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Community DevelopmentVenture Capital Alliance 1

Promoting Venture Capital to Support the Croatian SME Sector

“Investing Patient Capital”


Part 1: Context


Financing & Political Elite:“The Families”

Middle Class

Vulnerable

Impoverished

Mission of SME Investment: Poverty Reduction


Business Financing Alternatives

CashShort- Term Debt

Long-Term Debt

Subordinated Debt

Venture Capital

Private Equity

Trade Credit

Asset- Backed

Financing

Public Equity

Convertible Debt

Debt with Royalties

Debt with Warrants

Equity

Financing Spectrum

Institutional and Private (Business Angel)


01

234

56

78

Self Fun

ding

Credit C

ards

Family

Suppli

ers

Commercial

Banks

Asset

Based

Lende

rsIns

titutio

ns

Insuran

ce C

ompan

ies

Ventur

e Cap

italist

sPriv

ate Equity

Public

Debt

Commercial

Paper

Sources of Funding

Firm

Mat

urity

The Stages of Financing: General

Presenter

Presentation Notes

Elements of Self Funding? Business Type: Suppliers, Inventory


0

1

2

3

4

5

6

7

8

Self Fu

nding

Family

Suppli

ers

Commerc

ial B

anks

Commerc

ial P

aper

Sources of Funding

Firm

Mat

urity

Stages of Financing: Croatia

What happens here?


Few Experienced ManagersLess Robust Deal Flow

Need to Build TrustLack of Leverage

Exit ChallengesLegal/Accounting

Challenges to SME Investment


Venture Capital for SMEs: Some Key Points

Venture capital is building companies, not “finance”There is not ONE model to copy or applyA unified Government strategy is KEY

A “Champion” is equally as important

Presenter

Presentation Notes

Do partnerships exist? Is failure viewed as a stigma or an opportunity? Long term enforceability of agreements an option?


Part 2: Key Issues in Private Equity Investing

Venture Capital and Business Angels


Equity: Categories

Equity

Public

Private

Venture Capital

Risk Capital

CDVC

SME VC

Private Equity


Equity: Categories

Venture Capital

Risk Capital

CDVC

SME VC

Stage Company Status Competitive Sources of Capital

SEED Pre-Business Plan Friends, Mom

Start-Up Plan and Most of Team.

Pre-Product, Pre- Revenue

Angels

Growth Full team, Product, Customers,

Predictable Business Model

Strategic Partners, Corporate,

Venture Capital

Mezzanine Predictable and Profitable

Strategic, Corporate, VC

Public Predictable and Profitable

Public Markets


Analysis of Debt and EquityDebt Equity

1. Objective: Limit downside risk Maximize upside reward

2. Decision Process: Credit-worthiness, historic and future

cash flows, collateral value

Business value, future potential and risk

3. Return: Limited, even if company performs

well

Depends on company performance, potentially

high

4. Cost of Capital: Low w/ fixed or variable coupon

High. Percentage of company value


Analysis of Debt and EquityDebt Equity

5. Investor relationship w/ entrepreneur:

Minimal: review of financial position

and loan covenants

Significant: board seat and involvement in day to day business

operations

6. Repayment or exit:

Exit through repayment of debt

from cash flow

Exit through source other than current income: sale to 3rd

party or IPO

7.Complexity: Boilerplate, less complex

Customized, more complex


1. ObjectiveDebt

Limit downside risk• Unsecured: Senior debt or subordinated debt• Secured debt: senior secured debt or senior

subordinated debt (collateralized or guaranteed)Fixed or floating interest rate – no upsideConvertible debt

Preferred StockConvertible preferred stock

EquityCommon stock


2. Decision Process Is Based OnDebt

CreditworthinessHistorical and future cashflowCollateral value

EquityValuation: what is the business worth?

