Unconventional Sources of VC: EBRD VCIP

Overview

This is part of our series on one unusual source of venture capital funding which you may not have thought of: the multilateral development banks.

In this installment we outline what financing may be available through the European Bank for Reconstruction and Development (EBRD).

 

Funds and Programs

EBRD’s venture capital investments are made through its London-based, Venture Capital Investment Programme (VCIP).

To date, there have been three, as the EBRD terms them, “frameworks” to the program. For our intents, think of each framework as a fund representing a separate vintage: VCIP I (2012), VCIP II (2018), and VCIP III (2022). There is also a debt fund.

We will concern ourselves with the most recent and only program actively making new investments, VCIP III:

  

EBRD VCIP III

Program size:

VCIP III was launched February of 2022 with €250 million in funding. 

Our research indicates they have made one investment to date for an undisclosed amount; however, it is likely much less than $25 million as the EBRD was a co-investor with seven others and the total deal size was for $25 million.

Bottom line, this is a new fund with much remaining capacity.  

  

Fund life: 

There is no stated fund life for VCIP III, but we can make an estimate from past programs: for VCIP I and VCIP II, exits have been between 3 to 7 years. This is in-line with the typical 7- to 10-year VC fund.

 

Target number of investments: 

VCIP III had no stated target number of investments, though based on the VCIP’s target investment size, theoretically the number of investments could range between 10 and 125.

From its last portfolio review, VCIP I had 16 investments on €73 million in funding; VCIP II had 11 investments on €69 million in funding. So, realistically, our estimate is that VCIP III should make between 30 to 60 investments if it deploys all capital allocated to the program.

  

Company stage:

This is an early and growth stage program, so the investment in your company would likely be Series A and beyond. Based on VCIP’s minimum ticket size and target IRR, pre-Series A looks like it’s out of scope for the program.

As such, to be a potential investee your company should have product-market-fit established and be ready to commercialize and start scaling the business.

 

Target investment type and size:

The fund makes equity investments with a ticket size between €2 million and €25 million.

 

Target company characteristics:

The program is seeking companies providing an innovative, technology-based solution or business model. Ideally, your firm should have a competitive advantage (i.e., not a “me too” product) targeting a large addressable market (i.e., not niche) with the potential for fast growth.

The management team should be committed to the company (so no part-time projects or teams).

VCIP III is fully-profit driven and the program targets an overall IRR of 20% or greater on its investments, so you should concentrate on creating shareholder value.

 

Target sectors:

The program has not stated that it targets any specific sectors. A review of the portfolios of VCIP I and VCIP II indicate a lot of diversity in the sector investment. There are no indications VCIP III should be any different.

VCIP I and II have invested in healthtech, edtech, security (physical and digital), retail ecommerce, food delivery, employment marketplaces, online news, document creation/management/analysis, travel and mobility, marketing, data computation and storage platforms, and enterprise agile planning (EAP) platforms.

 

Geographic focus:

VCIP doesn’t have a strict requirement that your company be headquartered in an EBRD region country. To be eligible for VC financing your company simply needs to do the majority of its engineering and/or development work in an EBRD region country (see our Country Eligibility table for EBRD regions).

Additionally, per a EBRD Approach Paper (evaluating VCIP strategy and operations), the current VCIP III is expected to expand operations in the Western Balkans, Southern and Eastern Mediterranean, and “Early Transition” countries.

For further clarity, Early Transition Countries include Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan. (Belarus is also included, however, EBRD has suspended in-country operations.)

 

Deal structure:

VCIP usually invests as a co-investor; that said, it is not a requirement.

 

Deal speed:

Not disclosed, but we would expect standard time to close.

  

How to contact VCIP:

To submit company information or a pitch deck, email barsukm@ebrd.com with “EBRD VCIP investment opportunity” as the subject line.

Otherwise, for general enquiries call +44 0 207 338 8623.