Tera Ventures will start managing the state venture capital portfolio
Eesti Arengufond (Estonian Development Fund), its investment company SmartCap and Tera Ventures signed an agreement on May 3 according to which the state direct investment portfolio and management of additional capital for follow-on investments was transferred to the private fund manager.
“The state has fulfilled its current role in the venture capital market as a direct investor and it is time to move to the next phase. We continue to provide venture capital as a fund investor via the funds managed by KredEx and thereby helping the capital market in several different development phases from the initial phase until the expansion. Since the availability of capital is vital for the startups, it is good to note that the state of Estonia is contributing to it comprehensively,” said Urve Palo, the Minister of the Entrepreneurship and Information Technology.
“The state has contributed approximately 33 million euros during 2007-2017 via Estonian Development Fund and SmartCap. This capital has helped development and sales of such companies as Fits.me, Vitalfields and GrabCAD. The transferred portfolio has 12 companies, including international success stories such as Cleveron, Jobbatical, Lingvist, Monese and Realeyes,” added the Minister.
In December 2016, an independent selection committee of the European Investment Bank selected Tera Venture as the winner of the call for private fund managers organised by Estonian Development Fund and SmartCap.
“The negotiations stage on technical details subsequent to the call went as planned. The new fund was founded according to the terms of the private fund manager contest and tender of Tera Ventures. Tera Ventures team manages the existing state direct investment portfolio from May 3. During the following four to seven years, the team will make follow-on investments, if needed, and looks for divestment options,” said Sille Pettai, the Fund Manager of SmartCap.
In April, Estonian Financial Supervision Authority registered Tera Ventures Fund as the Estonia’s first Trust Fund according to the Investment Funds Act. According to Pettai, the main terms of the activities of the trust fund are typical for the venture capital market, and the investment and risk diversification principles of Tera Venture follow the earlier investment policy of Estonian Development Fund. Tera Ventures will invest supplementary capital to the established fund and will manage it on market conditions.
The next phase of reorganisation foresees the tripartite contract between the Ministry of Economic Affairs and Communications, Fund KredEx and Estonian Development Fund according to which the current investment activities of Estonian Development Fund and SmartCap are fully transferred to Fund KredEx organisation. SmartCap continues reorganising investment activities according to the fund of funds concept and plans new investments to the accelerator funds already this year.
According to the CEO of KredEx, Lehar Kütt, Estonia is one step closer to establishment of the well functioning venture capital market. “European Investment Bank has commended the work of Estonian public sector for the development of local venture capital market. This is recognition to the work of Estonian Development Fund and SmartCap at the time when the market was in the early development stage and state-side contribution was crucial for creation of the environment necessary for investments. The long-term goal is to establish a viable venture capital market which main burden is carried by the private sector,” said Lehar Kütt.
Transfer of the direct investment portfolio of Estonian Development Fund and SmartCap to the private fund manager and transferring SmartCap to KredEx finishes another phase in restructuring the activities of Estonian Development Fund and SmartCap. In earlier stages of the restructuring, surveillance activities had already been transferred to the Foresight Centre formed under the Chancellery of the Riigikogu, and the support unit for Estonian startups, Startup Estonia, has become a part of KredEx.
Ms Sille Pettai
SmartCap Fund Manager
+372 523 1675