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EIF and the Czech government launch early stage equity fund of funds to raise EUR 100m for SMEs

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    Date: 24 January 2017

The European Investment Fund (EIF) and the Czech Ministry of Industry and Trade (MIT) have today signed a funding agreement to establish the Czech ESIF early stage equity Fund of Funds (FoF), with a contribution of EUR 40 million from the European Regional Development Fund. The FoF will in turn invest into risk capital funds targeting local small and medium-sized enterprises with high growth potential.

This is the first EIF managed Czech Fund of Funds for equity investments and will use resources from Cohesion Policy funds. The initiative will target earlier stage investments through seed and venture capital, and potentially also business accelerators, in order to support the development of the Czech early stage equity ecosystem. The selected fund managers will be expected to boost the availability of financing to promising high-growth ventures, combined with business mentoring and development services for the investee companies.

Commenting on the new initiative, EIF Head of Mandate Management Hubert Cottogni stated: “We are delighted that the Czech Republic, represented by our partners from the Ministry of Industry and Trade, has decided to join other countries from the region and benefit from EIF’s expertise in providing risk capital to early stage high-growth SMEs and in fostering the development of national ecosystems for equity financing. The Czech ESIF Fund of Funds is also a great example of how the EIF can co-invest alongside Structural Funds resources, contributing to their efficient and effective utilisation.

The launched initiative represents a new step in public support for innovation in the Czech Republic. Our goal is to support Czech start-ups in their access to equity financing of their development on the market basis. It is important that this initiative is being launched together with the EIF, whose vast experience in the area promises its successful implementation. Furthermore, the Ministry welcomes EIF’s readiness to support a know-how transfer to the Czech authorities, which will contribute to transition towards the greater use of financial instruments in the support of entrepreneurship, including the project of National Innovation Fund. Partnership with the EIF brings additional benefits also in the form of resources it will co-invest alongside the Fund of Funds, effectively leveraging the funds from the OP Enterprise and Innovation for Competitiveness”, said Jan Mládek, Minister of Industry and Trade.

"Financial instruments have the potential to multiply the impact of each euro the EU invests on the ground. This new, Cohesion Policy supported Fund of Funds will facilitate access to finance for Czech entrepreneurs. It will help them turn their ideas into concrete projects with high value added, for the direct benefit of the Czech real economy", said European Commissioner for Regional Policy Corina Crețu.

The EUR 40 million contribution from the ERDF Operational Programme Enterprise and Innovation for Competitiveness 2014-2020, managed by the MIT, will be supported by EUR 10 million in co-investments into the selected intermediaries by the EIF. The EIF is in advanced negotiations with the Prague City Hall for an additional EUR 10 million allocation into the Fund of Funds under its Prague – Growth Pole Operational Programme, with a respective EIF co-investment of EUR 2.5 million. All these resources shall be further leveraged through private capital participating at the level of selected fund managers, with total investments into Czech SMEs expected in the range of EUR 100 million.

The initiative, which represents EIF’s first partnership in the country with public authorities, will benefit from EIF’s experience with successful implementation of similar equity instruments in other Central and Eastern European countries.

The initiative’s investment strategy will be complementary to other instruments managed by the EIF, such as the anticipated Central Europe Fund of Funds (CEFoF), of which MIT is also to be an investing partner for the Czech Republic, expected to be launched in the spring of this year. The CEFoF will aim at providing growth and expansion capital to established companies in support of their future development.

Background information

The European Investment Fund (EIF) is part of the European Investment Bank group. Its central mission is to support Europe's micro, small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment.

The Ministry of Industry and Trade (MIT) is the main Czech authority responsible for support of entrepreneurship, industry and trade. In the programming period 2014-2020 MIT manages the Operational Programme Enterprise and Innovations for Competitiveness (OP EIC), supporting innovations, SMEs, energy efficiency and ICT.

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