Venture Capital and Private Equity
Venture Capital and Private Equity investments target rapid-growth companies. Such companies are typically start-ups, scale-ups and mature companies with a promising potential. By nature, venture capital provides high-risk investments and, therefore, it does not compete with low-risk financing (e.g., bank loans). Venture capital investors add value and actively contribute their expertise to foster business development and increase value of their target companies.
In Latvia, a relatively new market, venture capital funding is mainly provided by institutional investors, where substantial contribution stems from government agencies . As the capital market matures, the proportion of private funding in venture capital sector increases. According to recent statistics, 95% of Latvia-focused funds’ resources are financed explicitly by institutional investors. For internationally oriented local funds this figure reaches 64%.
Altum venture capital investments
ALTUM plays a pivotal role in the creation of local venture capital ecosystem in Latvia. ALTUM invests substantial ERDF and state funds in the venture capital sector. During the last few years, more than 180 million euros have been invested. Notable funding has been earmarked for the following years as well.
Altum has invested in 16 funds, including Baltic funds of funds (i.e., BIF1 and BIF2). Venture capital investments have contributed to the establishment of many start-ups with high added value products in IT, sciences and manufacturing industries.
101mEUR have been invested ensuring start-up growth and development*
335 companies have been supported through venture capital and private equity investments
Altum investments have contributed to over 184mEUR payments in taxes over the last 10 years
636 new jobs created, through funds of funds more than 10000 jobs secured
*Data on target companies, September, 2022
We are members of Latvian Private Equity and Venture Capital Association (LVCA),
Invest Europe, as well as European Venture Fund Investors Network (EVFIN) and EIF-NPI Equity Platform
Contacts for fund managers and policy makers:
Financial Intermediaries Department,
Email: rkf@altum.lv
News
Types and uses of funding
Venture capital funding available to companies at different stages of development
Entrepreneurs striving to develop a scalable business idea, a ready-made project or those looking forward to amplifying an existing business are encouraged to use the most appropriate type of funding. Funds provide multiple financing opportunities to companies at different stages of development. In order to explore investment attraction opportunities please reach out to fund managers directly by using contacts provided in their websites.
What is venture capital intended for?
Venture capital could be:
investment in an enterprise with a high growth and a scalability potential
initial funding for early-stage companies to develop an idea or create a product
for growth stage companies to increase capacity or expand into new markets if traditional means of financing are not available
Altum-backed venture capital funds target high added value industries: IT, medicine, sciences, Green Deal.
How can a venture capital investment benefit your company?
The amount of venture capital funds available and the extent of an investor’s role in your company depends on whether it is only idea, a start-up or a company already conquering the market. Companies will receive not only funding, but also an active investor participation in business development and growth, knowledge about the chosen industry and networking benefits. These benefits will spur growth and value.
How to receive venture capital funding?
To find out more information about available financing and means of acquiring it, contact fund managers. To convince an investor of your idea’s, project’s or company’s future growth, you will need to provide a clear and an ambitious business plan with the capabilities to execute it. Key indicators: business plan viability, a team and its ability and competence to execute the plan as well as scalability of your business idea.
Make sure that your company is suitable for venture capital investments
Depending on specialization, choose venture capital fun
Contact fund managers
On 13 June 2023, the Latvian Government approved the creation of the Baltic SME IPO Fund (IPO Fund), which will be established together with the Lithuanian development financial institution INVEGA.
- The objective of the Baltic SME IPO Fund (Capital Market Development Acceleration Fund or CMDAF or IPO Fund) is to enhance the availability of financing for SMEs and Small or Innovative mid-caps in Baltics.
- The aim is to accelerate the development of the Baltic overall public market funding ecosystem while catalyzing private investor flows.
The total financing of the Fund is EUR 50 million, of which ALTUM and INVEGA will invest EUR 20 million each, but EUR 10 million will have to be attracted by the Fund manager, that will be selected in Open call for expression of interest process and in accordance with the principles of transparency, non-discrimination, fair competition and respecting the best practices as well as observing the requirements of confidentiality and impartiality.
- The IPO Fund will participate in initial public or private offerings related to both the main (regulated) market (at Nasdaq Baltic) and the alternative market (First North), as well as will invest in private pre-listing stage Baltic companies with a clear intent to list on the aforementioned venues in a reasonable period of time (indicatively 12-18 months) with agreed roadmap.
- The Fund will target established commercially viable SME companies with valuation between EUR 5-100 million.
- Depending on the specific project, the investment amount in one company is planned from EUR 0.4 to 5 million, on average EUR 2-3 million. The IPO fund will invest up to 50% of the deal amount.
On 16 August 2023, ALTUM signed the Memorandum of Understanding with INVEGA, committing to launch the public selection of the Fund manager by the January 2024 and to announce the Fund manager by May 2024.
More on creating the Fund https://www.fm.gov.lv/en/article/government-currently-examining-report-establishment-and-financing-initial-public-offering-fund-small-and-medium-sized-baltic-enterprises
First procurement commences to select managers of EUR 55.8 million of start-up venture funds
ALTUM has launched a public procurement process to choose three fund managers for startup venture capital funds. These managers will be responsible for deploying European Union funds and private financing to support emerging and export-focused companies in Latvia and other EU countries over the next five years.
