Horizon 2020 Financial Instruments SMEs IN HORIZON 2020 Brussels, 18 October 2013 Horizon 2020 Financial Instruments Access to Risk Finance under the EU Framework Programme for Research and Innovation 2014-2020 Ignacio Puente González DG Research and Innovation, RTD-C.3 Financial Engineering Unit Research and Innovation

HORIZON 2020 "Access to Risk Finance" Part of the Horizon 2020 budget (3.69%)* will not be provided through grant funding but in the form of risk-sharing (for loans and guarantees) and by providing risk finance (equity) Around EUR 2.725 billion in total (net of administrative costs) for market-driven financial instruments Leverage effect: to attract additional finance and multiply HORIZON 2020 budget resources Addressing financing gaps: Intervention only if there are financing gaps in the R&I delivery chain (e.g. due to high risk) Building a bridge from R&D to Innovation: Effective and cost- efficient way to complement grant funding under Horizon 2020 and translate R&D results to the market * Actual figure for the budget after the Council/EP/COM negotiations of July 2013; to be confirmed 2 Not legally binding 2

Principles and Implementation Continue and refine proven facilities that have supported R&I in 2007-2013: RSFF, RSI, GIF-1 Continue to run facilities in a demand-driven way(no earmarking; "first come, first served"), coupled with targeted awareness-raising Encourage top-up funding to target sectors/policies Keep focused on attracting private investments As now, implementation via entrusted entities (EIB/EIF) (NB exploratory talks with other institutions) As before, select financial intermediaries through open calls for expressions of interest Complementarity with other EU's Financial Instruments, i.e. COSME Not legally binding

HORIZON 2020: "Access to Risk Finance" (sub)programme Objectives: Facilitate access to finance for: (1) RDI-driven/ innovative SMEs & small midcaps; and (2) Ambitious RDI projects carried out by a variety of recipients (companies, universities, research centres etc.) Aim: At least 30% of the budget to serve R&I-driven SMEs and small midcaps One Debt instrument; one Equity instrument; Accompanying measures 4 Not legally binding

What does "Access to risk finance" mean in the Horizon 2020 context ? Using part of the Horizon 2020 budget to stimulate more investment in research and innovation not through grants but in the form of Financial Instruments: Debt finance Loan finance, i.e. risk-sharing loans to companies and for innovative projects introducing new technologies Guarantees to financial intermediaries (commercial and development banks) that provide loans to research- and innovation-driven SMEs and small mid-caps Equity finance Equity, i.e. venture capital for newly created companies exploiting R&D results   5 Not legally binding 5

HORIZON 2020 Financial Instruments Debt finance: Loans and guarantees for investments in Research & Innovation; demand-driven; targeted at midcaps and larger companies, research bodies and stand-alone projects; ("RSFF II") Guarantee facility for research-intensive and innovative SMEs & small midcaps ("RSI II") SME Initiative (under development, called by the June European Council): Joint Guarantee Instrument/ Securitization for loans to (innovative) SMEs and small midcaps; joint approach involving European Structural & Investment Funds (ESIF), HORIZON 2020 and COSME, with crucial support from EIB Group and Member States 6 Not legally binding

Who or what is eligible for a loan? SMEs and Small Midcaps Who or what is eligible for a loan? Loan is for investments in R&D or innovation with significant technology or application risk or Loan is to a "fast-growing" enterprise (meaning >20% p.a. in growth or employees over last 3 years) or Loan is to an "enterprise with significant R&D or innovation potential" — which means what, practically? Catalogue of criteria — just one must be met … * Actual criteria, subject to fine-tune Not legally binding

"Enterprise with significant R&D or innovation potential" Expenditure in innovation in last balance-sheet is at least 20% of loan volume At least 90% of loan is earmarked in business plan over next 2 years for R&D/innovation expenses or investment Firm awarded grants, loans or guarantees from EU or national R&I support schemes within last 2 years Firm awarded an innovation prize within last 2 years Firm registered a patent within last 2 years Firm has been invested in by high-tech VC fund Firm is based in science, technology or innovation park Firm received tax benefits linked to RDI investment within last 2 years Not legally binding

RSI - Financial Intermediaries (up to now) Financial Intermediary Country 1 Unicredit Bank Austria Austria 2 Ceska Sporitelna (Erste) Czech Republic 3 ABN Amro Netherlands 4 Bankinter Spain 5 AIB Ireland 6 Banco Popolare (joint application - 2 FIs) Italy 7 Cassa Di Risparmio di Cento 8 Deutsche Bank Germany 9 Komerční banka 10 BPI Portugal 11 Bank Pekao Poland 12 BPCE (joint application - 17 FIs) France 13 Credito Valtellinese Group (joint application - 4 FIs) 14 Raiffeisen Leasing Polska 15 Halkbank Turkey 16 Bpifrance financement Not legally binding

HORIZON 2020 Financial Instruments Equity finance: Early stage finance for innovative enterprises - notably seed and start-up companies, growth-stage also possible. ("Successor to GIF-1") Pilot facility for technology transfer (under development) to bring R&D results from public research organisations and universities to the market Implementation of the guarantee facility (debt) and the equity facility will be made in co-operation with COSME financial facilities for SMEs Accompanying measures: Technical and financial assistance (of EIB); improving investor-readiness of start-ups, SMEs and small midcaps; piloting co-investment by Business Angels; prizes for best practices in R&I finance etc. 10 Not legally binding

More information Horizon 2020 Financial Instruments RSFF http://www.eib.org/products/rsff/ RSI www.eif.org/what_we_do/guarantees/RSI/index.htm EU Access to Finance Specific portal www.europa.eu/youreurope/business/index_en.htm Horizon 2020 General portal http://ec.europa.eu/research/horizon2020/index_en.cfm?pg=home&video=none 11 Not legally binding

Thank you very much for your attention!

RSFF Innovative loan facility co-developed by the Commission and the EIB; FP7 budget support (EUR 1 billion) for risk- sharing Operational since 2007 and available until the end of 2013 Loan finance for Research, Development, Demonstration and Innovation in EU Member States and FP7 Associated Countries Demand-driven; projects supported on a “first come, first served” basis Very successful: Loans of EUR 8.8 billion for more than 90 projects in 23 countries (EU Member States and Associated Countries)

RSI Guarantee facility under the RSFF for research-driven and/ or innovative SMEs and small midcaps (up to 499 employees) Pilot scheme (2012/2013) to test guarantees and counter- guarantees for loans/ leases for RDI investments; Implemented by the European Investment Fund (EIF); FP7 budget support to RSI for risk-sharing: EUR 270 million Significant leverage effect expected: Approximately EUR 1.125 billion of EIF guarantees and total loans and leases of EUR 2.25 billion for the period 2012-2015 Important to know: RSFF and RSI are the "blue print" for the future loan and guarantee Financial Instruments of Horizon 2020 14 Not legally binding

RSI - Financial Intermediaries (up to now) As of 27 September 2013 25 applications + 4 requests for increase 27 for the direct guarantee 2 for the counter guarantee 11 countries in the pipeline so far… (more to come!) 16 guarantee contracts signed with Financial Intermediaries from 11 countries for total guarantee amount of EUR 860 million total loan/lease Volume of EUR 1.76bn available to innovative businesses in 11 countries 10 applications covering 3 additional countries approved by the Board & to be signed before year end