Enabling Growth and Innovation in SMEs: Think Globally Act Locally Venture Capital Banking Mario W'

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Enabling Growth and Innovation in SMEsThink
Globally Act LocallyVenture Capital
BankingMario W. Cardullo, P.E.Counselor,
Technology and Entrepreneurism

• U.S. Department of CommerceOffice of the Under
  Secretary for International Trade
  Administration

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Investment Cycle
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What is the USA Venture Capital Industry?

• Fractionated no large market share leaders
• SME, i.e. small businesses
• Guild
• Apprenticeship
• Principals master craft-persons
• Returns may not match risks

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Global Investment
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Where are the Economies?

• Various stages of venture capital growth
• Following a slow growth path
• Building on USA model
• Many still have small amount of funds under
  management

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Venture Capital Banks

• USA VC growth model not efficiently aggressive
  for other economies.
• Economies should not develop SME style VC
  industry.
• Managing investments requires size to achieve
  returns matching risks portfolio theory.
• Economies of scale coupled with professional
  management and financial concepts is what is
  needed.

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Issues Faced in Business Creation
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Major Management Problems During Growth
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Venture Industry in 2004
FFFfamily, friends fools VCventure capital
SIstrategic investors IBinvestment bank Bbank
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SME Venture Fund, LP
Services
30 Government 70 Mngmt Staff
Services
Private
Private
Private
Private
Private
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Objectives

• Provide financial returns to its limited partners
  that significantly exceed what might be expected
  from more traditional investment vehicles such as
  publicly-traded equities
• Efficiently allocate capital to promising new and
  growth companies
• Engage U.S. and other risk capital fund managers
  to manage the fund and train local managers in
  making venture capital, larger private equity and
  mezzanine capital investments in growth companies.

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Fund Basics
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Evolution of the Venture Industry Whats Right
Seed
Early Stage
Late Stage
Mezzanine
Buy-out
Venture Capital Corporation
Investment Bank
Buy-out
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Benefits

• Increase in employment
• Increase venture capital investment FDI
• Enhance entrepreneurial culture
• Develop entrepreneurial human capital
• Diversify sources of financing
• Diversify methods of financing
• Provide easier access to start-up tools

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Impact
10,000,000,000
Seed 1,500,000,000
Growth 4,000,000,000
Later Stage 4,500,000,000
Funds
Investment per enterprise
Seed 500,000
Growth 2,000,000
Later Stage 4,000,000
Seed 3,000
Growth 2,000
Later Stage 1,125
TOTAL6,125 Enterprises
Enterprises
Seed 30,000
Growth 200,000
Later Stage 562,500
Jobs
TOTAL 792,500 Jobs
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For Investors

• Outstanding returns
• Minimized risk
• Management support
• Aggressive deal prospecting
• Convenience

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For the Start-up

• Quicker time to market
• Access to consistent development capital
• Access to dedicated sector, operations and market
  specialists
• Access to established angel networks
• Access to more international markets

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Possible Risk Return Space