ECONOMY

Venture capital firms focus on high-tech, foodstuffs, retailing

One of the prerequisites for firms to withstand the pressures of competition is the enlargement of their capital base. Capital adequacy is also a priority in planning new activities, to be taken into account in feasibility studies and in financing the acquisition of the necessary equipment. A company’s share capital is also the base for the right proportion of borrowing which should prevent it from running into excessive debt. One of the institutions helping companies reach the desired capital base is the venture capital firm, which acquires minority interests in another’s share capital. They become partners, contributing funds, know-how and connections. Four senior executives of venture capital companies, subsidiaries of big banking groups, give us a briefing on the firms they seek partnerships with. National National Venture Capital (EES) today manages funds of 150 million euros and has an investment portfolio of 24 million euros. It has participated in 14 venture capital schemes and has already liquidated four of them. Managing Director Kyriakos Mitsotakis says EES considers investments in all sectors but has a clear preference for advanced technology, services, the broad foodstuffs sector and retailing. It invests in companies at any stage of development and also examines proposals for investing in acquisitions and restructuring. «We place primary importance on the quality and efficiency of the management team and secondarily on their business plan. The team has to convince us that with our participation the firm will be able to distinguish itself vis-a-vis competitors and will quickly create a potential for further growth,» he says. In 2003, the company will give greater emphasis to acquisitions and holdings in listed firms which find it hard to raise capital on the stock market under the present conditions. Alpha Alpha Bank has two venture capital arms, Alpha Ventures and Alpha Equity Fund, which have invested a total of about 29 million euros in 19 companies. Their investments focus on branches with potential for fast growth and on firms able to tap opportunities, become competitive internationally and yield considerable profits, says Pantelis Vernikos, general manager of Alpha Ventures, who pinpoints the branches of foodstuffs and beverages, consumer goods, health services and tourism as having good growth prospects. Alpha’s venture capital arms place emphasis on funding business expansion and acquisitions. They will only consider funding a start-up business if it has a promising growth potential, says Vernikos. A candidate firm must have a competent management team with successful careers, a competitive advantage in existing or new market requirements, and good viability prospects. Commercial Commercial Capital Ventures (EKS) to date has invested about 190 million euros in minority stakes in 59 firms in Greece and abroad. It focuses on the sectors of food and beverages, construction materials, retailing, services and technology. It treats Eastern Europe and the eastern Mediterranean as one economic region, offering good medium- and long-term investment opportunities, says Managing Director Panos Mavrokefalos. EKS invests in promising firms irrespective of the stage of their development and particularly seeks participation in each investment for a period of two to seven years; it then liquidates its holding in pre-agreed ways. Piraeus Piraeus Bank’s Equities Holding Company (PEHC) has invested 14.6 million euros in six companies to date. It prefers participating in firms that are in an intermediate stage of development, says Managing Director I. Bravos, but demand for start-up capital and the financing of new ideas is strong; these can be extremely interesting but entail the assumption of high risks, he adds. Interest is also strong toward financing the acquisition of businesses by their own executives and their restructuring, but conditions do not appear to have reached the stage of maturity. PEHC’s investment strategy has an accent on growth. Therefore, proposals coming from sectors of the economy with high concentration, sharp competition and weak prospects for restructuring and applying innovative solutions are considered very austerely, as they rarely achieve high growth rates, says Bravos.