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Venture Capital as Financial Source for SMEs in Transitive Economy of Slovakia and Hungary

Venture Capital as Financial Source for SMEs in Transitive Economy of Slovakia and Hungary. Marián Gál Technical University in Košice Faculty of Economics. Introduction. Reasons for choosing the theme Objectives Hypotheses Methodology Theses Conclusion. Reasons for choosing the theme.

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Venture Capital as Financial Source for SMEs in Transitive Economy of Slovakia and Hungary

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  1. Venture Capital as Financial Source for SMEs in Transitive Economy of Slovakia and Hungary Marián Gál Technical University in Košice Faculty of Economics Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  2. Introduction • Reasons for choosingthe theme • Objectives • Hypotheses • Methodology • Theses • Conclusion Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  3. Reasons for choosing the theme • the most up-to-date form of capital – a venture capital • impact of venture capital on financial performance of SMEs • information about latter forms of capital • theoretical knowledge about financial sources • regain and strengthen the competitiveness in practice • the main driving forces of the market economyand SME creation • continuum in research specialisation Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  4. Objectives – part 1 The main scientific objectives: • to determine use and impact of venture capital on profitability, growth, market share and position of analysed SMEs • to explain the role of SMEs in the transition from planned to the market economy Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  5. Objectives – part 2 Partial objectives: • to analyse transition of Hungarian and Slovak economy • to determine the main elements and indicators • to compare the impact of SMEs on the economy • to analyse the SME performance • to introduce the financial sources • to characterise venture capital • to explain the role and impact of venture capital on financial performance • to formulate the recommendations Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  6. Hypotheses 1: Privatisation of state property and legislation changesas the major forces. 2: SME contribution to the macroeconomic growth. 3:Profit and bank loans: the most significant financial sources. 4: Venture capital as accelerator of the macroeconomy. Venture capital as stimulator of the SME effectiveness. 5: Venture capital contributes to better economic performance. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  7. List of the main literature sources used Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  8. Methodology 1. Hypotheses 1: domestic and foreign literature sources. 2. Hypothesis 2: dependent and independent variables. 3. Hypothesis 3: researches, statistic evaluations and opinions of entrepreneurs’ surveys. 4. Hypotheses 4 and 5: secondary research with combination of primary research using the financial analysis methods. 5. Financial statements as the main source. 6.Final statements:the venture capitalintroduced, characterised and defined and all calculations provided. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  9. Theses – part 1 / T1 The main objectives to launch privatisation and thus to make a potential for the entrepreneurs’ creation: • to change the mechanism of funds allocation in the economy, • to support the stimulation at micro level, • to force the enterprises to react on demand, • to lower state budget deficits and bring taxation revenues, • to liberate production and entrepreneurial potential • to make the economic re-structuralisation easier, and • to allow people to make profit. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  10. Theses – part 2 / T2 SMEs contributedto the growth of both economies: • Real GDP in Slovakia 6-9% per year,in Hungary 3-5% per year. • Growth of the labour productivity in Hungary 60-70%, in Slovakia 55-65% per person employed of the EU-25. • Price stability: inflation rate decreased in Slovakia from 13-15% in 1994 to 2-3% in 2006, in Hungary from 18-22% in 1992-1996 to 2-5% by 2006. • Number of enterprises of all legal forms and natural persons increased in Hungary up to 1.2 mill, in Slovakia up to 500 thousand. • The increased shareof SME on gross production and total export increased GDP. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  11. Theses - part 3 / T2 Number of registered enterprises by legal form in Hungary, 2000-2004. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  12. Theses – part 4 / T2 Development of natural persons in Hungary, 1990-2004. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  13. Theses – part 5 / T2 Share of SMEs on employment in selected sectors in Slovakia. 1 – industry, 2 –building industry, 3- trade, 4 – retail, 5- transport, 6 – market services. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  14. Theses – part 6 / T2 Share of SMEs on total employment in Slovakia. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  15. Theses – part 7 / T3 • Bank loans: grew in Hungary from 1844 mill. EUR in 1999 up to 10490.8 mill. EUR by half of 2005 and in Slovakia with rather similar proportion. • EU funds: the second biggest source. • Profit: the most important form own capital. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  16. Theses – part 8 / T3 Bank loans for SMEs in Hungary 1999-2005 (EUR million). Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  17. Theses – part 9 / T3 Volume of bank credit in % of the Gross Value Added 1999-2004. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  18. Theses – part 10 / T4 • Total venture investments: in Hungary up to 121 mill EUR, in Slovakia up to 7 mill. EUR. Dominant: expansion investments. (2) The revenues after the venture capital entry into enterprises doubled. (3) The number of employees grew faster and in significant numbers - app. 15% per year. (4) The investments into equipments, buildings and financial tools grew by one half. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  19. Theses – part 11 / T4 • Higher revenues in state and municipal budgets. (6) Expertise aid in enterprise development. (7) Venture investments stimulate the economy as whole: (a) faster growth of turnover than 100 other SMEs, (b) invested almost three quarters of whole turnover, (c) export growth in venture-financed firms more than one third ; almost one quarter of all their revenues. • Financial and non-financial aid to SMEs: (d) capital allowing fast growth of SMEs, (e) leadership and experiences, (f) contribution is evaluated positively. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  20. Theses – part 12 / T4 Investments as a percentage of GDP in chosen CEE countries in 2003-2004 (in mill. Euros). Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  21. Theses – part 13 / T4 Type of investment by chosen CEE countries in 2004. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  22. Theses – part 14 / T5 • Earnings in BALA Company grew by over 150% within 5 years of venture capital investments and ROE up to 10%, ROA up to almost 2%. This company also expanded on foreign markets. • SLOVPACK Company increased sales expressed in mill. Euros by almost 150% (from 4 up to almost 10 mill. Euros). VC investment also contributed to the productivity growth. • ENIGMA Company increased sales from 77 thousand Euros up to 1137 thousand Euros and venture investment contributed to the positive productivity. • EURONET WORLDWIDE Companyalsonoticed a significant growth of revenues within 8 years of investment fund performances (increases from 11 mill. USD up to 362 mill. USD). Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  23. Conclusion Application of theresearch results: • Theoretical application of new findings in the area of venture capital in educational process. • Sustaining the research activities focusing on venture capital impact on SMEs and elaborating the comprehensive analysis of venture capital. • Widening the information sources. • Bringing positive examples of venture capital impact on financial performance of SMEs. • Finding new potential investors as well as target SMEs seeking for capital. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  24. I would like to thank all the people, teachers and staff at the University of Miskolc who allowed me to study and helped me during my education. Especially, I’d like to express my warm acknowledgement to late prof. Tóth László, toprof. Nagy Aladár– my dissertation supervisor as well as to my opponents – Dr. ZsugyelJános and Dr. BozsikSándorfor great aid and contribution in preparing for the public defence. Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

  25. Thank you for your attention.E-mail: Marian.Gal@tuke.sk Public defence of PhD dissertation. University of Miskolc. 7 December, 2007.

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