• Comparable businesses• Discounted cashflow analysis• Recent sales of similar businesses

Future potentialRisk


3. Return

DebtLimited, even if company performs well

EquityDepends on company performancePotentially high


4. Cost of Capital

DebtEntrepreneur – how much does it cost you to finance your business?

EquityEntrepreneur – High: giving up percentage of ownership


5. Investor Relationship with Entrepreneur

DebtMinimal: review of financial position and loan covenants

EquitySignificant: shareholder, board seat and involvement in day to day business operations


6. Repayment or Exit

DebtExit through repayment of debt from cash flow

EquityExit through source other than current income: sale to 3rd party, management buyout, or IPO


7. Complexity

DebtBoilerplate, less complex

EquityCustomized, more complex


Debt vs. Equity: Debt

DebtCapital supplied in form of loan [as claim against company assets]Fixed time period, interest rate and feesInvestor focus on predictability of repayment through cash flowsBorrowers pledge assets as collateral in the event cash flow is insufficient to retire debt

Presenter

Presentation Notes

Debt financing revolves around the lender’s safety No matter how well or how poorly the company performs, deals are structured to ensure timely repayment of principal and payment of interest with minimal risk to the lender.


Debt vs. Equity: Equity

EquityCapital is supplied as investment in exchange for ownership in the companyReturns derived from growth and increased value of company which translates into higher equity value to investorInvestors seek to “exit” investments by selling their equity at higher value

Presenter

Presentation Notes

While debt focuses on limiting downside risk for the lender, EQUITY focuses on maximizing potential upside gain to the investor Equity investors thus sacrifice security and predictability in exchange for potential upside gain greater than might be realized through debt investments


The Power of Equity: Financing GrowthYear 1 2 3 4 5 6 7 8 9 10 11

Positive

CashFlow

Negative

Startup 1st Stage

2nd Stage

4th Stage Growth

Personal S

avings

Angels and

Venture Capita

l

Friends &

Family

Debt

Private Place

ment

IPO

Credit Card

sESOP

Mgt Buy Back

Expansion Stage

Presenter

Presentation Notes

Let’s look at the role that equity plays in the growth cycle of a typical business. This slide is a communication device: represents most bus. But not all go thru all stages in this order. Describe chart: years at top, type of financing at bottom, in the middle the cash position of the business. In the first few years of their existence all businesses rely on personal and family savings to get started. Only after a few years of operation, and a trend toward positive cash flow, will venture capital enter the picture. Businesses typically fail in years 3-5 of operations, which coincides with when businesses run out of personal resources and informal equity sources. For the businesses we care about (those that employ low-skilled, minority & women led, new business models run by social entrepreneurs), access to equity is probably a greater need than for other companies that access formal VC, which increases the potential role that VC can play for these firms. Transition to first ‘Overview’ slide - VC Resources. Now I will turn it over to Karen who will talk about the recent rends in venture capital funding “Informal” equity estimated to be $30B per annum. Considerable overlap of funding streams.Variations also dependent on industry and scale A few stats: for businesses under $10 million in capitalization over 30% of their capital comes from owner equity, nearly 13% from friends and family, and only 5% comes from Angel and Venture capital. Source: www.sbam.org/resource/edc/image/financing.pdf


Equity Investing: Highlights

Successful deal structuring involves balancing returns – whether social or financial – with the risk presented by a companyA well-structured and documented deal affords the fund legal protection and is a critical step in the investment processThere is no substitute for a good screening process, a complete and thoughtful due diligence review, and a monitoring program that tracks investee operating and financial performance


Who Are Business Angels?Business Angels are (typically) self made, high net worth individuals who invest their own money directly in unquoted companies and are likely to play a hands on role in their investee businessesBusiness Angels comprise the informal venture capital marketBusiness Angels are distinctive from:

• Family and friends (different motives)• Private equity investors in pooled funds (participative)• Venture capitalists (investing their own money)


Who Are Business Angels?

