This project is funded by the European Union Integrated Innovation Support Programme Venture Capital – Challenges & Support Barriers and Solutions Robert Sheffrin IISP Finance Expert & SPEA Board Member 30th September 2013

This project is funded by the European Union “What is the problem”?  Many good SMEs in Serbia …So why can’t most access funding?  Bank funding not available to all  Bank funding not suitable for all  Funding gap  Most don’t know how to access funding Integrated Innovation Support Programme (IISP) 2

This project is funded by the European Union Integrated Innovation Support Programme EU Project: 1.Development of innovation support services 2.Development of new financial instruments (venture capital)  supply of venture capital  demand for venture capital 3

This project is funded by the European Union Private Equity & Venture Capital  Private Equity is the provision of long term, equity (share) capital to private companies with high growth potential  Venture Capital is a type of Private Equity focussed on start-up, early stage companies and emerging growth companies 4 Integrated Innovation Support Programme (IISP)

This project is funded by the European Union Companies that have received VC funding

This project is funded by the European Union Example – Biotech start-up Integrated Innovation Support Programme (IISP) 6  Activity – crop nutrition & protection products  2003 – start up funding. Owner + business angel  £50k seedcorn finance (venture capital fund)  2005 – 6 patents – intellectual property rights  2005/06 - £1m. VC funds & business angels  £3.85m AIM (London junior stock market )

This project is funded by the European Union Bank vs Venture Capital Integrated Innovation Support Programme (IISP) 7 Bank Debt Collateral Capital & interest repayments Risk of withdrawal Monitoring relationship REPAYMENT – regardless of profitability Venture Capital Risk funding (equity capital) Return only on success Committed Partner relationship - support GROWTH – no repayment until sufficient profit and value

This project is funded by the European Union Serbia - Issues/Problems  International - perception not good  Demand for investment – underdeveloped entrepreneurial culture  Supply of investment – limited access to finance / underdeveloped capital markets / limited intellectual property protection 8

This project is funded by the European Union Solutions – stimulating growth Supply  Legislation for venture capital funds  Encourage investment by Serbian institutions into venture capital funds  Improve capital markets – facilitate exits from investments  Tax regime – incentivise entrepreneurs & investors  Fiscal consolidation & further reform of para-fiscal charges Demand  Ease barriers to technology transfer  Make SMEs investment ready - entrepreneurial education & much more! 9

This project is funded by the European Union What an investor looks for Integrated Innovation Support Programme (IISP) 10  High growth potential  An ambitious management team that can achieve the growth  Product / service that has a good market and the ability to reach that market  Competitive edge / unique selling point  Willingness to share ownership  Exit route

This project is funded by the European Union 20 things investors like to see Ability to Implement Management and visionary leadership An impressive management team and board Credible professional advisors Teamwork across the company History of the business to date Compatibility – can you work with them? 11 Integrated Innovation Support Programme (IISP) Ability to Compete A clear strategic plan Market size (local and international) Competitors and differentiation Barriers to entry Future products /services potential Relevant technology How you beat competing technology Intellectual property you own Return on Investment Realistic funding requirements Assumptions used Financial plans How you are currently financed An investable business model A match between the investors’ skills and the business opportunity

This project is funded by the European Union Key dimensions of investment readiness for Serbian SMEs o Equity aversion – why SMEs are reluctant to work with investors o Investability – what investors see as good business models o Presentational failings – how SMEs can improve their ‘pitching’ and presentations of their investment opportunities 12 Integrated Innovation Support Programme (IISP)

This project is funded by the European Union Investment Readiness Training for Serbian SMEs: Raise awareness of investment opportunities Develop understanding of needs of potential investors Make SMEs attractive to investors Formulate business investment propositions Present SME ‘pitches’ to win the investment Prepare for successful negotiations Materials developed - training in progress E-learning platform by December Integrated Innovation Support Programme (IISP)

This project is funded by the European Union Thank you for listening…. Integrated Innovation Support Programme (IISP) 14 Robert Sheffrin Tel: (0) Web: