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Home BUSINESSGrowth-financing scheme in the offing
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Sat, 13 Apr, 2013 12:37:17 AM
FTimes Report, April 13

 

The government has decided to launch a long-term growth-financing programme to consolidate the capital market and support the growth of small and medium enterprises (SMEs). The decision was a direct outcome of a government discussion on spending limits, said a press release on Friday.
 
The size of funding for the 10-year programme may reach up to Euro 1 billion over the next decade.
 
The financing programme will be implemented in co-operation with private investors and at least 50 per cent of its costs will be mobilised from private sources. 
 
Minister for Economic Affairs Jan Vapaavuori. Photo Lehtikuva
Government funding for the programme will be channelled through the Finnish Funding Agency for Technology and Innovation (Tekes) and the Finnish Industry Investment Ltd.
 
Private investors will be encouraged to invest in the start-up funds of the initiative by offering lucrative returns on the investments. ‘The time is right for the government to undertake a growth-expediting programme. Of all the Nordic countries, Finland has the most positive attitude towards start-up companies,’ said Economic Affairs Minister Jan Vapaavuori.
 
The minister observed that many innovative companies were being launched but a lack of funding frequently clipped their wings before they had a chance to grow up. 
The state will try its best to ensure that the financing programme would not disrupt the market and it will be directed primarily to areas where market failures exist.
 
As a rule, external venture financing will be used to hire new, highly competent staff for starting growth companies. Due to this modus operandi, the state is estimated to get back its entire investment in the programme in tax revenues in just one year. 
 
In addition, capital invested through the programme will be returned later, with potential profits, when the investments will exit. Finnish Industry Investment Ltd will be provided with a EUR 30 million capital a year for financing the programme. 
 
EUR 20 million from the existing resources of Tekes will also be allocated for capital investment. In addition, the direct investments of Finnvera will be capitalised at the rate of EUR 5 million a year during the transition period to run until 2017, after which the state will not make any new, direct investment in the companies.
 
A lion’s share of new jobs is created in the rapidly growing SME sector, which requires an adequate access to outside venture capital to maintain growth. The state should share the risks, since the venture capital market has withered in recent years as private investors have withdrawn from the market, followed by industry actors. 
 
This programme also embodies a method of addressing the dramatic structural changes in the ICT and other industries.
 
The most significant investment target of the programme is a new growth fund being created by the Finnish Industry Investment Ltd. The state investment, combined with at least an equal amount of private capital, will create approximately 10 capital funds, which would finance roughly a total of 100 companies. 
 
These investments would generate 6,000 job opportunities at the target companies within five years. The estimates are made based on the results of FoF Growth’s Fund I scheduled to wrap up its operations this year and the findings of an impact study carried out by the Finnish Venture Capital Association, said the government press release.
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