Different types of angels:Guardian angelsEntrepreneur angelsOperational angels Financial angelsJob seeking angels


Who are Business Angels?Angels are increasingly grouping together to invest in syndicates – various operating modes: e.g. manager- led and member-led

Opportunity for novice angels to learnBusy angels can be passive (in certain models)Wider skill sets for due diligence and supportDiversificationSuperior deal flowCan do bigger deals, make follow-on financingSocial benefitsResponse to the funding gap left by VC funds as a result on the increase in the deal size of VC funds


Who are Business Angels?

Stylised facts:Predominantly male (over 90%)Mostly 45-65 years oldPredominantly with an entrepreneurial background (many are serial entrepreneurs)Multiple motivations: financial reward (capital gain), psychic income (involvement in the entrepreneurial process), philanthropic (‘putting something back’)Generally allocate 5-15% of their overall investment portfolio to informal investmentsTypically are ‘hands on’ investors


Who are Business Angels?Most have clear investment preferences: industry, stage, locationGenerally invest in markets and industries that they know and understandActual investments often do not match their stated preferencesInvest in less than 10% of their deal flowTypically have less than 5 investments in their portfolio40% of investments fail; 23% are very successful

National differences in characteristics?


Economic Significance of Business Angels

What they invest in:Stage of business developmentIndustry

How much they invest:Amount investedLeverage effectLink with VC funds

Nature of the investment:‘smart money’ – hands on investment = value added impact


Economic Significance of Business AngelsWhere they invest:

‘local’ investments: retaining and recycling wealth in the regions in which it was generated; role in cluster development30% of investments are long distance

Scale issues:Number of business angelsNumber of investments and amount invested, cf. VC fundsUntapped potential: existing angels willing to invest more (opportunity constrained); potential to expand the population of business angels

Note: possibility of national differences in the development of the informal venture capital market


Public Policy Issues

Supply side measures: encourage more high net worth individuals to become business angels

Exit opportunities for entrepreneursTax: capital gains tax, CGT rollover relief, front- end tax reliefs, cut in tax on dividends, loss reliefEducation and awareness raising



Reducing information inefficiencies: make the market operate more efficiently

Business angel networksPromoting angel syndicatesPromote links between business angels and venture capital fundsSecurities legislation: advertising of investmentsEducating investors and entrepreneurs on how to do the dealEducating intermediaries: accountants, lawyers, small business advisors



Demand side constraints:Increasing the number of entrepreneurial businessesReducing equity aversion by entrepreneursTax treatment of raising equity vs. loansEducation to increase ‘investment readiness’ amongst businesses seeking venture capital


Business Angel Networks

The objective of business angel networks (BANs) is to overcome the high search costs of entrepreneurs and business angels and the desire of most business angels for anonymityUK evaluation

Positive direct effects: mobilisation of previously invisible source of capital; effect on demand side – latent demand; investment activityInduced investment effects: leverage effects on other sources of finance; follow-on finance by angels; commercial benefits/resource acquisition; hands on involvement of investorsIndirect effects: advisory and signposting functions; feedback; education and training; cultural change – equity culture; demonstration effectsEffective in cost-per job terms


Issues in the Establishment of Business Angel Networks

Achieving scaleNeed a critical mass of investors and entrepreneursActive promotionGeographical operating area: population amount/density, accessibility

Delivery modeNational serviceRegional servicesHybrid



Organisation of introductionspublicationscomputer matchinginternetpresentationsventure fair

Additional functionsNeed to educate the market: investment ready seminars, angel ’schools’, ”doing the deal” workshops, educational materialsPromoting angel syndicatesDeveloping pro formas (e.g. standard investment agreements)



Management skillsMarketing and promotion abilityEmpathy with both investors and entrepreneursDetailed knowledge of investment preferences of investorsMissionary zeal



Sponsoring organisationPublic sector agencyPrivate sector organisation (e.g. accountant, lawyer)Not-for-profit organisation: e.g. university, chamber of commerce, enterprise agencyMust be seen to be an ‘honest broker’, no conflicts of interest, and well networked

FinancingShould clients be charged?Basis of charging: membership fees, pay-as-you go fees, success fees, equityFees likely to be insufficient to cover operating costs: will need sponsorship or government support


Business Angels: Example of the U.S.

