Introduction to European Investment

Fund
Supporting Technology driven SMEs through early-stage
equity investment

Tbilisi, Georgia, September 2016

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What is the EIF?

“ We provide risk financing to

stimulate entrepreneurship and

”
innovation in Europe

Making Offering Working Supporting

finance more a large array of with financial the market in a
accessible and targeted products intermediaries countercyclical
helping SMEs to to support SMES across the EU-28 way
innovate and ranging from venture EFTA countries,
grow capital to guarantees candidate &
and microfinance to potential candidate
SMEs countries

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Our history

“ We have designed and implemented

financial solutions for SMEs for 20
years and so far supported more

”
than 1.5 million SMEs

1994 2000 2004 2014

Founded and started EIB becomes EIF starts to EIF’s role
by providing majority manage the first strengthened with
guarantees to shareholder and SME focussed increased
financial makes EIF the fund-of-funds on capacity allocated
intermediaries ; “SME risk finance behalf of an EU by its shareholders
in 1997 offer expands specialist” Member State for the benefit of
to venture capital European SMEs

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EIF shareholders
A unique public-private shareholding

FIs – 12.3%
61.2%
26.5%

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Small and Medium-sized Enterprises
(SMEs) key facts

“ SMEs are major contributors to

economic growth and job

”
creation in Europe

99% 20 million EUR 3.4 trl 1 in 3 SMEs

of businesses in SMEs in Europe of SME failed to obtain the
Europe are SMEs totalling 86 million contribution to financing they
jobs which equal the GDP* of the needed in 2015.
66.5% of all EU-28 This is where EIF
European jobs steps in.

*source: Annual Report on European SMEs 2012/2013 - European Commission – 2012 figure

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EIF helping businesses at every stage
of their development
Public Stock Markets

Portfolio Guarantees & Credit Enhancement

Formal VC Funds & Mezzanine Funds

Social Impact Funds

VC Seed & Early Stage

Microcredit

Business Angels,
Technology Transfer

PRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH DEVELOPMENT

SME Development Stages

HIGHER RISK LOWER RISK

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EIF Model

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European Private Equity &
Venture Capital Market
Considerations

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 European Private Equity & Venture Capital
Market Overview – 2Q 2015 (1/3)
Europe Fundraising per Quarter: Deal Size Distribution 2015:
45
37%

30
25%
26.1 24%

20
18.0
13%
11.2

1%
0%

Q4 2014 Q1 2015 Q2 2015 € <50m € 50-100m € 100- € 250- € 500- € >1,000m

250m 500m 1,000m
Funds Closed Total Amount Fundraised (€bn)
86%

 Between 2014 & 2015 substantial increase in funding activity with +125% for three
quarters in terms of number of funds closed and a +133% increase in the total amount
of capital raised

 86% of all Private Equity deals in Europe range between EUR 50m-250m

Source: PE Breakdown 2015, Merrill Datasite 9

 European Private Equity & Venture Capital
Market Overview – 2Q 2015 (2/3)
Europe Deal by Type: Europe Deal by Sector:
€300 2500 100%
90%
€250 80%
2000
70%
€200
1500 60%
€150 50%
1000 40%
€100
30%
500 20%
€50
10%
€0 0 0%
2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
B2B B2C
Buyout (€B) Growth (€B) VC (€B)
Energy Financial Services
Other (€B) Buyout Growth
Healthcare IT
VC Other

 VC activity in terms of number of deals falls but capital invested spikes reflecting
increasing valuations and deal sizes in the European market.

 Deal flow by sector in Europe didn’t change much year-over-year, though IT continued to
grow its share of overall activity.

Source: PE Breakdown 2015, Merrill Datasite 10

 European Private Equity & Venture Capital
Market Overview – 2Q 2015 (3/3)

Europe Exit per Year: Europe Exit per Type of Transactions:

€ 160 1,200 € 140 700
1,078
€ 140 968 € 120 600
1,000 € 30.83

€ 120 844
€ 100 500
800
€ 100 672 € 28.08
788 € 37.15
€ 80 € 28.17 400
€ 80 600
395 € 60 € 5.64 € 30.24 € 16.63 300
€ 60
400
€ 40 € 20.93 € 4.02
€ 74.82 200
€ 40
€ 57.76
200 € 10.39 € 49.43
€ 103.3

€ 133.7

€ 20 € 4.18 100
€ 22.6

€ 51.3

€ 91.6

€ 73.0

€ 20 € 38.70
€ 17.87 € 20.03
€0 0 €0 0
2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014

Capital Exited (€B) # of Exits Acquisition (€B) IPO (€B) Buyout (€B)
Acquisition Count IPO Count Buyout Count

 Over EUR 133.7 billion in capital exited in 2014 due to the stronger public markets on
the continent and high industrywide valuations of underlying assets.

