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During the last two years we have witnessed the dramatic changes in the private equity and venture capital activity in the South East Europe (SEE). Back in 2007, the SEE markets were the rising stars: more than 1/3 of private equity and venture capital funds invested in the CEE region went to SEE economies totalling EUR 1.2 billion. The downturn was especially severe on the region, with very few deals closing and fundraising extremely difficult. However, the private equity and venture capital activity in the region is picking up again from Q4 2009.

Looking forward, there are several reasons to regain optimism regarding the attractiveness of the region for private equity and venture capital investment. First, several of the SEE Governments have announced the policy measures with the objective to jump start private equity and venture capital activity. In Croatia, Bulgaria and Serbia we expect the public investor (government, state or public institution) to co-invest in venture capital funds and thus provide the relief for the shortage of venture capital funds. For such initiatives to be successful, the investments using public and private funds should be made in accordance to the market principles. Further, the Governments of the regions should create the conditions for the venture activity supportive ecosystem to develop. Such indirect market-oriented measures include creating the favourable legal and regulatory environment (strong investors rights protection, good corporate governance and transparency with respect to financial data), lower taxes or tax incentives, strong R&D and entrepreneurial culture, availability of exit mechanisms (IPO, trade sale) and improved overall business climate. Second, the changed market conditions may also shake the supremacy of banks in providing SMEs and larger companies financing. We expect the entrepreneurs to look for alternative sources of finance, including private equity and venture capital. Third, the leverage in SEE markets was always very conservative and several of the funds have the ability to finance all (or most) equity deals with decent returns. The real strength of private equity and venture capital deals in SEE comes from its deal makers that are close to the ground. The successful deals come from crafted approach, close work with the company’s management, conservative financial planning, and not from financial engineering. In addition, the adverse financing conditions are nothing new for the private equity pioneers operating in the region.

The current downturn can therefore represent an opportunity for the private equity and venture capital activity to develop in the region over the medium term.

We look forward to your attendance of VentureXchange Events – new networking platform connecting investors and entrepreneurs in the South East Europe. You will benefit from meeting the key private equity and venture capital players in the region, and the most perspective venture capital investment opportunities in the region (finalists of the VentureXchange South East Competition 2010). The outstanding speakers’ panel will provide you with the invaluable insights into trends and strategies for private equity and venture capital investing for the region.

Mirna Marovic, President, Croatian Private Equity and Venture Capital Association

Mirna Marovic, President
Croatian Private Equity and Venture Capital Association

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