2nd UTEN Workshop Start-up Funding: Streamlining venture capitalists and business angels

Venture Capital in Portugal João Correia de Matos [email protected] 21/May/2012 Algarve – Faro, Portugal

Portugal status The Global Competitiveness Report 2011-2011(world economic forum):

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Portugal ranks 45 (was 46 2010/2011, was 43 2009/2010) Portugal stage of development: Innovative driven economy Better relative rankings at Innovation and sophistication factors (38) and Efficiency enhancers (39)…

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…but within this later category, lower ranking in Financial market development (78)

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Financial market development is the 8th pillar of the Global

Competitiveness Index, and within this Venture capital availability ranks 73

Portugal status INNO-Policy TrendChart, Innovation Policy Progress Report: Portugal, 2009 (European Commission, Entreprise Directorate-General):

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“Portugal exhibited a relatively good performance in Finance and support: it scores around 0.45, not very far away from EU average”,

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but “The weakest 'link' in this group is Venture capital. This result is not at all surprising, since it is the consequence of two main factors: the credit-

based nature of the Portuguese financial market; and the 'shallowness' of the domestic market, raising barriers to the development of a sound venture capital industry, in spite of the measures taken by the successive governments to encourage the development of venture capital activities ”

Portugal status The Global Entrepreneurship Monitor 2011 Report:

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Portugal has a total early-stage entrepreneurship activity (TEA) of 7,5, above the average of 6,9 for the 21 countries with innovation-driven economies, and the 8th highest

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“A key finding is the marked increase in TEA rates from 2010 to 2011 in many economies across all development levels”

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“The 20 innovation-driven economies that participated in both years showed, on average, a nearly 22% increase in 2011”

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But… …“Several European countries that were affected by the recent economic crisis display some of the lowest opportunity perceptions across the entire sample.

These include Greece, Hungary, Portugal and Spain”

Portugal venture capital •

Portugal has a specific legal regime for venture capital (capital de risco), including business angels (investidores em capital de risco), Decree-Law nº 375/2007, of 8th november

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Venture capital corporations (sociedades de capital de risco or SCR) usually manage several venture capital funds (fundos de capital de risco or FCR)

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CMVM, the portuguese securities commission, is the regulator for venture capital, and according to CMVM latest annual report (2010) there were 30 SCR

managing 51 FCR, each FCR with an average of 31,7M€ of raised capital

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APCRI is the portuguese venture capital association

Portugal venture capital •

FNABA and APBA are the two national portuguese business angels associations, with several more regional associations

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Business angels activity is fairly new, the main driver was the 2011 launch

of several FCR specifically targeted for business angels investors

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These FCR were promoted by the government, with partial capital subscribed by FINOVA , a fund of funds originated from the european

commission, and the rest of the capital subscribed by business angels

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The business angel development is work in-progress, as the landscape matures it will be possible to assess the impact in more detail

Portugal venture capital •

The public sector of venture capital is presently dominated by three SCR wholly or majority owned by the government: Aicep Capital Global (ACG), InovCapital (IC) and Turismo Capital (SC)

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These 3 SCR are undergoing a merger process to be finalized in the first half of 2012, where ACG and TC will merge with IC, creating a single public venture capital corporation

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With the merger, the new SCR will manage 25 FCR, and it is expected that these will be merged in a process starting in the second half of 2012

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The new SCR will continue to promote seed-capital and early-stage capital The new SCR will try to focus more on selecting and supporting innovative

business projects that can become international champions

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The new SCR will try to invite international experts to help selecting and supporting the innovative business projects

Portugal venture capital Some personal comments:

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A successful venture capital economy needs:

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A viable eco-system, linking universities, companies, investors

Innovative ideas that have an economic effect, and entrepreneurs ready to make the ideas, their own or someone else, happen

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For small countries where cash is scarce, additional venture capital investment must come from abroad

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Investment from abroad requires a track-record of successful investments Successful investments are those where the venture capital exited with profit In a global environment, international expertise is fundamental to help

understanding what best-practices should apply in assessing new investment projects and what the status-of-art is for each economic sector where the new product or service is to be sold

2nd UTEN Workshop Start-up Funding: Streamlining venture capitalists and business angels

Thank You João Correia de Matos [email protected] 21/May/2012 Algarve – Faro, Portugal