Guarantee Fund for investments in venture capital
Details
COUNTRY: Italy
REGION: Friuli Venezia Giulia
PERIOD: 2019 – ongoing
LINK
Goals, Recipients, Beneficiaries
The Regional Guarantee Fund for venture capital investments in innovative start-ups aims to offer capitalisation opportunities to existing innovative start-ups, as well as to promote the birth and establishment of new initiatives in Friuli Venezia Giulia region. Investors who carry out venture capital operations in innovative start-ups can be guaranteed. These are financial intermediaries and holding companies, as defined by Italian tax law, or independent private investors. The investment initiative proposed to the Fund is based on the positive assessment of the innovative start-up business plan by the investor or independent professional, carried out according to criteria of professionalism and good faith. The final recipients targeted are innovative start-ups, as provided by the Italian Law, with head and operations office in Friuli Venezia Giulia Region. The financial envelope of the Fund is EUR 5.5 million. The Fund’s allocations may be supported by:
- Contributions from the Region.
- Contributions from the State, other public administrations and private entities.
- Interest accrued on treasury stocks;
savings and redemptions related to financial transactions. - ERDF 2014/2020 structural Funds.
Eligible Projects / Expenses
As part of the venture capital investments, the Fund’s guarantee shall assist the following investment operations:
- Investments in quasi-equity structured as privileged capital to be implemented through subscription of shares or preferred units, with a “put option”.
- Investments in quasi-equity structured in forms other than privileged capital, to be made in conjunction with investments in quasi-equity structured as privileged capital.
The guarantee is provided free of commission on the eligible operations for an amount up to 70% of the investment operation and for a total guaranteed amount up to Euro 1 million.
Support
The guarantee is provided free of commission on the eligible operations for an amount up to 70% of the investment operation and for a total guaranteed amount up to Euro 1 million. The guarantee will cover the amount of the loss which is equal to the difference between the purchase price and the selling price of the shares. If the conditions for exercising the put option are not met and therefore a selling price is not available, an estimated fair value will be used to estimate the amount of the loss. The investment operation must be completed, with all the amounts being paid to the beneficiary, within 24 months from the approval of the guaranteed eligibility. The guarantee is offered for the entire time horizon of the investment operation if it does not exceed 7 years. In case of need to ask for the execution of the guarantee, the venture capitalists must fill a request to the Managing Committee of the Revolving Fund for Economic Initiatives. A preliminary amount equal to 50% of the guarantee is paid to the investor. The final payment is operated after the conclusion of the winding-up operations.
Reimbursement of the entire amount of the investment operations in the form of equity is operated in casa of:
- Sales of shares for the final beneficiary.
- Deadline of the last term for exercising the put option.
- Reduction of the share capital to zero for covering accrued losses.
Eligible Projects / Expenses
As part of venture capital investments, the Fund’s guarantee shall assist the following investment operations:
- Investments in quasi-equity structured as privileged capital to be implemented through subscription of shares or preferred units, with a “put option”;
- Investments in quasi-equity structured in forms other than privileged capital, to be made in conjunction with investments in quasi-equity structured as privileged capital.
The guarantee is provided free of commission on the eligible operations for an amount up to 70% of the investment operation and for a total guaranteed amount up to Euro 1 million.
Procedure
The instrument has been activated by the Autonomous Region Friuli Venezia Giulia in 2019, within the Revolving Fund for Economic Initiatives (FRIE), which boasts already a consolidated governance structure. The Managing Committee of the Revolving Fund for Economic Initiatives requires a positive evaluation of the business plan of the start-up from the promoting investor to decide on the guarantee’s request. The Secretariat of Managing Committee receives each application presented by the investors and decides on the guaranteed request. The initiatives submitted are instructed by the Secretariat of the Managing Committee of the FRIE according to the chronological order of receipt and are granted, in general, within 90 days of receipt of the investor’s request.
Status / Results
This instrument represents a first attempt of the regional administration to support the regional VC market and to meet the financing needs of companies in the early stage. The fund will target operations for a value of up to 1 million Euro per startup and aims at using all the allocated resources. Therefore, a minimum of five operations conducted with the support of the fund is envisaged.
Remarks
Venture capital is largely accepted as a key contributor to the financing of RTDI-driven businesses. Venture capitalists are well-equipped to evaluate the risk-return potential of RTDI-driven businesses and may be actively involved in the operations of their investments.
The Italian Venture Capital industry is still lagging many other European counties. In this context, public interventions in the market may be very helpful to drive the Italian VC market to a more mature stage. This guaranteed mechanism represents, therefore, an interesting example of how policymakers can boost the VC market, at a regional level, leveraging on public funds.
Contacts
ORGANISATION: Revolving Fund for Economic Initiatives (FRIE) managing committee
CONTACT PERSON: Paola Del Neri
EMAIL: segreteria@frie.it
PHONE: : +39 040 377 5641
ORGANISATION: Autonomous Region Friuli Venezia Giulia Service for enterprises Autonomous Region Friuli Venezia Giulia Service for enterprises
CONTACT PERSON: Gabriele Colapietro
EMAIL: gabriele.colapietro@fvgplus.it