The European venture capital landscape

Bruno RobinoEuropean Investment Fund

Athens, 28 June 2006

Agenda

Private equity in Europe: 2005 a record year

EIF venture capital in Europe

Vision for the future

Conclusion

Private equity in Europe: 2005 a record year

Private Equity Investment as % of GDP in 2005

0.0

04

0.0

05

0.0

22

0.0

53

0.0

58

0.0

64

0.0

65

0.0

67

0.1

2

0.1

23

0.1

48

0.1

54

0.1

65

0.1

77 0.2

94 0.4

19

0.4

31

0.4

65

0.5

06

1.0

61

1.3

31

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Slovac

Rep

ublic

Greec

e

Czech

Rep

ublic

Hunga

ry

Austri

a

Poland

Belgium

Irelan

d

Germ

any

Switzer

land

Finla

nd Italy

Portu

gal

Norway

Spain

Europ

e

Fran

ce

Nethe

rland

s

Denm

ark

Sweden

United

King

dom

* Source: EVCA / Thomson Financial Venture Economics / PricewaterhouseCoopers

Divestments at cost € 29.8bn

Key points

Fundraising: • more than double over 2004 reaching € 72bn• 80% of funds expected to be allocated to buyouts

Investments:• reached a record at € 47bn, a 27% increase over 2004• buyouts represent 68% by amount invested• venture investments +23% over 2004, representing 27% by amount invested

• and 75% by number of investments

Divestments: at cost up to 52% at € 30bn•Write-offs decreased at around 5% of total amount divested

Key points

Investments benchmarks 2005:

• Long term net return since 1980: 10.3%

• Top quarter return 22.9%

• Increased distributions, with realisations above 2000 record level

• Strong performance compared to other asset classes

EIF venture capital in Europe

EIF at a glance

1994 EU specialised financial institution for SMEs,

acting through: Venture Capital (fund of funds) and Guarantees for SME portfolios

AAASubscribed capital of EUR 2 billion : - 62 %: European Investment Bank - 30 %: EC for the EU- 8 %: 20 financial institutions

PPPArt 2 : « pursuit of Community objectives » such as growth, employment, knowledge-based economy, innovation, regional development, LisbonArt 24 : « generate an appropriate return on its resources »

Venture Capital activities

Acting as a Fund-of-funds

Public Private Partnership, selecting funds Eligible to EU Objectives Able to generate risk-commensurate returns

Biggest European early-stage investor (with a 15% market share)

Respected investor (even in the crowded lower mid-market)

EIF : mainly a manager of external resources (mandates)

EUR 600m EUR 4 000m EUR 800m

To be committed in venture capital funds and financial institutions in the EU and Candidate Countries

European Community

Revolving

over 500 000 SMEs indirectly benefited from EIF support

BMWA - ERP

Etc…Up to EUR 1bn

Dahlia SICAR S.R.

Assets under management - EU based Fund-of-funds (Eur millions)

16,000

7,775

4,750

4,450

3,275

3,250

3,230

2,473

1,610

1,435

1,292

1,225

1,138

1,074

900

900

900

840

745

742

560

Alpinvest

Pantheon - Russell Private Equity

European Investment Fund

Capital Dynamics

LGT Capital Partners Ltd

Standard Life Investments

Partners Group

ATP Private Equity Partners

Swiss Re Private Equity Advisors

AXA Private Equity

CDC Capital Partners

Adveq

SGAM Private Equity

Danske Private Equity A/S

VCM

AGF Private Equity

Access Capital Partners

Unigestion

Fondinvest Capital

SVG Capital

Robeco

Sources: Thomson, VentureXpert database, Almeida Capital & companies' websites.

European fund-of-funds market

EIF: Venture Capital

• EUR 3.2 bn have been committed in about 220 funds

• Disbursements represent 60% of the amounts committed

• Young age of the portfolio

• EUR 1.8bn still available for future investments

• 2 944 companies in the underlying portfolio

• Total invested by portfolio funds in these companies EUR 7.5bn

Credentials

Venture Capital commitments of EUR 3.2bn (as at end 2005)

Key investor in major markets

Niche opportunity seeker in smaller markets

Austria(58m)

2%

Belgium(37m)

1%

Denmark(54m)

2%

Finland(78m)

3%

France(522m)

17% Germany(242m)

8%

Greece(20m)

1%

Ireland(99m)

3% Italy

(244m)8%

Luxembourg(19m)

1%

Netherlands(21m)

1%

Portugal(16m)

1%

Slovakia(5m)0%

Spain(185m)

6%

Sweden(61m)

2%

United Kingdom(433m)

14%

Central and Eastern Europe(138m)

4%

Multi-Country(875m)

28%

EIF vs the European Venture Capital market

EIF portfolio stage distributionby % of amount invested

Buyout7%

Expansion19%

Generalist25%Seed

5%

Start-Up44%

European PE/VC market stage distributionby % of amount invested

Seed 1%

Start-up11%

ReplacementCapital

4%

Expansion27%

Buyout57%

• EIF: tendency towards early stage investments (49%)• EIF: investments biased towards tech (56% in ICT and LS)• EU: tendency towards later stage buyouts (57%)

* Source: EVCA / Thomson Financial Venture Economics / PricewaterhouseCoopers

EIF’s investment focus

49% of portfolio are early stage investments - EU average 12% between 2000-2004 (source: EVCA).

