Baltic Innovation Fund (BIF) and Baltic Innovation Fund 2 (BIF 2)
About this good practice
BIF and BIF2 are excellent illustrations of the three Baltic States acting together, enabling to make small capital markets more attractive for investors and creating further financing possibilities for enterprises with high growth potential.
Individual venture capital markets in the Baltic countries are of very limited size and are unattractive to international investors. For this reason, the EIF proposed to set up the BIF and BIF2, the Fund of Funds intended to promote the development of venture capital markets in the three Baltic States in order to foster SME competitiveness.
BIF and BIF 2 aim to build a balanced portfolio of growth and later-stage equity funds with an investment focus on the Baltic States, having regard to their investment focus, vintage year, and an appropriately diversified number of underlying investments, which provide, directly or indirectly, equity and/or hybrid debt/equity investments or other forms of risk financing to portfolio enterprises. In addition, BIF and BIF 2 may pursue co-investment opportunities alongside business angels, investment funds, family offices, or institutional investors into portfolio enterprises.
BIF and BIF2 invest in micro, small and medium-sized enterprises as well as Small MidCaps with high growth potential operating in the Baltic region and outside the Baltic region.
Expert opinion
The BIF practice is interesting from at least two aspects:
1. Funds of Funds developed in collaboration with the European Investment Fund are a powerful tool to support investment in selected areas or industrial sectors. However, their setup requires expertise, the experiences within the support organisation INVEGA can be valuable to other regions.
In another context, the ALTER'NA fund setup by the French region Nouvelle Aquitaine for supporting the agricultural transition (project SME ORGANICS, https://www.interregeurope.eu/policylearning/news/8902/alter-na-an-innovative-investment-fund-to-support-the-agricultural-transition/ illustrates the targeted sectoral use of this instrument).
2. The BIF is a transnational financing instrument, which is not common. The experience could be beneficial to other regions or countries with a lack of critical mass in terms of investments for setting up similar initiatives.
Resources needed
The size of the Baltic Innovation Fund (BIF) is EUR 130 million.
The total size of the Baltic Innovation Fund 2 (BIF2) will amount to €156m.
Evidence of success
The number of equity investments financed by BIF and BIF2 in one enterprise can be from EUR 3 million to EUR 15 million.
As of 31 March 2020, BIF resources supported funds with the financing of EUR 522m. Of this, close to EUR 240m has already been invested in the companies: there were 50 investments and 10 sectors, 3 exits.
Potential for learning or transfer
BIF and BIF2 are excellent illustrations of the three Baltic States acting together, enabling to make small capital markets together more attractive for investors and creating further financing possibilities for enterprises. Close cooperation with EIF as an experienced and well-known investor ensures that the best market standards are followed giving additional assurance to possible private and institutional investors. Without such cooperation, it would be very difficult to attract equity investments of comparable size.
This long-term partnership between the three Baltic States and EIF was the first initiative of such kind at the EU level. It is extremely important that the efforts of individual countries in the Baltic region in increasing the accessibility of private equity and venture capital for high-growth SMEs were well coordinated by EIF and effectively leveraged with additional private funds.
Further information
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Good practice owner
You can contact the good practice owner below for more detailed information.
national promotional institution INVEGA