EIF as cornerstone invester in UK Regional Venture Capital Funds

The EIF has today agreed to invest EUR 86 million (GBP 53.5m) in the landmark Regional Venture Capital Fund programme initiated and sponsored by the UK Government. Such a level of support represents some 20% of the maximum programme size.

Regional Venture Capital Funds (RVCFs) are being created to increase the provision of small-scale equity finance for SME companies with growth potential. Small-scale equity finance (investments in the range of GBP 0.1 to 0.5 million) has been identified as an equity gap in the regions of England. It is planned for nine RVCFs to be set up, one in each of the regions, with the first of the Funds expected to be launched by the end of December and the rest following during 2002. EIF investments in the Funds will be managed by Small Business Service, part of the Department of Trade and Industry.

At the signing of the agreement earlier today, in the presence of Ms Patricia Hewitt, Secretary of State for Trade and Industry, EIF Chief Executive Walter Cernoia explained his strong support for the EIF role in the Programme as cornerstone investor:

...The Regional Venture Capital Funds are a major and concerted effort to address an identified equity gap in the regions of England. They are the culmination of extensive consultation with the relevant parties in each region, including SMEs and entrepreneurs, VC and financial institutions, business support networks and the public sector. This investment of the EIF is fully in line with the policy initiative of HM Government and referred to by the Chancellor Gordon Brown in his 2000 budget speech. It can also be regarded as a model to be replicated elsewhere in Europe, and in particular to sensitise national governments in respect of the importance of supporting through national programmes the development of venture capital as a means of harnessing technology in order to create new enterprises and employment.

The EIF is the European Union's specialised financial institution for Venture Capital and SME Guarantees. Based in Luxembourg, the EIF was established in 1994 as a joint venture between the European Investment Bank (which has become its majority shareholder), the European Commission and a number of European banks and financial institutions.

The EIF is now a major player in the European Venture Capital market. It has invested in some 150 funds all over the EU as well as in Central and Eastern Europe. Its Venture Capital portfolio exceeds EUR 1.8 billion and it is expected that some 60 new funds for an overall amount of about EUR 800 million will be put in place this year. The investment strategy of the EIF focuses essentially on the promotion of European technology through investments in venture capital funds located in the Union and the Accession Countries.

EIF guarantee instruments facilitate access to debt finance for SMEs through the intermediation of a wide range of banks and financial institutions. The latter are allowed to allocate capital to those operations at a rate of 20% in accordance with EIF's status as a Multilateral Development Bank under the European Solvency Ratio Directive.