Serbia gains access to ENIF – Investors looking for new partners in Serbian market

By signing the joining agreement, the Republic of Serbia has become a partner in the regional Enterprise Innovation Fund (ENIF), which currently has EUR 41 million at disposal for funding innovative small and medium enterprises from the Western Balkans in the early stage of development. The agreement was signed by the Innovation Fund on behalf of the state. The fund also took part in initiating this regional program and is authorized to participate in the ENIF's activities.

The fund is managed by the company South Central Ventures (SCV), which has invested in four IT companies since the foundation of the fund in September 2015 – DryTools, City Expert, Cube and Workplus. The investments amount to EUR 2.8 million altogether, i.e. more than 50% of the ENIF's investments so far.

The Government of Serbia reached the decision on April 20 to secure slightly over EUR 1.3 million in the next five years for the purposes of Serbia's participation as an investor in the ENIF, and the funds are planned within the budget of the Ministry of Education, Science and Technological Development. The Ministry of Economy is also involved in the initiative through its managing bodies.

– The Government will set aside RSD 21 million for taking part in the ENIF in the first year alone. This way, we want to support the knowledge-based economy and confirm the position, emphasized several times so far, that innovation is the key to development – said Minister of Education Mladen Sarcevic on this occasion.

Minister of Economy Goran Knezevic reminded that the support to entrepreneurship is best shown through RSD 18 billion set aside by the Government of Serbia in 2017 for support to the SME sector.

– Of this, RSD 300 million has been set aside for innovations, and, in addition to the budget funds, around EUR 500 million has been provided from alternative sources, through cooperation with various companies and from various programs. Through our participation in the ENIF, it is precisely the risk capital market in Serbia that we want to strengthen, that is, to attract private investors to support entrepreneurs this way – Knezevic pointed out.

A fourth of funds already planned

The ENIF has been present in the Western Balkans (including Serbia) since September 2015, and the strategy of this fund, run by South Central Ventures, is to invest in local extraordinary skill teams with ambition and potential to develop regionally or globally.

The investors in the ENIF are the European Commission, the European Investment Fund, a member of the European Investment Bank Group and the head of the COSME program, the European Bank for Reconstruction and Development (EBRD), the German development bank KfW, as well as the countries of the Western Balkans – Croatia, Macedonia, Montenegro and now Serbia, through ministries or agencies for SME, as well as several private investors.

– Eight technological companies, of which four from Serbia, have been supported in their early development through the ENIF so far. The first ENIF investment, in February 2016, the DryTools startup, which has become a part of the company Alchemy, headquartered in Novi Sad and San Francisco, through a merger in the meantime, has also attracted investors from the USA thanks to the successful export of its products, and the number of employees has increased from 3 to 17 – said Jan Kobler, a partner and one of the SCV managers in charge of the ENIF.

He said that the ENIF operated as a risk capital fund limited to 10 years, with the first five being dedicated to investments in innovative companies, whereas the other five are meant for their development and the exit or sale strategy, in order to make a certain profit for its investors.

SCV has so far invested 13% of its funds, agreements are about to be signed for around 8%, whereas 7% are being negotiated about at the moment. This means that roughly one fourth of the funds have been practically allocated.

In his interview for eKapija, Kobler says that Serbia's joining the ENIF is of formal nature and important in the sense of supporting innovative enterprises, that is, as an indicator of a stable and positive business climate.

– We have been active since September 2015 and we will continue to operate in the same manner. Nevertheless, Serbia's joining is a great sign of acknowledgment and support to the entire entrepreneurial ecosystem, as it means that there truly is a dedication to this sector. This is also a support to our activities and we can be more assured and comfortable as a fund. The ENIF continues to look for innovative enterprises to invest in and partners to cooperate with in Serbia and the region – Kobler pointed out.

According to Ivan Rakonjac, the acting director of the Innovation Fund, Serbia's joining the ENIF might act as an incentive for other private investors to get involved in the risk capital market.

– Serbia supports innovative entrepreneurship in several ways. One of them is through allocating grants through the Innovation Fund program. The ENIF entails the fund of the risk capital of the Western Balkans economies and it operates under market principles exclusively. In signing agreements with the companies it funds, the ENIF enters the ownership structure with the intention of selling its stake and making a certain profit for its investors after a certain period of time – Rakonjac clarified for eKapija.

Pillars of support to innovative enterprises

The ENIF is one of the pillars within the Western Balkans Enterprise Development and Innovation Facility (WB EDIF), which offers a set of complementary financial measures of support to the SME sector in the Western Balkans. The program aims to stimulate and promote the formation of new and the development of existing innovative enterprises with a high potential for growth, as well as the formation of the regional risk capital market. The EDIF is coordinated by the European Investment Fund.

– WB EDIF is the most important platform through which the EU provides financial support to the development of SME in the Western Balkans region, along with co-financing by European financial institutions – the European Investment Bank, the European Investment Fund, the European Bank for Reconstruction and Development, the German development bank. The initial value of the program was EUR 145 million and it is increased through annual allocations from the EU budget, with EUR 300 million being effectively at disposal for direct financing of SME in the Western Balkans. The program is for the most part financed from the EU funds through the regional IPA component meant for the Western Balkans. How much each country draws down depends on the enterprises and the banks – explains Steffen Hudolin of the EU Delegation to Serbia.

As the Ministry of Economy explains, aside from the ENIF, the Western Balkans Enterprise Development and Innovation Facility also includes the Enterprise Expansion Fund (ENEF), a development capital fund focusing on established SMEs with a high potential for growth. Businessmen already have EUR 100 million available through this instrument, and the ENEF has had six investments in the region so far, of which two in Serbia in the total amount of EUR 3 million (Delmax and Gomma Line).

Aside from the funds, WB EDIF also secures guarantees to the banks crediting innovative small and medium enterprises, thereby enhancing the possibility of access to finance. More than EUR 220 million has been realized so far through new loans with guarantees to the banks in the Western Balkans countries.

Considering that the European Commission sees the EDIF as the main financial platform for the region, EUR 20 million for guarantees for Serbia from the national IPA allocation will also be operationally provided through this platform, the ministry adds.

Marko Andrejic