1. 1 Experiences with assistance to Start-ups in Central and Eastern Europe Dick Moor – Senior SME Development Specialist – FACET BV Zeist The Netherlands

2. 2 Objectives of this lecture To communicate experiences with assistance to starters in CEE and CIS countries In order to initiate a discussion about what could be done in the Serbian reality

3. 3 Development stages of an enterprise 1.Birth of an enterprise 2.Start-up phase (2 – 3 years from start) 3.Early stage of further development (2 – 5 years from start) 4.Expansion phase (often after 5 years)

4. 4 Major problems of SME at the initial stage Survey conducted in 3 Russian Regions (2002) % of respondents Amount of start-up capital44 Office and other space27 Acquisition of equipment26 Relations with authorities23 Level of competition23 Availability of information19 Registration process19 Search for employees17 Limited market for products/services16 Availability of adequate knowledge and experience 14 Necessary business contacts and linkages14

5. 5 Comments Most of the starters anywhere in CEE and CIS complain about the lack of finance They almost always underestimate the importance of a sound marketing plan Starters in innovative enterprises usually have serious problems acquiring “state of the art” equipment Problems in the relation with authorities often refer to lack of transparent taxation laws

6. 6 Start-up capital sources 1.Personal savings 2.Money from friends, associates and relatives 3.Money contributed by business partners 4.Bank loans, mainly short-term 5.Funds provided under foreign enterprise development programmes

7. 7 Summary SME Financing Stages In the start-up phase most starters rely on “seed capital” Business Angels and Venture Capitalists can offer a source of finance after the initial start-up phase When enterprise development stabilizes, financial tools are: financing of working capital, equipment leasing, discounting receivables and trade credits In later stages of the development re-investment of profits, (long-)term lending and equity investments will also be part of the “financing mix”

8. 8 Explanation Business angels – Private investors in SME. They often sold their own enterprise. They provide not only finance but experience and business skills. Their motivation ranges from simple return on investment to community benefits. Venture capital - Equity investment in enterprises by outsiders who are not the main owners.

9. 9 Why no external financing in the start-up phase? Starters usually have poor possibilities to provide collateral for borrowing and they have no “credit history”. This makes external bank financing in the start-up phase very difficult. Financing and monitoring starters is relatively expensive. One way to solve this problem is the Guarantee Fund. In my country this is an effective instrument for more than 50 years.

10. 10 Services of BAS providers In all stages of enterprise creation and development providers of Business Advisory Services play an essential role. In the early stages these services are often free (for would-be entrepreneurs) or subsidised (for starters) In later stages entrepreneurs are able to pay a more commercially calculated price.

11. 11 Forms of assistance by a BAS provider Technical assistance (e.g. business planning, loan applications, market evaluation) Training Information dissemination Referral to specialists Support to networking Assistance to implementation Counselling Mentoring

12. 12 When could assistance be fruitful? When the starter has a concrete and realistic idea for the business (s)he wants to start. When he or she has a (more or less) clear idea about the markets (s)he will operate in. When the starter disposes of the characteristics necessary to have a chance be successful. When there is a relation of mutual thrust and acceptance between the starter and the consultant and a readiness to accept advise.