ZAGREB, July 8, 2015 — Minister of Finance, H.E. Boris Lalovac, and the World Bank’s Country Manager for Croatia, Mr. Carlos Piñerúa, today signed a Loan Agreement in the amount of EUR20 million (US$21.92 million) for the Innovation and Entrepreneurship Venture Capital Project. The project aims to strengthen risk capital financing for innovative Small and Medium Enterprises (SMEs) and startups in Croatia, and to help the private sector become stronger, more productive and more competitive. The World Bank’s Board of Directors approved the loan on July 7, 2015.
Stronger exports are critical for Croatia to achieve faster and sustained economic growth. Innovative SMEs, including startups, can play a key role in this process as they can help leverage the country’s low cost base, boost productivity and increase exports. However, innovative SMEs still need support in the Croatian entrepreneurial landscape in particular with accessing early stage financing, that is, helping companies move from idea to product or service.
In the coming years Croatia will benefit from early stage financing through European Structural and Investment Funds which will also support science, technology, innovation and entrepreneurship. However, unless Croatia has an efficient risk capital financing framework in place, these funds may not be fully absorbed. Therefore, it is important for Croatia to develop a sound mechanism for early-stage financing.
To date, there is not a single existing venture capital fund registered in Croatia regardless of a healthy demand for early stage financing. The Innovation and Entrepreneurship Venture Capital Project will help establish a Pilot Venture Capital Fund to provide financing to innovative SMEs and startups. It will also setup a Seed Co-Investment Fund that will provide smaller amounts of risk capital financing alongside investors in the market such as angel financing and incubators. The Pilot Venture Capital Fund will be managed by a private fund manager, while HAMAG-BICRO will manage the Seed Co-Investment Fund. HAMAG-BICRO, investors and entrepreneurs will receive training and advice to prepare them for using future EU funds.
“The Croatian Government recognized the big potential of our innovative entrepreneurs. Therefore, it is our intent to make it possible for them to access capital during all stages of their development,” said Gordan Maras, Minister of Entrepreneurship and Crafts of the Republic of Croatia. “I am especially proud that this is the first Venture Capital Fund in Croatia and would like to thank the World Bank for recognizing the importance of this project. The project will also make it possible for entrepreneurs not to have to look for financing abroad and to develop their ideas in their own country. The only way to create new jobs and industries of the future is to invest in the creativity and ideas of our young entrepreneurs.“
“I wish to thank the World Bank for their overall support to the Croatian economy,” said Boris Lalovac, Minister of Finance of the Republic of Croatia. “By signing this Loan Agreement today for the Innovation and Entrepreneurship Venture Capital Project we are, together with the Bank, continuing to support the private sector in Croatia. In particular, under this Project that will provide risk capital financing to innovative SMEs and startups, the Government’s aim is to stimulate the startup community and in that way contribute to creating new jobs, increasing exports and the productivity of the economy.”
“We are very pleased to support the Croatian Government in developing a much stronger risk capital financing industry and help innovative Croatian SMEs bring their products not only to Croatian and European Union markets but beyond,” said Carlos Piñerúa, World Bank Country Manager for Croatia. “Through this project we seek to help strengthen the innovation and entrepreneurship system which is a key element to build a stronger, more productive and competitive private sector.”
The Euro denominated variable spread loan has a final maturity of ten years including a grace period of four years.
Since joining the World Bank in 1993, Croatia has benefited from financial and technical assistance, policy advice, and analytical services provided by the global development institution. To date, the World Bank has supported 53 operations amounting to around US$3.5 billion.