Venture Capital in CEE – challenges and drivers Sylwester Janik MCI Management

MCI Management

MCI Management

Who we are MCI Management SA is one of the most established and experienced private equity management firms in CEE, focused on venture and growth capital . Founded in 1999; listed on the Warsaw Stock Exchange since February 2001 with institutional and private investors . Over PLN 300 million (~€ 90 million) * of total assets under management . Four funds under management: TechVentures 1.0 - e arly stage and growth technology f und (VC) Eur oVentures 1.0 - mid-market buyout fund (PE) HelixVentures Partners 1.0 - seed & start-up technology fund (VC) B ioVentures 1. 0 - early stage health care & biotech nology fund (VC) * Book value of assets as of 31st Dec 2008

MCI Management SA is one of the most established and experienced private equity management firms in CEE, focused on venture and growth capital .

Founded in 1999; listed on the Warsaw Stock Exchange

since February 2001 with institutional and private investors .

Over PLN 300 million (~€ 90 million) * of total assets under management .

Four funds under management:

TechVentures 1.0 - e arly stage and growth technology f und (VC)

Eur oVentures 1.0 - mid-market buyout fund (PE)

HelixVentures Partners 1.0 - seed & start-up technology fund (VC)

B ioVentures 1. 0 - early stage health care & biotech nology fund (VC)

MCI’s presence in the CEE MCI is active across the main countries of the CEE region: Poland, the Czech Republic, Slovakia, Bulgaria and Romania . 8 Partners with diverse background and experience , supported by team of e xperienced investment professionals Sector specialization - areas of particular interest are : - Internet - Software - Telecom munication, - Wireless & mobile, - HealthCare & Biotechnology , - Retail & Distribution, - Cleantech (practice in development.

MCI is active across the main countries of the CEE region: Poland, the Czech Republic, Slovakia, Bulgaria and Romania .

8 Partners with diverse background and experience , supported by team of e xperienced investment professionals

Sector specialization - areas of particular interest are :

- Internet

- Software

- Telecom munication,

- Wireless & mobile,

- HealthCare & Biotechnology ,

- Retail & Distribution,

- Cleantech (practice in development.

Diversified portfolio

VC & the CEE market opportunity

VC & the CEE market opportunity

by Sequoia Capital

VC & the CEE market opportunity Fast-growing economy The stability of the political, legal & regulatory environment Attractive investment opportunities - success stories ( Skype, Grisoft (AVG), Bioton, etc;) Well-developed exit environment

Fast-growing economy

The stability of the political, legal & regulatory environment

Attractive investment opportunities - success stories ( Skype, Grisoft (AVG), Bioton, etc;)

Well-developed exit environment

On average, the CEE countries grow at least 2x f aster than USA, Japan and developed countries of the European Union Source: International Monetary Fund, The World Bank, Eurostat, The Economist Intelligence Unit, Goldman Sachs, Morgan Stanley Political and legal stability of the region (EU regulations) gives PE/VC funds an advantage to invest in emerging market growth at a risk , that is comparable to that of Western Europe VC & the CEE market opportunity 2007 2008 est. 200 9 F 2007 2008 est. 2009 F (IMF) 2009 F (banks) USA 2,0% 1,3 % -0,5% GDP Growth 6,0 % 4, 4 % 3,6% -1,9% Czech Rep. Japan 2, 4 % 0,4 % -0,4% 6,2 % 8,5 % 4,7% 1,7% Romania China 11, 9 % 9 , 8 % 6,7% 6, 6 % 5, 4 % 3,8% 0,0% Poland UK 3, 0 % 0 , 7 % -1,0% 6 , 2 % 6,5 % 4,5% 0,0% Bulgaria Canada 2, 7 % 2, 7 % -1,2% 10, 4 % 7, 0 % 4,9% 1,5% Slovakia Euro Area 2,6% 1,2% 0,1% 7, 6 % 6 , 4 % 2,5% -2,0% Ukraine 4,5% 3,4% 2,7% -1,5% Turkey

On average, the CEE countries grow at least 2x f aster than USA, Japan and developed countries of the European Union

