Western Balkan Technology Fund (WBTF) Initiative Ljiljana Kundakovic, Viktor Nedovic, Goran Radosavljevic Ministry of Science and Technological Development Republic of Serbia

Objectives Stimulate long-term economic growth prospect and competitiveness of Western Balkan (WB) economies Further engage International Financial Institutions (IFI) in private sector development in WB Increase the ability of innovative SMEs to access and efficiently use equity-based investments Create €100M equity investment fund focused on technology

Status of the Initiative WBTF supported by all beneficiaries WBTF initiative has been presented to high representatives of EC, EIB, EIF, WB and EBRD Preliminary analysis of supply and demand of equity finance for SME in WB, conducted by the European Investment Fund (EIF)

Competitiveness and Innovation On a cost basis Western Balkans businesses are competitive today “To sustain competitiveness, the Western Balkans needs to move up the value chain: first, by differentiating through value-added services and innovation; and second, by further leveraging the region’s proximity to the EU market” OECD: RECOMMENDATION FOR A REGIONAL INVESTMNENT STRATEGY, 2008

Financial Markets in WB are Underdeveloped The supply of equity capital in seed, early and expansion stages of development of enterprises is either completely absent or is at the embryonic stage Access to and the cost of finance are a significant constraint on investment. On average, companies in the manufacturing sector need collateral of 177%, with an interest rate of 11%. Public intervention in creating a supply of equity finance available to SMEs is needed OECD: RECOMMENDATION FOR A REGIONAL INVESTMNENT STRATEGY, 2008 EIF: WB Venture Capital Assessment . 2010

WBTF Structure and Financing Phase I Phase II IPA 2011 and 2012 (multibeneficiary)/WBIF 25M IFI/Donor Community 50M WB Beneficiaries Participation 10M Albania 0.7 Bosnia and Herzegovina 1.1 Croatia 4.2 Macedonia 0.6 Montenegro 0.3 Serbia 3.1 Private Sector 15M Total 35M 65M Phase I (€25-25M) IPA multi beneficiary funds IFI through WBIF WB Beneficiaries Phase I Evaluation Phase II (up to €65M) IFI/Donor Community Private sector

European Investment Fund WBTF Management European Investment Fund Evaluation of investment proposals Collaboration and coordination with local offices/agencies in all beneficiaries Establishing a network of VC funds and business angels for co-investment Management Beneficiaries Identification and preparation of investment proposals Negotiation and closing Follow up of investments through active participation in companies’ management Local Offices

Staged Approach to Establishing WBTF Development of full investment portfolio Significant participation of IFIs and private sector >2015 Developing and financing a pipeline of investment projects Technical support to detailed preparation of projects at the beneficiary level Assessment of individual investment projects 2012-2014 Capacity building (supported by multi-beneficiary IPA) Training and capacity building of beneficiaries Assistance in establishing the WBTF 2012

Investment Strategy Generalist with strong technology and innovation component Equity financing with standard terms with respect to protective provisions, Board representation and right to participate in subsequent issuance of equity securities Convertible debt financing Main Investment Criteria: High growth potential and proven business models Competitive innovative product or services Technologies with potential to access international markets Leadership capable of sustaining growth

Link with EP and WB EU Agenda EUROPE 2020 : A strategy for smart, sustainable and inclusive growth Priority: Smart growth - developing an economy based on knowledge and innovation Innovation Union – EU 2020 flagship initiative to improve framework conditions and access to finance for research and innovation so as to ensure that innovative ideas can be turned into products and services that create growth and jobs. The 2007 EU Enlargement Strategy: The need to raise competitiveness and further stimulate investments and SME growth through improved access to finance Implementation of Small Business Act : Recommends that The EU and Member States should facilitate SMEs’ access to finance, in particular to risk capital, micro-credit and mezzanine finance

Improved access to finance Thank you! Ministry of Science and Technological Development Republic of Serbia ljiljana.kundakovic@nauka.gov.rs Improved access to finance