A unique initiative on the Hungarian capital market
Over five years, the Széchenyi Venture Capital Fund concluded a total of nearly 100 capital investments in Hungarian small and medium-sized enterprises. As such, it is the most active player on the Hungarian venture capital market and has become the investor with the largest portfolio of companies. During this time, the Fund has placed the entire amount of the EU funded facility, worth nearly HUF 13 billion, available for investment (total amount of resources without the management fee). Although due to the typically three to five-year investment period, as of 2016, most of the exits will take place after 2018, the Széchenyi Venture Capital Fund has exited from over 20 companies.
Széchenyi Venture Capital Fund was launched on 1 June 2011, with the aim that Hungarian small and medium-sized enterprises, previously lacking the appropriate equity instrument benefit from venture capital investment type financing. The Széchenyi Venture Capital Fund (abbreviated as SZTA) is managed by the 100% state-owned Széchenyi Venture Capital Fund Management Zrt. It is the first capital fund in Hungary that has been licenced by the European Commission on an individual basis to implement its large-scale small enterprise capital investment programme (SA.32825 Regional Capital Investment Fund Programme) that is unique in Europe and has ever since been unparalleled in the Central Eastern European region.
With its equity programme, Széchenyi Venture Capital Fund primarily targets enterprises in traditional industrial sectors, however our experiences have indicated that the activity of the Fund is much needed in other sectors as well. Following the launch of our unique equity programme, we have been approached by an increasing number of companies lacking equity financing, which has made it clear that there is a real demand for our products in the market. This fact is also underpinned by the outstanding number of our portfolio in the domestic capital market, as well as by the steadily manifest demand for financing that exceeds manyfold the capital funds available to Hungarian SMEs.
What we are looking for
The Széchenyi Venture Capital Fund offers venture capital for mature companies that have been in operation for decades, as well as for start-ups meeting the criteria of the Fund’s capital instrument. The youngest company in the portfolio was established in 2016, whereas the enterprise with the longest tradition was established more than 25 years ago. 12% of the portfolio of companies is less than one-year old, 35% is between two and five years, whereas 53% of the companies have been in operation for more than five years. Within the portfolio, there is currently an even distribution among companies in the startup and spin-off, the early and the late phases. SZTA offers Hungarian and foreign private investors the opportunity to co-invest alongside SZTA, as a single-transaction co-investor. SZTA invest EUR 800.000 as maximum amount to each target company and requires always minority stake.
Basis for SZTA’s professional expertise
The Széchenyi Venture Capital Fund has developed and implemented a venture capital programme with a total amount of HUF 14 billion, focusing on traditional industrial sectors, based on the individual licence of the European Commission. The Széchenyi Venture Capital Fund is currently the most active capital fund on the Hungarian capital market with the largest portfolio of companies. During its five years of operation, the Fund has invested in more than 90 micro, small and medium-sized enterprises. During the last three years of its activity, SZTA has represented one third of all investments on the Hungarian venture capital market. The Fund’s staff have thus accumulated considerable practical experience and expertise on the venture capital market and are among the best qualified specialists on the Hungarian market. They were involved in the highest number of investment projects and have substantial EU programming and regulatory experience as well. The Fund Manager team therefore represents all the skills, expertise, and commitment that allow them to achieve all the set national economic goals.
Which areas are covered by SZTA’s expertise?
While the Széchenyi Venture Capital Fund with its large-scale investment activity focuses on traditional industrial sectors, it has also acquired a minority stake in enterprises operating in a number of different fields. The companies in its portfolio represent five major areas: the manufacturing industry (mostly metal and machinery), healthcare (medical services and developments, biotechnology), the environmental sector (specifically waste water treatment) information technology, and the fashion and design industry as well.
During its five years of operation, the staff of the Széchenyi Venture Capital Fund has gained in-depth knowledge of the market relations, trends and demands in the sectors listed above, which is put to use during the business and financial consulting services offered to portfolio companies. The Fund can assist their successful operation, thereby actively contributing to promoting the international competitiveness of the given sectors. The principal reason for a given capital investment can vary by sector.
Regardless of the industrial sector, Hungary is the home of countless innovative enterprises, whose products and services have managed to achieve outstanding results even measured against international standards. Venture capital investment and innovation go hand in hand, and are the most effective way to reach sufficient growth potential and stabilise expansion. 76% of SZTA’s portfolio companies are engaged in product, service, technological or even process-level innovation activities, thus contributing not only to value creation but also to increasing the regional, national, or international competitiveness of domestic enterprises. Many companies had already focused on innovation before the investment, but for many of them it was precisely the investment of SZTA that enabled the realisation of their development plans.