Source: International Monetary Fund, The World Bank, Eurostat, The Economist Intelligence Unit, Goldman Sachs, Morgan Stanley

Political and legal stability of the region (EU regulations) gives PE/VC funds an advantage to invest in emerging market growth at a risk , that is comparable to that of Western Europe

VC & the CEE market opportunity Substantial growth opportunities for PE/VC funds in relation to developed countries of the European Union An emerging generation of well-educated and highly motivated entrepreneurs able to build companies successfully competing in a global marketplace Majority of the region’s investment activity and new investment opportunities concentrated in Poland, the Czech Republic , Romania and Bulgaria PE /VC investments as % of GDP in 20 07 Source: EVCA / PEREP %

Substantial growth opportunities for PE/VC funds in relation to developed countries of the European Union

An emerging generation of well-educated and highly motivated entrepreneurs able to build companies successfully competing in a global marketplace

Majority of the region’s investment activity and new investment opportunities concentrated in Poland, the Czech Republic , Romania and Bulgaria

VC & the CEE market opportunity Viable exit routes for PE/VC funds due to meaningful M&A activity and developed stock exchanges Venture backed companies are exited mainly by trade sale, but number of IPOs is growing dynamically Source: EVCA

Viable exit routes for PE/VC funds due to meaningful M&A activity and developed stock exchanges

Venture backed companies are exited mainly by trade sale, but number of IPOs is growing dynamically

Geographic interest of LPs worldwide Source: LP Allocation to Private Equity 2008, Almeida Capital survey (130 LPs)

VC in the CEE region – challenges & drivers

VC in the CEE region –

challenges & drivers

EU accession Political as well as economic risks are much lower than they used to be and also much lower than in other emerging markets Improvement of ICT infrastructure across CEE Significatnt improvement over last 5 years (+); differences between countries and regions are still huge (-) „ Come back” of many Eastern Europeans to their home countries M anagement experience , personal networks , motivation, knowledge, start-up capital (sometimes) The attitude towards starting an own business B etween what it is in the US A and Western Europe ; the region still lacks the critical mass of people who want to start out on their own Drivers

EU accession

Political as well as economic risks are much lower than they used to be and also much lower than in other emerging markets

Improvement of ICT infrastructure across CEE

Significatnt improvement over last 5 years (+); differences between countries and regions are still huge (-)

„ Come back” of many Eastern Europeans to their home countries

M anagement experience , personal networks , motivation, knowledge, start-up capital (sometimes)

The attitude towards starting an own business

B etween what it is in the US A and Western Europe ; the region still lacks the critical mass of people who want to start out on their own

A n excellent academic track record and a reputation for outstanding scientific research S till a long way to go to leverage and unlock a commercial potential of universities, incubators and technology parks . T he massive capital inflow into the private equity asset class during the credit boom years I nvestors look outside their traditional territories search for returns and investment opportunities at the smaller end of the investment spectrum following the credit crunch Drivers

A n excellent academic track record and a reputation for outstanding scientific research

S till a long way to go to leverage and unlock a commercial potential of universities, incubators and technology parks .

T he massive capital inflow into the private equity asset class during the credit boom years

I nvestors look outside their traditional territories

search for returns and investment opportunities at the smaller end of the investment spectrum following the credit crunch

Entrepreneurial environment needs to improve I nvestments in infrastructure are needed to form stronger basis for future growth Wider adoption of incentives for venture capital investors government-sponsored programmes , tax breaks, Development of venture capital-friendly environment & infrastructure Language and cultural issues Cost advantage of the CEE region is disappering Limited number of s erial entrepreneurs Equity gap - seed / early stage investments Challenges

Entrepreneurial environment needs to improve

I nvestments in infrastructure are needed to form stronger basis for future growth

Wider adoption of incentives for venture capital investors

government-sponsored programmes , tax breaks, Development of venture capital-friendly environment & infrastructure

Language and cultural issues

Cost advantage of the CEE region is disappering

Limited number of s erial entrepreneurs

Equity gap - seed / early stage investments

www.mci.eu [email_address]