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International Internet Magazine. Baltic States news & analytics Monday, 20.05.2019, 02:30

Estonia putting EUR 10 mln in fund for hi-tech investment

BC, Tallinn, 27.02.2019.Print version
The Estonian Ministry of Economic Affairs and Communications, Kredex and SmartCap have signed an agreement on the subscription of units in Early Fund II for the investment of 10 mln euros in hi-tech companies, reported LETA/BNS.

Investments will be made via the fund in early stage, hi-tech small and medium-sized companies whose product or service development and business model rest primarily on research and development work and commercialization of entailed intellectual property, spokespeople for the Ministry of Economic Affairs and Communications said.

"For many research and technology intensive businesses limited availability of capital is an obstacle namely in the launch phase. Since these are areas where success largely depends also on a fast start, the state decided to establish a fund for additional support measures which supports change in the Estonian economy, helps increase export and create highly skilled jobs. This is not just about support, but an investment fund that is also tasked with raising the fund's assets through profitable investments," Minister of Entrepreneurship and Information Technology Rene Tammist said.

Under the agreement, the ministry will give Kredex 10 mln euros for making a payment into the fund's equity. A subsidiary of Kredex, SmartCap, is to find a fund manager on the private market by means of a competition. 

Sille Pettai, board member of SmartCap, welcomed the state addressing the problem of shortage of capital for research and development intensive startups and said that while there are many experienced businesspeople and experts in Estonia, the amount of capital in research-intensive fields is not sufficient to carry out all ideas. 

Pettai said that in addition to raising capital, startups' cooperation with investors and experts is important.

"Therefore, in making investments, we will rely on experienced fund managers in the area of venture capital who in addition to the investment have a definitive interest in and capability to offer also diverse support and professional advice to businesses," she added.

Provision of venture capital via funds of fund such as Balti Innovatsioonifond I and EstFund have made the private market function very well. The new investment is a step towards further developing the already well-functioning venture capital market. In total about 560 million euros' worth of private and venture capital investments are to reach businesses via Balti Innovatsioonifond and EstFund, with which market failures have been alleviated to a very big extent, spokespeople for the ministry said.

Another base of the investment decision is an agreement signed by political parties last year to direct 1% of GDP to research and development.

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