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Investing in Greece

7 th Venture Capital Forum June 2006. Investing in Greece. (or through Greece). George Kourtis President, HVCA Partner, Global Finance. VC and PE in Greece and the Region.

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Investing in Greece

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  1. 7th Venture Capital Forum June 2006 Investing in Greece (or through Greece) George Kourtis President, HVCA Partner, Global Finance

  2. VC and PE in Greece and the Region Greek Venture Capital & Private Equity industry has been active in Greece and the South East European Region since early ‘90s • Some size; with successful investment track record • Opportunities in Greece but also difficulties in business environment From Greece but active in the Region: • Romania, Bulgaria, FYROM, Albania, Serbia (but also Russia, Ukraine and CEE countries) • With or without VC funding, Greek companies invest abroad With stable (politically and economically) Greece, VC & PE may find in the Region • Business growth for existing Greek portfolio companies or • New, local investment opportunities, in a high growth environment with lower (than in recent past) risk profile

  3. Greek VC industry map • Far from being a mature industry, Hellenic Venture Capital Association (HVCA) has 15 members, all the industry participants: • Five Private Equity firms • Leveraged Buyouts - majorities, • Large growth deals, pre-IPO - minorities • Six Venture Capital firms • Early-stage, minorities • Expansion capital deals, small-medium size companies • Three Incubators • One fund-of-funds (TANEO, state controlled) • Five controlled by Banks and nine independent • Total Size of Industry currently under management estimated at € 1.50 billion– about half available for investment

  4. Supply-demand of Capital in Greece Greek PE VC & PE TANEO-Backed VCs Incubators

  5. … to cover the existing gap • … of financing between Incubators and VC Funds at the riskiest part of the market • Digital Leap Fund: state sponsored VC Fund (Information Society) • Size: € 100 M VC Fund • To finance SME, ICT companies during early-stage • Expect to invest in 30-50 companies in next two years and hoping to create a long-lasting leveraging effect on current and new ICT companies and Innovation • Mid-term benefit: financing of better companies will provide quality ICT deal flow for VC Funds in 3-4 years • Long-term benefit: for the whole Greek economy

  6. Invest in Greece • Stable economic and political background, solid continued growth of GDP (mainly consumption-driven), improving macros, inflation under control • Good infrastructure (highways, telecom networks etc.) • Government initiatives to boost activity: PPPs (ΣΔΙΤ), privatizations • Positive VC legal framework (AKES) but also … • Large part of economy still owned or controlled or greatly influenced by the State • Service-mainly economy; large importer of goods • Small entrepreneurial appetite for risk • Complex tax and legal environment limiting activity and sectors (i.e. “basic shareholder”) • Greek Pension Funds not allowed to invest in VC & PE Funds

  7. Opportunities still exist … • Absence of IPO market in ASE • Growing Interest Rates • Less risk-taking Banks (Basel II, consumer credit preference) • Insignificant corporate venturing (after the “bubble years”) • Maturity in most (traditional) sectors but also, • Emergence of new business models CREATE OPPORTUNITIES FOR THE VC & PE INVESTOR IN GREECE

  8. Greece and the Regional Prospects • Greek companies have been very active in the Region since early ’90s (when few Western European dared to enter) and still dominate FDI in some countries: • accumulated FDI exceeds € 7 billion • biggest investor in Albania, FYROM and Serbia, #2 in Bulgaria and #3 in Romania => created more than 200K new jobs • Various sectors; banking, telecoms, textiles, trade, retail etc. • Many Greek companies consider the Region as part of their natural growth expansion business ground (thus securing jobs in Greece) • New markets with ever growing consumer needs with young population and good education systems • Lower cost structure in order to remain competitive

  9. Investing through Greece … • Early investors in the region were caught in the rough years: instability, financial crises, unregulated markets • The Region now is the most dynamically growing part of Europe with lower risk profile: • Bulgaria, Romania entering the EU soon • GDP growth 50% to 100% higher than Greece, 4x EU avg • Tamed inflation; macroeconomics in better shape; low foreign debt • Simple and low tax environment (Bulgaria 15%, Romania 16%) • Greece can become the gateway to South Eastern Europe and Turkey for international as well as for Greek companies with: • Large local market and • The Region a growth upside

  10. … Private Equity and Venture Capital • PE & VC Funds can provide the financing for companies expanding abroad since there is: • Limited liquidity in local Equity markets • Local capital is not abundant • Taking risks is part of their day-to-day business…

  11. Thank you George Kourtis President, HVCA Partner, Global Finance

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