Estonian state-owned financial institution KredEx, via the EstFund initiative and the European Investment Fund (EIF), has made two new contributions to the Equity United PE I and Tera Ventures Fund II investment funds.
Together with capital from private investors, this means in practical terms that approximately €100 million is to be made available for Estonian companies.
"In announcing these EstFund's investments, KredEx marks a further step towards the development of the Estonian venture capital market,'' said KredEx chief executive Lehar Kütt.
"With this investment in Tera Ventures Fund II and Equity United PE I, EstFund and the EIF aim to support many innovative promising Estonian enterprises,'' he went on.
Pier Luigi Gilibert, chief executive of the EIF, added that '' There are currently only a handful of early-stage equity investors active on the Estonian market, and these investments should play a catalytic role in promoting an under-served part of the equity market and in supporting the SME (small and medium-sized enterprise) eco-system in Estonia.''
Investment funds for incubating innovators
Tera Ventures Fund II is due to focus on venture capital investments in innovative early-stage companies. Equity United PE I on the other hand will provide expansion capital to those SMEs with high growth potential which are aiming to expand to new products or markets.
Before starting actively investing in the Estonian market however, the fund managers apparently need to raise additional resources from private investors, which is due to be completed in the following few months, it is reported.
EstFund aims to develop the early and expansion stage equity market in Estonia by providing equity financing to high growth SMEs and attract private investors to the local market.
EstFund is an equity fund of funds created by cooperation between the Republic of Estonia, KredEx and the European Investment Fund. EstFund is financed by the European Regional Development Fund from the Operational Program for Cohesion Policy Funds for 2014-2020 to the tune of €48 million, with the EIF co-investing €12 million alongside via EIF-managed resources. These funds are earmarked to offer equity financing from seed to growth for Estonian SMEs via the selected equity funds.
A third investment under EstFund was signed at the end of 2017 in United Angels Co-investment Fund I, which is now actively co-investing together with the other private investors in early stage Estonian SMEs.
These transactions complete the fund managers' selection process under EstFund, managed by the EIF on behalf of the Estonian Ministry of Economics and Communications and KredEx.
This underlines the importance of continued support for the development of the equity sector in the region, which is of key importance in fostering high growth innovative SMEs and hence economic growth.
Role of EIF and KredEx
The EIF is part of the European Investment Bank group. Its central mission is to support Europe's micro and SME businesses by helping them to access finance. The EIF designs and develops both venture and growth capital, guarantees and microfinance instruments, which specifically target this market segment. In this role, the EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth and employment.
KredEx is a financing institution which helps Estonian enterprises develop quicker and expand more safely in foreign markets, offering loans, venture capital, credit insurance and credit guarantees backed by a state guarantee.
Editor: Andrew Whyte