Διάλεξη 8 Πηγές Χρηματοδότησης Διάλεξη 8 Πηγές Χρηματοδότησης Include excerpts from the material prepared by Joe Hadzima Senior Lecturer MIT Sloan School for the Course “The Nuts and Bolts of Business Plans”, 2008 Include slides from the ones prepared by Margaret Fletcher on D. Deakins and M. Freel “Entrepreneurship and Small Firms”, 4th ed. MacGraw Hill, 2007.

Sources of Finance Four main sources of finance: Owners capital/equity (personal savings, mortgages, sale of assets, family and friends) Retained profits within the business Borrowings/debt finance Private equity (venture capital, business angel) AND Crowd Funding

Sources of Finance Internal or external Internal sources: owners capital and profits. External sources: External equity, bank loans, other borrowings and credit, grants.

Sources of Finance Long or short term The source of finance should be matched to the purpose of finance Long term finance should be raised for fixed assets and long term need Short term finance should be raised for working capital and day today deficits

Own Resources Cheap money, quickly obtained, no repayment threat, demonstrates commitment to other lenders. But Cash is tied up Limited amount available

Family and Friends Common source of finance in some cultures. Can be… Loan Gift Inheritance But Loan will have to be re-paid May want some say in business

Bank Finance Competitive rates, specialist advice, many branches But Do not provide risk capital. May require security and expect information for monitoring (to avoid moral hazard).

Equity Finance Owner sells a stake in the business for cash e.g. to a Venture Capitalist, Business Angel The investor receives payback at “exit” point Equity finance is an important source for expanding businesses But The owner will have to abandon a stake of the business The investor may have a say in the running of the business

Crowd funding Crowdfunding … crowdfinancing or crowdsourced capital It is an approach to raising the capital required for a new project or enterprise by appealing to large numbers of ordinary people for small donations. It has long precedents in the sphere of charity It receives increasing attention from entrepreneurs, now that social media and online communities make it possible to reach out to a group of potentially interested supporters at very low cost.

Τι είναι το venture capital «Ένας τρόπος χρηματοδότησης της ίδρυσης, ανάπτυξης ή εξαγοράς μιας εταιρείας, βάσει του οποίου ο επενδυτής αποκτά τμήμα του μετοχικού κεφαλαίου της εταιρείας ως αντάλλαγμα για την παροχή χρηματοδότησης» British Venture Capital Association

Τυπικό σχήμα VC Fund Fund Πηγή: Γ. Κιντής Διαχειριστής Επενδυτής Β Επενδυτής Α Επενδυτής Γ Fund Διαχειριστής Εταιρεία Δ Εταιρεία Γ Εταιρεία Α Εταιρεία Β Πηγή: Γ. Κιντής

Χαρακτηριστικά VC Funds Πολύ σπάνια εισάγονται στο χρηματιστήριο Αμοιβή διαχείρισης αμοιβή διαχείρισης 2-2,5% ετησίως Συμμετοχή στις υπεραξίες (carried interest) 20% υπεραξίας πάνω από ένα προσυμφωνημένο στόχο (π.χ. κρατικά ομόλογα) Πηγή: Γ. Κιντής

Χαρακτηριστικά VC Funds Τμηματική καταβολή επένδυσης 10-20% με την υπογραφή Υπόλοιπο ανάλογα με τις επενδύσεις Άμεση διανομή προϊόντος ρευστοποίησης επενδύσεων Πηγή: Γ. Κιντής

Διαχειριστής Κοινή ανώνυμη εταιρεία ειδικού σκοπού Ελάχιστο μετοχικό κεφάλαιο €100.000 Έχει την πλήρη ευθύνη Πηγή: Γ. Κιντής

Τι προσφέρει ένα VC Κεφάλαια, κεφάλαια, κεφάλαια Υποστήριξη Χρηματοοικονομικές συμβουλές Άντληση νέων κεφαλαίων Σύναψη στρατηγικών συμμαχιών ή εξαγορών Επαφές για είσοδο σε ξένες αγορές Κύρος θεσμικού επενδυτή Δυνατότητα ανεξάρτητης ανάπτυξης Πηγή: Γ. Κιντής

Και τι αναμένει Ρευστοποίηση της επένδυσης με κέρδος Εισαγωγή σε χρηματιστήριο Εξαγορά Ιδιωτική τοποθέτηση Πώληση στον επιχειρηματία βάσει προσυμφωνημένης μεθόδου αποτίμησης Πηγή: Γ. Κιντής

