TGFS Venture Capital: Funding for Technological Enterprises in Saxony

1. TGFS- Venture Capital Fonds for Saxony „2nd Brussels Workshop“ on the Future of the European Cohesion Policy“ Thursday, 12 November 2009

2. Economic and structural policy goals of the TGFS • Saxony: medium-sized industrial base with focus on technology; high level of qualifications; well established research infrastructure; lack of large enterprises with effective research departments • Growth through innovation comes primarily from company assets and new businesses • Market failure in the early stage of funding; this leads, amongst other things, to insufficient commercial exploitation of R&D potential and comparatively low number of innovative business formations (e.g. study by Centre for European Economic Research)

3. LBBWSparkasse ChemnitzSparkasse LeipzigSparkasse Dresden 15 Mio. EUR Structure and funds • TGFS makes available venture capital für young technological enterprises. Investors: TGFS Holding GmbH & Co. KG 45 Mio. EUR Free State of Saxony Silent participation EFRE: 35 Mio. EURLand: 10 Mio. EUR 27 Mio. EUR 18 Mio. EUR TGFS Seed 20 Mio. EUR TGFS Start up 40 Mio. EUR 2 Mio. EUR 13 Mio. EUR Start-up financing Seed financing

4. Conditions for participation Enterprise phase Seed and Start-up Product (ideas) ready to be launched onto the market within 18 months Young enterprises Maximum 5 years old Area of technology Information and telecommunication technology Semiconductor and microsystems technology Innovative high tech sectors Internet / New media Material sciences Environmental and energy technology Life Science / Medical technology Funded by Developing products close to the market Funding requirements for the product Product launches If necessary establishment of production 4 | 9. November 2009 | Helmut Stier

5. How the TGFS works • Close to the market: as far as known first tendering procedure for funds management for a EFRE venture capital fund in Germany. For the fund management, raising additional funds was an award criterion in the tendering process. This meant that private investors could become involved in the fund and the fund management. Commitment from private investors used to be focused on company level, not on fund level. • Disproportional loss distribution through release from liability (50% for private investors) make participation in TGFS attractive for investors. • TGFS should achieve a financial return in line with the industry standard. Profit orientation of investment decision through incorporation of investors via an Investment Committee. • Investment period basically up to five years after start of the fund. Settlement on the basis of Structural Fund regulations until 31/12/2015.

6. Incorporation of the TGFS in regional networks • Typical of VC is the close support given to firms by the capital provider in all stages of participation • This essential support is guaranteed by TGFS through the presence on the spot of the savings bank partners and the pan-regional and international network provided by CFH (an associated subsidiary of Sachsen Bank/LBBW) • The TGFS pursues active networking and supports this through existing structures in Saxony

7. Interim evaluation of the TGFS model • The means and instruments for promotion are innovative, above all through the competitive tendering procedures for fund management • To date, 11 investments have been made, at a cost of 5.4 million euros (since April 2008) • Increased use of innovative financial instruments under Strucural Funds Programmes • Problems encountered when establishing the TGFS: High complexity of EU rules requires great efforts • Strengthening of the R&D potential through increasing the efficiency of economic performance of enterprises remains essential • "European added value" through the programming process/Lisbon strategy