1. Enterprise and industry European Commission New Financing opportunities for Innovative SMEs Rome, 1 December 2006 Jean-Noël DURVY INSME- UNIDO International Training Course on « Business Sart-Up and Access to Finance for SMEs and New Technology based Firms »

2. DG Enterprise and industry - European Commission MAIN PROGRAMMES / SOURCES OF EU FUNDING  Structural funds  FP7: (53.2 billion)  CIP: (3.6 billion) But also:  EIF/EIB: innovation 20% initiatives  Framework for States Aids: de minimis, innovation, risk capital, etc.

3. DG Enterprise and industry - European Commission CIP: 9 previous programmes 1. ENTERPRISE (PARTICULARLY SME) COMPETITIVENESS 2. INNOVATION AND ECO-INNOVATION 3. COMPETITIVE, INNOVATIVE & INCLUSIVE INFORMATION SOCIETY 4. ENERGY EFFICIENCY & NEW/RENEWABLE ENERGY SOURCES 4 common objectives LIFE Environment MAP Innovation Modinis eCONTENT eTen Intelligent Energy Europe STEERSAVEALTENER

4. DG Enterprise and industry - European Commission CIP Budget breakdown € billion 1 Entrepreneurship and innovation Programme (EIP) - thereof financial instruments - including eco-innovation 2.166 1.133 430 2 ICT Policy728 3 Intelligent Energy-Europe Programme (IEE) 727 Total3.621

5. DG Enterprise and industry - European Commission 1st pillar: EIP Objectives: Access to finance SME cross-border cooperation Innovation and eco-innovation Entrepreneurship and innovation culture Policy development Main instruments: Financial instruments (equity and loan guarantees) Business support services Projects (clusters, regional innovation) Analysis and monitoring Policy exchange

6. DG Enterprise and industry - European Commission 2nd pillar - ICT Programme Objectives : Single information space Innovation and investment in ICT Inclusive information society Main instruments: Networks for exchange of knowledge Pilot and markete replication projects Policy analysis & information

7. DG Enterprise and industry - European Commission 3rd pillar - IEE Programme Objectives: Energy efficiency & rational use of resources (SAVE) New & renewable energy sources (ALTENER) Energy in transport (STEER ) Main instruments: Promotion and dissemination projects Market Replication Projects

8. DG Enterprise and industry - European Commission Eco-Innovation in EIP CIP ECO-Innovation (€ 430) LIFE (→ 2006) NatureEnvironment Environmental technologies: Pilot and Market Replication projects Access to finance (€200 million) – Articles 11, 16-19 Risk capital (GIF 1&2), capacity building, including resources dedicated to support SMEs developing or using environmental technologies Networking of Eco-Innovation actors – Articles 13, 21 Clusters, partnerships, networks, technology transfer, intellectual property Business and innovation support, policy development & exchange E.T.A.P. FROM 2007

9. DG Enterprise and industry - European Commission FINANCIAL INSTRUMENTS  JEREMIE (Structural funds)  Risk sharing facility (FP7)  Financial instruments for SMEs (CIP)  EIF/EIB: own resources Some more activities : technology transfer accelerator

10. DG Enterprise and industry - European Commission Enterprise ’s Revenue Enterprise’s development stage Pre-seed phase Seed phase Valley of Death HIGHER RISK Start-up phaseEmerging growthExpansion LOWER RISK Entrepreneur, friends, family Business Angels Seed/early stage VC funds Public stock markets Bank loans and guarantees Venture Capital Funds CIP financial instruments - Meeting SMEs’ financial needs

11. DG Enterprise and industry - European Commission Financial instruments for SMEs CIP  Three instruments: -High growth and innovative SME facility (GIF1+2) -SME Guarantee Facility (SMEG 1 to 4) -Capacity building (CBS)  A budget of 1129 Mio: including an eco- innovation component: 228 Mio

12. DG Enterprise and industry - European Commission Enterprise ’s Revenue Enterprise’s development stage Pre-seed phaseSeed phase Valley of Death HIGHER RISK Start-up phaseEmerging growthExpansion LOWER RISK Risk Capital High Growth Innovative Companies Scheme (GIF) VC funds (~ € 500 mio) o Seed and start-up o Early expansion stage (new) Business Angels (new) Capacity Building Capacity Building (~ € 60 mio) Seed Capital Action CIP financial instruments - Meeting SMEs’ financial needs Debt financing & guarantees SME Guarantees SME Guarantees (~€ 500 mio) Loan Micro-credit Equity and mezzanine (modified) Securitisation (new) Capacity Building Partnership with IFIs (new)