 Both IPOs and corporate acquisitions recorded strong years and accounted for a
combined €103 billion in capital exited in 2014

Source: PE Breakdown 2015, Merrill Datasite 11

 European VC Ecosystem is Maturing

• Preferred career path • 1st generation founders as

• Attracts high potentials / mentors
managers Talent Experience • Execution infrastructure ready
• Next generation of founders • Excellence building blocks
available

Exits Capital
• Successful exits via M&A • Former entrepreneurs invest
and IPOs • Business angels are
• Entrepreneurs reinvest in everywhere
the ecosystem • Every good idea gets funded
Thinking
• Powerful role models for Big
young talent
• Strong teams are ambitious
• Looking beyond building small
• Focus: big international opportunity
Source: Holtzbrinck Ventures 12
Technology Talent

Source: Real Deals 13

European Unicorns t-3

Source: Holtzbrinck Ventures 14

 European Unicorns

Europeantech
European techcompanies
companies surpassing
reaching ~USD ~USD 1bn valuations
1bn valuations

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Holtzbrinck Ventures, EIF 15

 The rise & fall of the unicorns

 Dropbox -20%

 Snapchat -25%

 Square -20% - -40%

 Zenefits -50%

 MongoDB -50%

But not all is bad: Uber, The Honest Co., AirBnB, SpaceX, etc.

Source: Fortune (re. Fidelity), Economist, Sunstone, EIF 16

It’s going North!

Performance Index - Rebased to 100 on 31.12.10

200.0

180.0

160.0

LMM Funds

140.0 VC Funds

120.0

100.0

80.0

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EIF’s VC portfolio (1/2)

Double digit net fund

IRRs for vintages 2007
and beyond

Top 10: 33% - 66% Median = 46%

Top 20: 23% - 66% Median = 32%

Top 30: 16% - 66% Median = 27%

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 EIF’s VC portfolio (2/2)

European VC investing VC model broken?

can be done profitably
Distributions/capital calls
ratio in 2014 & 2015 in EIF
 Attractive single and
portfolio above 1
double digit net IRRs (corrected for drastically increased
on some of our VC commitment volumes over the last years)
FoFs mandates

Increasing appetite for

 Provisioning for
carried interest on
European VC funds +
some of them oversubscribed funds
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Equity Investment Organisation

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Equity Investment
Organisation chart

Head of Equity Mandate

GS&M
Investments Mgt

Technology & Front Office Business

Lower Mid-Market
Innovation Support

Venture Capital & LMM Western

Impact Investing Europe

Business Angels & LMM Northern,

Tech Transfer Eastern & Southern
MM: Mandate Management
GS&M: Guarantees, Securitisation
and Microfinance
LMM Services Unit

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 Equity portfolio

Benefiting from a well-diversified

portfolio
220 LMM funds 286 VC/TTA funds

EUR 5.3bn committed EUR 5.3bn committed

(EUR 2.8bn disbursed, EUR (EUR 3.0bn disbursed, EUR
1.3bn repaid, EUR 1.4bn net Lower Venture 1.0bn repaid, EUR 1.9bn net
paid-out) Mid Capital paid-out)
Market / TTA
EUR 32.2bn total fund 49.9%
EUR 21.9bn total fund
50.1%
sizes sizes

> 1,500 companies > 3,000 companies

Figures as of 31.12.2014
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Equity Investment Team
Multi disciplinary team with substantial combined experience

Diverse and multi-disciplinary

 Ca. 60 investment professionals with focus on the Private Equity and Venture Capital market
across Europe
 Specialist knowledge of specific technology segments including Digital Life, Health & Wellbeing,
Industrial, Resource Efficiency
 Mix of financial, industrial and technology backgrounds: investment banking, corporate
finance and audit, management consulting, pharma/biotech, mobile, telecom, semiconductor
industries
 Truly multi-cultural ,10+ nationalities: Luxembourg, German, French, Belgian, Finnish, Italian,
Spanish, British, Polish
 13+ languages: English, German, French, Dutch, Luxemburgish, Russian, Portuguese, Spanish,
Italian, Finnish, Swedish, Hindi, and Polish

Supported by EIF’s full institutional capacity

(total headcount ca. 400)
 Risk management
 Legal and compliance
 Fund administration
 Accounting, financing and reporting

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Investment Process

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EIF’s Investment Process

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The Key Step: Due Diligence

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The «Magic Triangle» of due diligence

Team/Track-Record

Strategy

Market Opportunity Fund Parameters

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1. Strategy

• What:
– Focus of investment program
– Drivers of value creation

• How:
– Team’s past experience and skillset
– Compare with other market players
– Market opportunity and competition
– Deal-flow analysis
– Sustainability
– Fit with policy objectives
– …

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2. Track Record

• What:
– Assessment of past performance

• How:
– Relevance
– Attribution to the team
– Prospects of current portfolio
– Value creation
– Crisis Management
– Benchmarking against peers
– …

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3. Team

• What:
– Assessment of team potential

• How:
– Background of team members
– Complementarity / completeness of skillset
– Stability / Turnover
– Alignment of Interests and incentives
– Succession issues
– Reputation
– …

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4. The Market

• What:
– Analysis of market opportunity

• How:
– Macro-economic trends
– Regulatory environment
– Market deal-flow
– Competition
– Ranking
– …

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5. Fund Terms and Conditions

• What:
– Structuring
– Economic terms
– Investor protection

• How:
– Legal negotiations!

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Contact

Nitan Pathak
Institutional Business Development
[email protected]
European Investment Fund
37B avenue J.F. Kennedy
L-2968 Luxembourg
www.eif.org

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