Private equity financing for new businesses:

Institutional venture capital volume doubled between 1996 and 2002 to $21.0 billionOnly 2% of these dollars went to seed and start-up businesses



Start-up businesses need outside equity capital and mentoring

Overwhelmingly, this capital comes from individual, angel investors, who number between 250,000 and 500,000

2002: 200,000 private individual investors placed US$14 billion into 36,000 businesses

Presenter

Presentation Notes

Defined as a person who has done at least one deal of at least tens of thousands of dollars of debt or equity in a private company Research shows that angels provide 80% of the seed and start-up capital for high tech entrepreneurial ventures in the US



U.S. business angels invest between US$200,000 and US$1.0 million per company, preference for seed and early-stageTraditionally, access to these investors was informal, word-of-mouth, “who do you know?”Recognition of role of these investors has led to efforts to organize: 1996: 10 groups seeking to organize angels. 2002: more than 170 such “portals”

Presenter

Presentation Notes

Not just a result of the Internet stock bubble, either – between 1998 and 2002, the number of portals grew by 60% Recognition of the role of angel investors to SME’s in U.S. is widespread – academic research, states now have variety of programs to foster this kind of investment activity, and foundations support these programs.


Business Angels: RAIN Funds and Bioverse, Inc., a Case Study

Background: Hard Economic Times in the Rural United States

Manufacturing jobs are disappearing in the rural midwest – rural factories in the U.S. cut 4.6% of their workforce in 2002, and 140 plants were permanently closed.2000 census shows 30% more people live below the poverty line in rural areas than urban.The rate of serious crime in Nebraska, Kansas, Oklahoma and Utah is as much as 50% higher than the State of New York (FBI October 2002)



Minnesota Investment Network Corporation (MIN- Corp), a CDVC fund founded in 1998 to promote community economic development in rural MinnesotaTo create capacity in rural areas in Minnesota, MIN- Corp developed a model for a small, regional fund comprised of wealthy individuals who lived in the area, RAIN fund



Regional Area Investor Network: “RAIN Funds”, a limited liability company comprised of no fewer than 10 individuals, each of whom contributes approximately $50,000MIN-Corp. contributes 10% and a template for legal documentation to reduce costsLocal control of investment decisions

Presenter

Presentation Notes

In the U.S., to market an investment in such a fund to an individual, securities regulations require that the individual must be considered a sophisticated individual, able to understand the risks that such an investment entails. Thus, each indivudal who invests in a RAIN fund must be an “accredited investor” for U.S. securities law purposes, which means that person must have a net worth of at least US$1.0 million or an annual income of $200,000, or $300,000 if the person is married. More about U.S. legal requirements is in angel book, Part 3. In general, people interested in such an investment will be wealthy local people. Since its founding, Prairie Capital estimates it has created 60 jobs, paying approximately US$47,500 per job, in rural communities in MN.



RAIN Funds: Prairie Capital LLC, founded in 2002, 12 individuals from Worthington, Minnesota, contributed a total of $640,000 to the fundWorthington is 175 miles from MN’s largest city, Minneapolis1960 –Worthington had 9,015 residents2000 -- 11,283 people

Presenter

Presentation Notes

Worthington is 175 miles from MN’s largest city, Minneapolis. 1960 –Worthington had 9,015 residents, 2000 -- 11,283 people.



