What is a public venture capital fund?
It is a legal structure created by a public authority which invests in the share capital of companies not listed on the stock exchange.
These structures do not exercise a productive activity as such, but instead support and encourage the start-up or development of companies.
What are the differences and similarities with private venture capital funds?
- They are both “private equity” investment funds.
- The investment is made following a detailed analysis of the company and its potential
- The level of risk for projects in the portfolio can be very high.
- The investment is made directly in the share capital and sometimes through hybrid financing instruments.
- These funds can be general or can target a certain sector or geographic area.
- They often intervene in the early stages of a company’s life.
- Shares are held for a limited period.
- Profitability is sought
- The main aim of a public fund is often to support the launch and development of companies considered to be important in terms of economic, technical, social and job creation considerations, among others.
- Therefore, profitability is a key aspect of the funds invested
- Public funds usually hold less than 50% of the share capital in companies and thus don’t control said companies
- The intervention and involvement of the public fund in the daily and strategic management of companies is less radical
- The timing and type of the sale to other investors of the shares held by the public fund and the choice of compensation are determined considering the interests of the company held, its shareholders and its staff.
In Belgium, there are several types of structures created by public authorities active in Private Equity.
They can be differentiated based on the level (amount) of investments made, the type of companies held and the purpose, as well as the type of public authorities creating the structure (State, federated entities, local authorities, etc.).
Of course, the idea here is to only approach structures likely to invest in companies active in the Brussels region and, more specifically, the following three stakeholders:
Finance.brussels can support the creation, reorganisation, expansion or development of private companies. It gets involved either by buying shares during the creation or increase in a company’s share capital, by subscribing to the issue of a mandatory loan or by issuing a subordinated loan.
There are four categories of company specifically targeted:
- Companies being launched, based on innovative projects. In these files, finance.brussels' preference is for collaboration with industrial partners.
- Expanding young companies who need additional financial support to achieve their objectives.
- Small and medium enterprises wanting a larger financial base (e.g. for diversification)
- Foreign investors wanting to develop projects in the Brussels-Capital region
Some specific characteristics of finance.brussels:
- finance.brussels makes investments of between €125,000 and €3,000,000
- The average level of investment is €500,000
- The participation period is 5-10 years
- The company’s head office is located in the Brussels Capital region
- It only works with SAs and SPRLs existing for more than 5 years. NB: for younger companies, SRIB acts through its subsidiary Brustart
- The decision period is 3 months
Brustart is a subsidiary of the finance.brussels group which is aimed specifically at start-ups less than 5 years old.
Brustart has three target groups:
- young entrepreneurs looking to market a new product or a product with great potential for growth
- experienced teams of managers wanting to bring a new product or service to the market
- research teams having developed a new process or a prototype and having prepared a business plan or a production model
Some specific characteristics of Brustart:
- Brustart makes investments of between €12,500 and €250,000
- The participation period is a maximum of 5 years
- The company’s head office must be located in the Brussels Capital region
- It only works with SAs and SPRLs being created or existing for less than 5 years
- The decision period is 2-3 months
The St’Art investment fund (FR) is a financial instrument created by the Walloon region and the Wallonia-Brussels federation. Its aim is to support the development of the cultural and creative economy, recognising that companies active in this sector often have trouble finding the financing they need for their development.
St’Art works with Brussels and Walloon SMEs (including ASBLs) with activities related to the performing arts, fashion, digital arts, heritage, plastic arts, video games, music, publishing, radio, television, design, etc.
The fund contributes to the creation of companies and the development of existing structures to, for example, launch a new project, create a product or conquer new markets. Boasting 16 million Euros, it provides loans and equity participation.
Another aim is to bring about a lever effect with banks and private investors. St’Art’s intervention is complementary to the other existing financing mechanisms and any public aids; it does not replace them.