Private fund manager selected for state venture capital portfolio

December 19, 2016
An independent selection committee appointed on the proposal of the European Investment Bank has decided that Tera Ventures is the winner of the call for private fund managers organised by Estonia’s Arengufond (Development Fund) and SmartCap. Tera Ventures is a venture capital fund manager, which is starting activities in Estonia with SmartCap’s former investment managers Andrus Oks and Stanislav Ivanov as well as advisor James Patrick Mcdougall on their team.
According to Bruno Robino from the European Investment Bank (EIB), all of the teams that made it to the second round had their individual strengths. The strong points of Tera Ventures, decreeing it the winner, were reportedly the attractive financial conditions of the offer and the clear long-term vision on growing the value of portfolio companies as well as on the role of the management company itself in Estonia’s VC environment. The team’s excellent knowledge of the local VC market was also appreciated, as well as the fact that the team has worked together before and proven its capabilities, which is a key point for investors investing into private and VC funds; and an indicator of the long-term management capabilities of the fund managers.

Bruno Robino from EIB said that the selection committee faced high-level candidates, as expected. According to Robino, managing the existing portfolio will cost less for the state in the future because the offered management fees were lower.“As the team of the new fund management company will invest their own capital into the portfolio as well, this will be a significant additional motivator for the manager to maximise the value of the portfolio,” Robino emphasized.

SmartCap’s Fund Manager Sille Pettai said that negotiations with representatives of Tera Ventures on the technical details of the reorganisation will now start. As a result of these talks, management of the investment portfolio should be transferred to the private management company within the first quarter of 2017. The offers that came in second and third place have been put on hold so that if talks with Tera Ventures should be unsuccessful, the next-ranking team can be contacted to find solutions suitable to everyone.

A total of six teams participated in the contest, four of these qualified for the second round and thus got a chance to become acquainted with the present portfolio of direct investments, to formulate a strategy for further management of the investments and to come up with a final offer to the selection committee appointed on the proposal of EIB. The teams that made it to the second round all have long-term private or venture capital backgrounds and were reinforced by members of international background.

After the reorganisation, the independent private fund manager will continue its investment activities according to the present principles – investments into the stock capital of portfolio companies are only made together with other private investors. The winner of the call will have to invest into the stock capital of the new fund and manage it on regular market conditions. Profits earned through previous investments will not be transferred to the new private fund manager, nor will shares in companies that Arengufond or Smartcap plan to exit from before the new fund manager starts.

The call marks the end of another stage of the reorganisation process of the activities of Arengufond and SmartCap. In earlier stages of the reorganisation, surveillance activities had already been transferred to the Foresight Centre formed under the Chancellery of the Riigikogu, and the support unit for Estonian startups, Startup Estonia, has become a part of KredEx. At present, the process of investing into acceleration funds is already underway in SmartCap as a part of the new Fund of Funds concept.

Further information:
Sille Pettai
Fund Manager at SmartCap
Sille.Pettai@smartcap.ee
+372 523 1675