Competitive Advantage through Private Equity and Venture Capital Financing Dr. Jürgen Marchart AVCO – Austrian Private Equity and Venture Capital Organisation 28 th March 2014

1.What is AVCO? 2.What is Private Equity/Venture Capital? 3.Austrian Private Equity Industry 4.Competitive Advantage 5.Framework Conditions Agenda

AVCO – Austrian Private Equity und Venture Capital Organisation is … …the umbrella organisation of the Austrian Venture Capital industry Represents 80% of the Austrian Venture Capital market AVCO’s mission is: What is AVCO?

Mission Information and know-how services, to raise awareness for benefits of VC Networking, fostering the co-operation of all VC players Lobbying, to improve framework conditions Co-operation with EVCA, nVCAs, EC,… Organisation AVCO is a non-profit association Financed by membership fee, sponsoring, projects Mission of AVCO

Fund location and legal framework conditions o Representation of PE/VC industry in nationalen and European legal framework discussions o Working groups, know-how generation and information of AVCO Members o Interface to other national umbrella organisations and EVCA Deals/Transactions o Matching platforms o Co-operation with potential targets (portfolio companies,...) Investors o Co-operation with potential investors o Information generation und dissemination about the Austrian PE/VC industry Co-Investments o Creation of matching platforms o Investment cases, success stories, … AVCO Services I

Marketing and visability of the know-how and the services of AVCO Members o visability for know-how and services of AVCO Members to members of the PE/VC Community o Generation of projects/business Education o PE/VC trainings and seminars o Know-how transfer to young employees of AVCO Members o Development of an education certificate Information o Newsletter o News & changes at members AVCO Services II

PR (image of the branche) o Public relation o Image building for activities of the PE/VC industry o Active communication of topics o Communication of positive effects of PE/VC for Austria o Awareness building Networks o Network platforms o Matching platforms o Active community, matching of the players Lobbying o Competent and independent information und know-how provider o Active discussion with representatives of the government o Active creation and further development of PE/VC in Austria AVCO Services III

Members of AVCO Member PE/VC Funds Service Provider Bank Houses Investors / Family Offices Associated Member Companies PE/VC Umbrella Organisations Individual Member Business Angels Professionals

AVCO Members – PE/VC

AVCO Members – Service Providers

1.What is AVCO? 2.What is Private Equity/Venture Capital? 3.Austrian Private Equity Industry 4.Competitive Advantage 5.Framework Conditions Agenda

Financing Instruments intensity financing-risk success participation property interests governance shareholder loan subordinated loan unsecured loans credit & loan debt mezzanine equity silent participations

Financing Mix – Over Time Stock Equity Debt Equity Cash Flow Private Equity Funding/ FFF

Private Equity provides equity capital to enterprises not quoted on a stock market. Private Equity can be used to develop new products and technologies to expand working capital to make acquisitions or to strengthen a company’s balance sheet. to resolve ownership and management issues - a succession in family-owned companies to buy out or buy in of a business by experienced managers What is Private Equity?

Venture capital is, strictly speaking, a subset of private equity and refers to equity investments made for the launch early development or expansion of a business. (Definition of EVCA – European Private Equity and Venture Capital Association) What is Venture Capital?

“Every day, each of you benefits from Private Equity. Your morning starts with a Latte at Starbucks, you carry your internet research at work via Google or Yahoo !, you talk to family and clients around the globe over Skype and eat a quick lunch snack at Nordsee or Burger King. You order books and CDs from Amazon.com and your kids liaise with their friends over MySpace.com and U-Tube on their Compaq computer powered by Intel. You shop for Tommy Hilfinger, Jimmy Choo, Tumi bags and suitcases, Bally, Tag Heuer etc. in the evening. Your doctor recommends you products from Actelion and Genentech or Amgen and you work out at Fitness First or Holmes Place and you finish your day off buying tickets over Ebay, drinking a beer at Punch and watching TV on Cablecom or Sky.” (Javier Echarri, former EVCA Secretary-General) One Day with PE/VC?

PE & VC – More than Money PE/VC as Financing-Tool PE/VC as Asset class Performance Capital FundraisingInvestment Investment plus Information, Coaching, Management Know-how EXIT Profit SME Growth support, Innovation … Fund Fundmanagement Investor Institutional investors like Pension funds, Insurances, Banks Captial Call Concept

1.What is AVCO? 2.What is Private Equity/Venture Capital? 3.Austrian Private Equity Industry 4.Competitive Advantage 5.Framework Conditions Agenda

PEREP_Analytics™: (Private Equity Research Exchange Platform) Private Equity non-commercial pan-European private equity database Industry statistic: PE/VC activities of PE/VC funds located in Austria (Fundraising / Investments / Exits at national and international SME). Market statistic: PE/VC activities at SME located in Austria (Investments / Exits of national and international funds). European PE/VC Industry – Statistics

Industry statistic – Austrian Funds: PE/VC activities of PE/VC funds located in Austria (Fundraising / Investments / Exits at national and international SME). Market statistic – Austrian Companies: PE/VC activities at SME located in Austria (Investments / Exits of national and international funds). Source: EVCA PEREP_Analytics | AVCO (May 2013) 2012 Fundraising Investments Deinvestments Austrian Funds Austrian Companies Incl. funds located in Austria, investing in Austria and abroad Private Equity & Venture Capital in Austria 173 Mio.-31% 115 Mio.-7%261 Mio.-19% 83 Mio.-76%182 Mio.-37%