These funds will focus on investing in pre-seed and seed-stage companies. The total public funding for startup investments is EUR 55.8 million, with each selected fund receiving EUR 18.6 million. Additionally, each fund manager will be required to secure private investments totaling EUR 2.07 million.
ALTUM Board Member Ieva Jansone-Buka: “With this procurement, we are initiating the selection of venture capital managers for the upcoming European funding period. The new period will witness the highest-ever funding allocation for startups. Building on the success of previous fund managers who invested in emerging companies like NACO Technologies, Alternative Plants, RoboEatz, and others that have made a mark in international markets, we believe that additional funding for the industry will foster the emergence of new, innovative, and competitive companies in Latvia, contributing further to the Latvia’s growth.”
Selection of venture capital fund managers has been announced in accordance with Cabinet Regulation No. 463 of August 15, 2023, “Rules for Implementation of “Venture Capital Investments” Programme”. Public funding for the funds will come from the European Regional Development Fund.
Funds and Criteria
The selected fund managers will invest in pre-seed stage companies, with a maximum investment of EUR 250,000 per project, as well as in seed-stage companies, with a maximum investment of EUR 1.5 million per project, thereby promoting the creation and development of startups.
Ieva Jāgere, Head of ALTUM Private Equity Department: The existing generation fund managers have so far committed EUR 7.8 million to pre-seed and seed investments across 157 companies, however, their investment period ends in June 2024. We definitely see the positive and favourable impact of this venture capital program it has on the growth of startups and boosting a successful startup business environment in Latvia.”
Information about the Procurement
The fund managers’ selection criteria, other information regarding procurement and a draft procurement (limited partnership) agreement have been published in the electronic procurement system: https://www.eis.gov.lv/EKEIS/Supplier/Procurement/112614
Submissions will be open until 10 a.m. on January 31, 2024.
Meeting of interested suppliers on 5 December
A meeting with potential suppliers will be held at ALTUM offices at 4 Doma Square on December 5 at 11 a.m. to give the opportunity to clarify any issues concerning the new procurement.
Furthermore, ALTUM intends to initiate two additional procurement processes in the middle of December 2023. These procurements aim to appoint a fund manager for an early growth stage private equity fund and another for a growth-stage private equity fund, collectively offering EUR 37.2 million in public funding for both managers. This funding will be directed towards investments in more mature companies
Important Details Regarding the 5th Generation Private Equity and Venture Capital Fund Program
The program’s public funding is set at EUR 93 million, and it will be entrusted to five fund managers.
The fund managers will be chosen through an open, transparent, and non-discriminatory selection process, adhering to the guidelines of public procurement regulation.
| Early-Stage funds (3 fund managers) | Late-seed fund (1 fund manager) | Growth fund (1 fund manager) | ||
|---|---|---|---|---|
| Pre-seed | Seed | |||
| Altum financing | EUR 55 800 000 (EUR 18 600 000 per fund) | EUR 12 400 000 | EUR 24 800 000 | |
| Private financing | At least 10% of the fund amount | At least 40% (EUR 8.27 M) | At least 40% (EUR 16.5 M) | |
| Regulation | EU Regulation 651/2106 Article 21 (GBER Article 21) | |||
| Max ticket size | EUR 250 th | EUR 250 th | EUR 2 M | EUR 4 M |
| Term | 10 (1+1) (investment period 5 years) | |||
| Distribution of losses and income | Distribution of losses – in proportion to the invested amount Income distribution – asymmetric Ieņēmumu (virspeļņas) sadale – asimetriska | |||
Pre-seed and Seed funds:
- Three 5th generation pre-seed and seed venture capital fund managers to be selected through an open, transparent, and non-discriminatory selection procedure;
- Altum’s funding for each fund is EUR 18.6 million, an additional 10% (EUR 2.1 million) pre-seed and seed fund managers will have to attract from private investors;
- Submission of applications for pre-seed and seed fund managers is planned until 31 January, 2024.
Late seed and Growth funds:
- Procurement and Selection documentation for one Late-seed and one Growth fund manager are planned to be published in December, 2023;
- Altum’s funding for the late-seed fund is EUR 12.4 million, the selected fund manager will additionally have to attract 40% (EUR 8.3 million) from private investors;
- Altum’s funding for the growth fund is EUR 24.8 million, the selected fund manager will additionally have to attract 40% (EUR 16.5 million) from private investors;
- Submission of applications for Late seed and Growth fund managers is planned until 29 February, 2024.
* The terms provided are very indicative and may be changed
Stay updated with the latest developments on altum.lv and follow @AltumLV on LinkedIn, where we will provide ongoing information about the fund manager selection process.
You can access the regulation of Cabinet of Ministers for “Private equity and Venture capital investments” here:
https://likumi.lv/ta/id/344634-programmas-iespejkapitala-ieguldijumiistenosanas-noteikumi?&search=on
Fund managers
To find out more information about available financing and how to acquire it, contact fund managers.
