InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com

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InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
Policy Webinar #14
InvestEU: what's in it for venture philanthropists
and social investors?
Tuesday, 11th December 2018 | 15:00–16:00 CET
InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
Bennet Barth
Policy Team Support, EVPA

   WELCOME
InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
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InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
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InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
Policy & Public Affairs @ EVPA

Thought Leader                  Catalyst

                                             4
InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
Policy Webinar Series
25.06.2014   Policy Webinar #1 | EuSEF Regulation
25.09.2014   Policy Webinar #2 | Impact Measurement
05.03.2015   Policy Webinar #3 | Social Impact Bonds in the EU
17.06.2015   Policy Webinar #4 | How can VP/SI Practitioners access EU funding
23.09.2015   Policy Webinar #5 | Social enterprises and Public Procurement
16.03.2016   Policy Webinar #6 | Crowdfunding for Impact
21.06.2016   Policy Webinar #7 | Ordinary People as Social Impact Investors
23.11.2016   Policy Webinar #8 | EU Funding Update for VP/SI Practitioners
22.03.2017   Policy Webinar #9 | Foundations & Social Impact – Going beyond grant-making
14.06.2017   Policy Webinar #10 | The Sustainable Development Goals & VP/SI
12.12.2017   Policy Webinar #11 | Fostering public private collaboration to address social issues
11.04.2018 Policy Webinar #12 | How EuSEF’s recent reform can impact the VP/SI sector
20.06.2018 Policy Webinar #13 | Outcome Funds - Challenges and Opportunities

                                                                                                    5
InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
Policy Webinar #14 Introduction

   “InvestEU – What’s in it for venture
  philanthropists and social investors?”

Multiannual Financial Framework: 2021 – 2027

  • Long time horizon to ensure planning certainty

  • EU budgets to complement national budgets

  • Define instruments and strategy to deploy capital

                                                            6
InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
Welcome to our e-Speakers!

            Bernardo Urrutia                       Dr. Markus Freiburg
          EaSI Programm Officer                 Financing Agency for Social
EC - Employment, Social Affairs and Inclusion        Entrepreneurship

                                                                              7
InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
Programme

Time            Description                                                Speaker
                Welcome to participants
15:00 – 15:15                                                              Bennet Barth, EVPA
                Introduction to the topic, agenda and speakers

                                                                           Bernardo Urrutia, European
15:15– 15:30    Multiannual Financial Framework 2021 – 2027 and InvestEU
                                                                           Commission
                                                                           Dr. Markus Freiburg, Financing
15:30 – 15:45   InvestEU from the practitioner’s perspective               Agency for Social Entrepreneurship
                                                                           (FASE)

15:45 – 15:55   Q&A session (moderator and participants)                   All panellists

15:55 – 16:00   Summary and conclusions                                    Bennet Barth, EVPA

                                                                                                                8
InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
Bernardo Urrutia
                                              European Commission

‘Multiannual Financial Framework 2021-2027’
Context

The evolution of the EU Agenda:

            Social Business       • Access to finance
               Initiative         • Visibility
                                  • Regulatory environment
                 2011

             Start-up and         • Access to Finance
                                  • Access to markets
           Scale-up initiative    • Framework conditions
                                  • New technologies and business models
                 2016             • International agenda

                                                                               10
Context

A broad and complementary range of EU-level instruments to develop the social finance
market ecosystem
                         EaSI Guarantee                                           Micro-
                                                                                enterprises
                         EaSI Capacity Building                                   up to € 25k
             Financial                                      Financial
           instruments                                   intermediaries           Social
                         EFSI Equity Social Impact
                                                                                enterprises
                         EaSI Funded (loans)                                     up to € 500k

                         Actions to boost supply & demand of social finance markets

             Grants      Transaction cost support grant for financial intermediaries

                         Operating grants for EU-wide networks: Euclid, EMN, EVPA, MFC

           Procurement   Technical assistance for financial intermediaries
                                                                                                    11
                         Under development
Context

•   The next Multiannual Financial Framework 2021-2027 will be the first for the European
    Union of 27. This is a pivotal moment for the EU.

•   The Commission proposes a new, modern and focused long-term budget, tightly geared
    to the political priorities.

•   The proposed budget combines new instruments with modernised programmes to
    deliver on the European Union’s priorities 2021-2027.

                                                                                            12
MFF 2021-2027
                                                              In billion euro, current prices

The new Multiannual Financial Framework 2021-2027
“A budget for a Union that protects, empowers, and defends”

InvestEU

    ESF+

                                                                                      13
ESF+

A new and improved European Social Fund – ESF Plus
The European Social Fund Plus will be the EU’s main financial instrument to strengthen the
EU’s social dimension, by putting the pillar into practice. It is the new and improved version of
the Existing European Social Fund.

