By signing the Management Agreement, the Slovene Enterprise Fund will enter into a new investment initiative called the Central Europe Fund of Funds (CEFoF), which will be managed by the European Investment Fund.
The CEFoF was conceived by EIF in close cooperation with the governments and national agencies of Slovenia, Austria, the Czech Republic, Slovakia and Hungary with the aim to boost equity investments into SMEs and small mid-caps in the Central European region. That means that in the next four years, a minimum of around EUR 80 million will be invested in private equity and venture capital funds, which will further invest in SMEs and small mid-caps to support their growth. In total, at least EUR 160 million will be available for investments into Central European enterprises. The Government of the Republic of Slovenia and the Ministry of Economic Development and Technology supported the project, and the Slovene Enterprise Fund will actively participate with the commitment of EUR 8 million.
What is the CEFoF – Central Europe Fund of Funds?
The Central Europe Fund of Funds (CEFoF) is an initiative created by the European Investment Fund (EIF) following carefully conducted market research, in close cooperation with the governments and national agencies of Slovenia, Austria, the Czech Republic, Slovakia and Hungary. The main objectives of the CEFoF are to boost equity investments in the region’s small and medium-sized enterprises and small mid-caps, establishing a sound market-based infrastructure for risk financing, implementing and introducing the best market standards for equity investments in enterprises, and attracting institutional investors and fund managers to Central Europe.
The initial size of the CEFoF is approximately EUR 80 million, which will be available for investments into 5-8 private equity and venture capital fundsfocused on growth and later stage investments in the next 4 years (2017-2021). Through selected funds, at least EUR 160 million will be available for equity investments into SMEs and small mid-caps with high growth potential. This amount can also be increased with the help of institutional and private investors.
The launch of the CEFoF and the start of the investment process are expected in the fourth quarter of 2017.
The Republic of Slovenia will invest EUR 8 million into the CEFoF, while the financial resources will be provided by the Slovene Enterprise Fund (SEF).
SEF has already signed the Management Agreement and officially joined the CEFoF with a commitment of EUR 8 million. Other financial resources will be provided by EIF, the International Investment Bank (IIB) and the remaining partners / countries from Central Europe.
Maja Tomanič Vidovič, M.Sc, Director of the Slovene Enterprise Fund, stated:
“The first steps of venture capital financing in the Republic of Slovenia were made in 2010. At that time, the Republic of Slovenia first allocated funds to Slovenian high-tech enterprises through the SEF. The SEF set up a public-private partnership with four venture capital companies, which invested into fast-growing, innovative young companies. In total, they invested into 29 companies. Already some successful exits were performed, but the most positive one was the partial sale of a business share in Celtra Inc., where the Republic of Slovenia earned EUR 3.2 million which was almost 8 times the amount invested. This led to the first breakthrough in the development of such forms of financing in Slovenia, but it is essential that the incentives in this area continue. The continuation of these forms of incentives is also the CEFoF project, which allows the continuation of venture capital financing for fast-growing and globally oriented companies. CEFoF is a good example of cooperation among countries, since it allows smaller capital markets together to be more attractive to investors, and at the same time it creates new, additional financing opportunities for enterprises. In this way, Slovenian SMEs will be able to obtain alternative sources of financing. Collaborating with EIF as an experienced and well-known investor ensures that best market standards are followed, which will provide additional assurance to potential private and institutional investors.”
Aleš Cantarutti, M.Sc., State Secretary at the Ministry for Economic Development and Technology, stated: “Republic of Slovenia welcomes this long-term partnership between EIF and Central European countries. CEFoF will increase the availability of venture capital for SMEs with high growth potential operating in the region. The creation of CEFoF will contribute towards further regional private equity and venture capital market development and will strengthen the partnership and cooperation especially between the participating countries and EIF. This initiative will have a positive impact not only for further development of Slovene venture capital ecosystem, but certainly will stimulate the growth of employment and economic competitiveness.“
Hubert Cottogni, Head of Mandate Management at the European Investment Fund, stated:
“The EIF has long believed in Central Europe’s potential as an equity financing ecosystem and Slovenia’s participation in the CEFoF is a crucial step in stimulating the region’s investment activity, which level has been lagging behind more developed EU countries. As the latest in a series of EIF-managed regional funds of funds, the CEFoF complements our existing support to early stage equity investment by providing funding to companies at a later stage and in their growth phase. We welcome and deeply appreciate Slovenia’s participation in it.“