Situation Analysis Brandenburg Peter Effenberger Dr' Peter Eulenhfer SEEDREG Meeting Kladno 12122005

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Situation AnalysisBrandenburgPeter
EffenbergerDr. Peter EulenhöferSEED-REG
MeetingKladno 1-2/12/2005
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Content

• Characteristics of Germany/Brandenburg
• SME sector in Brandenburg
• SME policies in Brandenburg
• Regional early-stage financing programmes for
  SMEs
• Supraregional financing programmes for SMEs

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Brandenburg Germanys Capital Region

• Area in sq. km
• Berlin 892
• Brandenburg 29476
• Population in millions
• Berlin 3,4
• Brandenburg 2,6
• Germany 82,5

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Brandenburg 15 years after German reunification
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Characteristics of Germany Largest member state
in the EU
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Characteristics of GermanyLargest GDP of EU 25
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Characteristics of GermanyLow GDP growth rate
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Characteristics of GermanyPositive balance of
international trade
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Characteristics of Germany high rate of
unemployment
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Characteristics of Brandenburg Low population
density
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Characteristics of Brandenburg High rate of
unemployment
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Characteristics of Brandenburg Low growth of
GDP after year 2000
Germany
Brandenburg
source LDS Brandenburg
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Strengths (1) Capital region
Berlin is 60 German, 35 New York and 5
jungle (Sir Simon Rattle, Conductor and
Artistic Director of the Berlin Philharmonic
Orchestra in 2002)
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Strengths (2) modern infrastructure

• traffic system
• communication
• business parks
• innovation centres

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Strengths (3) universities and RD
Prenzlau
7 universities 21 colleges of further
education 176,000 Students gt250 research
institutes 23 technology centers
Perleberg
Neuruppin
Eberswalde
Brandenburg/Havel
Berlin
Frankfurt/O.
Potsdam
Belzig
Luckenwalde
Cottbus
Herzberg
Forst
Senftenberg
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Strengths (4) investment conditions

• low labour costs (compared with regions in west
  Germany)
• excellent grants and other financial incentives
• availability of qualified workforce

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weaknesses (1) no industrial tradition
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weaknesses (2) no SME tradition
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weaknesses (3) economical transformation
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weaknesses (4) demographic process alarming age
pyramid
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weaknesses (4) demographic processpeople moving
away from Brandenburg
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weaknesses (4) demographic processshrinking
cities
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situation of SMEs (1) needs

• qualified employees
• access to financing instruments
• knowledge and information (markets, technologies)
• partners for RD
• partners in the value chain
• access to domestic partners for dealing foreign
  markets

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situation of SMEs (2) support in Brandenburg
Coaching and Consulting for Founders
Technology Transfer
Technology and Innovation Centres
Business Plan Contest
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strengths of SME sector

• Infrastructure
• High rate of self-employment

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weaknesses of SME sectoraccess to early-stage
financing
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SME policies (1) new orientation

• Growth programme for SMEs
• unbureaucratic access to investment grants
• Concentration on 16 fields of branch competence

• Biotechnology / Life Sciences
• Aviation technology
• Media / ICT
• Automotives
• Food industry
• Power-producing industry
• Geoinformation industry
• Wood-working industry

• Plastics
• Logistics
• Metal production / mechatronics
• Mineral oils/biofuels
• Optics
• Paper
• Rail transport technology
• Tourism.

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SME policies (2) Innovation programme

• Cooperation with Berlin
• Fields of branch competence with regard to
  technology and RD
• Funding innovations
• Technology transfer
• Innovation-oriented settlement strategy
• Founding

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Regional early-stage financingprogrammes for SMEs
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Supraregional early-stage financingprogrammes
for SMEs
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1. Low-interest loans

• Microloan - maximum amount 25,000 - natural
  persons, freelancers and SMEs existing for not
  more than three years and with not more than
  10 employees
• StartGeld - maximum amount 50,00 - (start-up
  money) is formally available for the same target
  group as the microloan but with a slightly
  higher credit volume
• ERP capital for founding - natural persons who
  intend to found a business or start
  self-employment - maximum amount 500,000 for
  each applicant
• Entrepreneurial credit - natural persons,
  enterprises and freelancers for business
  start-up, active participation, takeover of
  an enterprise or for investment projects -
  maximum ammount 5,000,000
• ERP Innovation Programme - exisiting enterprises
  and freelancers for the realization of RD
  projects - maximum ammount 5,000,000

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2. Guarantees

• Deficiency guarantees- existing SMEs and
  freelancers for business start-up, active
  participation, takeover of an existing
  enterprise or the market penetration after RD -
  maximum amount of 750.000 - The financed share
  is up to 80 of the credit amount.
• Guarantees without a bank- available for the
  same target group as the deficiency guarantees -
  but the maximum amount of that support is
  250,000 only - The guarantee first given by the
  surety bank signalises to the firms bank that
  the project has been assessed acceptable. In so
  far, the credit taker has good conditions to be
  accepted by the firms bank

