ZAGREB, September 1, 2020 - The European Investment Fund (EIF) and the Croatian Bank for Reconstruction and Development (HBOR) will invest more than €70 million in three venture capital funds in Croatia - Prosperus Growth Fund, Adriatic Structured Equity Fund and Croatian Mezzanine Debt Fund, which will start operating this autumn.

The three funds will facilitate access to capital for small and medium-sized enterprises (SMEs) and mid-cap companies and provide an alternative source of funding and more flexible transaction structures, the HBOR and EIF said in a joint statement on Tuesday.

As of this autumn, Croatian companies will be able to approach these funds which will decide on individual investment projects. It is expected that the average investment will range between €2 million and €8 million.

The source of joint investment is the €80 million Croatian Growth Investment Programme (CROGIP), jointly launched by the EIF and HBOR in 2019 to provide Croatian SMEs and mid-caps with new sources of funding to boost growth, development, innovation and competitiveness and to support the development of the Croatian venture capital market, the statement said.

The EIF and HBOR each set aside €40 million for this programme, which is expected to accelerate private sector investment in the venture capital funds and thus reach €205 million which these funds will invest in companies.

EIF Director-General Alain Godard said he was pleased that the CROGIP and the partnership with the HBOR would provide Croatian companies with access to new sources of funding. He also expressed satisfaction with the EIF's contribution to the further modernisation of the Croatian financial market in accordance with EU standards.

Godard expressed hope that the EIF would remain one of the key drivers of the sustainable development of Croatia, especially by supporting SMEs and mid-caps in recovering from the consequences of the COVID-19 pandemic as quickly as possible.

Valdis Dombrovskis, Executive Vice-President of the European Commission for an Economy that Works for People, said that the Commission and the European Investment Bank Group were continuing to help SMEs cope with the socio-economic consequences of the crisis caused by the COVID-19 pandemic.

Our aim is to better protect companies and jobs so that the economic recovery can be faster. This investment will significantly help companies in Croatia, both SMEs and mid-caps, by giving them access to €205 million at the time of the crisis, Dombrovskis said.

Tamara Perko, President of the HBOR Management Board, said they were very proud that the HBOR was involved in creating funds that would provide an alternative form of funding to businesses.

Since the venture capital market in Croatia is still underdeveloped, the HBOR has launched a series of activities to promote this form of funding, Perko said, citing last year's launch of a venture capital fund for start-ups.

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The Croatian startup scene has been given a new opportunity since Fil Rouge Capital entered the market.

Marko Repecki writes for index.hr about the new venture capital fund which has found its way to the Croatian market this summer, as he spoke to Stevica Kuharski, one of the partners in the fund. Stevica is a well-known fixture on the Croatian startup scene, having been a serial entrepreneur on his own (Locodels is probably his most successful project thus far), and he's made his way to "the other side", now helping find and distribute the funds provided to the Croatian companies.

Mr Kuharski explains that the Fil Rouge Capital fund is mostly supported by the European structural and investment funds (ESIF) with over 32 million euro, while the total value of the fund is 45 million euro. It took less than a year between the public tender for the management of the fund and when it started working in earnest. They cover all of the phases of the development of a startup, from the early stages of an idea, all the way to those who already have a product or a service ready. Within the next four years, they plan to invest into 250 to 300 companies. 9 million euro will go to the companies that are early-stage startups, while the rest of it will go to more developed ideas.

Early-stage startups will be able to get 10 thousand euro, and you can apply at any time. If the fund decides to invest in such companies, they get 10 per cent of the ownership.

The teams that claim they have a "minimum viable product" can receive an investment in the amount of 25 to 50 thousand euro through the acceleration program for which they must apply. The first group was selected in early September, and they've been awarded 50,000 euros each. Next round will happen in March, and if you want to apply, you should do it before the end of the year. For bigger investments, the ownership given to the fund will be in the 6 to 8 percent range. 

Fil Rouge Capital fund is not specialised, they are willing to consider any Croatian startups, but they really need to be Croatian - meaning they need to be registered in Croatia and most their employees need to be local. Founders can be (and are!) from all over the world, but they need to recognize that Croatia is an excellent market to try an idea or a product out to see if they work. In addition to funds, the VC fund provides full support through mentorship, contacts, networking, helping open new markets, whatever it takes. The people in the fund have good contacts with over 50 institutional investors and numerous private investors, all of which might help the startups to secure the investments in the following investment rounds.

Stevica Kuharski also highlights that nobody should be afraid of any type of control the fund might exert over them, explaining that they simply don't have enough people to do that. He also adds that they are willing to invest 10 thousand euro into an idea, a single piece of paper, to get 10 per cent of the ownership - which means that they've valued the idea itself at one hundred thousand euro!