•   The financial resources will be attributed to key political priorities and citizens concerns
     – ESF+ projects and programmes concentrate on challenges identified under the European
       Semester
     – Member States with a substantial number of young people not in employment, education or
       training will have to channel > 10% to youth employment activation of young people
     – Member States should at least 25% of ESF+ funding to measures fostering social inclusion and
       targeting those most in need.

•   ESF+ will be made with and complementary to other funds that provide support to
    people, such as Erasmus, the Asylum and Migration Fund, among others.
                                                                                                    14
ESF+

A new and improved European Social Fund – ESF Plus
The European Social Fund Plus will be the EU’s main financial instrument to strengthen the
EU’s social dimension, by putting the pillar into practice. It is the new and improved version of
the Existing European Social Fund.

                                                                   ESF funding is designed and
                                                                   implemented in a partnership with
                                                                   national and regional authorities.
                                                                   This partnership also involves a
                                                                   wide range of other partners.

                                                                   ESF+ will be a more flexible and
                                                                   simpler version of the current ESF
                                                                   merging a number of existing
                                                                   funds and programmes.
                                                                                                    15
InvestEU

InvestEU – a single fund to integrate all EU financial Instruments

§ EU Budgetary Guarantee supporting financial transactions

§ Suitable for projects able to generate revenues

§ Policy driven approach implemented through thematic policy windows

§ Possibility of combining EU grants and financial instruments

§ Complementarity between EU level and MS level

§ Simplification and Flexibility

                                                                            16
InvestEU

  InvestEU – a single fund to integrate all EU financial Instruments

                                     Capital market instruments
                                                                   InvestEU supports 4 different
                                        Credit enhancement         policy areas, focussing on where
                                                                   the EU can add the most value by
                                       Equity or quasi-equity      providing a budgetary guarantee to
                  Implementing                                     attract private investment.
                    partners          Guarantees and counter-
EU GUARANTEE         or through
                   other financial          guarantees
                    institutions                                   1. Sustainable Infrastructure
                                               Loans               2. Research, Innovation and
                                     Participation in investment
                                                                      Digitization
                                         platforms or funds        3. SMEs
                                                                   4. Social Investment and Skills
                                         Subordinated debt
                                                                                               17
InvestEU

  InvestEU – Indicative proposed budget allocation

                                                                  Mobilised investment
  Window                                   Budgetary guarantee
                                                                  (estimate)
  Sustainable infrastructure                             11 500                    185 000
  Research, Innovation and Digitisation                  11 250                    200 000
  SMEs                                                   11 250                    215 000
  Social investment and skills                            4 000                     50 000
  TOTAL (EUR Million)                                    38 000                    650 000

• Budget for InvestEU Advisory Hub, InvestEU Portal and accompanying measures is
  proposed to be EUR 525m.
                                                                                       18
InvestEU

InvestEU - Regulation support to Social Investments, in particular through:

a. microfinance, social enterprise finance and social economy;
b. demand for and supply of skills;
c. education, training and related services;
d. social infrastructure, in particular
      i.     education and training, including early childhood education and care, educational facilities, student housing and
             digital equipment;
      ii.    social housing;
      iii.   health and long-term care, including clinics, hospitals, primary care, home services and community-based care;
e. social innovation, including innovative social solutions and schemes aiming at promoting social impacts and outcomes in
   the areas referred to in this point;
f.   cultural activities with a social goal;
g. integration of vulnerable people, including third country nationals;
h. innovative health solutions, including health services and new care models;
i.   inclusion of and accessibility for persons with disabilities.                                                      19
InvestEU

InvestEU – Project Financing Process

                                            20
MFF 2021-2027

Multiannual Financial Framework 2021-2027: Next Steps

§ Final configuration depends on the co-legislator decision: European Parliament and Council
  discussion are on-going.

§ 2019 and 2020 will require extensive preparatory work.

§ All elements need to be ready for starting operations on 1 January 2021

§ Commission’ Expert Groups will be consulted on relevant aspects (e.g. GECES working
  group on social finance)

                                                                                         21
Dr. Markus Freiburg
                                                             FASE

‘What's in it for venture philanthropists and social investors’
FINANZIERUNGSAGENTUR FÜr                Eine Initiative von
Social Entrepreneurship

INVEST EU: WHAT'S IN IT FOR VENTURE
PHILANTHROPISTS AND SOCIAL INVESTORS?
Presentation at EVPA Policy Webinar

Dr. Markus Freiburg

Brussels, December 11, 2018                             23
The FASE solution: building a bridge between
social enterprises and impact investors
                                                                               FINANZIERUNGSAGENTUR FÜr
                                                                               Social Entrepreneurship

