KredEx, Startup Estonia, and SmartCap announced procurement for accelerators

The purpose of the recently announced procurement is to find accelerator funds, which would offer early phase venture capital to start-ups and accelerator programme that supports their development. In total EUR 11.2 million are invested in new accelerators.

First, the project will be looking for independent investment teams, who have sound knowledge and long-term experience in the investment field and who would be able to raise the capital of investors with different background. The aim is to purchase the accelerator service and invest in two venture capital funds. The amount allocated to the purchase of accelerator service is EUR 2.8 million, i.e. 1.4 million per service provider. The total amount invested in venture capital funds is EUR 8.4 million, i.e. 4.2 million per fund. In addition, the fund manager has to invest its own money and raise private capital in the amount of at least EUR 1.8 million. After the funds have been established, they will start making daily investments on their own.

“Investors are interested in strong teams and we assume that their main motivation is to make good deals. Thereby, the state’s role is to hedge the risks – we invest 70% of the fund’s volume and they altogether 30%. This gives high motivation to join the scheme,” said Mari Vavulski, head of Startup Estonia.

The funds should have a definite investment direction, whereas the preferred areas are ICT, health technologies, and smart enhancement of resources. No specific requirements are set for the models of currently operating funds and the teams have liberties also in terms of the structure of customers. The funds play an important role for start-ups by offering the necessary know-how, in order to facilitate the creation of new sustainable business models, which would allow competing also on international markets.

According to the Startup Compass survey, Estonia has 500-700 start-ups in different development stages as at the end of 2015. Altogether, the Estonian start-ups provide ca 2,300 jobs, of which more than 80% are in Estonia. In 2015, the start-ups paid over EUR 20 million to the state budget in taxes on labour.

Applications for participating in the procurement can be submitted until August 8 and the final selection should be clear by next May. The project is also a part of the transfer of Startup Estonia and SmartCap to KredEx. Official merger of the institutions shall take place on July 1 this year.

According to Lehar Kütt, CEO of KredEx, merger with Startup Estonia is a natural continuation of activity, since both organisations stand for the same thing. “It is important to create a favourable breeding ground for faster development of new businesses and improve the funding options of entrepreneurs in all development phases.”