To date, $520,000 invested into six local companies through Prairie Capital LLCLeverage: Individuals invested an additional $620,000 into portfolio companies, so investment totals $1.140 million



Portfolio Company: Bioverse, Inc.Bioverse markets and packages environmentally sound freshwater management systems.2002 Revenue: US$872,0002003 Revenue (anticipated): US$2.5 millionPrairie Capital invested in 2002 Received co-investment from Prairie Capital’s chairman, Dr. Conrad Schmidt

Presenter

Presentation Notes

Prairie Capital invested because Bioverse’s manufacturing facility is located in Pipestone, MN, a short drive from Worthington. Five jobs so far at this facility, hopefully will expand as sales grow.



Portfolio Company: Bioverse, Inc.Dr. Schmidt is classic value-added angel investor: business expertise, a hands-on investor and source of capitalVeterinarian who founded an animal health laboratory later sold to Upjohn CompanyA Bioverse director, encouraged Bioverse to search for agricultural applications for its product

Presenter

Presentation Notes

Dr. Schmidt’s company, Oxford Laboratories, had developed a successful products to aid in animal health, including feeding microorganisms to livestock. Bioverse now working on new products including highly concentrated bacteria formulation for pork, dairy and poultry producers for application to manure pits and lagoons, odor control product for agricultural ponds and confinement barns, and a mosquito control product.


Business Angels: Example of Slovenia

Klub Poslovhnih AngelovFounded in 2001Joint Venture Between Podjetnik magazine and the Small Business Development Center



Reviewed approximately 95 business plans since forming20 angel investors, most of whom are former entrepreneurs27 meetings to date, 4 deals negotiated with varying degrees of successAverage invested in two deals closed to date: 26,000 Euroshttp://www.pcmg.si



In Context: Slovenia has six venture capital funds that were active in 2002, with total capital of more than EU60 million

2002, 2 deals closed by these funds for a total of EU18 millionVenture Capital Association formed in 2002But -- regulatory obstacles to venture capital formation


Part 3: Private Equity Financing in Croatia


Private Equity Financing in Croatia: Investment Funds

CC Partnership, LP:Established 1997Initial capital: $30MM; 8 investments in Croatia1 successful exit “Overseas Express”

Quaestus Fund:Established 2003

SEAF Croatia:Established 1997US$10.4MM Capital; US$4.4MM Invested


Private Equity Financing in Croatia: Developing Economy Characteristics

Third-party ownership is not often accepted or understoodPersonalized ownership is not easily transferred

“Return” from shareholdings is less prevalent than US/Western Europe (i.e., owning a large block of shares gives rights to receive a “return” from the companyElements necessary for vibrant capital markets to support IPOs are going in wrong direction

Lack of transparency, regulatory leadershipNo critical mass of capital market – relative gap is increasing

No long term pattern of successful financial ownership


Private Equity Financing in Croatia: Developing Economy Characteristics

Investment Exits:Divestment process must be agreed at inception of investmentAssumption of friendly capital markets and deep merger/acquisition candidates is not validManagement/entrepreneur must be committed to process (continuous from day one!)Three exit routes – two reliable

• Industry consolidation• Strategic buyer• “Praying for rain”


Private Equity Financing in Croatia: Existing Investment Incentives

Investment Promotion LawTaxes on profits range from 0% (for twenty year holding period) to 7% (for 10 year holding period), provided employment levels are maintained (30 – 75 employees)Direct assistance for job creation – up to 15,000 kunas per employee

Small Business Development Programme 2003-2006


Profile of a Croatian Venture Capital Fund


Part 4: Public Policy to Promote Private Equity Financing for SMEs

Government Support:“Regulation + Incentives”

Presenter

Presentation Notes

The CDFI sector benefits from regulation that is neither cumbersome nor dampening as well as programmatic incentives that target unique populations or communities.


