offering mezzanine loans, credit lines, credit insurance and guarantees with state guarantee.
Latvian Guarantee Agency (LGA) is Latvian specialized development finance institution active in all segments of financial market, investing in VC funds, providing mezzanine loans and loan, leasing and export guarantees. LGA has a capital base of EUR 175m, mostly originating from various SF programmes. Currently it has invested in 6 VC funds, with up to 3 more signed by end 2012. LGA has issued more than 1000 loan, leasing and export guarantees.
INVEGA promotes the development of small and medium-sized enterprises in Lithuania facilitating their access to the sources of financing. The key objectives of activities of INVEGA are to provide financial services – the guarantees, to implement and administer financial and other support measures for small and medium businesses.