Venture capital market: big bucks but no projects

According to recent estimates, the Romanian venture capital market amounts to a mere 300 million dollars, as only a small amount of the available funds find their way to attractive placements.

This means that funds investing in Romania in venture capital will keep dealing this year with an older issue: “there is money available, but the market is very small.”

“I believe that there are at least 100 million dollars on the market right now, which could be invested immediately, if only there were good projects,” Jordan Mariuma, Sierra Quadrant representative for Romania (a $150m regional fund), told Romania.

He says that every time a sound investment projects emerges on the market, financing sources are found right away.

“People investing in Romania are thinking that the risk they have taken is quite high as it is, because of the country risk, that is why they are asking for a 30-35% yield for placing their money,” Jordan Mariuma maintains. In his opinion, there aren’t many managers who can persuade investors that they can get such profitability.

Venture capital investment funds first look at management skills, which have to be able to take the respective business to a leading market position within four-five years. Experts in this field know that the big secret is finding an entrepreneur with a vision, capable of growing a business, develop a certain brand and expand the market share.

In fact, the high value of an investment made with venture capital funds is given by the managerial team.

Another important element considered by potential investors is the possibility of securing their “exit,” namely the certainty that there are strategic investors interested to take over the respective business when it reaches a certain development level.

“There is money, but market projects fail to live up to expectations,” Sierra Quadrant representative stated. The same problem is felt in Bulgaria, Yugoslavia, Ukraine and Macedonia.

“Although there were signs of economic recovery at a macro level, but also at the companies we are involved in, I can say that 2000 was an expectative year from the investment perspective,” Francisc Bodo, senior investment officer with GED Capital Development, told Ziarul Financiar.

GED Capital manages the Romanian Post-Privatisation Fund (FRPP), which owns significant stakes in Arctic and Sicomed, but which is mainly oriented towards venture capital investments.

Francisc Bodo says that, “according to our estimates, the level of foreign investments in venture capital was much below the country potential, and I believe that the expectative state will maintain in 2001, especially since investors are facing problems on foreign markets.”