21 Investments 2012 GDP share: PE & VC Funds in Europe Private Equity & Venture Capital in Europe in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments 2012 GDP share: PE & VC Austrian Companies Private Equity & Venture Capital in Europe in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments 2012 GDP share: VC only Austrian Funds Private Equity & Venture Capital in Europe in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments 2012 GDP share: VC only Austrian Companies Private Equity & Venture Capital in Europa in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments Development: PE & VC Austrian Funds Private Equity & Venture Capital in Austria in Mio. € Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments Development Austria vs. Europe: PE & VC Austrian Funds PE/VC Investments Austira vs. Europe in Mio. € Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments Development: PE & VC Austrian Companies Private Equity & Venture Capital in Austria around € 590 Mio. in Mio. € around € 500 Mio. Communication Deal around € 180 Mio. Statistics since Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments Development: VC share Austrian Funds Private Equity & Venture Capital in Austria in Mio. € Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments 2011 / 2012 Branches: PE & VC Austrian Funds Private Equity & Venture Capital in Austria in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments 2011 / 2012 Branches: PE & VC Austrian Companies Private Equity & Venture Capital in Austria in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments 2011 / 2012 Life Cycle phases: PE & VC Austrian Funds Private Equity & Venture Capital in Austria in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments 2011 / 2012 Life Cycle phases: PE & VC Austrian Companies Private Equity & Venture Capital in Austria in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Investments 2012 Flow: PE & VC in Austrian Companies: 261,3 € 115,4 Mio. Investments made by Austrian Funds 32,9 82,5 178,7 € 261,3 Mio. Investments in Austrian Companies 0,084 % GDP share 0,037 % GDP share von österr. Fonds: 115,4 abroad Private Equity & Venture Capital in Austria in Mio. € Germany17,2 Mio. Czech Republic11,5 Mio. Switzerland2,1 Mio. Hungary1,6 Mio, Liechtenstein0,3 Mio. Source: EVCA PEREP_Analytics | AVCO (May 2013)

Exits Development: PE & VC Austrian Funds Private Equity & Venture Capital in Austria in Mio. € Source: EVCA PEREP_Analytics | AVCO (May 2013)

Exits Development: PE & VC Austrian Companies in Mio. € Private Equity & Venture Capital in Austria Statistics since Source: EVCA PEREP_Analytics | AVCO (May 2013)

Exits 2011 / 2012 Exit Route: PE & VC Austrian Funds Private Equity & Venture Capital in Austria in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Exits 2011 / 2012 Exit Route: PE & VC Austrian Companies Private Equity & Venture Capital in Austria in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Fundraising Development / Sources: PE & VC Austrian Funds Private Equity & Venture Capital in Austria in Mio. € Source: EVCA PEREP_Analytics | AVCO (May 2013)

Fundraising 2011 / 2012 Sources: PE & VC Austrian Funds Private Equity & Venture Capital in Austria in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

Fundraising Sources: PE & VC – Share Government Agencies Austrian Funds Private Equity & Venture Capital in Austria in % Source: EVCA PEREP_Analytics | AVCO (May 2013)

1.What is AVCO? 2.What is Private Equity/Venture Capital? 3.Austrian Private Equity Industry 4.Competitive Advantage 5.Framework Conditions Agenda

PE & VC – Intelligent Money Financing Function: no alternative finance sources available for specific project Selection Function: limited financial resources are allocated to projects with highest profit-potential at high risks Added Value: („smart money“) input of active investors is not only money, but also management know-how, networking, consulting, …

PE & VC Investment Phases Pre-Seed Stage  Business Angel Investment Business Angel Early Stage Expansion Stage Later Stage  Management Buy-out/Buy-in (MBO, MBI)  Bridge Financing (Pre-IPO)  Turnaround Financing  Seed Financing  Start-up Financing  First Stage Financing  Second Stage Financing  Third Stage Financing Venture CapitalPrivate Equity

PE & VC – The Process Analyse & Valuation Preliminary Offer Stop or Go LOI Closing Supervisory Board Contract Negotiations Due Diligence Business Due Diligence Legal Due Diligence Financial Due Diligence Post Due DiligencePre Due Diligence

Effects of PE/VC on Company Development

PE/VC financed companies show: 70 % higher turnover 50 % higher employment Effects of PE/VC on Company Development

1.What is AVCO? 2.What is Private Equity/Venture Capital? 3.Austrian Private Equity Industry 4.Competitive Advantage 5.Framework Conditions Agenda

Tax & Legal Situation Austria

Legal Framework Conditions AIFMD implementation, adoption necessary Future national PE/VC regulation for sub-threshold area is depend on AIFMD implementation MiFiG ended 2013 IGG / ”MifiG new” is under discussion Status Quo in Austria

AVCO Community 16 Fund Members represent the relevant players in the market Service Provider are well educated and highly experienced with PE/VC Austrian SME landscape provides an attractive pipeline for portfolio companies Austrian investors seek for investment opportunities abroad and/or Austria, and for syndication partners Status Quo in Austria

Jürgen Marchart Managing Director T F AVCO Austrian Private Equity and Venture Capital Organisation Contact