Ζητούμενο Ραγδαίοι ρυθμοί ανάπτυξης: Μπορεί η εταιρία να αυξήσει δραματικά κύκλο εργασιών και κερδοφορία σε μια 3ετία; Διοίκηση: Δυναμική, φιλόδοξη και με διάθεση να παραχωρήσει ένα κομμάτι της εταιρίας σε θεσμικό επενδυτή Κεφάλαια: Χρειάζεται η εταιρία πρόσθετα ίδια κεφάλαια για να συνεχίσει την ανάπτυξή της; Πηγή: Γ. Κιντής

Διαδικασία προσέγγισης VC Υποβολή Επιχειρηματικού Σχεδίου Συναντήσεις με στελέχη εταιρείας Έρευνα αγοράς Χρηματοοικονομική ανάλυση Due diligence Τελικές διαπραγματεύσεις Ζητούμενα Ποιοτική διαχείριση Σημαντικές προοπτικές γρήγορης ανάπτυξης Πηγή: Γ. Κιντής

Αποτίμηση Εταιρεία αξίας 100 €, χρειάζεται κεφάλαια 25 € για επενδύσεις Αν βάλω αυτά τα κεφάλαια, τι ποσοστό παίρνω; Πως προκύπτει η αξία; DCF αλλά και… Πηγή: Γ. Κιντής

Venture Capital: The numbers European PE: Annual funds raising Source: EVCA Venture Capital: The numbers European PE: Annual funds raising

European PE: Investments Source: EVCA European PE: Investments

European PE: Investments by stage Source: EVCA European PE: Investments by stage

European PE: Investments by sector Source: EVCA European PE: Investments by sector

Business Angels Ιδιώτες επενδυτές “Informal Venture Capital” Ιδιώτες επενδυτές Μέση επένδυση 200.000 €(50.000 - 750.000) Εναλλακτική στο VC λύση κυρίως λόγω κόστους Due Diligence “Father figure” Πηγή: Γ. Κιντής

Σχεδιασμός Επενδύσεις σε ΜΜΕ σε αρχικά στάδια ανάπτυξης Ο νέος επιχειρηματίας υποβάλλει το επιχειρηματικό σχέδιο στο business angels network To network προωθεί την πρόταση, εφόσον ικανοποιεί κάποια ελάχιστα κριτήρια, στα μέλη του εκείνα που κρίνει ότι θα έχουν ενδιαφέρον Εάν δεχθεί να επενδύσει κάποιος angel, το δίκτυο μπορεί να αναλάβει τη διεκπεραίωση της επένδυσης (εφόσον το επιθυμεί και ο angel) Πηγή: Γ. Κιντής

The business plan as a financing document Potential lenders and investors evaluate the business plan through different lenses Lenders are primarily interested in the ability of the new venture to pay back the debt including interest within a designated period Investors that provide large sums of capital for ownership (equity) are primarily expecting cashing out within 5-7 years

The business plan as a financing document Lenders focus on the 4Cs of credit Character: the entrepreneur’s credit history Cash-flow: the entrepreneur’s ability to meet debt and interest payments Collateral: the collateral of tangible assets that secure the loan Contribution of equity: the amount of personal equity the entrepreneur has invested

The business plan as a financing document Lending criteria mnemonics: CAMPARI: Character Ability to repay Margin Purpose (What for and for how long?) Amount Repayment source Insurance (collateral/security)

The business plan as a financing document: Remember! The objective of investors is to achieve a high return on the investment in the form of capital gain through an exit For instance: “The objective of venture capital is to achieve a high return on the investment in the form of capital gain through an exit, achieved by the sale of the equity stake rather than through [interest or] dividend income. Exit is normally achieved either through an initial public offering (IPO), involving the flotation of the company on a stock market where its shares are traded freely, or through a trade sale in which the venture capital fund, normally along with all the other shareholders in the company, sell out to another company” Mason and Harrison, 1999 29

The business plan as a financing document Investors focus on: The entrepreneur’s personality and competence As they will probably play a role in the actual management of the venture The market and financial projections on within 5-7 years As they expect high rates of return

The business plan as a financing document “There is no question that irrespective of the horse (product), horse race (market), or odds (financial criteria), it is the jockey (entrepreneur) who fundamentally determines whether the venture capitalist will place the bet at all” MacMillan et al. (1985)

Greece 2014: Access to financing Source: Global Competitiveness Report 2013-14

Access to financing 42% of the SMEs in Greece report that ‘Access to finance’ is their most pressing problem Erosion of confidence (trust) in the financial sector Non-performing loans reached EUR 78bn (and growing) i.e. 35% of the total portfolio Severe devaluation of collaterals (mainly real estate) and their usability (market collapse)