Government Support

A national, cohesive policy of promoting equity investing ensures constructive development of the SME sector

Countries without a “holistic” view of SME sector development and equity investing have experienced difficulties

Core areas to address:TransparencyLegal and regulatory compatibility Training

Presenter

Presentation Notes

Business formation: 193 days (Brazil), 2 days (Australia), 1 day (US) Pledge of movable assets


Government Support

Policy Focus: Reduce Risk or Increase Potential ReturnTax CreditsGrants and Loans to FundsCo-Investment in FundsPartial Guarantee Against LossesLeveraged Investment in Funds

Presenter

Presentation Notes

Credits: NMTC, CITC, States Loans to funds: SBICs Co-Investment: Germany Part gtee against loss


Government Support: Example of U.S.

Bank Enterprise Awards Program

Native American CDFI Technical Assistance

Small and Emerging CDFI Assistance

New Markets Tax Credits

CORE/IntermediaryDepartment of Treasury, CDFI Fund

Small Business Investment Company

New Markets Venture Capital

Specialized Small Business Investment Company

The Small Business

Administration

Presenter

Presentation Notes

For example, the Department of Treasury through its CDFI Fund, operates several CDFI programs of which the New Markets Tax Credit Program is the most recent addition.



Small Business Investment Company ProgramProgram established in 1959, targeting SMEsGovernment guarantee provides liquidity and leverage58% of 2002 U.S. venture capital investments were made through SBICsProgram being replicated in numerous countries

SBIC(Corporation,

LP, LLC)

SME

Equity Cash

Market

CashDebenture

SBA Private Investors

Cash

EquityGuarantee

Step 1Step 2

Step 3


Government Support: Example of U.S.Community Development Venture CapitalFederal grants and low- interest loans provide working capital for technical assistanceFunds focus on SMEs in low-income communitiesNearly 80 funds established

Management Company

(“For-Profit”)

Parent(“Non- Profit”)

Investment Fund(“For- Profit”)

Investors

Foundations, Government,

Others

SME

Grants/ PRIs

Technical Assistance

CashCash



Federal Tax Incentives for Equity Investment“Qualified Small Business Stock” allows individual investors to reduce their tax on capital gains by 50%

• Stock must be held by the investor for at least five years• Capital gain from QSB stock held more than six months

can also be rolled into new QSB, thus avoiding tax

New Markets Tax Credit Program

Presenter

Presentation Notes

“Qualified Small Business” has assets of less than US$50 million



State tax incentives for Equity investmentAll 50 States in the U.S. also impose taxes on individuals who reside or do business in their stateThree states with significant economic development issues, each of whom has little or no venture capital, offer tax incentives to help stimulate angel and community venture capital investing

• Iowa, Oklahoma, Maine



Iowa allocated $10MM for tax credits for investments (angels and others) in qualifying businesses or in community-based seed capital funds (defined as a fund having $500,000 to $3.0 million)Credit cannot exceed 20% of the taxpayer’s investment, not to exceed $50,000 per business

State of IowaPopulation: 2.9MM

52 per Sq. Mile2002 VC Record: 1 Investment

Presenter

Presentation Notes

Croatia: Population 4.7MM 213 per Sq. Mile



Credit against Oklahoma State income tax of 30% of the amount of equity investment in an Oklahoma small business venture located in a rural area, 20% in non-rural area, either as an angel investor or through a qualifying fund

State of OklahomaPopulation: 3.5MM

50 per Sq. Mile2002 VC Record: 5 Investments



Individual investors receive tax credit of up to 40% of the cash equity provided to eligible Maine businesses, and up to 60% credit for investments in high unemployment areasInvestments up to $5MM, five year holding period.Companies must be located in Maine, have gross sales of less than $3.0 million per year

State of MainePopulation: 1.3MM

41 per Sq. Mile2002 VC Record: 5 Investments


Government Support:Example of Israel

Yozma Program, 1993Ten funds, $210MM total40% Government/60% Private Investors

Key Points to Success:Government as a CatalystLowered RiskMarket Failure ConditionsPredetermined Exit ConditionsTimed Entry and ExitNo Government ControlIndirect Investments (Funds)