13. DG Enterprise and industry - European Commission Source: EVCA Venture Capital for early stages European VC - amounts invested in 2005 Trends in VC early stages - % of investments Sources: DB Research: EVCA, PwC Money Tree

14. DG Enterprise and industry - European Commission Equity Investments *Source: EVCA 2005 Stage distribution by % of Amount Invested* € 47 billion* European Private Equity Investments (2005) : € 47 billion* Returns (IRR) as at 31.12.2005** **Source: Thomson Financial, 2006

15. DG Enterprise and industry - European Commission CIP financial instruments Commercially oriented / best market principles Minimum 50% of private investors Pari passu with private investors Catalytic effect Includes eco-innovation

16. DG Enterprise and industry - European Commission RISK CAPITAL (GIF) principles PRE-SEED & EARLY STAGE (GIF1) SMEs < 10 years Focus on high growth potential Support co-investment with business angels Typically up to 25% EU investment EXPANSION STAGE (GIF2) Lower EU intervention More sizeable VC funds Typically up to 15% EU investment

17. DG Enterprise and industry - European Commission Debt finance – main issues The main source of external finance for the majority of SMEs New bank requirements (« Basel II ») Collateral SMEs can provide often insufficient Specific financial needs in different phases of SME life cycle

18. DG Enterprise and industry - European Commission SMEG Facility  Four windows: -SMEG1: debt finance with loans or leasing -SMEG2: microcredit financing -SMEG3: equity and quasi equity instruments for SMEs (incl. Mezzanine finance) -SMEG4: securitisation of SMEs debt portfolios.  Providing counter guarantees or co- guarantees for guarantee schemes.  Providing direct guarantees for financial intermediaries.

19. DG Enterprise and industry - European Commission SMEG 1 TO 3  Intermediaries: -Guarantee schemes (incl. mutual guarantee) -Financial organisations (banks, leasing companies, mezzanine funds, micro-finance institutions, etc) operating in participating countries.  Objectives: -cover part of the risk (for instance: 50 % for loans, 75 % for microcredit) taken by financial intermediaries in financing individual transactions (capped with pre-agreed amount)  Permanent open call  Pari passu clause: subject to guarantee cap, EIF will usually rank pari-passu with the intermediary, with regard to loss payments.  Selection process: based on selection criteria in conformity with market and business practices.  Monitoring, audit and promotion

20. DG Enterprise and industry - European Commission SMEG 4  Provides guarantees for originators to securitise portfolios of loans to SMEs with the aim to enable those originators to provide further SME financing.  Originators: banks, leasing companies and other financial Institutions. Committed to SME financing with a particular attention for small entities.  Guarantee rate: 100 % (except first loss piece where a maximum of 50 % is guaranteed) guarantee fee (and where appropriate commitment fees).

21. DG Enterprise and industry - European Commission CBS  Two windows: -Seed capital action (SCA) -Partnership Action (PA)  SCA provides grants for the recruitment of staff with financial or technological expertise.  PA provides grants for technical assistance to improve credit appraisal procedures for SME debt financing in countries with low banking intermediation.

22. DG Enterprise and industry - European Commission MAP FINANCIAL INSTRUMENTS: IMPLEMENTATION Bank Venture capital Fund European Union budget SMEs Invests Lends Provides funds Guarantee Society Co-Guarantees EIF selects its financial intermediaries based on capability, history and solidity

23. DG Enterprise and industry - European Commission SME Guarantees Nr of SMEs supported 277 033 EU budgetary funds committed Total aggregate Loan amount € 400.7 mio€ 20 290 mio Up to 31 December 2005 Nr of Portfolios of Financial Intermediaries 69 VC funds EU budgetary funds committed Total funds committed € 153 mio€ 920 mio 28 FUNDS + 14 VCFs in the pipeline (Investment Amount of EUR 150 M) Innovative SMEs Supported Innovative SMEs Supported323 Achievements (1998-2005)

24. DG Enterprise and industry - European Commission Information Slide - The New SME Definition

25. DG Enterprise and industry - European Commission Further Information http://europa.eu.int/comm/enterprise /enterprise_policy/cip/index_en.htm

26. DG Enterprise and industry - European Commission CONTACT Enterprise & Industry Directorate-General Financing SMEs, entrepreneurs & innovators European Commission B-1049 Brussels Fax +32 2 295 21 54 E-mail: entr-finance-smes-entr-innov@ec.europa.eu