Access to financing Pertinent to the Greek Banking System: Shortage of funds for new business loans despite bank recapitalisations, consolidations, buyouts, mergers and successful stress-tests Non-competitive bank interest rates exceeding 7% for business loans while ECB interest rate hits a record low of 0,05%

Initiatives for SMEs financing Echoes of European initiatives Joint European efforts which include the limited resources of the Greek state European involvement through Structural Funds, European Regional Development Fund, Cohesion Fund European Investment Bank (EIB) European Investment Fund (EIF) managing funds and providing risk financing solutions to financial intermediaries European instruments for 2007-2013 but still operational for 2014 JEREMIE providing both risk capital and capital for bank loans JESSICA Sustainable Urban Development European PROGRESS Microfinance Facility / JASMINE (Joint Action to support Micro Finance Institution)

Initiatives for SME financing Elikonos Fund, Odyssey Partners, Open Fund II and Piraeus Tech Catalyst Fund: are seed and early stage high-tech venture capital funds attracted EUR 48m from JEREMIE equity and an additional EUR 21m from private investors JEREMIE participation per fund between 50% and 70% provide maximum investments of EUR 750 000 per company per year participation percentage between 35% and 40% may perform several financing rounds 13 year old NBG Technology Fund: acquisition of early-stage companies

Portfolios of investments

Χρηματοδότηση ύψους 1 εκ Χρηματοδότηση ύψους 1 εκ. ευρώ έλαβε η ελληνική εταιρεία λογισμικού Nubis από το επενδυτικό ταμείο Elikonos Jeremie Fund. H Nubis ξεκίνησε τη δραστηριότητα της το 2013 και από τότε επεκτείνεται τόσο στην εγχώρια, όσο και στις διεθνείς αγορές. Η εταιρεία ανέπτυξε μια ολοκληρωμένη λύση λογισμικού για μικρομεσαίες επιχειρήσεις αξιοποιώντας πλήρως τα πλεονεκτήματα του cloud computing

Initiatives for SME financing ETEAN: National Fund for Entrepreneurship and Development a public organization supported by the EIB supports Trade Finance Facility in Greece up to EUR 500m facility, to support foreign trade activities of Greek SMEs guarantees a portfolio of foreign trade letters of credit, letters of guarantee ea. manages Enalio fisheries fund and Agriculture entrepreneurship fund

Initiatives for SME financing KEPA: Business and Cultural Development Centre is a public, non-bank microfinance institution supported by the EIF functions within the framework of the European Progress Microfinance Facility / JASMINE (Joint Action to support Micro Finance Institution) provides microfinance products for micro-enterprises development and unemployment reduction

Initiatives for SME financing Pancretan Bank and Bank of Peloponese cooperative banks that have partnered with EIF within the framework of JEREMIE Microfinance / PROGRESS Microfinance initiative for a total programme amount of EUR 60,6m provide micro-loans up to EUR 25 000 for micro-businesses and self-employed entrepreneurs provided total micro-loans to date: EUR 5m

Initiatives for SME financing Almost all commercial banks: signed agreements with EIF Alpha Bank and National Bank of Greece: commercial banks that have agreed with EIF in June 2014 (latest development) for EUR 200m to be matched by another EUR 200m from the two banks provide loans and micro-loans the allocation of the funds is not clear yet

SME financing challenges SMEs access to finance via partner banks and non-bank institutions has been facilitated by EIB (combined with state guarantee) Total to date: EUR 500m, 2015 target: EUR 1b. Beneficiaries to date: more than 250 SMEs The percentage of these funds targeting micro loans remains to be clarified Micro loans, usually: vary from EUR 5 000 to EUR 25 000 have a repayment period from 48 to 60 months including a grace period of 12 months target seed and early stage (up to 3 years) ventures with less than 50 employees

SME financing challenges A solid institutional and legal framework for microfinance is still missing micro-loans are subject to the institutional framework and banking rules and regulations SME loans and micro-loans are considered to be low interest loans Yet, they have still an overall rate of ca 3.8%, modulated by collaterals zero interest for the EIF part (50%) an actual interest of ca 7,5% and serious collaterals for the bank part of the loan (the other 50%) Public sector microfinance intermediaries (ETEAN, KEPA etc.) introduce severe administration overhead and delays

Suggested References Deakins D. and Freel M., 2003. Entrepreneurship and Small Firms, 3rd Edition McGraw Hill. MacMillan, I., Siegal, R. and Subba Narishima, P., 1985. ‘Criteria used by venture capitalists to evaluate the venture proposals’, Journal of Business Venturing, 1, 126-141. Mason, C. and Harrison, R., 1999. ‘Venture Capital: Rationale, aims and scope’, editorial, Venture Capital, 1(1), 1-46.

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