Australia

Taiwan

Czech Republic

South Africa

New Zealand

Denmark

Korea

Governments applying the “Yozma Model”


Government Support: Example of Latin America

30.5

211.75286.75

379

839916

437.5 475

156 100.7535.5 14.5 56.4 123 58 67.5 75.5

0

200

400

600

800

1000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Market commitment (US mm), NOT including private equity funds

MIF sponsored Funds commitment

Brazil: Business plan competitions, Venture Capital forumsChile: Program recently launched similar to the SBIC programPeru: VC lobbying associationMexico: Partnerships with U.S. firms and associations to improve market

Start of VC

Privatization and “dot-com”

bubbleMarket

returning, with MIF support$MM


Government Support: U.K.’s Recent Strides, a Case Study

BackgroundGovernment recognized that the extraordinary wealth creation in England in the ’80’s and ’90’s was unevenly distributed and that significant gaps existed in investment flows into deprived areasSmall businesses were suffering from lack of investment capital



Social Investment Task ForceAnnounced by Chancellor of the Exchequer in February 2000 – Reported in October 2000Chairman - Sir Ronald Cohen, Chairman of Apax Partners

Remit of Task Force: “To set out how entrepreneurial practices can be applied to obtain higher social and financial returns from social investment, to harness new talents and skills to address economic regeneration and to unleash new sources of private and institutional investment.”“In addition the Task Force should explore innovative roles that the voluntary sector, businesses and Government could play as partners in this area”



Social Investment Task Force Recommendations:A Community Investment Tax Credit (CITC) to encourage private investment in under-invested communities.Community Development Venture FundsDisclosure by banksGreater latitude and encouragement for charitable trusts and foundations to invest in community development activitiesSupport for Community Development Financial Institutions



Bridges Community Ventures: SummaryLaunched in May 2002, funds closed in September 2002Mission led – invest for purpose as well as a profitThe first Community Development Venture Capital fund in the UK£40MM fund: £20MM from the private sector with £20MM in matching investment from the GovernmentProvide venture capital to businesses in the most under- invested areas in EnglandMust achieve an attractive financial return for investors



Bridges Community Ventures: Fund Structure£20MM of Government funds - £10MM is subordinatedDrawn down firstPaid back last5% capped returnFund management fee: 3%20% carry with no hurdle



Tier 3: Entrepreneurs’ ClubSuccessful entrepreneurs and business people£20K - £100K plus commitment as Non-Exec

Tier 2: Strategic InvestorsVenture capital companies, high net worth individuals, private sector

institutions£500K - £1MM

Tier 1: Cornerstone Institutional InvestorsBanks and Pension Funds

£1MM – £4MM



Bridges Community Ventures: Investment Strategy:Equity investments between £125K and £2MM in any one CompanyAll stages consideredAll sectors considered, with emphasis on manufacturing, services, media, retail and leisureExit horizon 3 – 5 years, but flexible6 – 12 Investments a year



Bridges Community Ventures: “Entrepreneurs’ Club”Invested in FundCo-investment in individual companies offeredSuccessful entrepreneurs and business people who have “cashed out”Committed to an unpaid non-executive position on the board of at least one company and/or technical advisory work


Part 5: Conclusions and Steps Forward


Conclusions and Steps ForwardPhase One:

Form an action “Task Force”Structure an educational program to address awareness gap

• Investors/Potential Investors• Entrepreneurs: Need for equity capital• Professional advisors: Lawyers, accountants

Review of existing regulations in order to provide specific recommendations to various Government authorities to promote the sectorGather existing venture capital funds into an Association with regular meetings and advocacy initiativePromotion of business angel activitiesAssociation of entrepreneurs


Promoting Venture Capital to Support the Croatian SME Sector

“Investing Patient Capital”

promoting venture capital to support the croatian sme · pdf filepromoting venture capital to...

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