Social enterprises receive:                        Investors benefit from:
ü support in developing their business models      ü access to investment opportunities in leading,
  to reach investment readiness                       investment-ready social enterprises
ü identification of potential investors            ü customized impact investing opportunities,
  and recommendations for the ideal financing        selected according to individual investor
  mix                                                preferences
ü comprehensive consulting and coordination        ü clearly structured and transparent investment
  to guide them through the transaction              and transaction processes between social
  processes                                          enterprises and investors

FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship                                                      24
In over 5 years, FASE has arranged EUR 20+ mn in equity
instruments raised for 40+ companies in variety of sectors
                                                                             FINANZIERUNGSAGENTUR FÜr
       Impact Sector                                                         Social Entrepreneurship
                                                                                       Transaction closed
                                                            2.Runde
                                                                                        Transaction > 500K
        Education
                                               2.Runde
                                                                  2.Runde

        Energy
        Solutions                                             2.Runde

        Health
                                     2.Runde

        Inclusion &                                               2.Runde
        Infrastructure

        Other

                         Mezzanine                       Equity             Financing Model

FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship                                                        25
The challenge: early-stage social enterprises don´t fit
into traditional types of funding
                                                                                  FINANZIERUNGSAGENTUR FÜr
                                                Hybrid                            Social Entrepreneurship

                                     • Moderate returns
                                     • Few exit options
                                     • Not ‘one’ financing solution

           Non-Profit                                                    Commercial
       • No return                                                    • Market-rate returns
       • Short-term horizon                                           • Exit options

FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship                                                       26
Our mission: closing the ‘strategic financing gap’
with hybrid growth capital
                                                                                                   FINANZIERUNGSAGENTUR FÜr
                                                                                                   Social Entrepreneurship
            Market rate
                return     Experimentation        Strategic financing gap
                                                                                        Scaling
                                                  - Early stage financing -

                                               „Too large for philanthropists,
                                                   too small (and risky) for
                                                institutional social investors“

                                 Start-up               Early-stage growth           Later-stage growth
                             < 50 TEUR       50 - 250 TEUR             > 250 TEUR   > 1 Mio. EUR

                             § Equity                                               § Multiple
                             § Donations                                             financing options

                                                     Hybrid financing
                                                       Combination
                                                  of philanthropic capital
                 -100 %                        and impact „first“ investments
                 (grant)

FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship                                                                        27
Food for thought: With InvestEU and ESF+ we should
build a Single European Market of Social Innovation
                                                                                                FINANZIERUNGSAGENTUR FÜr
                                                                                                Social Entrepreneurship
                   Mobilisation of capital: Leverage more private capital into the social enterprise finance
                   sector via de-risking of social enterprise funding (e.g. classical guarantees, equity
                   guarantees, first loss capital)

                        Capacity building: Support capacity development of social enterprises based on
                        outcomes of acceleration / incubation programs (e.g., capacity building linked to
Single European         obtained financing volume of social enterprises)
Market of Social           Transaction cost: Reduce transaction costs for financial intermediaries (e.g., direct
   Innovation              transaction cost support for financing rounds up to EUR 500k) and support set-up of
                           new financial intermediaries (e.g., provision of patient capital for new financial
                           intermediaries)
                        Impact payments: Leverage ESF+ funds to provide outcome payments for social
                        enterprises to increase attractiveness of their business models (e.g., direct pay-for-
                        results payments, outcome-based unsecured debt, redeemable impact shares)

                   Outcome match funds: Leverage ESF+ funds to match-fund outcome-based
                   commissioning of national/regional/local governments to facilitate more pay-for-success
                   schemes (e.g. SIBs, SIINC)

FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship                                                                     28
Contact

                                                                      FINANZIERUNGSAGENTUR FÜr
                                                                      Social Entrepreneurship

                  Dr. Markus Freiburg
                  Founder & CEO

                  Financing Agency for Social Entrepreneurship GmbH
                  Prinzregentenplatz 10
                  81675 Munich
                  Germany

                  Tel: +49 - 211 - 36 79 09 88
                  Mobil: +49 - 177 - 55 21 028
                  Fax: +49 - 3212 - 14 02 672
                  E-Mail:mfreiburg@fa-se.de

                  www.fa-se.de/en/

FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship                                           29
Q&A:
‘What's in it for venture philanthropists and social investors’

               Bernardo Urrutia          Dr. Markus Freiburg
             EaSI Programm Officer              FASE
Thank you!
RUE ROYALE 94
B-1000 BRUSSELS

T +32 2 513 21 31
EVPA.EU.COM
info@evpa.eu.com

   european-venture-philanthropy-association
   @_EVPA_
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