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E i fExperience from 30 years of
iinvestments
Claes de Neergaard CEO
A t ti i th tA presentation in three parts
1 I d t if d d l i th S di h1. Industrifonden and our role in the Swedish venture capital landscape
2. The role of government in the support ofg ppcommercialization
3. Lessons learned from 32 years ofin estment operationsinvestment operations
W i t i S di h th iWe invest in Swedish growth companies
SOLD
SOLD
I d t if d i b i fIndustrifonden in brief
O f th l t i t i ll S di h One of the largest investors in small Swedishgrowth companies
Total assets of SEK 3,8 billion, Investments currently in some 90 companies Staff of 28, four branches Acts on strict commercial terms Independent trust established by
t i 1979government in 1979
SEK 10 billion to more than 1,000 companies
S i l f tSpecial features
Si l t Single country
Multisector
E l t Early stage
Multiple financing tools
Evergreen fund with a long-term investment horizon
Financial strength, can invest 5-190 MSEK per companyper company
Active minority investor; partner to entrepreneursand private investorsp
32 ith I d t if d32 years with Industrifonden
Loans and grants to small
t i
Equity for SME devlopment and expansion
Soft loans tolarge companies
enterprises
1996-
19901995
1996-
19791989
OOur purpose
I d t if d i i i t t i d t i l th d Industrifondens mission is to promote industrial growth and development in Sweden by financing SME:s on commercialterms.
Operational objectives:– Industrifonden shall complement the market and collaborate with
private investors with the aim of investing about 60 percent of itsequity in companies.
– Value creation: A combination of a return on equity exceeding the five-year treasury bond yield and social economic return.
– Costs shall not exceed 2,5 percent of total assets.Costs shall not exceed 2,5 percent of total assets.
450
400General index Swedish stock exchangeFeb 20, 1980-Nov 21, 2011
300
350
250
300
200
100
150
50
AFGX index 100 = 1995 12 29
080.02.20 82.02.20 84.02.20 86.02.20 88.02.20 90.02.20 92.02.20 94.02.20 96.02.20 98.02.20 00.02.20 02.02.20 04.02.20 06.02.20 08.02.20 10.02.20
AFGX index 100 = 1995-12- 29
P fit/l d tProfit/loss and returns
251 000
Profit/loss, MSEK Return on equity, %
%
737 15
20
25
600
800
1 000 21,7%
0
5
10
0
200
400
-10
-5
0
-400
-200
0
06/07 07/08 08/09 09/10 10/1106/07 07/08 08/09 09/10 10/11
Five successful exits!Five successful exits!
40 timesinvested
it l!capital!
24 timesinvestedinvestedcapital!
Th l f tThe role of governmentThe enabling Seed Development andFundThe enablingframework
Seedcapital
Development and expansion capital
Fundof funds
D l t d d i f iDevelopment and dynamics of companies
New business activity
Median country
Sweden
New business activity
Job growth in the business sector
Number of new start-ups
No of new companiesValue-added growthwith employees
P t f iP d ti it th i
in the business sector
Percentage of emergingcompanies (employees)
Percentage of emergingcompanies (turnover)
Productivity growth in the business sector
companies (turnover)
A t fi iAccess to financing Median country
Sweden
Costs for closingbusinesses
Effective marginal corporate tax
Effective averagecorporate tax
bus esses
Access to bank financingObstacles for trade and investments
Domestic lending to private sectorEntrepreneurial obstacles
Expansion stageprivate equity
Size of stock market
Early stage private equity
Some successful VC-investments
S l l dSome lessons learned
Th l f tThe role of government Overall responsibility for a smooth and effective
financing systemg y Distinguish between general SME financing
needs and those of high tech Go Globals The annual cost of commercialization is small in
relation to R&D Tax incentives for private investors needed Tax incentives for private investors needed If SME growth is a top priority, dare to act,
experiment and develop successful models VC is not the only answer for creating a buoyant
SME sector
Financing of new companies in Sweden
Bank loans24% Customers
12%
New capital from previous owner
12%
Suppliers
6%
Company cash flow35% V t C it l
Other sources4%
Regional funds6%
Venture Capital1%
S l l dSome lessons learned
Th l f VC i tThe role of VC-investors The VC industry carries too many risks,
governance much better in Buy Outg y Relation founder/investors must be managed Syndication fine when everything smells
roses, but can be a pain when difficulties arise
Fewer local and regional VC funds partially Fewer local and regional VC funds partially replaced by
Super Angels and private investment companies
International VC:s Adds sector competence and business skills Adds sector competence and business skills
S l l dSome lessons learned
R l f t d i tRole of government owned investors: Be strong where market is thin Always respect strict commercial criteria! Always respect strict commercial criteria! Attract the best staff with market conditions.
But, there are other drivers than carry for making a good job!
Partnership with the private sector, co-finance on the same conditionsco-finance on the same conditions
Long-term investments based on evergreen structures very precious
State supported funds-of-funds and directinvestment vehicles in seed, start and growthare crucial for the formation and growth ofare crucial for the formation and growth ofnew companies.