Transcript Model 3 – Co

Learning from Experience –
Venture Capital Fund Models for 2007-2013
Phil Cammerman
YFM Group Development Director
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Agenda
The Importance of Venture Capital
YFM Group
Skills & Strengths
Key Requirements
Model 1 – Structural
Model 2 – Conventional
Model 3 – Co-investment
Comparison of Models
Conclusions
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The Importance of Venture Capital
EVCA* statistics demonstrate that between 2000 and 2004:
Employment in VC backed businesses has grown by 30.5% per annum – over
40 times the average growth rate of 0.7% pa
 73% of VC backed businesses increased employees by more than 25% per
annum
 Average R&D expenditure per employee was €50,500 – compared to €8,500
for the 500 most innovative businesses

Over time VC backed businesses contribute large improvements in
productivity and GDP
* European Venture Capital Association
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YFM Group
Privatised in 2003
Strong Financial Profile
€400 million funds under management
€30 million invested in 2005 into 60 businesses
Wide range of investors
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ERDF
12 UK Pension Funds
3 Clearing Banks
UK Government
European Investment Fund
Private Investors
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Skills & Strengths
Public / Private Partnerships
Intellectual property in delivering small ticket venture and loan capital
to SMEs
From Micro Finance (€5,000) to Venture Capital (€1.5million)
Hiring and development of
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New teams
New geographic regions
Raised over €300 million in 10 years into a variety of funding structures
Strong investment track record – 17% compound over 20 years
Strong balance street and cash position to support team and facilities
development.
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Key Requirements
Demand for funds and business support for SMEs
Legal and regulatory structure
State Aids Consideration
Intervention Rates

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to be as high as possible
helps risk return for matching investors
Creation of Legacy Funds
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Model 1 - Structural
Government
Office
ERDF
Regional
Office
Fund
Structural Fund Board
Sub Fund A
Sub Fund B
Sub Fund C
Fund Mgr A
Fund Mgr B
Fund Mgr C
Administration
Marketing
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Model 1 - Structural
ERDF and matched funding partners need to be in place before investing begins
Lengthy process to put in place – 4 years
Cumbersome to operate
Wasteful bureaucracy leads to higher costs
Beware high (> 30%) gearing
Confusion of responsibilities between parties
Examples:
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MSIF – Merseyside Special Investment Fund
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SYIF – South Yorkshire Investment Fund
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PIF – Partnership Investment Finance
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Model 2 – Conventional
ERDF
EIB / EIF
Czech
Government
Fund
Mgr
Czech
Banks
Fund
Czech
Institutions
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Fund
Mgr
SMEs
Model 2 – Conventional Limited Partnership
UK Regional VC Model
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ERDF (EIF), Banks, Institutions take preferential return
State aids precedent approved
All equity, gearing at a minimum
Relies on strength and track record of fund manager
Flexible
Builds on UK experience
Can take time to put in place
Not suitable for micro and small loan funding
Examples:
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Yorkshire & Humber Equity Fund
The Capital Fund
South West Ventures Fund
+ 6 Other Funds
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Model 3 – Co-investment
Seed
Fund
ERDF
VC
Fund
Fund Mgr
Loan
Fund
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SME A
Inst A
SME B
Inst B
SME C
Inst A
Model 3 – Co-Investment
Quick to set up
Flexibility for seed, micro, loan and venture capital
No gearing an advantage
Enables variety of co-investors to invest depending on the particular investment
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Venture Capital Funds
Business Angels
High Net Worth
Banks
Relies on relationships of fund manager with other sources of finance
Lower fees to operate
Example:
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North West Business Investment Scheme (Objective 2) in North West UK
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Comparison of Models
Structural
Conventional
Getting Started Quickly
Flexibility
State Aids Precedents
Effect of Leverage
Operational Costs
Legacy Funds
Intervention rate to be as high as possible
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Co-Investment
Conclusions
VC and Loan Funds
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Increases investment
Improve productivity
Increase employment
Increase GDP over time
Large revenue grants to SMEs
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Prolong the status quo
Do not incentivise managers to long term growth
Implement ERDF VC and Loan Funds quickly by
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Avoiding lengthy bureaucracy
Encouraging flexible matching procedures
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Thank you for your attention
If you have any queries please contact:
 Phil Cammerman
 Email: [email protected]
 Mobile: + 44 (0) 771 927 910
or
 Zuzana McMillan
 Email: [email protected]
 Telephone: + 44 113 294 5000
THANK YOU FOR LISTENING
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