1. INSTITUTIONAL FRAMEWORK AND SME ACCESS TO FINANCE PROF. DR. SOPHIE MANIGART VLERICK BUSINESS SCHOOL AND GHENT UNIVERSITY

2. FUNDING GROWTH IS CRUCIAL FOR THE SUCCESS OF COMPANIES 2 Development Stage Source: EY; Frontier Economics; EVCA

3. © Vlerick Business School

4. MOST ACTIVE CROWDFUNDING CATEGORIES

5. © Vlerick Business School FUNDS PAID OUT PER EQUITY BASED PROJECT

6. FUNDING GROWTH IS CRUCIAL FOR THE SUCCESS OF COMPANIES 2 Development Stage Source: EY; Frontier Economics; EVCA

7. © Vlerick Business School

8. THE VENTURE FUNDING LANDSCAPE IN THE US COUNTS MANY DIFFERENT PLAYERS IN ALL STAGES

9. © Vlerick Business School US COMPANIES RAISE MORE VC FUNDING US EU First round$ 7 mio€ 3,2 mio Cumulative VC amount$21 mio€10,4 mio

10. © Vlerick Business School THIS LEADS TO HIGHER GROWTH IN US COMPANIES

11. © Vlerick Business School VC IN EUROPE IS THREATENED  Banks: Basel III regulation  Insurance companies: Solvency II regulation  National/regional public policy focuses on small funds, but big money is needed  Public policy invested 30%-40% of new money in european VC funds between 2009-2012

12. © Vlerick Business School BELGIUM SCORES LOW ON BROAD INSTITUTIONAL FACTORS Source: Groh, Liechtenstein, Lieser, 2013 12 (Stock market, M&A) Quality of education

13. © Vlerick Business School A STRONG INSTITUTIONAL FRAMEWORK LEADS TO MORE SME FINANCING SUPPLY OF FUNDING  Legality index  Effectiveness of legal system, absence of corruption, risk of contract repudiation,…  Self-dealing protection  Legal protection of minority shareholders  Creditor rights protection DEMAND FOR FUNDING  One-share-one-vote  Bankruptcy regulation and execution  Discharge available?  Bankruptcy process costs? Duration?

14. © Vlerick Business School LEGAL FRAMEWORK AND SME FINANCING IN EUROPE MORE EQUITY RAISED IF…  Stronger legality index (+22%)  Better protection against self-dealing (+79%) MORE DEBT RAISED IF…  Stronger legality index (+13%)  Stronger creditor rights (+12%)  Discharge after bankruptcy (+79%)  Quicker bankruptcy closing, lower closing costs

15. © Vlerick Business School POSITION OF BELGIUM COMPARED TO UK

16. © Vlerick Business School CONCLUSION  Improving the legal (and, more broadly, the institutional) environment for  Minority shareholders  Creditors  Entrepreneurs would strongly enhance the availability of funding for SMEs  …at low cost for public policy!

17. © Vlerick Business School FUNDING