SPAIN SETS UP PUBLIC FUND TO WOO VENTURE CAPITAL

Spain Sets Up Public Fund To Woo Venture Capital

Spain Sets Up Public Fund To Woo Venture Capital

Spain’s entrepreneurs are set to receive a funding lifeline thanks to the creation of the country’s first ever public venture capital fund.

As the economic and financial crisis continues to bite, many small and medium-sized enterprises (SMEs) have found it difficult to access bank loans and are struggling to grow their businesses.

SMEs account for around 70 percent of the Spanish economy.

The new investment fund has been launched by Madrid-based state bank, the Instituto de Credito Oficial (ICO), with financing from the European Investment Bank (EIB).

ICO’s fully-owned fund management arm Axis is spearheading the project and last month selected independent advisory firm Arcano to handle the design and implementation of the fund of funds FONDO-ICO Global.

A RESPONSE TO VENTURE CAPITAL DEMANDS

FONDO-ICO Global will have an initial capital of up to 1.2 billion euros but is expected to mobilise a total of around 3 billion euros.

It will be a catalyst for the creation of about 40 new private venture capital funds which will invest in Spanish companies at all stages of their business development.

So what prompted the government to adopt this seed capital mechanism?

The decision responds to a request from Spain’s own venture capital community , which demanded greater public sector involvement at a time when it is difficult to generate investment and raise financing.

FONDO-ICO Global is also expected to attract renewed foreign investor interest in SMEs.

Venture capital investors will be able to access funds to match their investments once they have been accepted as participants in the project.

The amount of cash each of these firms can draw down depends on their size and on the stage of development reached by the start-up in which they invest.

The investment process will kick-off in the autumn, giving potential investors time to consider where the cash from Brussels should best be spent.

SMALL FIRMS WITH EXPORT POTENTIAL COULD BENEFIT

Spanish exports of goods and services currently account for a record 33 percent of gross domestic product and the sector is considered a future driver of economic growth.

Against a backdrop of sluggish domestic demand, more and more SMEs are nursing overseas ambitions but they lack the funding to develop their products and carry out the necessary market research to ensure success away from home.

One of the country’s most successful exports are its engineering goods, with machinery and metal products also well positioned.

Entrepreneurs in these industries are likely to benefit from Spain’s newly created private equity funds, keen to take advantage of their export potential.

For more information on FONDO-ICO Global, contact Argali Abogados

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