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ESTER Objectives

Transferring success programmes to New Member States in Europe and obtained results Eng. Vittorio Modena, University of Pavia. ESTER Objectives.

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ESTER Objectives

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  1. Transferring success programmes to New Member States in Europe and obtained resultsEng. Vittorio Modena, University of Pavia V.Modena - EDE Conference, Sofia - November 28, 2005

  2. ESTER Objectives ESTER is aimed at transferring the success factors from the Israeli experience in early stage financing to three New Member States: Latvia, Estonia and the Slovak Republic for the creation of suitable venture capital sources V.Modena - EDE Conference, Sofia - November 28, 2005

  3. Partnership University of Pavia National Agency for SMEs Slovakia Connect Estonia University of Haifa Mr. Yigal Erlich Latvian Investment & Development Agency Prof. Morris Teubal Bic Bratislava V.Modena - EDE Conference, Sofia - November 28, 2005

  4. The Latvian VC scheme V.Modena - EDE Conference, Sofia - November 28, 2005

  5. Latvian Venture Capital SchemeOutline(1/3) The programme "Aid to the risk capital of small and medium-sized commercial companies“ was planned and promoted by the ESTER team in Latvia (Latvian Investment and Development Agency) financed by the local Ministry of Economy and the European Regional Development Fund. V.Modena - EDE Conference, Sofia - November 28, 2005

  6. Latvian Venture Capital SchemeOutline (2/3) • 15 Million Euros for the period 2005-2006 will be provided by the Ministry of Economy in Latvia and the ERDF to match private funds. Private funds are expected to cover 30% of the funds. • The task is to ensure the creation and functioning of at least 3 risk capital funds for SMCC (Small and Medium Commercial Companies) operating in Latvia. V.Modena - EDE Conference, Sofia - November 28, 2005

  7. Fund of Funds Limited by 70% or 5,0 million€ Private Investors At least 30% of total investment in new VC fund Target : 50/50 Investment Fund ~ 8 ... 10 million € Latvian Venture Capital SchemeOutline (3/3) Public Budget 15.0 MEUR 3 new funds Private management 7-10 years Maximum investment about 1m € in one project Maximum 285k € in the first investment tranche V.Modena - EDE Conference, Sofia - November 28, 2005

  8. Latvia Venture Capital Scheme –Incentive • Profit distribution • The management company • The private investors until they are repaid • The public sector until it has repaid 25% of its investment 4. Investors are paid until they get 6% yearly profit • The state is repaid the remaining 75% • The state receives 6% profit • All other profits are distributed between the investors and the management company V.Modena - EDE Conference, Sofia - November 28, 2005

  9. Latvia Venture Capital Scheme –Transferred principles (from the Yozma Programme) • Funds are privately managed • Public sector only contributes “passive money” • Funds are sectorally neutral • As little bureaucracy as possible 5. Strong incentive to investors and managers V.Modena - EDE Conference, Sofia - November 28, 2005

  10. Latvia Venture Capital Scheme (Strategy) V.Modena - EDE Conference, Sofia - November 28, 2005

  11. Latvia Venture Capital Scheme (transferring experience) • Local partners are crucial • 2. A long study on the local system • A long process for creating a common language • 4. Final adaptation of principles V.Modena - EDE Conference, Sofia - November 28, 2005

  12. The Yozma Programme, or how to build a venture capital industry from scratch V.Modena - EDE Conference, Sofia - November 28, 2005

  13. The Yozma Programme (1/2) 1992 • No Venture Capital Funds • Success in R&D - Failure in Marketing • Few IPOs, No M&As • Lack of international involvement 2005 • ~60 Venture Funds • $10B raised by VCs • $21B M&A deals • #3 in Nasdaq • Cisco, IBM, Intel, Microsoft… • American & ROW VCs VC V.Modena - EDE Conference, Sofia - November 28, 2005

  14. The Yozma Programme (2/2) • Basic principles: • Investment of $8M in each drop-down fund • (minority position) • A 5 year option to Yozma’s partners to buy out the • Government’s share at predetermined conditions • Results: • 8 out of the 10 drop-down funds have exercised • their option and bought out the Government • 9 out of the 15 companies Yozma Venture Capital has • invested in directly, went public or have been acquired • The Israel Venture Capital industry has been • established V.Modena - EDE Conference, Sofia - November 28, 2005

  15. Yozma Drop Down Funds • FUND CAPITAL MANAGED ($MM) • Original sizeToday • Eurofund 20 90 • Gemini 25 550 • Inventech 20 40 • JPV 20 675 • Medica 20 130 • Nitzanim-Concord 20 280 • Polaris 20 945 • Star 20 900 • VERTEX 20 250 • Walden 25 175 • 210 4,035 V.Modena - EDE Conference, Sofia - November 28, 2005

  16. Contacts/references Email: vmodena@libero.it IFISE Project http://ifise.unipv.it ESTER Project http://www.unipv.it/ester/index.html V.Modena - EDE Conference, Sofia - November 28, 2005

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