State investment company SmartCap will continue as a subsidiary of KredEx
Eesti Arengufond (Estonian Development Fund), Ministry of Economic Affairs and Communications and KredEx signed an agreement by which the Estonian Development Fund transferred the shares of SmartCap, the subsidiary set up for venture capital investment, into the ownership of KredEx.
The venture capital investments of the Estonian Development Fund were consolidated in the investment fund Early Fund II managed by SmartCap. The activities of SmartCap, the subsidiary previously owned by Estonian Development Fund, will continue as before – the company will manage the state fund of funds, the capital of which is invested in Estonian early-stage venture capital funds.
Mari Vavulski and Sille Pettai will continue as board members of SmartCap. Ville Jehe (Chairman), Priit Põldoja, Lehar Kütt and Mikko-Jussi Suonenlahti will continue as SmartCap supervisory boards members. Reimo Hammerberg resigned from the company's supervisory board by his own request. Fund KredEx became the parent company of SmartCap.
According to the CEO of KredEx, Lehar Kütt, the Estonian Development Fund, launched in 2006, has made a positive impact to the economy by laying the groundwork for the establishment of a local venture capital market. "There is now a local venture capital ecosystem that functions through cooperation of the public and private sectors, which at that time was totally non-existent. SmartCap, the subsidiary of Estonian Development Fund, has become a key player in the management of state funds of funds," said Lehar Kütt.
SmartCap restructuring began last year to carry out investment activities that match today’s market level and the development of the strategy to be implemented as a part of KredEx. A transition was made in the state provision of venture capital from the model of direct investment, used until now, towards the fund of funds model. For the sustainable development of the field, using funds of funds is the next logical next step since it allows to include a maximum of knowledge and capital also from the private sector.
One of the first steps of the restructuring took effect this spring, when SmartCap signed a LPA with Tera Ventures, the winning team of a call organized by SmartCap, Estonian Development Fund and European Investment Bank for a private fund manager. The second phase of the implementation of the new strategy is the call for accelerator fund managers that was announced in October 2016. "We received an initial offer from seven teams, four of which met the qualification criteria. The winner will be announced no later than at the end of August," said SmartCap board member Sille Pettai.
The transfer of SmartCap shares to KredEx was the last transaction of the Estonian Development Fund. The decision regarding the termination of the Estonian Development Fund was made by the Economic Affairs Committee in spring 2016. The activities of the Estonian Development Fund came to an end on July 1, 2017 along with the repeal of the Estonian Development Fund Act.