57% are tech-related, primarily ICT and life sciences,

balanced by buyout, development and generalist (30%).

EIF always operates alongside private sector investors. Diversified geographical investment focus provides good opportunities outside main areas. Aims to attract more private sector funding to VC space.

A unique positioning and mix of expertise

The largest VC portfolio in Europe (about 220 funds) with most of the current top quartile teams (core) and the emerging ones (satellite)

A repeat investor in top fundsAbility to construct portfolio that meets specific risk profile – proprietary systemAbility to structure transactions that meet the risk appetite of most potential investors –

financial engineering, guarantees

More complex products for more demanding clients

EIF’s Value-added

Long-term, committed and pro-active investor Recognised know-how Rigourous selection and due diligence procedures Pari-passu cornerstone investor Active monitoring; regular presence Widespread network in European venture capital industry Looking also at the more difficult segments (seed, first time teams)

“More than money”

EIF’s vision for the future

EIF’s strategy

Continue to develop EIF existing markets (Early stage, Expansion, Small BO)

In parallel, promote new niches

With the aim to: increase the availability of risk capital in Europe stimulate the development of a high growth market in

Europe improve the investment environment benchmark best practices in Europe

EIF’s focus

Later-stage

Buy-out

IPOs

Tech

Transfer

Incubators

Business

Angels

Expansion /

Dev.Capital

Early StagePre-Seed

Seed

SME LIFE CYCLE

« VENTURE CAPITAL » « PRIVATE EQUITY »

New policy areas

European Investment Fund

CIP COVERAGECURRENT MANDATES COVERAGEGAP

The innovation cycle covered by EIF

New investment focus- Business Angels - Side Funds- Tech transfer - Incubators - Pre-Seed

Existing markets- Early Stage - Expansion - Development Capital

Fundraising underway in these

new areas

New fundraising in our

existing markets

CIP

TTA

JEREMIE

CIP: Competitiveness & Innovation Framework Programme

Successor programme for MAP for period 2007–2013 European Commission proposal was adopted on 6 April 2005 Co-decision procedure by European Council & Parliament

Objectives Generate economic growth and create more jobs Boost the productivity, competitiveness and innovation capacity

CIP – the proposed instruments

High Growth Innovative Companies Scheme (VC) (EUR 518m)

GIF1: Early stage (ex ETF Start-Up)

GIF2: Later stage (job creation, generation change…)

SME Guarantee Facility (EUR 468m)

SME loans, Microcredit, Equity and mezzanine

SME loan securitisation risk-sharing scheme

Capacity Building (EUR 60m)

Tech Transfer

“There is considerable weakness of early stage ventures in Europe … due to structural differences in the transfer of technology from labs to industry (compared to US)” . ECFIN paper for the EFC – March 2005

USUniversity Revenues (€m)Columbia University 115.4University of California 65.3Stanford University 50.0University of New York 49.9Sloan Kettering Institutefor Cancer Research 43.3University of Rochester 33.5

Europe

University Revenues (€m)

Pasteur 32.6

Edinburgh University 4.5

Utrecht* 4.0

Cambridge 3.1

INRIA* 3.0

VIB* 2.7

Technology Transfer

R&D Tech transfer / proof-of-concept Marketable product

«Licensing» Special Protection Vehicles

Virtual LABCreated by leading R&D

Centres

Potential exits for the SPV projects

Licensing to corporation

Sale to corporation

Purchase / investment by other investors

IPO

Investment focus of TTA

«Technology» Intellectual Property «Prototype» Intellectual Property

Looking for new funds from EU to stimulate tech transfer

«Spin-off» Special Protection Vehicles

«Hybrid» Special Protection Vehicles

Funding gapFunding: FP7 Funding: CIP

JEREMIE

JEREMIE is an initiative of the Commission (DG Regio) launched in October 2005

Joint” because it combines resources from EC, National Public Authorities, EIF, EIB and/or other International Financial Institutions (IFIs)

JEREMIE is not an organisation, but a series of coherent actions

Main Targets:

Optimising use of ERDF funding for enhancing the access to finance for SMEs through sustainable and « revolving » financial instruments

Leveraging ERDF funding with EIB loans as well as EIF expertise in creating tailor-made instruments

Develop the role of Entrepreneurship in EU

JEREMIE: Phases

Venture CapitalFunds

Preparation of

Operational Programmes

EVALUATION PHASE

2006 2007 - 2013

IMPLEMENTATION OF NATIONAL FUNDS

DISBURSEMENT PROCESS

MicrofinanceProviders(MCPs)

Tech TransferActivities

Guarantee schemes

Transforming parts of the ERDF grantsinto financial products for SME

Multiplier effect on the budget by attracting EIB & IFIs’ lending

SMESMEs

SMESMEs

SMESMEs

SMESMEs

SMESMEs

Conclusion

Private equity as winemaking?

“It is easier to pick a good wine if one starts with a list of the vintage years.

As in wine-making venture capital has its good years and of course its bad years.

Sometimes the quality of the year is not apparent until some maturation has taken place, but in many cases the indicators

are apparent from the environment and maturation merely serves to confirm what everybody feared in the first place [..].

Quality brands will always stand out.”

Chris Smart, General Partner at IDGVE, 2002.

Thank you for your attention

European Investment Fundtel.: (+352) 42 66 88 1fax: (+352) 42 66 88 200

Bruno Robinob.robino@eif.org

For more info:www.eif.orginfo@eif.org