Venture Debt in CEE Venture Debt Summit 2018 March 22, Luxembourg
EY CSE snapshot Access to wide range of companies EST LVA ~25,000 Clients in EY CSE (2014 2017) ~2,700 Clients in TAS CSE (2014 2017) ~350 Clients in CSE CDA (2014 2017) LTU CZE SVN HRV POL SVK HUN BIH MNE SCG ALB MKD ROU GRC BGR MLD TUR CYP Oil & Gas Health Power & Utilities 36 Offices in CSE Telecommunications Industrials Consumer Products Retail Technology ~600 Employees in TAS CSE ~50 Dedicated CDA Professionals in TAS CSE Page 2
Doing business in CEE EST LVA LTU POL CZE SVK HUN SVN ROU HRV BIH SCG BGR MNE ALB MKD GRC MLD TUR CYP GDP growth in 2017 Source: IMF 2017, PRS Group 2017 data % growth 7% 6% 5% 4% 3% 2% 1% 0% 4.5 4.0 3.5 3.0 2.5 2.0 1.5 Above average growth, belowaverage safety Below average growth, belowaverage safety 55 60 65 70 75 80 85 90 LATVIA SLOVAKIA (A3/A-) SERBIA (A2/A+) BULGARIA (Baa2/BB+) BOSNIA CROATIA (Ba2/BB) SLOVENIA (Baa1/A+) INDIA CHINA World average SOUTH AFRICA HUNGARY (Baa3/BBB-) ROMANIA (Baa3/BBB-) CZECH REPUBLIC (A1/AA-) GREECE (Caa2/B-) Above-average growth, aboveaverage safety Below average growth, aboveaverage safety Safety of investing in the country CEE GERMANY SWEDEN Real GDP growth 2017-e2021 POLAND (A2/BBB+) 1.0 0 100 200 300 400 500 600 700 Nominal GDP 2017 (bn $) Source: BMI, EY Research Page 3
Funding early stage businesses in CEE high Risk of capital Family, Friends, Equity Grants Family, Friends, Equity Suppliers/ Customers VC Grants JV VC Asset sale Shld. Loan Debt Funds Private Equity, Debt Funds IFIs, Banks Retained earnings Capital Markets Banks, Leasing low Seed Start-up Growth Stability, maturity, exit Business early stages Page 4
CEE main challenges in accessing funding Macroeconomic: non single currency, inflation disparate tax regimes legal framework not aligend 1 Limited financing alternatives: High dependence on bank market low liquidity on stock exchanges 7 2 Lack of corporate governance Higher cost of capital 6 CEE businesses 3 Poor data availability, weak preparation Difficult scalability, smaller size 5 4 Polarization of funding: Regulatory constraints High return requirements Short tenors Page 5
CEE Venture capital highlights 2016 48% HUN 61% ITC Investments 16% Consumer goods and services #233 100 mil Vs. CEE PEFs 69% of companies 6% of value vs. European VCs 7.5% of companies 2.3% of value 12% Biotech #73 31 mil POL #46 21 mil Exit as Trade Sale CEE yet to be a growing market for VC VC size down to 1/3 of 2008 levels Increased regulatory pressure on traditional lending Fintech increases relevance: 2.2bn in revenues estimated in the coming years in CEE 75% 12% 13% Later stage venture Seed Start-up 0.43 mil avg. VC investment 1.4 mil VS avg. European VC investment Source: Invest Europe, CEE PE report 2017 Buoyant PE activity ( 621 mil raised): shift of European investors outside CEE towards CEE (e.g. provided for 58% of total capital raised) Page 6
Most recent Unicorn, a CEE story UiPath created by two Romanian entrepreneurs Set as outsourcing company to specialize in robotic process automation 2005 UiPath builds an industry standard platform For training and orchestrating software robots 2012 Rebranding to UiPath Moved headquarters to US Seed money - US$ 1.6 mil 2015 Meaningful financing Early stage VC (Series A) - US$ 29.6mil Company valuation at US$ 109mil 2017 2 nd round of funding and partnership with Celonis Early stage VC (Series B) - US$ 153mil raised from 8 investors Company valuation at US$ 1bn 2018 Page 7
EY CSE Capital & Debt Advisory LTU EST LVA Capital & Debt Advisory We have Wide network of clients Senior financing advisory team that originates deals Specialized teams in structuring Local & presence implementation and know-how of financing Integrated approach towards Deal deal making completion expertise (origination, due dill, execution) First hand on deals CZE SVN HRV POL SVK HUN BIH MNE SCG ALB MKD ROU GRC BGR MLD TUR CYP We offer Access to client network and deal referral Pre-scanned deal to match your investment criteria Reverse deal inquiry when needed Resources to work on the deal execution You get Local presence and know-how Deal making expertise First hand on deals Page 8