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3. Supply of equity(1) Supraregional financing
programmes High-Tech-Entrepreneurial-Fund

• Investment Conditions
• the fund disposes of a capital of 262 million
• Investors Federal State of Germany, BASF,
  Siemens, Telekom
• finances new, growth-oriented technology
  enterprises (not older then 1 year)in the early
  stage (18 month) of their development
• support may amount to the maximum of 500,000
• the Fund takes in principle 15 of the share
  (nominal)
• Founders in Brandenburg should investment at
  least 10 of the amount given by the
  High-Tech-Entrepreneurial-Fund 10 (maximum
  50,000)
• Additional grants and low interest loans
• Support (Coaching during the first 18 month) by a
  regional coach is necessary

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3. Supply of equity(1) Supraregional financing
programmes High-Tech-Entrepreneurial-Fund

• Coaching concept
• the new, growth-oriented technology enterprises
  should be supported by regional coaches, such as
  - Seed-Funds, - Business Angels or - special
  qualified coaches
• a financial shareholding by the regional coach is
  necessary
• the coaches should help- in the first stage
  work out of the Business Plan and the application
  form of the High-Tech-Entrepreneurial-Fund-
  in the second stage support in the first 18
  month of the investment (for example
  controlling of milestones)

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3. Supply of equity(1) Supraregional financing
programmes ERP Start Fund

• finances the market penetration and the
  development of new or essentially improved
  products, procedures or services.
• the main principle for supplying equity is that
  another equity investor participates in the
  technology enterprise with at least the same
  amount as KfW and undertakes the management of
  the KfW equity as well - finances the market
  penetration and the development of new or
  essentially improved products, procedures or
  services.
• support may amount to the maximum of 3,000,000

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3. Supply of equity(2) Regional financing
programmes

• Seed Capital Brandenburg- finances people who
  start their own business and new, growth-oriented
  technology enterprises in the early stage of
  their development- support is given to the
  stages of RD and market penetration. - equity
  amounts to 100,000 up to 1,000,000
• Mittelständische Beteiligungsgesellschaft
  Berlin-Brandenburg GmbH- finances SMEs and
  people who start their own business- support may
  be used for starting the business, financing
  growth, enterprise takeover, or preparating
  the way to the stock exchange- concept, research
  and development stages are excepted- maximum
  amount of 1,000,000
• Beteiligungsgesellschaft der Sparkassen des
  Landes Brandenburg- finances the start of ones
  own business, as innovative and technology-
  oriented SMEs which are in the start-up stage or
  in first expansion, market penetration and
  growth - support amounts to 150,000 up to
  500,000

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ERDF-venture capital fund of the State of
Brandenburg (BeteiligungsFonds Brandenburg, BFB)

• the State of Brandenburg takes new ways with the
  recent establishment of an equity fund
  co-financed by ERDF
• the fund disposes of a capital of 30 million
• investments can only be made through this fund if
  a private investor undertakes to be the
  co-investor. The planned investment ratio shall
  be 60 through BFB and 40 through the private
  investor
• the fund is available for early-stage and
  mid-stage enterprises
• target enterprises are SMEs according to the EU
  definition with a genuine place of operation in
  the State of Brandenburg
• the fund is designed for enterprises in the
  specific innovative technology arena
• it is planned to invest means of this fund in
  around 20 enterprises

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4. Grants

• Grant for starting ones own business
  (me-inc./microenterprise)- finances the start
  of ones own business and is awarded to founders
  who were unemployed- a monthly lump-sum shall
  support the start into self-employment as a main
  job- the grant is awarded for up to three years
  (600 monthly in the first year, 360 monthly
  in the second and 240 monthly in the third year)
• Bridging money- is available for founders who
  were unemployed- a grant to the amount of the
  unemployment benefit or unemployment
  assistance received until then is paid for up to
  6 months and shall ensure living and social
  security in the time after the business
  start-up- a combination with the grant for
  starting ones own business is not possible
• EXIST-SEED- finance the early stage of
  technology-oriented new businesses founded by
  students, young scientific staff or graduates -
  the enterprises must not have been founded yet -
  founders from universities and colleges are
  backed up while transforming their innovative
  founding idea into a business plan - personnel
  costs are financed for up to one year with up to
  30,000 for scientific staff, up to 10,000
  for undergraduates

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items for discussion

• Financing of economic transformation processes
• Shortage of equity as a vicious circle
• supply oriented vs. demand oriented support and
  financing instruments
• Grants vs. tax reduction
• Sustainability of financing instruments for SMEs
  financing life life cycles