Situation in Slovakia
In general, venture capital is aimed at investment with high growth potential. The success of a venture capital investment is determined primarily by a successful exit either by the sale of the company to a strategic investor or by an initial public offering. In Slovakia, as in other Central European countries, the financing of a company’s development through venture capital is still the exception, rather than the norm.
Despite investment opportunities for venture and private equity capital, there are relatively few funds active in this area. In general, the majority of funds draw from public sources of state institutions such as European Bank for Reconstruction and Development, European Union funds and the US government, which is represented in Slovakia by the Fund.
SAEF is the most active venture capital fund in Slovakia. It supports the venture capital concept by its own investment strategy, educational activity and partnering with other organizations interested in promoting new investment in Slovakia.
Virtually all investment in Slovakia occurred during the recent expansion phase, but there has been limited interest in start-ups and seed capital from venture capital funds. Industrial products and services attracted more than half of all investments. Most exits are sales to strategic buyers and to a lesser degree repayment of loans and sales to a management team (buy-back).
With Slovakia’s entry to the European Union, we may expect increased market consolidation, which may lead to enhancement of investment opportunities for both financial and strategic investors.
In recent years there has been a marked improvement in the quality of business plans submitted to SAEF for venture capital investment, the result of more experienced management teams. At the same time, education of entrepreneurs about the principles of venture capital is still needed, which continues to be an important role for SAEF.